Exhibit 4.2




















Exhibit
4.2






FORWARD INDUSTRIES, INC.




2007 Equity Incentive Plan

 






FORWARD INDUSTRIES, INC.




2007 EQUITY INCENTIVE PLAN




1. Purpose.
The purpose of the Forward Industries, Inc. 2007 Equity Incentive Plan (the
“Plan”) is to promote and further the growth and profitability of the Company
by offering incentives to selected key personnel and directors who have the
capacity for contributing in substantial measure toward the growth and
profitability of the Company, and to attract and retain such key individuals,
by making discretionary grants of Stock Options and/or Restricted Stock.  The
Plan has been adopted and approved by the Board of Directors and shall become
effective as provided in Section 16 hereof.




2. Definitions.
For purposes of the Plan the following terms shall have the indicated meanings
unless otherwise expressly provided or unless the context otherwise requires:




(a)
“Affiliate” shall mean an affiliate within the meaning of Rule 12b-2 under the
Exchange Act, and shall include a Subsidiary. 




(b)
“Award” means an award of Options or Restricted Stock pursuant to the
provisions of the Plan.




(c)
“Board” means the Board of Directors of the Company.




(d)
“Cause” shall mean, unless otherwise determined by the Committee: (1) in the
case where there is no employment or consulting agreement between the Grantee and
the Company or any Subsidiary at the time of grant or where such an agreement
exists but does not define “cause” (or words of like import), the Grantee’s (i)
dishonesty, or fraud, (ii) insubordination, willful misconduct, or refusal to
perform services, (iii) unsatisfactory performance of services or material
breach of any written agreement between the Grantee and the Company or any
Subsidiary, (iv) disclosure to anyone outside the Company or its
Affiliates, or use in other than the Company’s or its Affiliates’ business,
without authorization from the Company, of any confidential information or
material relating to the business of the Company or its Affiliates, acquired by
the Grantee either during or after employment or other service with the Company
or its Affiliates, or (v) attempt directly or indirectly to induce any employee
of the Company or its Affiliates to be employed or perform services elsewhere
or attempt directly or indirectly to solicit the trade or business of any
current or prospective customer, supplier or partner of the Company or its
Affiliates, or (2) in the case where there is an
employment or consulting agreement between the Grantee and the Company or any
Subsidiary at the time of grant which defines “cause” (or words of like
import), the meaning ascribed to such term under such agreement.

 

 
































(e)
“Certificate” means either a physical paper stock certificate or
electronic book entry or other electronic form of account entry evidencing the
ownership of Shares issued upon exercise of an Option or Restricted Stock
acquired as a result of an Award.  Such Certificates may bear a restrictive
legend, as set forth herein.




(f) “Code”
means the Internal Revenue Code of 1986, as amended from time to time, and any
regulations promulgated thereunder.




(g)
“Committee” means a committee of the Board of Directors, which shall
consist of two or more persons, each of whom, unless otherwise determined by
the Board of Directors, is (1) an “outside director” within the meaning of
Section 162(m) of the Code, (2) a “non-employee director” within the meaning of
Rule 16b-3 under the Exchange Act, and (3) an “independent director” as defined
in The Nasdaq Stock Market Rule 4200.   Unless otherwise determined by the
Board of Directors from time to time, the Committee shall mean the Compensation
Committee of the Board of Directors or such other committee of the Board as may
be appointed by the Board to administer the Plan in accordance with Section 3
hereof, provided in each case that its membership satisfies the foregoing
qualifications.




(h)
“Company” means Forward Industries, Inc., a New York corporation.




(i) “Corporate Change in Control” means the first to
occur of the following events:   


(i) any Person or group  (as such terms are defined
in the Exchange Act and regulations thereunder) is or becomes the beneficial
owner (as defined in the Exchange Act or regulations thereunder), directly or
indirectly, of securities of the Company (not including in the securities
beneficially owned by such Person or group any securities acquired directly
from the Company or its Affiliates)  representing 50% or more of the combined
voting power of the Company’s then outstanding securities, excluding any Person
or group who becomes such a beneficial owner in connection with a transaction
which is a merger or consolidation; 




(ii) the election to the Board, without the
recommendation or approval of a majority of the incumbent Board (as of the date
on which the Plan becomes effective), of directors constituting a majority of
the number of directors of the Company then in office, provided, however, that
directors whose election or appointment following such effective date is
recommended or approved by a majority of the members of the incumbent Board
shall be deemed to be members of the incumbent Board for purposes hereof,
provided further that directors whose initial assumption of office is in
connection with an actual or threatened election contest relating to the
election of directors of the Company will not be considered as members of the
incumbent Board for purposes of this paragraph (ii); or 




(iii) the occurrence of any other event which the
incumbent Board of Directors in its sole reasonable discretion determines
should be considered a Corporate Change in Control. 




