Document:

Exhibit 10.2

EMPLOYMENT AGREEMENT (this "Agreement"), dated
as of the 27th day of December, 2005, and effective as of October 1, 2005 (the
"Effective Date"), between Forward Industries, Inc., a New York corporation having
its principal offices at 1801 Green Road, Suite E, Pompano Beach, Florida 33064
(the "Company"), and Michael M. Schiffman, residing at 22153 Larkspur Trail,
Boca Raton, Florida 33433 ("Executive").

W I T N E S S E T H:

WHEREAS, Executive has been rendering services
to the Company pursuant to an employment agreement between him and the Company effective
as of October 1, 2003 (the "Prior Agreement");

WHEREAS, the Company desires to employ
Executive to perform senior executive and other services for the Company, and
Executive desires to accept such employment, upon the terms and conditions of
this Agreement, and the parties agree that the Prior Agreement shall be
terminated on and as of the Effective Date;

NOW, THEREFORE, in consideration of the mutual
covenants herein contained and other good and valuable consideration, the
receipt of which the parties hereby acknowledge, the parties agree as follows:

1.         TERMINATION OF PRIOR AGREEMENT

The parties hereto hereby
agree that, on and as of the Effective Date, (a) the Prior Agreement shall be,
and it hereby is, terminated and of no further force or effect whatsoever, (b)
the terms and conditions of this Agreement supersede the terms and conditions
of the Prior Agreement, and (c) the Company shall have no remaining obligations
under the Prior Agreement except in respect of unused personal days and
vacation time accrued in respect of the fiscal year ended September 30, 2005, and
pension, medical benefits, and other benefits granted to all employees
generally as such benefits have accrued on behalf of Executive consistent with
the terms of the Prior Agreement.

 

2.         EMPLOYMENT
AND DUTIES

On the terms and conditions
hereinafter set forth, the Company hereby employs Executive as its President
and Chief Operating Officer for the term of this Agreement, as set forth in
Section 3, and Executive hereby accepts such employment.

3.         EMPLOYMENT TERM

Unless terminated at an
earlier date in accordance with the terms of this Agreement, the term of
employment hereunder (the "Employment Term") shall commence on the
Effective Date and expire on December 31, 2007.  Upon expiration of the
Employment Term, this Agreement shall be automatically renewed for successive
terms of one year each; provided, however, that if either party provides
written notice to the other party of its or his determination not to so renew
not later than 90 (ninety) days prior to the expiration of the Employment Term,
or any renewal thereof, as the case may be, this Agreement shall terminate at
the end of the Employment Term or such renewal term, as the case may be. 
Subject to the terms of Section 6, in the event that the Company gives notice
to Executive of its determination not to renew, Executive shall be entitled to
severance in an amount equal to his Salary (as hereinafter defined) for six
months at the rate in effect at the time that such  notice is given, payable in
a lump sum (less applicable withholding and payroll taxes and other deductions
in accordance with the Company's benefit plans in which Executive is
participating at the time) on the last day of Executive's employment.  Payment
of bonus compensation shall be subject to the terms of Section 5.

 

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4.         SERVICES

(a)        Executive
shall perform such duties of a senior executive nature for the Company, as
shall be consistent with the provisions of the Company's By-laws in effect on
the date hereof, subject to the direction of the Company's Chief Executive
Officer and its Board of Directors (the "Board").  Executive shall serve the
Company faithfully and to the best of his ability and shall devote his full business
time and attention to the business and affairs of the Company, subject to
reasonable absences for vacation and illness as determined by the Compensation
Committee of the Board (the "Compensation Committee").  Executive will not
engage, directly or indirectly, in any other business or occupation during the Employment
Term. It is understood, however, that the foregoing will not prohibit the
Executive from (i) engaging in personal investment activities for himself and
his family, (ii) accepting directorships unrelated to the Company, subject to
the prior, written approval of the Compensation Committee, and (iii) engaging
in charitable and civic activities, so long as any one or more such outside
interests set forth in clauses (i), (ii) and (iii) hereof do not interfere with
or affect the performance of his duties hereunder.

(b)        Unless
otherwise agreed in writing by the Company and Executive, the performance of
Executive's services during the term of this Agreement shall be rendered at the
principal executive offices of the Company, subject to such travel in
furtherance of Executive's performance of his duties hereunder as the business
of the Company may require.

5.         COMPENSATION
AND EXPENSE REIMBURSEMENT

(a)        Salary. 
Executive shall be entitled to receive for all services rendered by Executive
in any and all capacities in connection with his employment hereunder a salary
(as it may be adjusted, "Salary") of $325,000 per annum (at such rate, retroactive
to the Effective Date), payable in equal installments in accordance with the
prevailing practices of the Company (but not less frequently than monthly). 

