Document:

Exhibit 10.7

 

 

 

 

 

 

AMENDED EMPLOYMENT AGREEMENT

 

AMENDED EMPLOYMENT AGREEMENT (this
“Agreement”), dated as of the 1st day of April, 2011, between Forward
Industries, Inc., a New York corporation having its principal offices at 3110
Main St., Suite 400, Santa Monica, CA 90405 (the “Company”), and James O.
McKenna, residing at 6771 Wandermere Rd., Malibu, CA 90265 (“Executive”).

RECITALS:

Executive is employed as the
Company’s Chief Financial Officer/Treasurer pursuant to an employment agreement
with the Company dated as of August 10, 2010 (the “Prior Agreement”), and the
Company has elected to move its executive offices from Pompano Beach, Florida
to Los Angeles, California.

The Company and Executive wish to
amend the Prior Agreement and secure Executive’s services upon the terms and
conditions set forth in this Agreement, with effect from the date hereof.

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

1.        
EMPLOYMENT TERM; PRIOR AGREEMENT

Upon execution hereof, this Agreement shall
become effective and the Prior Agreement shall be null and void and of no
further force or effect whatsoever.  The term of employment hereunder (the “Term”)
shall commence on the date hereof and, unless earlier terminated in accordance
with the terms of this Agreement, expire December 31, 2012.  Upon
expiration of the Term, this Agreement shall be automatically renewed for
successive terms of one year each; provided, however, that if either
party provides written notice to the other party of its or his determination
not to so renew not later than 90 (ninety) days prior to the expiration of the
Term, or any renewal thereof, as the case may be, this Agreement and
Executive’s employment shall terminate at the end of the Term or such renewal
term, as the case may be.  In the event that the Company is the party
giving notice of non-renewal, such termination shall be characterized as without
Cause and governed by the terms of Section 5.

 

 

 

 

 

  

2         
EMPLOYMENT DUTIES AND SERVICES

 

(a)       
On the terms and conditions herein set forth, the Company hereby employs
Executive as its chief financial officer, treasurer, and assistant secretary
for the term of this Agreement and any renewal(s) thereof, and Executive hereby
accepts such employment.  Executive shall perform such duties and
responsibilities of a chief financial officer and treasurer nature for the
Company as shall be consistent with the provisions of the Company’s By-laws in
effect from time to time and as are customary for a chief financial officer and
treasurer of corporations of similar size and business as the Company, subject
to the direction of the Company’s President (chief executive officer), or in his
absence, the Board of Directors of the Company (the “Board”).  Executive
shall serve the Company faithfully and to the best of his ability and shall
devote his full business time and attention to the business and affairs of the
Company, subject to reasonable absences for vacation and illness in accordance
with Company policies.  Executive shall not engage, directly or
indirectly, in any other business or occupation during the Term and any renewal.

 

 

 

 

 

 

 

 

 

(b)       
Nothing in this Agreement shall preclude the Executive from (i) engaging in
personal investment activities for himself and his family, (ii) accepting
directorships unrelated to the Company, subject to the prior, written approval
of the Nominating and Governance Committee of the Board (“Nominating and
Governance Committee”), (iii) engaging in charitable and civic activities, and
(iv) engaging in such other limited activities on behalf of family interests as
may be approved by the Nominating and Governance Committee, so long as any one
or more such outside interests set forth in clauses (i), (ii), (iii), and (iv)
hereof do not interfere with or affect the performance of his duties or
responsibilities hereunder.

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

 3.        
COMPENSATION AND EXPENSE REIMBURSEMENT

                              (a)       
Salary.  Executive shall be entitled to receive for all services
rendered by Executive in any and all capacities in connection with his
employment hereunder a salary (as it may be adjusted, “Salary”) at the rate of
$225,000 per annum, payable in equal installments in accordance with the
prevailing practices of the Company (but not less frequently than monthly).
                                                                                                                                                                                

 

 

 

 

 

 

                                                            
(b)        Bonus; Calculation and Payment. 
The Executive shall be eligible to receive a (“Bonus”) with respect to each
full fiscal year or part thereof (except to the extent expressly provided in
Section 3(b), 4, 5, or 6(b) hereof) in respect of his employment hereunder, as
set forth in this Section 3.  The amount of Bonus, if any, that Executive is
eligible to earn in any fiscal year during the Term hereof pursuant to this
Section 3(b) shall be based on the terms of the bonus plan that the Compensation
Committee (the “Compensation Committee”)  of the Board adopts, from year to
year. The Executive’s participation in such bonus plan shall be at a level
commensurate with the Executive’s current position or any more senior
position(s) to which Executive may be appointed.  