(j)
“Covered Employee” means an employee within the meaning set forth in
Section 162(m) of the Code.




(k) “Director”
means an individual serving on the Board as a result of the election by
shareholders or appointment by incumbent directors.

 

 






























(l)
“Employee” means any individual employed by the Company or any Subsidiary.




(m)
“Exchange Act” means the United States Securities Exchange Act of 1934.




(n)
“Fair Market Value” as of any date shall mean, unless otherwise required by the
Code or other applicable law, the closing sale price per Share as published by
the principal national securities exchange on which the Shares are traded on
such date or, if there is no sale of Shares on such date, the average of the
bid and asked prices on such exchange at the close of trading on such date, or
if the Shares are not listed on a national securities exchange on such date,
the closing price or, if none, the average of the bid and asked prices in the
over-the-counter market at the close of trading on such date, or if the Shares
are not traded on a national securities exchange or the over-the-counter
market, the value of one Share on such date as determined in good-faith by the
Committee.




(o)
“Grantee” means an Employee, Director, or Officer to whom an Award has been
granted hereunder.




(p)
“Incentive Stock Option” shall mean an Option that is intended to be an
“incentive stock option” within the meaning of Section 422 of the Code. 




(q)
“Non-Qualified Stock Option” shall mean an Option that is not an Incentive
Stock Option. 




(r)
“Option” shall mean an Incentive Stock Option or a Non-Qualified Stock Option
granted pursuant to the Plan. 




(s)
“Option Agreement” means the agreement pursuant to which an Incentive Stock
Option or Non-Qualified Stock Option is granted in accordance with
Section 7, a form of which, subject to completion by appropriate
insertions, modifications, restrictions, and limitations, as determined by the
Committee in its sole discretion, provided that such insertions, modifications,
restrictions, and limitations are not inconsistent with the terms of the Plan,
is attached hereto as Exhibit B.




(t)
“Performance Goals” means, and shall be based on, one or more of the
following business criteria: revenue growth; net income; earnings per share;
earnings before any one or more of the following items: interest, taxes,
depreciation or amortization; operating or pre-tax income; cash flow; return on
equity; return on invested capital; return on assets; cost reductions or
savings; funds from operations; appreciation in the market value of Shares;
product market share.  Where applicable, Performance Goals may be expressed in
terms of attaining a specified level of the particular criteria or the
attainment of a percentage increase or decrease in the particular criteria, as
determined by the Committee. The Performance Goals may be subject to a
threshold level of performance below which no vesting will occur, levels of
performance at which specified vesting will occur, and a maximum level of
performance above which full vesting will occur. Each of the Performance Goals
shall be determined, where applicable, in accordance with generally accepted
accounting principles and shall be subject to certification by the Committee;
provided that the Committee shall have the authority to make equitable
adjustments to the Performance Goals in recognition of unusual or non-recurring
events affecting the Company or any Subsidiary or the financial statements of
the Company or any Subsidiary, in response to changes in applicable laws or
regulations, or to account for items of gain, loss, or expense determined to be
extraordinary or unusual in nature or infrequent in occurrence or related to
the disposal of a segment of a business or related to a change in accounting
principles.






























(u)
“Permanent Disability” means disability of the Grantee that prevents him or her
from performing the customary duties of his or her employment or other service
for the Company or its Affiliates by reason of physical or mental incapacity
that is expected to be of indefinite duration or result in death, or as defined
in an applicable agreement entered into by the Grantee and the Company or its
Affiliate, or as determined by the Committee in accordance with uniform and non
discriminatory standards adopted by the Committee, in the absence of which the
provisions of Section 22(e)(3) of the Code shall apply.




(v)
“Restricted Stock” means the Shares awarded upon the terms and conditions and
subject to the restrictions set forth in Section 6 and in the Grantee’s
Restricted Stock Agreement.




(w)
“Restricted Stock Agreement” means the agreement pursuant to which Restricted
Stock is issued in accordance with Section 6, a form of which, subject to
completion by appropriate insertions, modifications, restrictions, and
limitations, as determined by the Committee in its sole discretion, provided
that such insertions, modifications, restrictions, and limitations are not
inconsistent with the terms of the Plan, is attached hereto as Exhibit A. 




(x)
“Shares” means shares of Common Stock, par value $.01 per share, of the
Company.




(y)
“Subsidiary” means any corporation or business trust the majority of the
outstanding voting stock of which is owned, directly or indirectly, by the
Company.




(z)
“Termination of Employment” means the time when the employee-employer
relationship between the Employee and the Company or a Subsidiary is terminated
for any reason, including, but not limited to, a termination by resignation
(including retirement), discharge, death, Permanent Disability or the
disaffiliation of a Subsidiary, but excluding any such termination where there
is a immediate reemployment (other than part time employment or consulting) by
either the Company or a Subsidiary.




