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**SEVERANCE AND RELEASE AGREEMENT**

 

            This **Severance and Release Agreement**(this “Agreement”) is entered into as of this 31st day of December, 2007, byand between Michael M. Schiffman, residing at 22153 Larkspur Trail, Boca Raton,Florida 33433 ("Executive" or “you”), and Forward Industries, Inc., aNew York corporation (“Forward”) having its principal offices at 1801 GreenRoad, Suite E, Pompano Beach, Florida 33064 (Forward, together with itswholly-owned subsidiaries Forward Innovations, Koszegi Industries, Inc., andKoszegi, Asia, Ltd., are referred to herein as the "Company").

 

**RECITALS:**

 

Executive hasbeen continuously employed by the Company as an executive since 1992;

 

Executive hasserved as director of Forward since 1992;

 

Executive has been party to employment agreements withForward whereby he has been employed as its President and Chief OperatingOfficer commencing 1998, as such agreement was extended and renewed in January2001, April 2003, and again in December 2005 (the agreement dated as ofDecember 27, 2005, is referred to herein as the “Prior Agreement”); 

 

In such executive capacities Executive has had access toconfidential and valuable non-public information relating to the Company’scustomer lists, supplier lists, sourcing and pricing know-how, othernon-public, proprietary information relating to product pricing, productproposals, product design proposals, product sourcing information, and otherinformation relating to the Company Business, as defined herein;

 

The Company and Executive have mutually agreed thatExecutive will not continue his employment by the Company in the capacitiesunder the Prior Agreement, and the Company has agreed to the payment,confirmation of benefits, and grant of Executive Release (as defined herein) setforth in paragraphs 1, 3 and 4, respectively, hereof in consideration of theRelease and covenants in this Agreement; and

 

This Severance and Release Agreement will govern allaspects of the termination and severance arrangements between Executive and theCompany arising out of or relating to the Prior Agreement and, as hereinafterset forth, shall supersede any provisions thereof that are inconsistent withthis Agreement, the inconsistent terms of the Prior Agreement being null andvoid:

 

In consideration of the foregoing, and in consideration ofthe obligations undertaken and benefits received pursuant to the PriorAgreement, the parties hereto agree as follows:

 

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1.  Consideration.  In consideration forExecutiveto execute and perform this Agreement,the Company agrees to pay Executive on the EffectiveDate  $[162,500.00 (one hundred sixty-two thousand five hundred US Dollars)(less applicable withholding and payroll taxes) and to grant the Executive Release.  Capitalized terms used in the Prior Agreement that arenot otherwise defined herein shall have the meanings ascribed to such termswhen used in this Agreement.  The parties hereto confirm the survival of Sections10(a), (c), (d), and (e), 11, and 12 of the PriorAgreement.

 