 

Bonus compensation, if any,
payable in respect of any fiscal year or part thereof shall be payable to
Executive no later than the tenth (10th) business day after the date
on which the Company’s audited financial statements relating to such fiscal
year 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”). If Executive is otherwise entitled to payment of a
Bonus pursuant to this Section 3(b) and the terms of this Agreement but has not
served as an employee for the full fiscal year in respect of which such Bonus
is payable, Executive, or his estate, shall be entitled to payment, at the time
specified in the next preceding sentence, of a ratable portion of such Bonus to
which he or his estate is entitled, based on the ratio that the actual number
of days in such fiscal year during which he served as an employee pursuant to
this Agreement and is so entitled bears to 365; provided, however, that
no Bonus (pro-rated or otherwise) shall be payable in respect of a fiscal year
during which Executive is employed hereunder solely for the first fiscal
quarter thereof because of expiration of the Term, or any renewal thereof as a
result of notice of non-renewal furnished pursuant to Section 1; and provided,
further, that if Executive’s employment was terminated as a result of
notice (not withdrawn) pursuant to Section 4, Termination for Cause, he shall
not be entitled to any Bonus compensation in respect of the fiscal year during
which the actions giving rise to Cause took place, or such notice of
termination was given or during which such termination becomes
effective.  

 

 

 

 

 

 

(c)       Expenses.  Executive will be reimbursed for all reasonable and
necessary expenses incurred by Executive in carrying out the duties contemplated
under this Agreement, in accordance with Company practices and procedures in
effect from time to time, as such practices may be changed from time to time by
the Board.  Executive shall be reimbursed for the expense of operating an
automobile (maintenance, gas, tolls and insurance only) for Executive’s use in
connection with the discharge of his duties under this Agreement, the maximum
amount of which reimbursement shall be determined by the Compensation Committee
and shall be includible in Executive’s W-2 statements and be subject to
applicable income tax withholding regulations. 

(d)        Relocation
Reimbursement.  The Company shall reimburse Executive’s reasonable,
documented out-of-pocket costs incurred in his relocation to the Los Angeles,
CA area from his Florida residence, including the following: (i) shipping of
furniture and other personal possessions from Florida to Los Angeles; (ii) economy
fare transportation from Florida to California for Executive and his family;
and (iii) current, monthly net rental expense in respect of Executive’s lease
of his Mill Creek Drive, Palm Beach Gardens, FL residence, commencing with
April rent until the earlier of lease expiration in August 2011 or the date of
early lease termination.

 

 

 

 

 

 

 

 

(e)        Housing Allowance. 
Executive shall be entitled to a housing allowance of $7,500 per month, or
$90,000 per annum, based on documented lease expense provided by Executive in
respect of his California residence, to assist in defraying the increase in
housing costs to be incurred by Executive with his relocation to the Los
Angeles, CA area.  The allowance shall be phased out over time if, as, and to
the extent that Executive’s base salary increases, in accordance with Schedule 1
[annexed hereto][for purposes of Board review: it will be removed as part of
the filing] approved by the Compensation Committee.  Such allowance may include
advance rent required to be paid by Executive under the terms of lease of his
Malibu, CA residence.  

 (f)      
Benefits.  Executive shall be entitled to participate in all group
health and other insurance programs and all other fringe benefit (including
vacation) and retirement plans (including any 401(k) plan) or other
compensatory plans that the Company may hereafter elect to make available to
its executives generally on terms no less favorable than those provided to
other executives generally, provided Executive meets the qualifications
therefor.  The Company shall not be required to establish any such program
or plan, except to the extent expressly set forth in this Section 4.

 

(g)       
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.

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

4.         
TERMINATION BY THE COMPANY FOR CAUSE

(a)       
The Board of Directors may, by written notice given at any time during the
Term, or any renewal thereof, terminate the employment of Executive for cause,
the cause to be specified in reasonable detail in such notice.  For
purposes of this Agreement, “cause” shall mean Executive’s: 

 

 

 

 

 

 

           
(i) willful misconduct in connection with the performance of any of his duties
or services hereunder, including without limitation (1) misappropriation or
improper diversion of funds, rights or property of the Company or any
subsidiary of the Company ("Subsidiary"), or (2) securing or
attempting to secure personally (including for the benefit of any family
member, or person sharing the same household, or any entity (corporate,
partnership, unincorporated association, proprietorship, limited liability company,
trust, or otherwise) in which Executive has any economic or beneficial
interest) any profit or benefit in connection with any transaction entered into
on behalf of the Company or any Subsidiary unless the transaction benefiting
the entity has been approved by the Board upon the basis of full disclosure of
such benefit, or (3) material breach of (x) any covenant contained in this
Agreement or (y) the Company’s Insider Trading Policy or Code of Business
Conduct and Ethics, as in effect from time to time, or (4) any other action in
violation of Executive's fiduciary duty owed to the Company or
 Executive's acting in a manner adverse to the interests of the Company
and for his own pecuniary benefit or that of a family member (or member of his
household) or any entity (as described in clause (i)(2) of Section 4(a) above)
in which he or any such person has an economic or beneficial interest; or (5)
Executive's failure to cooperate, if requested by the Board, with any
investigation or inquiry into his or the Company's business practices, whether
internal or external; 

           
(ii) willful failure, neglect or refusal to perform his duties or services
under this Agreement, which failure, neglect or refusal shall continue for a
period of 30 days after written notice thereof shall have been given to the
Executive by or on behalf of the Board ; and/or 

           
(iii) conviction of, or nolo contendere or guilty plea in
connection with, a felony.  