(aa)
“Transfer Restrictions” means the restrictions on transfer on Restricted Stock
set forth in Section 6 hereof.

3. Administration
of the Plan.  (a) Committee. The Plan shall be administered by the
Committee.  The Committee shall have the authority in its sole and
absolute discretion, subject to and not inconsistent with the express
provisions of the Plan, to administer the Plan and to exercise all the powers
and authorities either specifically granted to it under the Plan or necessary
or advisable in the administration of the Plan, including, without limitation,
the authority to grant Awards; to determine the persons to whom and the time or
times at which Awards shall be granted; to determine the number of Awards to be
granted, the number of Shares to which an Award may relate and the terms,
conditions, restrictions, limitations, and (as applicable) Performance Goals
relating to any Award (including without limitation the exercise and vesting
conditions relating thereto, as applicable), whether or not specifically set
forth in the Plan; to determine whether, to what extent, and under what
circumstances an Award may be cancelled, forfeited, exchanged, or surrendered;
to make adjustments in any applicable Performance Goals in recognition of
unusual or nonrecurring events affecting the Company or the financial
statements of the Company, or in response to changes in applicable laws,
regulations, or accounting principles; to construe and interpret the Plan and
any Award; to prescribe, amend, and rescind rules and regulations relating to
the Plan; to determine and interpret the terms and provisions of Option
Agreements, Restricted Stock Agreements, and any other instrument under the
Plan; and to make any and all determinations and interpretations and take such
other actions as may be deemed necessary or advisable in order to carry out the
provisions, intent, and purposes of the Plan.






























(b) Committee
Action. (i) The Committee may, in its sole and absolute discretion,
without amendment to the Plan, except in the case of Termination of Employment
or other relationship for cause, waive or amend the operation of Plan
provisions respecting vesting or exercise after Termination of Employment or
service to the Company or a Subsidiary and, except as otherwise provided
herein, adjust any of the terms of any Award. The Committee may also accelerate
the vesting date or waive or adjust any other condition or restriction imposed
hereunder with respect to the vesting of an Award, provided that the Committee
determines that such acceleration, waiver or other adjustment is in the best
interests of the Company and necessary or desirable in light of extraordinary
circumstances. Except as set forth herein, no
amendment or modification of an outstanding Award may adversely affect the
terms of a Grantee’s Award without the Grantee’s written consent.  Notwithstanding
anything in the Plan to the contrary, no Award outstanding under the Plan may,
directly or indirectly, be re-priced, re-granted through cancellation or
exchange, or otherwise amended or modified to reduce the price applicable
thereto (other than with respect to adjustments made in connection with a
transaction or change contemplated by Section 10 hereof) without the approval
of the Company’s shareholders. (ii) A majority of the members of the Committee shall
constitute a quorum. The Committee may act by the vote of a majority of its
members present at a meeting at which there is a quorum or by unanimous written
consent. The determinations of the Committee, including with regard to
questions of construction, interpretation and administration, shall be final,
binding and conclusive on all persons.




(c) Members
Protected. (i) No member of the Committee shall be personally liable for
any action, determination, or interpretation taken or made with respect to the
Plan, unless such action, determination, or interpretation constitutes willful
misconduct, fraud, gross negligence or demonstrates bad faith, and all members
of the Committee shall be fully protected by the Company with respect to any
such action, determination or interpretation except as aforesaid.  (ii) The
Company shall indemnify and hold harmless each member of the Committee and the
Board and any employee of the Company who provides assistance with the
administration of the Plan from and against any loss, cost, liability
(including any sum paid in settlement of a claim with the approval of the
Board), damage and expense (including the advancement of reasonable legal and
other expenses incident thereto) arising out of or incurred in connection with
the Plan, unless and except to the extent attributable to such person’s willful
misconduct, fraud, gross negligence, or bad faith.




4. Plan
Limitations; Shares Subject to the Plan. (a) Share Limit. The
maximum number of Shares that may be issued or transferred under the Plan shall
be 400,000 Shares in the aggregate, consisting of Shares underlying Options and
Restricted Stock, subject to adjustment pursuant to the provisions of
Section 10.  Such shares may be authorized but unissued Shares or
authorized and issued Shares held in the Company’s treasury.  Any (i) Options and (ii) Restricted Stock that have been
awarded under the Plan but are subsequently forfeited, surrendered, cancelled,
remain unexercised at Option expiration or termination, or otherwise revert to
the Plan pursuant to the provisions hereof or of an Award may again be issued
as Awards under the Plan.