(b)        Bonus. 
The Executive shall be eligible to receive a bonus ("Bonus") with respect to
each full fiscal year or (except to the extent expressly provided in Sections
5(c), 6, or 8 hereof) part thereof in respect of his employment hereunder, as
set forth in this Section 5.  

 

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(c)        Calculation and
Payment of Bonus.  The amount of Bonus, if any, that Executive may earn in
any fiscal year during the Term hereof pursuant to this Section 5(c) shall be based
on the extent to which, if any, the Company achieves all or a percentage of, or
exceeds, Target (as defined below) in each such fiscal year, in accordance with
guidelines for earning such bonus as fixed by the Compensation Committee in its
sole discretion not later than the date referred to in the next paragraph.

"Target" means, with respect to any fiscal year, the
amount of pre-tax income of the Company, in combination with other measures as determined
by the Compensation Committee of the Board in its sole discretion, projected
for achievement, in whole or in part, in such fiscal year by the Compensation
Committee for the purpose of establishing Bonus compensation.  Pre-tax income
is defined for purposes hereof as the Company's consolidated net income, after
giving effect to bonuses paid to employees (including executive officers) but
before extraordinary items (whether contributions to or deductions from net
income), plus income taxes, all as determined by reference to the results of
operations set forth in the Company's audited financial statements in respect
of the fiscal year with respect to which the calculation of the Bonus payable
hereunder is being determined.  The Compensation Committee shall determine the
Target in each such fiscal year, together with the formulas for earning Bonus
hereunder, after the Board has adopted the Annual Budget in respect thereof but
not later than the 61st day of such fiscal year.  The Compensation
Committee may determine that the amount of Bonus for such purposes may be pro
rated based on Target being achieved, exceeded, or missed.

"Fiscal year" means the fiscal year of the Company,
ending on September 30.

 

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Bonus compensation, if any,
payable pursuant to Section 5(c) shall be payable to Executive not earlier than
the date on which the Company's audited financial statements relating to the
fiscal year in respect of which such Bonus compensation is payable are first
filed with the Securities and Exchange Commission (the "Commission') pursuant
to Section 13 or 15(d) under the Securities Exchange Act of 1934 ("Exchange
Act") nor later than the tenth (10th) business day after such date. 
If Executive is otherwise entitled to payment of a Bonus pursuant to Section
5(c) and the terms of this Agreement but has not served as an employee for the
full fiscal year in respect of which such Bonus is payable, Executive, or his
estate, shall be entitled to payment, at the time specified in the next
preceding sentence, of a ratable portion of such Bonus to which he or his
estate is entitled, based on the ratio that the actual number of days in such
fiscal year during which he served as an Employee pursuant to this Agreement
and is so entitled bears to 365; provided, however, that no Bonus
(pro-rated or otherwise) shall be payable in respect of the part of the fiscal
year during which Executive is employed hereunder solely for the first fiscal
quarter thereof because of expiration of the Employment Term, or any renewal
thereof as a result of notice of non-renewal furnished pursuant to Section 3;
and provided, further, that if Executive's employment was terminated as
a result of notice pursuant to Section 6, he shall not be entitled to any Bonus
compensation in respect of the fiscal year during which such notice of
termination was given or during which such termination becomes effective.

(d)        Expenses. 
Executive will be reimbursed for all reasonable and necessary expenses
reasonably incurred by Executive in carrying out the duties contemplated under
this Agreement, in accordance with Company practices and procedures in effect
from time to time, as such practices may be changed from time to time by the
Board.  Executive shall be entitled to a monthly allowance, subject to the
approval and discretion of the Chief Executive Officer, to defray the expense
of the lease of an automobile (including monthly lease cost, maintenance,
insurance, and operating expense) for Executive's use in connection with the
discharge of his duties under this Agreement, the amount of which allowance
shall be includible in Executive's W-2 statements and be subject to applicable
income tax withholding regulations..

 

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 (e)       Benefits. 
Executive shall be entitled to participate in all group health and other
insurance programs and all other fringe benefit (including vacation) and
retirement plans (including any 401(k) plan) or other compensatory plans that
the Company may hereafter elect to make available to its executives generally
on terms no less favorable than those provided to other executives generally,
provided Executive meets the qualifications therefor.  The Company shall not be
required to establish any such program or plan, except to the extent expressly
set forth in this Section 5.