2.  Release.  This Release of Claims (the “Release”)is entered into by you as a condition precedent to receiving the severance andseverance related benefits herein.  In exchange for the receipt of theseverance and severance related benefits, you for yourself, your heirs andassigns and anyone else acting on your behalf, hereby voluntarily, knowinglyand irrevocably and forever discharge the Company, each of its subsidiaries,and their respective successors, as well as their respective present, former,and future officers, directors, shareholders, employees, and agents, in boththeir individual and representative capacities, and each of their heirs andassigns (the “Releasees”) from all actions, claims, demands, causes of actions,obligations, damages, liabilities, expenses and controversies of any naturewhatsoever, whether known or not now known or suspected, which you had, have ormay have against the Releasees from the beginning of time up to and includingthe date you sign this Release (the “Waived Claims”). The Waived Claims thatyou forever and irrevocably give up and release when the Release becomesEffective  include, but are not limited to, all claims related to (i)  youremployment at each of the Company and its subsidiaries or the termination ofyour employment, (ii)  statements, acts or omissions by the Releasees, (iii) any express or implied agreement between you and the Releasees, (iv)  wrongfuldischarge, defamation, slander, breach of express or implied contract,negligent and/or intentional misrepresentation or infliction of emotionaldistress, breach of an implied covenant of good faith and fair dealing, claimsof intentional or negligent interference  with economic, employment, orcontractual rights or promissory estoppel, (v)  any federal, state, or locallaw or regulation prohibiting discrimination in employment or otherwiseregulating employment, including but not limited to, the Age Discrimination inEmployment Act of 1967, as amended (ADEA), the Older Worker Benefit ProtectionsAct,  the Equal Pay Act of 1963, Title VII of the Civil Rights Acts of 1964, asamended,  the Civil Rights Act of 1991, the Family Medical Leave Act of 1993(FMLA), the Americans with Disabilities Act of 1990 (ADA), the WorkerAdjustment and Retraining Notification Act, the Fair Labor Standards Act of1938, as amended, the Employee Retirement Income Security Act of 1974 (ERISA),as amended, 42 U.S.C. Sections 1981 through 1988, the Consolidated OmnibusReconciliation Act of 1986 (COBRA) the New York State Human Rights Law and the NewYork City Human Rights Act, (vi) any claim for wages, commissions, bonuses,incentive compensation, vacation pay, employee benefits (except as set forth inparagraph 3 of this Release), expenses or allowances of any kind, or any otherpayment or compensation, according to the terms of each of those plans. You arenot waiving any claims with respect to your rights to enforce this Agreement.You are not waiving or releasing any rights or claims that may arise after thedate that you sign this Release.

 

3.  Termination and Severance Benefits. The Releasedoes not affect your vested rights and eligibility for benefits under theCompany 401(k) Plan, or any other employee benefit plan covered by ERISA (otherthan a severance plan). Eligibility for benefits under these plans isdetermined by the applicable plan documents.  The Release does not affect yourright to reimbursement of expenses incurred but not reimbursed prior to thedate you sign the Release, subject to the Company’s expense reimbursementpolicies.  In addition, this Release does not affect your right topost-retirement medical coverage as applicable.  In particular, this Agreementand the Release shall not affect your right to thepayment provided in Section 1 or the Executive Release.

 

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4.  Release.  This Executive Release of Claims (the“Executive Release”) is entered into by the Company in consideration ofExecutive entering into and performing this Agreement.  In exchange forExecutive’s performance of the terms of this Agreement and grant of theRelease, Forward, for itself, its subsidiaries, and their respective successorsand assigns, subject to the last sentence of paragraph one hereof and the accuracyof the representations set forth in paragraph 6 hereof, hereby voluntarily,knowingly and irrevocably and forever discharges Executive from all actions,claims, demands, causes of actions, obligations, damages, liabilities, expensesand controversies of any nature whatsoever, whether known or not now known orsuspected, which it had, have or may have against the Executive in his capacityas executive officer from the beginning of time up to and including the EffectiveDate of this Agreement (the “Executive Waived Claims”). The Executive WaivedClaims that the Company and its subsidiaries forever and irrevocably give upand release when the Executive Release becomes Effective  include, but are notlimited to, all claims related to (i)  Executive’s employment at each of theCompany and its subsidiaries or the termination of said employment, (ii)  statements,acts or omissions by Executive, (iii)  any express or implied agreement betweenthe Company and its subsidiaries and you, other than agreements that by theirterms survive the Prior Agreement, and (iv) defamation, slander, breach ofexpress or implied contract, negligent and/or intentional misrepresentation orinfliction of emotional distress, breach of an implied covenant of good faithand fair dealing. By entering into this Agreement or granting this ExecutiveRelease neither Forward nor any subsidiary hereby waives any claim with respectto its rights to enforce this Agreement. Neither the Company nor any subsidiarywaives or releases any rights or claims that may arise after the date that itexecutes this Release.