(b) Grantee Limit. The
total number of shares (i) underlying Options or (ii) of Restricted Stock
subject to one or more Awards awarded to any one Grantee in any tax year of the
Company shall not exceed 200,000 Shares subject to adjustment as provided in
Section 10.

 
































5. Eligibility
for Participation. The Committee shall from time to time in its absolute
discretion select Grantees from among those persons who, in the opinion of the
Committee are in a position to contribute materially to the growth and success
of the Company.  Notwithstanding the foregoing, Incentive Stock Options may
only be granted to persons who are employed by the Company or a Subsidiary at
the time of grant.




6. Restricted
Stock Awards. (a) Grant of Award. The Committee may, from time
to time, grant Restricted Stock Awards to eligible Employees, Directors, and
Officers.   Each Award shall be evidenced by a Restricted Stock Agreement
between the Company and the Grantee, which Agreement shall contain terms
prescribed by the Plan and such other terms and conditions, limitations, and
restrictions as the Committee may deem necessary or advisable. The purchase
price, if any, of Restricted Stock awarded under the Plan shall be set forth in
the Restricted Stock Agreement and shall not be less than the amount required
for the issuance of fully paid, non-assessable Shares under the Certificate of
Incorporation of the Company.  




(b) Vesting. At the
time of the Award of shares of Restricted Stock, the Committee shall establish
a vesting date or vesting dates with respect to such Award. The Committee may
divide Awards into classes and assign a different vesting date for each class.
Provided that all conditions to the vesting of a share of Restricted Stock
imposed pursuant to Section 6(c) are satisfied, upon the occurrence of the
vesting date with respect to a share of Restricted Stock, such Share shall vest
and the Transfer Restrictions shall lapse.




(c) Restrictions.
Restricted Stock shall be subject to the following restrictions:




(i)
no Restricted Stock may be sold, assigned, transferred, pledged, hypothecated
or otherwise disposed of during such time as such Restricted Stock is subject
to the restrictions provided in this Section 6;




(ii)
The restrictions with respect to the Restricted Stock shall be specified in,
and shall lapse in accordance with, the provisions hereof and as established by
the Committee and set forth in each Grantee’s Restricted Stock Agreement.




(iii)
Each Certificate issued with respect to Restricted Stock shall be registered in
the name of the Grantee and deposited, together with a stock power duly
executed in blank by the Grantee, with the Company or, if the Committee so
specifies, with a third party custodian or trustee, and shall bear the
following, or a similar, legend:




“The
transferability of this certificate and the shares of Common Stock represented
hereby are subject to the terms, conditions and restrictions (including
forfeiture) contained in the Forward Industries, Inc. 2007 Equity Incentive Plan 
and the Restricted Stock Agreement entered into between the registered owner
and Forward Industries, Inc. A copy of such Plan and Agreement are on file in
the offices of Forward Industries Inc., 1801 Green Rd., Suite E., Pompano Beach, Fl., 33064.”




(iv)
Awards of Restricted Stock granted to Covered Employees (or employees
who, in the Committee’s determination, may become Covered Employees) that are
performance based shall vest only after the attainment of Performance Goals has
been certified by the Committee.






























(d) Certificates.
Upon the vesting of Shares of Restricted Stock and at the expiration of the
restrictions provided herein and in the Restricted Stock Agreement, the Company
will cause a new Certificate to be delivered to the Grantee (or in the case of
the Grantee’s death (where the Committee has determined that unvested Shares
under an Award shall not be subject to forfeiture) to his or her legal
representative, beneficiary or heir), free of any legend provided herein for
such number of Shares as to which such restrictions shall have lapsed;
provided, however, that the Company shall not be required to issue fractional
Shares.




(e) Rights
of Grantee. During the applicable period of restriction as to any
Restricted Stock, a Grantee shall be the record owner thereof and shall be
entitled to vote such Shares and receive all dividends and other distributions
paid with respect to such Shares; provided that if any such dividend or
distribution is paid in Shares, the Shares so received shall be subject to the
same restrictions as the Restricted Stock with respect to which such dividend
or distribution was paid.  The Committee in its discretion may require
that any dividends paid on Restricted Stock be held in escrow until all
restrictions or conditions to the vesting of such Shares have lapsed, and the Committee may provide in the agreement such other
restrictions terms or conditions with respect to the treatment and holding of
any shares, cash or other property that may be received as consideration or in
exchange for Restricted Stock.




7. Stock Options. 




(a) Grant
of Award. The Committee may, from time to time, grant Option Awards to
eligible Employees, Directors, and Officers.   Each Award shall be evidenced by
an Option Agreement between the Company and the Grantee, which Agreement shall
contain terms prescribed by the Plan and such other terms and conditions,
limitations, and restrictions as the Committee may deem necessary or
advisable.  