(f)         Withholding. 
All payments required to be made by the Company hereunder to the Executive
shall be subject to the withholding of such amounts relating to taxes and other
governmental assessments as the Company may reasonably determine it should
withhold pursuant to any applicable law, rule or regulation.

(g)        IRC§409A.      Executive
and the Company agree that the provisions of this Agreement shall be construed
and implemented, and any deferrals and elections shall be made, in order to
comply with Internal Revenue Code Section 409A, as it may be amended, and the rules
and regulations issued thereunder from time to time.

6.         TERMINATION
FOR CAUSE

The Board of Directors may,
by written notice given at any time during the Employment Term, or any renewal
thereof, terminate the employment of Executive for cause, the cause to be
specified in reasonable detail in such notice.  For purposes of this Agreement,
"cause" shall mean Executive's: (a) willful misconduct in connection with the
performance of any of his duties or services hereunder, including without
limitation (i) misappropriation or improper diversion of funds, rights or
property of the Company or any subsidiary of the Company ("Subsidiary"), or
(ii) securing or attempting to secure personally (including for the benefit of
any family member, person sharing the same household, or any entity (as used
herein: corporate, partnership, unincorporated association,  

 

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trust, or
otherwise) in which Executive has any beneficial interest unless the
transaction benefiting the entity has been approved by the Board upon the basis
of full disclosure of such benefit) any profit or benefit in connection with
any transaction entered into on behalf of the Company or any Subsidiary, or
(iii) intentional disclosure or misappropriation of confidential information
belonging to the Company or any Subsidiary (unless disclosure is required by
applicable law or court or administrative order), or (iv) material breach of
any material covenant contained in this Agreement or (v)(x) any other action in
violation of Executive's fiduciary duty owed to the Company or (y) Executive's
acting in a manner adverse to the interests of the Company and for his own
pecuniary benefit or that of a family member (or member of his household) or an
entity in which he or any such person has an interest; (b) willful failure,
neglect or refusal to perform his duties or services under this Agreement,
which failure, neglect or refusal shall continue for a period of 30 days after
written notice thereof shall have been given to the Executive by or on behalf
of the Board of Directors of the Company; and/or (c) conviction of, or nolo
contendere plea in connection, with a felony.  Termination for cause
under clause (a) or (c) of this Section 6 shall be effective immediately upon
the giving of such notice; if notice of termination for cause relates to clause
(b) of this Section 6, termination shall be effective on the thirtieth (30th)
day after the notice referred to in the first sentence of this Section 6 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.  Upon termination of employment pursuant to this
Section 6, the Executive shall be entitled to receive (i) any earned and unpaid
Salary accrued through the date of termination, (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 and (iii) except for any
Bonus compensation (for which Executive shall not be eligible), any accrued and
unpaid benefits that may be due the Executive on the date of termination under,
and 

 

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subject to the provisions of, any employee benefit
plan or program, including any options, grants of Common Stock or other benefits
under any of the Company's compensation plans that are vested.  Upon the
termination for cause of the Employment Term (or any renewal thereof) pursuant
to this Paragraph 6, all provisions of this Agreement shall terminate except for
the provisions hereof and of Paragraphs 10, 11 and 12, the terms of which shall
survive such termination, and the Company shall have no further obligation to
Executive hereunder, except as herein expressly provided.  Termination of
Executive's employment under this Section 6 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.

7.         TERMINATION BY EXECUTIVE FOR GOOD
REASON

Executive shall have the
right to terminate his employment under this Agreement for Good Reason (as
hereinafter defined) upon 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 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.  In the event of any termination of employment by the
Executive for Good Reason, the Executive shall have no further obligations
under this Agreement other than the obligations provided for in Sections 10, 11
and 12 hereof, the terms of which shall survive termination of this Agreement,
and the Company shall have no further obligations under this Agreement, except
to pay to Executive within thirty (30) days following such termination under
this Section 7 (except in the case of Bonus, if any, under clause (b)(ii) of
this Section 7, which shall be 

 

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calculated and paid in the manner and at the
time set forth in Section 5(c), and subject to pro ration as set forth in
Section 5(c)): (a) all unreimbursed business-related expenses, (b) a lump sum
severance payment in an amount equal to (i) six months of his Salary under
Section 5(a) hereof at the rate in effect at the date such notice was given,
and (ii) 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, and (c)(i) compensation for any unused personal holidays
and unused vacation days accrued in the fiscal year in which termination occurs
through the date of termination and (ii) any accrued and unpaid benefits that
may be due the Executive on the date of termination under, and subject to the
provisions of, any employee benefit plan or program, including any options,
grants of Common Stock or other benefits under any of the Company's
compensation plans that are vested.  