 

5.  Nosuit. You represent and warrant that as of the date you enter into thisAgreement, you nor anyone acting on your behalf has made or filed, commenced,maintained, prosecuted or participated in any action, suit, charge, grievance,complaint or proceeding of any kind against the Company, any subsidiarythereof, and/or Releasees in any federal, state or local court, agency orinvestigative body.  You acknowledge that based on the foregoing, you herebywaive all relief available to you, including, without limitation, monetarydamages, attorney’s fees and costs, equitable relief and reinstatement, underany claims released pursuant to paragraph 2 above.

 

6.  Representations.You acknowledge and agree that:

(a)          You have read and fully understand the legal effect and binding nature of thepromises and obligations contained in this Agreement;

(b)          You are signing this Agreement freely and voluntarily;

 

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(c)          You have been advised to consult with legal counsel, at your own expense,before signing the Agreement;

(d)          You are receiving benefits as a condition to signing this Agreement and theAgreement becoming Effective that you would not otherwise be entitled toreceive but for the Agreement becoming Effective;

(e)              You have not,during the term of your employment under the Prior Agreement or thereafterperformed any act, or directed any other person or entity to perform any act onyour or their behalf, the intended or proximate result of which wouldconstitute a violation of the terms referred to or set forth in Section 7 ofthis Agreement, nor are there any agreements, arrangements, or understandings,written or oral, that would, if performed or acted upon, constititue such aviolation. 

(f)           There are no promises or representations that have been made to you to signthis Agreement except those that are included in this Agreement;

(g)           You will have had a period of five (5) days from the date of receipt of thisAgreement to consider it. After you sign the Agreement by sending a writtennotice of revocation via overnight mail or hand delivery to:

 

James O.McKenna

c/o ForwardIndustries, Inc.

1801 GreenRoad, Suite E,

PompanoBeach, FL 33064

 

 

(g)               This Agreement will be “Effective” on the eighth (8th) day after you sign itunless earlier revoked. 

 

7.  Covenants Under Prior Agreement.  You furtheracknowledge and agree that the Confidentiality, Non-Solicitation, Separability,and Specific Performance provisions in Sections 10(a), 10(c), 10(d), 11, and 12of the Prior Agreement are hereby reaffirmed and shall survive the terminationof your employment for whatever reason, and continue as set forth in the PriorAgreement.  Section 10(b) of the Prior Agreement issuperseded in its entirety and replaced with the following: 

Commencing on the date of this Agreement and expiring onDecember 31, 2008,Executiveshall not, without the express prior written consent of the Company, directlyor indirectly, either individually or as an employee, officer, director, agent,partner, shareholder, consultant, option holder, joint venturer, contractor,nominee, lender of money, guarantor or in any other capacity: own (or have anyfinancial interest in, actual, contingent, future, or otherwise), control, manage,operate, participate, engage in, invest in or otherwise have any interest in orthrough, or otherwise be connected with, in any manner, any firm, company,corporation, organization, associate, business, enterprise, venture or otherentity, association or person that does or proposes to do any one or more ofthe following as it relates to of the Company Business (as hereinafter defined): (a)(i) engage in, do, or solicitbusiness with, or (ii) interfere with or affect the Company’s businessopportunities with any of thecustomers with whom the Company has done business with during the most recent two calendar years or (b)(i)  engagein, do, or solicit business with or (ii) interfere with oraffect the Company’s business opportunities with  anyof the vendors with whom the Company has done business with during the mostrecent two calendar years.  The “Company Business” shallmean the business of designing, manufacturing, procuring the supply ormanufacture of, sourcing, selling, re-selling, and/or distributing of carryingor portable cases or cover plates and related carry case accessories suppliedto the cellular telephone, portable medical equipment, laptop computer,photography, video or audio industries. Nothing in this paragraph shall bedeemed to prohibit Executive from the acquisition or holding of, solely as apassive stockholder, not more than one percent (1%) of the shares or othersecurities of a publicly-owned corporation if such securities are traded on anational securities exchange or the NASDAQ Stock Market.