(b) Type
of Options. Subject to the provisions hereof, the Committee may grant
Incentive Stock Options and Non-Qualified Stock Options to eligible personnel
upon such terms and conditions as the Committee deems appropriate.  




(c) Option
Term. Unless sooner terminated, all Options shall expire not more than ten
(10) years after the date the Option is granted (or, in the case of an
Incentive Stock Option granted to a Ten Percent Stockholder, not more than five
(5) years). 




(d) Exercise
Price. The exercise price per Share covered by an Option may not be less
than one hundred percent (100%) of the Fair Market Value per Share on the date
the Option is granted (or, in case of an Incentive Stock Option granted to a
Ten Percent Stockholder, one hundred ten percent (110%) of the Fair Market Value
per Share on the date the Option is granted).  The “date the Option is granted”
shall refer to the date on which the Committee definitively authorizes the
grant of the Option (or upon the date on which all conditions, if any, imposed
by the Committee in conditioning the grant, have been satisfied).




(e) Exercise
of Options. The Committee may establish such vesting and other conditions
and restrictions on the exercise of an Option and/or upon the issuance of Shares
in connection with the exercise of an Option as it deems appropriate. All or
part of the exercisable portion of an Option may be exercised at any time
during the Option term, except that, without the consent of the Committee, no
partial exercise of an option may be for less than one hundred (100) shares.  All
Options shall be exercisable during a Grantee’s lifetime only by the Grantee.

 






























(f) Payment
of Exercise Price. An Option may be exercised by transmitting to the
Company: (i) a written notice specifying the number of Shares to be purchased,
and (ii) payment of the full exercise price, together with the amount, if any,
deemed necessary by the Committee to enable the Company to satisfy its federal,
state, foreign or other tax withholding obligations with respect to such
exercise. The Committee may establish such rules and procedures as it deems
appropriate for the exercise of Options. The exercise price of Shares acquired
pursuant to the exercise of an Option may be paid in cash, certified or bank
check and/or such other form of payment as may be approved by the Committee and
permitted by applicable law from time to time, including, without limitation, Shares
that have been owned by the holder for at least six (6) months (free and clear
of any liens and encumbrances). 




(g) Termination
of Options.  (i) Termination due to Death
or Disability. If a Grantee’s employment or other service terminates due to his
or her death or Permanent Disability (or if the Grantee’s employment or other
service is terminated by reason of his or her Permanent Disability and the Grantee
dies within one year of such termination of employment or other service), then:
(i) that portion of an Option that is not exercisable on the date of
termination shall immediately terminate, and (ii) that portion of an Option that
is exercisable on the date of termination shall remain exercisable, to the
extent exercisable on the date of termination, by the Grantee (or the Grantee’s
designated beneficiary or representative) during the one year period following
the date of termination (or, during the one year after the later death of a
disabled Grantee) or, if sooner, until the expiration of the stated term
thereof, and, to the extent not exercised during such period, shall thereupon
terminate. 




(ii) Termination for Cause or
at a Time when Cause Exists. Unless the Committee shall otherwise decide as
being in the best interests of the Company in respect of the portion of an
Option that is exercisable, if a Grantee’s employment or other service is
terminated by the Company or a Subsidiary for Cause or if, at the time of his
or her termination, grounds for a termination for Cause exist, then any Option
held by the Grantee (whether or not then exercisable) shall immediately
terminate and cease to be exercisable. 




(iii) Other Termination. If a
Grantee’s employment or other service terminates for any reason or no reason,
then, except as provided for in an employment agreement: (i) that portion of an
Option held by the Grantee that is not exercisable on the date of termination
shall immediately terminate, and (ii) that portion of an Option that is
exercisable on the date of termination shall remain exercisable, to the extent
exercisable on the date of termination, by the Grantee during the ninety (90)
day period following the date of termination or, if sooner, until the
expiration of the stated term thereof, and, to the extent not exercised during
such period, shall thereupon terminate.

8. Additional
Terms Relating to Options and Restricted Stock Awards.






























(a)
Conditions. At the time of an Award, the Committee may impose such
restrictions or conditions to the exercisability of Options or vesting of
Restricted Stock as it, in its absolute discretion, deems appropriate,
including requiring the achievement of Performance Goals.  If the conditions or
restrictions pertaining to such exercisability or vesting in respect of an
Award are not satisfied in accordance with their terms, the Award shall be
forfeited and the Shares underlying the Options or Restricted Stock, as the
case may be, shall revert to the Plan as authorized but unawarded Shares. To
the extent not inconsistent with the provisions of the Plan, the Option
Agreement and Restricted Stock Agreement, as the case may be, shall govern the
rights and obligations of the Grantee (and any person claiming through the
Grantee) with respect to the Option and Restricted Stock.  To the extent that an Award made to a Covered
Employee is performance based and is intended to satisfy the criteria set forth
in Code Section 162(m), it shall be based on and subject to achievement of the
Performance Goals as set forth in the Option Agreement or Restricted Stock
Agreement relating to such Award.  To the extent that an Award of Options
becomes exercisable or an Award of Restricted Stock is to vest based upon the
continued employment of the Participant, such Award shall vest pursuant to a
schedule as the Committee may determine in its sole discretion.






