For
purposes of this Agreement, the term "Good Reason" shall mean (a) the
assignment to Executive without his written consent of any duties inconsistent
in any material respect with Executive's positions (including status, titles
and reporting requirements), authority, duties or responsibilities as
contemplated by Section 4 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, or (b) 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.  

8.         TERMINATION FOR ILLNESS OR INCAPACITY

In the event of any
disability, illness or other incapacity (any one or more of the foregoing, a
"Disability") that prevents Executive from performing services as contemplated
by Sections 2 and 4, the obligation of the Company to pay compensation to
Executive pursuant to Section 5 shall be reduced to the extent of any amount
received by Executive pursuant to any disability insurance policy  

 

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maintained
and paid for by the Company.  If as a result of a Disability Executive can not
perform the services contemplated by Sections 2 and 4 of this Agreement for 120
or more consecutive days or for 180 days in any consecutive 12-month period,
the Company shall have the right to terminate this Agreement upon 10 days'
prior written notice to Executive with no further liability under this
Agreement, except under Sections 10, 11 and 12 hereof, the terms of which shall
survive such termination, and except for accrued and unpaid Salary and other
previously earned, accrued and unpaid benefits from the Company and under its
employee benefit plans, including any stock options,  grants of Common Stock or
other benefits under any of the Company's compensation plans that are vested and
Bonus to which Executive may be entitled, in each case through the date of such
termination; provided, however, that such termination 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; and provided,
further, that during the period of Disability, no Bonus may be earned or
accrued.  Upon termination under this Section 8, any Bonus to which Executive
would be entitled (subject to the exclusion contained in the second proviso of
the next preceding sentence) shall be determined and paid in accordance with
Section 5(c).

9.         DEATH

This Agreement shall terminate
automatically upon the death of Executive.  In such event, the Company shall
pay the estate of Executive, in addition to any amounts to which Executive's
estate would otherwise be entitled under the Company's retirement plans and
group life insurance policy, within 30 days after the date of death, all
compensation earned under Section 5 through the date of death; provided,
however, that, with respect to any partial fiscal year, any Bonus compensation
to which Executive may have been entitled under Section 5(b) shall be payable
in accordance with Section 5(c), and the amount of such Bonus, if any, shall be
prorated as provided therein. 

 

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10.       NON-COMPETITION AND TRADE SECRETS

Executive agrees that during the Employment Term, any
renewal thereof and for one full year after expiration or termination of the
Employment 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 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 or in any other capacity:

(a)        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), except as required in the course of performing his
duties as an Executive hereunder, trade secrets, intellectual property or other
confidential 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, arrangements
for supplying customers, methods of operation and organization, sources of
supply and arrangements with vendors; 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 (i) is within the public domain, or (ii) becomes
publicly known other than through disclosure by Executive in violation of this
provision;

 

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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 Employment Term or any renewal thereof, including
without limitation the business of designing, manufacturing, procuring and/or
distributing carrying or portable cases or cover plates supplied to the
cellular telephone, home medical equipment, laptop computer, photography, video
or audio industries, except that nothing in this Section 10(b) 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; 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) 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.

(e)        In
the event Executive shall violate or be in violation of any provision of this
Paragraph 10 (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.

 

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11.       SEPARABILITY

Executive agrees that the
provisions of Section 10 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.

12.       SPECIFIC PERFORMANCE

Executive acknowledges that:

(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 Paragraph 10 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.

 

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13.       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.

(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 (with
Executive's consent, not to be unreasonably withheld), to any successor to the
business of the Company, or to any Subsidiary or affiliate of the Company. 
In the event that Executive does not consent to the assignment of this
Agreement, the Company shall have the right, provided it is otherwise in
compliance with this Agreement, to terminate this Agreement automatically with
no further liability, except for accrued and unpaid Salary, and other previously
earned, accrued and unpaid benefits from the Company and its employee benefit
plans, including any options, grants of Common Stock and other benefits under
compensation plans that have vested prior to the date of termination.  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, 

 

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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.

(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.

 

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(i)            If to Executive to:

Michael M. Schiffman, 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 Board

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.

(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 10, 11 and 12 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.

 

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(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 27th day of December 2005, intending it to
be effective on and as of the Effective Date.

		
			
			MICHAEL M. SCHIFFMAN
	

 	

FORWARD
INDUSTRIES, INC.