 

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8.  Non-Disparagement. You agree that you will not make disparaging remarks about Forward, any of itssubsidiaries, or their officers, or directors in their individual andrepresentative capacities, or the Company Business. Forward and itssubsidiaries will not, and they shall cause their respective officers anddirectors not to, make disparaging remarks about you.  None of the partiesto this Agreement will issue or cooperate with issuance of any article,memorandum, release, interview, publicity, or statement, whether oral orwritten of any kind, to the public, the press or the media, which in any wayconcerns in a disaparaging, offensive, or prejudicial manner the other party,including any accusation of impropriety or unlawful conduct made directly or byauthorizing others to make such accusations. “Disparaging remarks” when used inthis Agreement shall mean the publication of matter that is untrue or adverselyaffects the subject’s reputation, image or good will, or is designed to induceothers not to do business with you, Forward, or any of its subsidiaries, as thecase may be. This subparagraph will not be construed to prevent you fromcomplying with any lawfully served and binding subpoena, provided however, thatyou forward a copy of said subpoena(s) to the Company within seventy-two (72)hours of receipt of the same, unless expressly prohibited by law from doing so.

 

9. Equitable Relief.  You agree that the violation of the obligations inparagraphs 7 and 8 would be a material breach of this Agreement, and theCompany shall have no adequate remedy at law and will be able to enforce theseobligations by seeking an injunction, including without limitation an ex partepreliminary and/or temporary restraining order, and such other relief as may bedeemed just and proper, including monetary damages. 

 

10. Cooperation.  You agree that you will cooperate with Forward,its subsidiaries, and each of their respective attorneys or other legalrepresentatives (“Company attorneys”) in connection with any claim, litigation,or judicial or arbitral proceeding which is now pending or may hereinafter bebrought against Forward or any of its subsidiaries by any third party. Yourduty of cooperation shall include, but not be limited to (i) meeting with Company attorneys by telephone or in person, at mutually convenient times andplaces,  in order to state truthfully your knowledge of matters at issueand recollection of events; (ii) appearance by you (that does not conflict withthe needs or requirements of your then current employer or occupation) as awitness at depositions or trials, without necessity of a subpoena, in order tostate truthfully your knowledge of matters at issues; and (iii) signing, uponthe request of Company attorneys, declaration or affidavits that truthfullystate matters of which you have knowledge.  The Company shall promptlyreimburse you for your actual and reasonable travel or other expenses that youmay incur in complying with your obligations pursuant to this paragraph.

 

 

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11.  Law Governing.  Agreement shall be deemed tohave been made within the State of New York, and shall be interpreted andconstrued and enforced in accordance with the law of the State of New York andbefore the courts of the State of New York.  This Agreement is not an admissionof any liability or wrongdoing by you, the Company and/or any Releasee.

 

12.  Return of Property.  You acknowledge that byexecuting this Agreement that you have returned to the Company all property andall copies of Confidential Information belonging or pertaining to, or arisingout of your employment by, the Company or any of its subsidiaries , as definedin Section 10(d) of the Prior Agreement, in your custody or possession.

 

13.  No Reinstatement.  By  entering into thisAgreement, you acknowledge that you (i)  waive any claim to reinstatementand/or future employment with the Company and (ii)  are not and shall not beentitled to any payments, benefits or other obligations from the Company or anysubsidiary thereof whatsoever (except as expressly set forth herein).

 

Your signature below acknowledges that you knowingly andvoluntarily agree to all of the terms and conditions contained in thisAgreement.

 

 

 

           Agreed to and Accepted this 28th day of January , 2008

 

 

/s/MichaelM. Schiffman

Michael M.Schiffman

 

 

FORWARDINDUSTRIES, INC.

(on its ownbehalf and behalf of each

subsidiarythereof)

 

/s/DouglasW. Sabra

By: DouglasW. Sabra

Presidentand Chief Executive Officer