 (b) Rights
Upon Issuance. No person shall have any rights as a shareholder with
respect to any Shares covered by or relating to any Award until the date of
issuance of a Certificate with respect to such Shares (whether by book entry or
in physical, certificated form).  Except as otherwise expressly provided in
Section 10, no adjustment to any Award shall be made for dividends or other
rights for which the record date occurs prior to the date of such Certificate.




(c) Termination
of Relationship. Subject to the terms of of Section 7(g) in the case of
Options, unless the Committee otherwise determines in its sole discretion, upon
Termination of Employment or other relationship between the Grantee and the
Company or any Subsidiary of the Company (or the successor of any such company)
for any reason, all Shares relating to an Award (or part thereof) which on the
date of termination is not exercisable, or which has not vested, or as to which
the restrictions thereon shall not have lapsed shall be immediately forfeited
to the Plan as authorized but unawarded Shares and the corresponding Award (or part
thereof) shall immediately terminate on such date; provided, however, the
Committee may not so determine in the case where the Employment or other
relationship is terminated for cause.




(d) Change of Control. 
In the event of a Corporate Change of Control, the Committee may, in its
discretion, and subject to compliance with the other terms and conditions of
the Plan, determine that the exercise or vesting schedule in respect of one or
more Awards may be accelerated. 




(e) Cancellation of Awards.
Unless an Option Agreement or Restricted Stock Agreement specifies otherwise,
the Committee will cancel, rescind, suspend, withhold or otherwise limit or
restrict any unexpired Option or unvested Restricted Stock at any time if the Grantee
is not in compliance with all material applicable provisions of the Award and
the Plan. Upon exercise of an Option and as a condition to issuance of
Certificates pursuant to Section 6(d), the Grantee shall certify in a manner
acceptable to the Company that he or she is in compliance with the terms and
conditions of the Plan.  

9. Amendment
of the Plan. The Board may at any time and from time to time modify or
amend the Plan in any respect; provided, that without approval of the
shareholders of the Company the Board may not increase the maximum number of
Shares that may be awarded under the Plan (other than increases due to
adjustments in accordance with Section 10), materially modify the
requirements as to eligibility for participation in the Plan, or otherwise materially
increase the benefits accruing to participants under the Plan; and provided,
further, that shareholder approval shall be required for any such
amendment if and to the extent the Board of Directors determines that such
approval is appropriate or necessary for purposes of satisfying Section 162(m),
Section 409A, or Section 422 of the Code or Rule 16b-3 under the Exchange Act
or other applicable law or the requirements of any securities exchange upon
which the securities of the Company trade. Nothing herein shall restrict the
Committee’s ability to exercise its discretionary authority pursuant to Section
3, which discretion may be exercised without amendment to the Plan.  Any modification or amendment to the Plan shall not,
without the written consent of any Grantee, adversely affect the Grantee’s
rights under an outstanding Award granted prior to such modification or
amendment.
































 




10. Dilution
and Other Adjustments. In the event of any change in the number of
outstanding Shares by reason of any stock dividend or split, recapitalization,
merger, consolidation, spin-off, reorganization, combination or exchange of
shares, or other similar corporate change affecting all shareholders on a pro
rata basis, the Committee shall make such adjustments, if any, as it deems
necessary, appropriate, and equitable in the aggregate number or kind of
Options or Restricted Stock or other stock or securities which may be awarded
pursuant to the Plan, and in the terms and restrictions of each outstanding
Award affected thereby. Such adjustments shall be conclusive and binding upon
all parties concerned, absent manifest error.




11. Tax
Matters. (a) Withholding.  The Company shall deduct from each
Grantee’s salary or wages, or, at the option of the Grantee, the Grantee shall
pay to the Company, the amount of any tax required by any governmental
authority to be withheld resulting on account of an Award, the exercise of an
Option, or the lapse of restrictions on Restricted Stock. The Committee may, in
its sole discretion, permit a Grantee the right to satisfy, in whole or in
part, any tax withholding requirement so resulting by electing to require the
Company to purchase that number of unrestricted Shares designated by the
Grantee at the Fair Market Value for Shares on the date of exercise or lapse of
restrictions, or if not traded on such day on the next preceding day on which
trading occurred. The Company shall not be required to deliver a Certificate
for any Shares upon exercise of an Option or lapse of restrictions until all such
taxes shall have been paid by the Grantee or the person entitled thereto. The
Company shall have the right, but not the obligation, to sell or withhold such
number of Shares distributable to the person entitled to such distribution as
will provide assets for payment of any tax so required to be paid by the
Company for such person unless, prior to such sale or withholding, such person
shall have paid to the Company the amount of such tax. Any balance of the
proceeds of such a sale remaining after the payment of such taxes shall be paid
over to such person. In making any such sale, the Company shall be deemed to be
acting on behalf and for the account of such person.