	 	

 	

 
	
			/s/ MICHAEL M. SCHIFFMAN
	

By:
	

/s/ Jerome E. Ball
	 	

 	

     Name: 
Jerome E. Ball

     Title:    Chief Executive Officer

 

 

 

 

 

 

-17-EMPLOYMENT AGREEMENT

 

                                                                                                

EMPLOYMENT AGREEMENT (this "Agreement"), dated
as of the 27th day of December, 2005, and effective as of October 1, 2005 (the
"Effective Date"), between Forward Industries, Inc., a New York corporation having
its principal offices at 1801 Green Road, Suite E, Pompano Beach, Florida 33064
(the "Company"), and Douglas W. Sabra, residing at 7441 Brunswick Circle,
Boynton Beach FL 33437 ("Executive").

W I T N E S S E T H:

WHEREAS, Executive has been rendering services
to the Company pursuant to an employment agreement between him and the Company effective
as of October 1, 2003, and amended as of July 12, 2005 (the "Prior Agreement");

WHEREAS, the Company desires to employ
Executive to perform senior executive and other services for the Company, and
Executive desires to accept such employment, upon the terms and conditions of
this Agreement, and the parties agree that the Prior Agreement shall be
terminated on and as of the Effective Date;

NOW, THEREFORE, in consideration of the mutual
covenants herein contained and other good and valuable consideration, the
receipt of which the parties hereby acknowledge, the parties agree as follows:

1.         TERMINATION OF PRIOR AGREEMENT

The parties hereto hereby
agree that, on and as of the Effective Date, (a) the Prior Agreement shall be,
and it hereby is, terminated and of no further force or effect whatsoever, (b)
the terms and conditions of this Agreement supersede the terms and conditions
of the Prior Agreement, and (c) the Company shall have no remaining obligations
under the Prior Agreement except in respect of unused personal days and
vacation time accrued in respect of the fiscal year ended September 30, 2005, and
pension, medical benefits, and other benefits granted to all employees
generally as such benefits have accrued on behalf of Executive consistent with
the terms of the Prior Agreement.

 

2.         EMPLOYMENT AND DUTIES

On the terms and conditions
hereinafter set forth, the Company hereby employs Executive as its Vice
President and Chief Financial Officer for the term of this Agreement, as set
forth in Section 3, and Executive hereby accepts such employment.

3.         EMPLOYMENT TERM

Unless terminated at an
earlier date in accordance with the terms of this Agreement, the term of
employment hereunder (the "Employment Term") shall commence on the
Effective Date and expire on December 31, 2008.  Upon expiration of the
Employment Term, this Agreement shall be automatically renewed for successive
terms of one year each; provided, however, that if either party provides
written notice to the other party of its or his determination not to so renew
not later than 90 (ninety) days prior to the expiration of the Employment Term,
or any renewal thereof, as the case may be, this Agreement shall terminate at
the end of the Employment Term or such renewal term, as the case may be. 
Subject to the terms of Section 6, in the event that the Company gives notice
to Executive of its determination not to renew, Executive shall be entitled to
severance in an amount equal to his Salary (as hereinafter defined) for six
months at the rate in effect at the time that such  notice is given, payable in
a lump sum (less applicable withholding and payroll taxes and other deductions
in accordance with the Company's benefit plans in which Executive is participating
at the time) on the last day of Executive's employment.  Payment of bonus
compensation shall be subject to the terms of Section 5.

4.         SERVICES

(a)        Executive
shall perform such duties of a senior executive nature for the Company, as
shall be consistent with the provisions of the Company's By-laws in effect on
the date hereof, subject to the direction of the Company's Chief Executive
Officer and its Board of Directors (the "Board").  Executive shall serve the
Company faithfully and to the best of his ability and shall devote his full
business time and attention to the business and affairs of the Company, subject
to reasonable absences for vacation and illness as determined by the
Compensation Committee of the Board (the "Compensation Committee").  Executive will
not engage, directly or indirectly, in any other business or occupation during
the Employment Term. It is understood, however, that the foregoing will not
prohibit the Executive from (i) engaging in personal investment activities for
himself and his family, (ii) accepting directorships unrelated to the Company, subject
to the prior, written approval of the Compensation Committee, and (iii)
engaging in charitable and civic activities, so long as any one or more such
outside interests set forth in clauses (i), (ii) and (iii) hereof do not
interfere with or affect the performance of his duties hereunder.

-2-

(b)        Unless
otherwise agreed in writing by the Company and Executive, the performance of
Executive's services during the term of this Agreement shall be rendered at the
principal executive offices of the Company, subject to such travel in
furtherance of Executive's performance of his duties hereunder as the business
of the Company may require.

