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.

 

 

 

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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 75th 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 (10th)
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 (30th) 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 (30th) 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
asserted as the basis for termination for Good Reason and (ii) a date of
termination that shall be at least thirty (30) days after the date of delivery
of such notice; and provided, further, that the Company shall have the right
during such thirty (30) day period to remedy the circumstances or event giving
rise to the notice of termination for Good Reason prior to the date specified in
such notice, in which case no right of termination or other right shall exist
under this Section.  . 

For purposes of this Agreement, subject to Section 7(D), the term “Good Reason”
shall mean:

(i) the assignment to Executive without his written consent of any duties
inconsistent in any material respect with Executive’s position (including
employment status, titles and reporting requirements), authority, duties or
responsibilities as contemplated by Section 2 of this Agreement or any other
action by the Company that results in a material diminishment in such positions,
authority, duties, or responsibilities, other than such assignment or other
action that is remedied by the Company prior to the date of termination
specified in the written notice from Executive:  

(ii) a decrease in annual Salary rate;

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(iii) any failure by the Company to perform any material obligation under, or
its breach of a material provision of, this Agreement that is not cured within
the 30-day notice period referred to above; or

(iv) failure of a Successor to expressly assume and agree to perform this
Agreement in the same manner and to the same extent as the Company would have
had there been no Successor. 

6.         TERMINATION FOR  DEATH OR DISABILITY

(a)        Executive’s employment shall terminate immediately upon his death or
Disability (as hereinafter defined).  Upon such termination, the Executive, his
estate, or his beneficiaries, as the case may be, shall be entitled to receive,
and their sole remedies under this Agreement shall be:

(i) subject to Section 7(b), 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) subject to Section 7(b), 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;

(iii) subject to Section 7(b), the ratable amount of Bonus, if any, to which
Executive would otherwise have been entitled in the current fiscal year to the
date of termination under this Section, payable at the time specified in Section
3(b);

(iv) any unpaid benefits accrued through 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

 

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(v) 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)        For purposes of this Agreement, the term “Disability” shall mean any
disability, illness, or other incapacity that prevents Executive from performing
services as contemplated by Section 2, for 120 or more consecutive days or for
180 days in any consecutive 12-month period.  In such event, the Company shall
have the right to terminate this Agreement upon 10 days’ prior written notice to
Executive. During the period of any such disability, illness, or incapacity, (i)
the obligation of the Company to pay Salary to Executive pursuant to Section 3
shall be reduced to the extent of any amount received by Executive pursuant to
any disability insurance policy maintained and paid for by the Company, and (ii)
no bonus compensation shall accrue or be earned, or count toward proration. 
Termination under this Section shall not prejudice any rights of Executive under
disability policies being maintained by the Company for Executive under the
terms of this Agreement, if any.

7.         TERMINATION UPON CHANGE OF CONTROL

(a)        In the event Executive terminates his employment under this Agreement
for Good Reason, 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 to Executive) other than due to death or disability,
in either case within 12 months after 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;

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(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 after a Change in
Control is a basis for termination for Good Reason, then the Salary in effect
immediately prior to such reduction), for a period of 12 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 7;

(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);

(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) immediate vesting and elimination of all restrictions on any restricted
share grants or deferred stock awards outstanding on the date of termination of
employment; and

(vii) immediate vesting of all outstanding stock options on the date of
termination of employment and the right to exercise such stock options as
provided in any stock option award agreement to which Executive is a party.

(b)        A “Change of Control” shall be deemed to have occurred if:

 

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(i)  Any Person (as hereinafter defined, other than the Company, any employee
benefit plan of the Company, or any company owned directly or indirectly by the
shareholders of the Company immediately prior to such occurrence) becomes the
Beneficial Owner (as hereinafter defined), directly or indirectly, of securities
of the Company or any Subsidiary (as hereinafter defined) representing 50% or
more of the combined voting power of the Company’s or such subsidiary’s then
outstanding securities;

(ii)        during any period of two consecutive years or shorter period,
individuals who at the beginning of such period constitute the Board, and any
new director (other than a director designated by a person who has entered into
an agreement with the Company to effect a transaction described in clause (i),
(iii) or (iv) of this paragraph (b)) whose election by the Board or nomination
for election by the Company’s shareholders was approved by a vote of at least
two-thirds of the directors then still in office who either were directors at
the beginning of the two-year period or whose election or nomination for
election was previously so approved but excluding for this purpose any such new
director whose initial assumption of office occurs as a result of either an
actual or threatened election contest (as such terms are used in Rule 14a-11 of
Regulation 14A under the Exchange Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of an individual,
corporation, partnership, group, associate, or other entity or Person other than
the Board, cease for any reason to constitute at least a majority of the Board;