(b) Section83(B)
Election. Each Grantee shall deliver to the Company a signed copy of any
instrument, letter, or other document the Grantee may execute and file with the
Internal Revenue Service evidencing the Grantee’s election under Section
83(b)(2) of Code to treat the receipt of any Restricted Stock as includable in
the Grantee’s gross income in the year of receipt. The Grantee shall deliver a
copy of any such instrument of election to the Company not later than the date
on which any such election is required to be made in accordance with the
appropriate provisions of the Code or applicable Regulations thereunder.




12. Applicable
Laws and Regulations. (a) Issuance. The Company’s obligation to
issue any Shares or deliver any Certificate pursuant to an Award shall be
subject to such compliance as the Committee in its sole discretion deems
necessary or advisable with respect to any and all of the following: the
listing of such Shares upon the Nasdaq SmallCap Market, or such other market or
securities exchange on which the Shares may then be listed; the registration or
qualification of such Shares under any federal or state law; the rulings or
regulations of any governmental regulatory body; or the obtaining of any
approval or consent from any federal state or other governmental agency.






























(b)
Listing and Other Conditions. The issuance and transfer of any Shares
hereunder shall be effective only at such time as counsel to the Company shall
have determined that the issuance and delivery of such shares are in compliance
with all applicable laws, regulations of governmental authority and the
requirements of the NASDAQ SmallCap Market or such other market or securities
exchange on which the Shares may be listed. The Committee may, in its sole
discretion, defer the effectiveness of any issuance or transfer of Shares
hereunder in order to allow their issuance to be made pursuant to registration
or an exemption from registration or other methods for compliance available
under federal or state securities laws.  The Committee shall inform the Grantee
(or a permitted transferee of such person) in writing of its decision to defer
the effectiveness of an issuance or transfer.  If at any time counsel to the
Company shall be of the opinion that any sale or delivery of Shares is or may
in the circumstances be unlawful or result in the imposition of excise taxes on
the Company under the statutes, rules or regulations of any applicable
jurisdiction, the Company shall have no obligation to make such sale or
delivery, or to make any application or to effect or to maintain any
qualification or registration under the Securities Act or otherwise with
respect to Shares, and the right to  perfect any Award shall be suspended
until, in the opinion of said counsel, such sale or delivery shall be lawful or
shall not result in the imposition of excise taxes on the Company.




13. Employment
or Other Rights. Nothing in the Plan or in any Option Agreement or
Restricted Stock Agreement shall confer upon any Grantee the right to continue
in the employ of the Company or its Subsidiaries or shall interfere with or
restrict in any way the rights of the Grantee’s employer to discharge the
Grantee at any time for any reason whatsoever, with or without cause, subject
to such rights, if any, as the Grantee may have under an effective employment
or other agreement with the Company or Subsidiary.  No person shall have
any claim or right to receive an Award hereunder. The Committee’s granting of
an Award at any time shall neither require the Committee to grant any other
Award to any other person at any time or preclude the Committee from making
subsequent grants to such Grantee or any other person.

14. Transferability.
The Committee may direct that any Option Agreement or Certificate evidencing Shares
issued pursuant to the Plan shall bear a legend setting forth such restrictions
on transferability as may apply to such Shares, including without limitation
the legend contemplated by Section 6(c). Awards granted under the Plan shall
not be transferable by a Grantee other than (i) upon Grantee’s death by will or
by the laws of descent and distribution (subject to the Committee’s action to
permit vesting, exercise, and transfer in such cases), or (ii) pursuant to a
qualified domestic relations order, as defined by the Code or Title 1 of the
Employee Retirement Income Security Act or the rules thereunder, or (iii) as
otherwise determined by the Committee in its sole discretion in accordance with
and in furtherance of the purposes of the Plan; provided, however, that no
transfer of an Incentive Stock Option may be made pursuant to clause (ii) or
(iii) of this sentence. The designation of a beneficiary of an Award by a Grantee
shall not be deemed a transfer prohibited by this Section 14.  Neither an Award
nor the Shares underlying an Award may be assigned, pledged, or hypothecated in
any way (whether by operation of law or otherwise) and shall not be subject to
execution, attachment or similar process. Any attempted transfer, assignment,
pledge, hypothecation, or other disposition of any Award contrary to the
provisions of this Section 14, or the levy of any attachment or similar process
upon an Award, shall be null and void. No transfer of an Award by will or the
laws of descent and distribution (subject to the Committee’s action to permit
vesting and transfer in such cases) or as otherwise permitted by this Section 14,
shall be effective to bind the Company unless the Committee shall have been
furnished with (a) written notice thereof and with such evidence as the
Committee may deem necessary to establish the validity of the transfer and (b)
an agreement by the transferee to comply with all the terms and conditions of
the Award that are or would have been applicable to the Grantee and to be bound
by the acknowledgments made by the Grantee in connection with the grant of the
Award. 






