5.         COMPENSATION
AND EXPENSE REIMBURSEMENT

(a)        Salary. 
Executive shall be entitled to receive for all services rendered by Executive
in any and all capacities in connection with his employment hereunder a salary
(as it may be adjusted, "Salary") of $185,000 per annum (at such rate, retroactive
to the Effective Date), payable in equal installments in accordance with the
prevailing practices of the Company (but not less frequently than monthly). 

(b)        Bonus. 
The Executive shall be eligible to receive a bonus ("Bonus") with respect to
each full fiscal year or (except to the extent expressly provided in Sections
5(c), 6, or 8 hereof) part thereof in respect of his employment hereunder, as
set forth in this Section 5.  

  

-3-

(c)        Calculation
and Payment of Bonus.  The amount of Bonus, if any, that Executive may earn
in any fiscal year during the Term hereof pursuant to this Section 5(c) shall
be based on the extent to which, if any, the Company achieves all or a
percentage of, or exceeds, Target (as defined below) in each such fiscal year, in
accordance with guidelines for earning such bonus as fixed by the Compensation
Committee in its sole discretion not later than the date referred to in the
next paragraph.

"Target" means, with respect to any fiscal year, the
amount of pre-tax income of the Company, in combination with other measures as determined
by the Compensation Committee of the Board in its sole discretion, projected
for achievement, in whole or in part, in such fiscal year by the Compensation
Committee for the purpose of establishing Bonus compensation.  Pre-tax income
is defined for purposes hereof as the Company's consolidated net income, after
giving effect to bonuses paid to employees (including executive officers) but
before extraordinary items (whether contributions to or deductions from net
income), plus income taxes, all as determined by reference to the results of
operations set forth in the Company's audited financial statements in respect
of the fiscal year with respect to which the calculation of the Bonus payable
hereunder is being determined.  The Compensation Committee shall determine the
Target in each such fiscal year, together with the formulas for earning Bonus
hereunder, after the Board has adopted the Annual Budget in respect thereof but
not later than the 61st day of such fiscal year.  The Compensation
Committee may determine that the amount of Bonus for such purposes may be pro
rated based on Target being achieved, exceeded, or missed.

"Fiscal year" means the fiscal year of the Company,
ending on September 30.

Bonus compensation, if any,
payable pursuant to Section 5(c) shall be payable to Executive not earlier than
the date on which the Company's audited financial statements relating to the
fiscal year in respect of which such Bonus compensation is payable are first
filed with the Securities and Exchange Commission (the "Commission') pursuant
to Section 13 or 15(d) under the Securities Exchange Act of 1934 ("Exchange
Act") nor later than the tenth (10th) business day after such date. 
If Executive is otherwise entitled to payment of a Bonus pursuant to Section
5(c) and the terms of this Agreement but has not served as an employee for the
full fiscal year in respect of which such Bonus is payable, Executive, or his
estate, shall be entitled to payment, at the time specified in the next
preceding sentence, of a ratable portion of such Bonus to which he or his
estate is entitled, based on the ratio that the actual number of days in such
fiscal year during which he served as an Employee pursuant to this Agreement
and is so entitled bears to 365; provided, however, that no Bonus
(pro-rated or otherwise) shall be payable in respect of the part of the fiscal
year during which Executive is employed hereunder solely for the first fiscal
quarter thereof because of expiration of the Employment Term, or any renewal
thereof as a result of notice of non-renewal furnished pursuant to Section 3;
and provided, further, that if Executive's employment was terminated as
a result of notice pursuant to Section 6, he shall not be entitled to any Bonus
compensation in respect of the fiscal year during which such notice of
termination was given or during which such termination becomes effective.

-4-

(d)        Expenses. 
Executive will be reimbursed for all reasonable and necessary expenses
reasonably incurred by Executive in carrying out the duties contemplated under
this Agreement, in accordance with Company practices and procedures in effect
from time to time, as such practices may be changed from time to time by the
Board.  Executive shall be entitled to a monthly allowance, subject to the approval
and discretion of the Chief Executive Officer, to defray the expense of the
lease of an automobile (including monthly lease cost, maintenance, insurance,
and operating expense) for Executive's use in connection with the discharge of
his duties under this Agreement, the amount of which allowance shall be
includible in Executive's W-2 statements and be subject to applicable income
tax withholding regulations..

 

 

-5-

 (e)       Benefits. 
Executive shall be entitled to participate in all group health and other insurance
programs and all other fringe benefit (including vacation) and retirement plans
(including any 401(k) plan) or other compensatory plans that the Company may
hereafter elect to make available to its executives generally on terms no less
favorable than those provided to other executives generally, provided Executive
meets the qualifications therefor.  The Company shall not be required to
establish any such program or plan, except to the extent expressly set forth in
this Section 5.