(iii)       the Company enters into any consolidation, merger, or other business
combination with or into any other corporation or other entity or person, or any
other corporate reorganization, whereby the shareholders of the Company
immediately prior to such consolidation, merger, business combination, or
reorganization own less than 50% of the voting power of the surviving entity
immediately after such consolidation, merger, business combination, or
reorganization;

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(iv)       the consummation of a plan or agreement for the sale or disposition
of all or substantially all of the consolidated assets of the Company (other
than such sale or disposition immediately after which such assets will be owned
directly or indirectly by the shareholders of the Company in substantially the
same proportions as their ownership of common stock of the Company immediately
prior to such sale or disposition), in which case the Board shall determine the
effective date of the Change in Control resulting from such transaction; or

(v)        the occurrence of any other event that the Board determines, in its
discretion, would materially alter the structure of the Company or its
ownership.

For purposes of this definition, the term:

(A)  “Beneficial Owner” shall have the meaning ascribed thereto in Rule 13d-3
under the Exchange Act (as such term or rule may be amended from time to time),
except that a Person shall be deemed to be the Beneficial Owner of all shares
that such Person has the right to acquire pursuant to any agreement or
arrangement or upon exercise or conversion of rights, warrants, or options, or
otherwise, without regard to the sixty day period referred to in Rule 13d-3);

(B)       “Exchange Act” means the Securities Exchange Act of 1934, as amended
from time to time, or any successor act thereto;

(C)       “Person” has the meaning ascribed thereto in Section 3(a)(9) of the
Exchange Act and used in Sections 13(d) and 14(d) thereof, including “group” as
defined in Section 14(d) thereof; and

(D)       “Good Reason” as used in this Section 7 shall not exist as a reason
for Executive to terminate his employment after a Change of Control
notwithstanding anything to the contrary in Section 5 where the Change of
Control arises in connection with the circumstances described in clause (b)(iii)
of this Section 7 and Executive’s employment by the entity surviving such
consolidation, merger, combination, or reorganization qualifies him as an
executive in such entity’s financial function or department.

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8.         OBLIGATIONS UPON TERMINATION, ETC.

(a)        Upon the termination of employment, all provisions of this Agreement
shall terminate except for this Section 8, Sections 9, 10 and 11, the terms of
which shall survive such termination, and the Company shall have no further
obligation to Executive hereunder, except as herein expressly provided.  The
Company shall comply with the terms of settlement of all deferred compensation
arrangements to which Executive is a party in accordance with his duly executed
deferral election forms. 

(b)        In the event of a termination of employment by Executive on his own
initiative during the Term or any renewal thereof by delivery of written notice
of such resignation ten business days in advance, other than due to Disability
or termination for Good Reason, Executive shall have the same entitlements as
provided in Section 4, Termination by the Company for Cause.  Notwithstanding
the foregoing, Executive shall have no right to terminate during the Term except
in the event of termination for Good Reason, and any voluntary termination of
employment shall be considered a material breach.

(c)        In the event of a termination of employment, payment made and
performance by the Company in accordance with the provisions of Section 4, 5, 6,
7, or 8, as the case may be, shall operate to fully discharge and release the
Company and its directors, officers, employees, subsidiaries, affiliates,
shareholders, successors, assigns, agents, and representatives (all of the
foregoing collectively, the “releasees”) from any further obligation or
liability with respect to Executive’s rights under this Agreement.  Other than
payment and performance as aforesaid, none of the releasees shall have any
further obligation or liability to Executive or any other person under this
Agreement arising out of termination of Executive’s employment under this
Agreement.  The Company shall have the right to condition the payment of any
severance or other amounts pursuant to Section 4, 5, 6, 7, or 8 upon delivery by
Executive to the Company of a release in form and substance satisfactory to the
Company releasing any and all claims the Executive, his estate, representatives,
and assigns may have against the Company and any other releasee arising out of
this Agreement.

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9.         COVENANTS

Executive agrees that during the Term, any renewal thereof, and for one full
year after expiration or termination of the Term or any renewal thereof (except
in the case of clause (a), as to which Executive’s covenant shall not be limited
in time), he shall not, without the express prior written consent of the
Company, directly or indirectly, either individually or as an employee, officer,
director, agent, partner, shareholder, consultant, option holder, joint
venturer, contractor, nominee, lender of money, guarantor, investor, owner,  or
in any other capacity:

(a)        except as required in the course of performing his duties as an
Executive hereunder, disclose, copy, divulge, furnish, distribute or make
available in any medium whatsoever to any firm, company, corporation,
organization, or other entity or person (including but not limited to actual or
potential customers or competitors or government officials), or otherwise
misappropriate trade secrets, intellectual property, or other confidential or
non-public information of or concerning the Company, its Subsidiaries or
affiliates or the business of any of the foregoing, including without
limitation, customer lists, product designs and product know-how, launch
information or plans pertaining to Company or customer products, arrangements
for supplying customers, methods of operation and organization, sources of
supply and arrangements with vendors, product development, business plans and
strategies; provided, however, Executive may make disclosures as and to the
extent required by applicable law or compelled upon court or administrative
order, provided, further, however, that in the event that Executive is so
required or compelled, he shall notify the Company not fewer than ten (10)
business days in advance of such disclosure in order to afford it the reasonable
opportunity to obtain a protective order or other remedy to limit the scope of
such disclosure (it being understood and agreed that, if such disclosure is
required by applicable law, Executive shall upon the Company’s request furnish
the source and precedents with respect to such requirement).  For purposes of
this Section 10, information shall not be deemed confidential if it is within
the public domain or becomes publicly known other than through disclosure by
Executive in violation of this provision; (ii)

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(b)        own (or have any financial interest in, actual, contingent or
otherwise), control, manage, operate, participate, engage in, invest in or
otherwise have any interest in, or otherwise be connected with, in any manner,
any firm, company, corporation, organization, business, enterprise, venture or
other entity, association or person that is engaged in the business actually
engaged in by the Company during the Term or any renewal thereof, including
without limitation the Company Business (as hereinafter defined) ; or

(c) solicit, employ or retain or arrange, encourage, facilitate or assist to
have any other firm, company, corporation, organization, business, enterprise,
venture or other entity, association or person solicit, employ, retain, or
otherwise participate in the employment or retention of, any person who is then,
or who has been, within the preceding six (6) months, an employee, consultant,
sales representative, technician or engineer of the Company, its subsidiaries or
affiliates.

(d)  own (or have any financial interest in, actual, contingent, future, or
otherwise), control, manage, operate, participate, engage in, invest in or
otherwise have any interest in or through, or otherwise be connected with, in
any manner, any firm, company, corporation, organization, associate, business,
enterprise, venture or other entity, association or person that does or proposes
to do any one or more of the following as it relates to of the Company Business
(as hereinafter defined): (a)(i) engage in, do, or solicit business with, or
(ii) interfere with or affect the Company’s business opportunities with, any of
the customers with whom the Company has done business with during the most
recent two calendar years or (b)(i)  engage in, do, or solicit business with, or
(ii) interfere with or affect the Company’s business opportunities with,  any of
the vendors with whom the Company has done business with during the most recent
two calendar years.  The term “Company Business” shall mean the business of
designing, manufacturing, procuring the supply or manufacture of, sourcing,
selling, re-selling, and/or distributing of carrying or portable cases or cover
plates and related carry case accessories supplied to the cellular telephone,
portable medical equipment, laptop computer, photography, video or audio
industries. Nothing in this Section 9 shall be deemed to prohibit Executive from
the acquisition or holding of, solely as a passive stockholder, not more than
one percent (1%) of the shares or other securities of a publicly-owned
corporation if such securities are traded on a national securities exchange or
the NASDAQ Stock Market.

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(e) Upon the expiration or termination of this Agreement for any reason,
Executive shall promptly deliver to the Company all documents, papers and
records in his possession relating to the business or affairs of the Company and
that he obtained or received in his capacity as an officer of the Company and
any other Company property or equipment in his possession or control.

(f)         In the event Executive shall violate or be in violation of any
provision of this Section 9 (which provisions Executive hereby acknowledges are
reasonable and equitable), in addition to the Company’s right to exercise any
and all remedies, legal and equitable, which it may have under applicable laws,
Executive shall not be entitled to any, and hereby waives any and all rights to,
each and every, termination payment under this Agreement.

10.       SEPARABILITY

Executive agrees that the provisions of Section 9 hereof constitute independent
and separable covenants, for which Executive is receiving consideration, which
shall survive the termination of employment, and which shall be enforceable by
the Company notwithstanding any rights or remedies the Company may have under
any other provision hereof.

11.       SPECIFIC PERFORMANCE

Executive acknowledges that:

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(a)        the services to be rendered and covenants to be performed under this
Agreement are of a special and unique character and that the Company would be
irreparably harmed if such services were lost to it or if Executive breached its
obligations and covenants hereunder;

(b)        the Company is relying on the Executive’s performance of the
covenants contained herein, including, without limitation, those contained in
Section 9 above, as a material inducement for its entering into this Agreement;

(c)        the Company may be damaged if the provisions hereof are not
specifically enforced; and

(d)        the award of monetary damages may not adequately protect the Company
in the event of a breach hereof by Executive.