15. Dissolution
or Liquidation of the Company. Immediately prior to the dissolution or
liquidation of the Company other than in connection with transactions to which
Section 10 is applicable, all Awards granted hereunder as to which Restricted
Stock shall not have vested or Options that have not been exercised shall
terminate and become null and void and shall be forfeited immediately prior to
such dissolution or liquidation. 




16. Effectiveness;
Term of Plan. The Plan shall become effective upon, and its effectiveness
is subject to, the approval of the shareholders of the Company at a duly called
meeting thereof, provided that such approval occurs within 12 months of Board
approval.  The Board may withdraw the Plan for shareholder approval before it
has become effective.  After effectiveness, the Board may, at any time,
suspend or terminate the Plan.  The Plan shall
terminate upon the granting of Awards equaling the maximum number of Shares
that may be awarded under the Plan, and thereafter the function of the
Committee will be limited to the administration of Option Agreements and
Restricted Stock Agreements, as the case may be. Each Award shall remain in
effect in accordance with its terms or until the conditions to exercise of
Options remain unsatisfied, or restrictions on Restricted Stock have lapsed or
the Restricted Stock shall revert to the Company in accordance with the terms
hereof. No termination of the Plan shall, without the written consent of the
Grantee, adversely affect the rights or obligations under Awards previously
granted.  Unless extended or earlier terminated by the Board, the right to
grant Awards under the Plan shall terminate on the tenth anniversary of Board
approval of the Plan.  Awards outstanding at Plan termination shall remain in
effect according to their terms and the provisions of the Plan and the
applicable Option Agreement and Restricted Stock Agreement, as the case may be.





17. Applicable
Law. The Plan shall be construed and enforced in accordance with the law of
the State of New York, without reference to its principles of conflicts of law.





18. No
Fractional Shares. No fractional Shares shall be issued or delivered
pursuant to the Plan. The Committee shall determine whether cash, other Awards,
or other property shall be issued or paid in lieu of such fractional Shares or
whether such fractional Shares or any rights thereto shall be forfeited or
otherwise eliminated. 




19. Beneficiary.
A Grantee may file with the Committee a written designation of a beneficiary on
such form as may be prescribed by the Committee and may, from time to time,
amend or revoke such designation. If no designated beneficiary survives the
Grantee, the executor or administrator of the Grantee’s estate shall, subject
to the Committee’s action to permit vesting and transfer, be deemed to be the Grantee’s
beneficiary. 






























20. Interpretation;
Special Rules. The Plan is designed and intended to comply, to the extent
applicable to performance-based Awards made under the Plan, with Section 162(m)
of the Code, and all provisions hereof shall be construed in a manner to so
comply. The Plan is also intended to comply with the provisions of Section 409A
of the Code, and all provisions hereof shall be construed in a manner to so comply. 
Notwithstanding anything in the Plan or a Restricted Stock Agreement to the
contrary, any provision of an Award that is subject to Section 409A but that does
not comply with the requirements of such section shall be null and void and of
no force or effect and the Committee shall, upon notice of such non-compliance
and in its complete discretion, amend and reform such provision or provisions so
as to comply with the provisions of Section 409A. Subject to Section 162(m) and
Section 409A of the Code and Section 16 of the Exchange Act, to the extent the
Committee deems it necessary, appropriate, or desirable to comply with foreign
law or practices and to further the purpose of the Plan, the Committee may,
without amending this Plan, establish special rules applicable to Awards
granted to Grantees who are foreign nationals, are employed outside the United
States, or both, including rules that differ from those set forth in the Plan,
and grant Awards (or amend existing Awards) in accordance with those rules. 




21. Severability.
If any provision of the Plan is held to be invalid or unenforceable, the other
provisions of the Plan shall not be affected but shall be applied as if the
invalid or unenforceable provision had not been included in the Plan.


	

  
	
  Adopted by the Board of
  Directors on 

	February 6, 2007, and by the shareholders 

	of the Company on May 2, 2007  

  
	

   

  
	
  Forward Industries, Inc.

	A New York corporation