(f)         Withholding. 
All payments required to be made by the Company hereunder to the Executive
shall be subject to the withholding of such amounts relating to taxes and other
governmental assessments as the Company may reasonably determine it should
withhold pursuant to any applicable law, rule or regulation.

(g)        IRC§409A.      Executive
and the Company agree that the provisions of this Agreement shall be construed
and implemented, and any deferrals and elections shall be made, in order to
comply with Internal Revenue Code Section 409A, as it may be amended, and the
rules and regulations issued thereunder from time to time.

 

-6-

6.         TERMINATION
FOR CAUSE

The Board of Directors may,
by written notice given at any time during the Employment Term, or any renewal
thereof, terminate the employment of Executive for cause, the cause to be
specified in reasonable detail in such notice.  For purposes of this Agreement,
"cause" shall mean Executive's: (a) willful misconduct in connection with the
performance of any of his duties or services hereunder, including without
limitation (i) misappropriation or improper diversion of funds, rights or
property of the Company or any subsidiary of the Company ("Subsidiary"), or
(ii) securing or attempting to secure personally (including for the benefit of
any family member, person sharing the same household, or any entity (as used
herein: corporate, partnership, unincorporated association, trust, or
otherwise) in which Executive has any beneficial interest unless the
transaction benefiting the entity has been approved by the Board upon the basis
of full disclosure of such benefit) any profit or benefit in connection with
any transaction entered into on behalf of the Company or any Subsidiary, or
(iii) intentional disclosure or misappropriation of confidential information
belonging to the Company or any Subsidiary (unless disclosure is required by
applicable law or court or administrative order), or (iv) material breach of
any material covenant contained in this Agreement or (v)(x) any other action in
violation of Executive's fiduciary duty owed to the Company or (y) Executive's
acting in a manner adverse to the interests of the Company and for his own
pecuniary benefit or that of a family member (or member of his household) or an
entity in which he or any such person has an interest; (b) willful failure,
neglect or refusal to perform his duties or services under this Agreement,
which failure, neglect or refusal shall continue for a period of 30 days after
written notice thereof shall have been given to the Executive by or on behalf
of the Board of Directors of the Company; and/or (c) conviction of, or nolo
contendere plea in connection, with a felony.  Termination for cause
under clause (a) or (c) of this Section 6 shall be effective immediately upon
the giving of such notice; if notice of termination for cause relates to clause
(b) of this Section 6, termination shall be effective on the thirtieth (30th)
day after the notice referred to in the first sentence of this Section 6 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.  Upon termination of employment pursuant to this
Section 6, the Executive shall be entitled to receive (i) any earned and unpaid
Salary accrued through the date of termination, (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 and (iii) except for
any Bonus compensation (for which Executive shall not be eligible), any accrued
and unpaid benefits that may be due the Executive on the date of termination
under, and subject to the provisions of, any employee benefit plan or program,
including any options, grants of Common Stock or other benefits under any of the
Company's compensation plans that are vested.  Upon the termination for cause of
the Employment Term (or any renewal thereof) pursuant to this Paragraph 6, all
provisions of this Agreement shall terminate except for the provisions hereof
and of Paragraphs 10, 11 and 12, the terms of which shall survive such
termination, and the Company shall have no further obligation to Executive
hereunder, except as herein expressly provided.  Termination of Executive's
employment under this Section 6 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.

-7-

7.         TERMINATION BY EXECUTIVE FOR GOOD
REASON

Executive shall have the
right to terminate his employment under this Agreement for Good Reason (as
hereinafter defined) upon 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 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.  In the event of any termination of employment
by the Executive for Good Reason, the Executive shall have no further obligations
under this Agreement other than the obligations provided for in Sections 10, 11
and 12 hereof, the terms of which shall survive termination of this Agreement,
and the Company shall have no further obligations under this Agreement, except
to pay to Executive within thirty (30) days following such termination under
this Section 7 (except in the case of Bonus, if any, under clause (b)(ii) of
this Section 7, which shall be calculated and paid in the manner and at the
time set forth in Section 5(c), and subject to pro ration as set forth in
Section 5(c)): (a) all unreimbursed business-related expenses, (b) a lump sum
severance payment in an amount equal to (i) six months of his Salary under
Section 5(a) hereof at the rate in effect at the date such notice was given,
and (ii) 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, and (c)(i) compensation for any unused personal holidays
and unused vacation days accrued in the fiscal year in which termination occurs
through the date of termination and (ii) any accrued and unpaid benefits that
may be due the Executive on the date of termination under, and subject to the
provisions of, any employee benefit plan or program, including any options,
grants of Common Stock or other benefits under any of the Company's
compensation plans that are vested.  