By virtue thereof, Executive agrees and consents that if Executive breaches any
of the provisions of this Agreement, the Company, in addition to any other
rights and remedies available under this Agreement or under applicable laws,
shall (without any bond or other security being required and without the
necessity of proving monetary damages) be entitled to a temporary and/or
permanent injunction to be issued by a court of competent jurisdiction
restraining Executive from committing or continuing any violation of this
Agreement, or any other appropriate decree of specific performance.  Such
remedies shall not be exclusive and shall be in addition to any other remedy
that the Company may have.

12.       MISCELLANEOUS

(a)        Entire Agreement; Amendment.  This Agreement constitutes the entire
employment agreement between the parties and may not be modified, amended or
terminated (other than pursuant to the terms hereof) except by a written
instrument executed by the parties hereto.  All other agreements, written or
oral, between the parties pertaining to the employment or remuneration of
Executive not specifically contemplated hereby or incorporated or merged herein
are hereby terminated and shall be of no further force or effect.

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(b)        Assignment; Successors.  This Agreement is not assignable by
Executive without the prior written consent of the Company and any purported
assignment by Executive of Executive’s rights and/or obligations under this
Agreement shall be null and void.  Except as provided below, this Agreement may
be assigned by the Company at any time, upon delivery of written notice to
Executive, to any successor to the business of the Company, or to any Subsidiary
or affiliate of the Company.  In the event that another corporation or other
business entity becomes a Successor of the Company, then this Agreement may not
be assigned to such Successor unless the Successor shall, by an agreement in
form and substance reasonably satisfactory to the Executive, expressly assume
and agree to perform this Agreement in the same manner and to the same extent as
the Company would be required to perform if there had been no Successor. The
term “Successor” as used herein shall mean any corporation or other business
entity that succeeds to substantially all of the assets or conducts the business
of the Company, whether directly or indirectly, by purchase, merger,
consolidation or otherwise. This Agreement shall be binding upon and inure to
the benefit of the parties and their respective heirs, executors,
administrators, personal representatives, successors and permitted assigns.

(c)        Waivers, etc.  No waiver of any breach or default hereunder shall be
considered valid unless in writing, and no such waiver shall be deemed a waiver
of any subsequent breach or default of the same or similar nature.  The failure
of any party to insist upon strict adherence to any term of this Agreement on
any occasion shall not operate or be construed as a waiver of the right to
insist upon strict adherence to that term or any other term of this Agreement on
that or any other occasion.

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(d)        Provisions Overly Broad.  In the event that any term or provision of
this Agreement shall be deemed by a court of competent jurisdiction to be overly
broad in scope, duration or area of applicability, the court considering the
same shall have the power and hereby is authorized and directed to modify such
term or provision to limit such scope, duration or area, or all of them, so that
such term or provision is no longer overly broad and to enforce the same as so
limited.  Subject to the foregoing sentence, in the event that any provision of
this Agreement shall be held to be invalid or unenforceable for any reason, such
invalidity or unenforceability shall attach only to such provision and shall not
affect or render invalid or unenforceable any other provision of this Agreement.

(e)        Notices.  Any notice permitted or required hereunder shall be in
writing and shall be deemed to have been given on the date of delivery or, if
mailed by certified mail, postage prepaid, return receipt requested, documented
overnight courier, or by facsimile transmission, on the date mailed or
transmitted.

(i)         If to Executive to:

James O. McKenna at his address

set forth in the preamble to this Agreement

(ii)        If to the Company to:

the address set forth in the

preamble to this Agreement

Attention: Chairman of the Compensation Committee

with a copy to:

Steven Malsin, Esq.

237 Upper Shad Road

Pound Ridge, NY 10576

 

Telecopy:  (914) 764-1940

(f)         Law Governing. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York governing contracts made and
to be performed in New York without regard to conflict of law principles
thereof.

 

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(g)        Survival.  All obligations of the Company to Executive and Executive
to the Company shall terminate upon the termination of this Agreement, except as
expressly provided herein.  The provisions of Sections 9, 10 and 11 shall
survive termination of this Agreement.

(h)        Counterparts.  This Agreement may be executed in counterparts, each
of which shall be deemed an original, and each party may become a party hereto
by executing a counterpart hereof.  This Agreement and any counterpart so
executed shall be deemed to be one and the same instrument.  It shall not be
necessary in making proof of this Agreement or any counterpart hereof to produce
or account for any of the other counterparts.

(i)         Approval.  This Agreement is subject to prior review and approval of
the Compensation Committee of the Company’s Board of Directors.

(j)         Headings.  The headings in this Agreement are for convenience of
reference only and shall not control or affect the meaning or construction of
this Agreement.

 

IN WITNESS WHEREOF, the parties have executed this Agreement as of the 12th day
of August 2008, intending it to be effective on and as of the Effective Date.

JAMES O. McKENNA

FORWARD INDUSTRIES, INC.

/s/ James O. McKenna

By:  /s/ Douglas W. Sabra

 

Title:   Chief Executive Officer

 

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