-8-

For purposes of this Agreement, the term "Good Reason" shall mean (a) the
assignment to Executive without his written consent of any duties inconsistent
in any material respect with Executive's positions (including status, titles
and reporting requirements), authority, duties or responsibilities as
contemplated by Section 4 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, or (b) 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.  

8.         TERMINATION FOR ILLNESS OR INCAPACITY

In the event of any
disability, illness or other incapacity (any one or more of the foregoing, a
"Disability") that prevents Executive from performing services as contemplated
by Sections 2 and 4, the obligation of the Company to pay compensation to
Executive pursuant to Section 5 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.  If as a result of a Disability Executive can not
perform the services contemplated by Sections 2 and 4 of this Agreement for 120
or more consecutive days or for 180 days in any consecutive 12-month period,
the Company shall have the right to terminate this Agreement upon 10 days'
prior written notice to Executive with no further liability under this Agreement,
except under Sections 10, 11 and 12 hereof, the terms of which shall survive
such termination, and except for accrued and unpaid Salary and other previously
earned, accrued and unpaid benefits from the Company and under its employee
benefit plans, including any stock options,  grants of Common Stock or other
benefits under any of the Company's compensation plans that are vested and
Bonus to which Executive may be entitled, in each case through the date of such
termination; provided, however, that such termination 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; and provided,
further, that during the period of Disability, no Bonus may be earned or
accrued.  Upon termination under this Section 8, any Bonus to which Executive
would be entitled (subject to the exclusion contained in the second proviso of
the next preceding sentence) shall be determined and paid in accordance with
Section 5(c).

-9-

9.         DEATH

This Agreement shall
terminate automatically upon the death of Executive.  In such event, the
Company shall pay the estate of Executive, in addition to any amounts to which
Executive's estate would otherwise be entitled under the Company's retirement
plans and group life insurance policy, within 30 days after the date of death,
all compensation earned under Section 5 through the date of death; provided,
however, that, with respect to any partial fiscal year, any Bonus compensation
to which Executive may have been entitled under Section 5(b) shall be payable
in accordance with Section 5(c), and the amount of such Bonus, if any, shall be
prorated as provided therein. 

10.       NON-COMPETITION AND TRADE SECRETS

Executive agrees that during the Employment Term, any
renewal thereof and for one full year after expiration or termination of the
Employment 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 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 or in any other capacity:

-10-

(a)        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), except as required in the course of performing his
duties as an Executive hereunder, trade secrets, intellectual property or other
confidential 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, arrangements
for supplying customers, methods of operation and organization, sources of
supply and arrangements with vendors; 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 (i) is within the public domain, or (ii) becomes
publicly known other than through disclosure by Executive in violation of this
provision;

-11-

(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 Employment Term or any renewal thereof, including
without limitation the business of designing, manufacturing, procuring and/or
distributing carrying or portable cases or cover plates supplied to the
cellular telephone, home medical equipment, laptop computer, photography, video
or audio industries, except that nothing in this Section 10(b) 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; 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) 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.

(e)        In
the event Executive shall violate or be in violation of any provision of this
Paragraph 10 (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.

-12-

11.       SEPARABILITY

Executive agrees that the
provisions of Section 10 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.

12.       SPECIFIC PERFORMANCE

Executive acknowledges
that:

(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 Paragraph 10 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.

-13-

13.       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.

(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 (with Executive's
consent, not to be unreasonably withheld), to any successor to the business of
the Company, or to any Subsidiary or affiliate of the Company.  In the event
that Executive does not consent to the assignment of this Agreement, the
Company shall have the right, provided it is otherwise in compliance with this
Agreement, to terminate this Agreement automatically with no further liability,
except for accrued and unpaid Salary, and other previously earned, accrued and
unpaid benefits from the Company and its employee benefit plans, including any
options, grants of Common Stock and other benefits under compensation plans
that have vested prior to the date of termination.  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.

 

-14-

(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.

(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.

 

-15-

 (i)         If to Executive to:

Douglas W. Sabra 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 Board

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.

(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 10,
11 and 12 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.

 

-16-

(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 27th day of December 2005, intending it to
be effective on and as of the Effective Date.

 

		
			DOUGLAS W. SABRA 	

 	

FORWARD
INDUSTRIES, INC.
	 	

 	

 
	
			/s/ DOUGLAS W. SABRA	

By:
	

/s/ Jerome E. Ball
	 	

 	

     Name: 
Jerome E. Ball

     Title:    Chief Executive Officer

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