 

 

 

 

 

 

(b)       
Termination for cause under clause (i) or (iii) of paragraph (a) of this
Section 4 shall be effective immediately upon the giving of such notice; if
notice of termination for cause relates to clause (ii) of paragraph (a) of this
Section 4, termination shall be effective on the thirtieth (30th)
day after the notice referred to in the first sentence of this Section 4 is
given to Executive, unless the Executive shall have, prior to such thirtieth
(30th) day, cured the alleged cause to the satisfaction of the
Board, in which case the Board shall so notify Executive and such cause shall
be deemed to no longer exist; provided, however, that if the Board
concludes that Executive’s willful failure, neglect, or refusal to perform has
resulted in material damage to the Company or its reputation that is not
capable of being remedied, termination shall be effective immediately upon
giving of notice.  

For purposes of this Agreement,
an act or failure to act on the Executive’s part shall be considered “willful”
if it was done or omitted to be done by him not in good faith, and shall not
include any act or failure to act resulting from any incapacity of the
Executive.

(c)       
Upon termination of employment by the Company for Cause, the Executive shall be
entitled to receive, and his sole remedies under this Agreement shall be:

(i) any earned and unpaid
Salary accrued through the date of termination for Cause, payable in a lump sum
not later than 15 days following Executive’s termination of employment; 

(ii) compensation for any
unused personal holidays and unused vacation days accrued in the fiscal year in
which termination occurs through the date of termination, payable as in clause
(i) of this Section 4;

(iii) except for any Bonus
compensation (for which Executive shall not be eligible), any unpaid benefits
accrued through the day immediately prior to the date of termination that may
be due the Executive under any employee benefit plans or programs of the
Company, payable in accordance with the terms of such plans or programs,
together with any documented, unreimbursed business expenses, payable in
accordance with Company policies; and 

 

 

 

 

 

 

 

 

 (iv) any stock options,
grants of Common Stock, restricted share grants or other benefits under any of
the Company’s compensation plans that were vested as of 5:00 PM on the date
immediately prior to the date of termination in accordance with the terms of
such plans and any applicable plan agreements with Executive, provided,
however, that any vested but unexercised stock options may not be exercised on
or after the effective date of termination.    

(d)       
Termination of Executive’s employment under this Section 4 shall be in addition
to and not exclusive of any other rights and remedies that the Company has or
may have relating to Executive with respect to the facts and circumstances pertaining
to such termination.

5.        
TERMINATION BY EXECUTIVE FOR GOOD REASON OR TERMINATION WITHOUT CAUSE 

(a)       
In the event Executive terminates his employment under this Agreement for Good
Reason (as hereinafter defined), or in the event Executive’s employment is
terminated without Cause (for the avoidance of doubt, termination without cause
shall include Company notice of non-renewal to be effective at the end of the
employment term, or any renewal thereof), which termination shall be effective
as of the date specified by the Company in written notice delivered to
Executive not fewer than 15 days prior to the date of termination) other than
due to death or Disability (as hereinafter defined), the Executive shall be
entitled to receive, and his sole remedies under this Agreement shall be: 

(i) any earned and unpaid
Salary accrued through the date of termination, payable in a lump sum not later
than 15 days following Executive’s termination of employment;  

 

 

 

 

 

 

 

 

(ii) Salary, at the annualized
rate in effect on the date of termination of Executive’s employment (or, in the
event a reduction in Salary is a basis for termination for Good Reason, then
the Salary in effect immediately prior to such reduction), equal to the amount
of salary payable for a period of one year following such termination, payable
in a lump sum not later than 15 days following termination of employment;

(iii) compensation for any
unused personal holidays and unused vacation days accrued in the fiscal year in
which termination occurs through the date of termination, payable as in clause
(i) of this Section 6;

(iv) except in the case of the
Company giving notice of non-renewal at the end of the Term (or any renewal
thereof), the ratable amount of Bonus, if any, to which Executive would otherwise
have been entitled in the current fiscal year but for termination under this
Section, payable at the time specified in Section 3(b);

(v) any unpaid benefits accrued
through the day immediately prior to the date of termination that may be due
the Executive under any employee benefit plans or programs of the Company,
payable in accordance with the terms of such plans or programs, together with
any documented, unreimbursed business expenses, payable in accordance with
Company policies; 

(vi) any stock options, grants
of Common Stock, restricted share grants or other benefits under any of the
Company’s compensation plans that were vested as of 5:00 PM on the date
immediately prior to the date of termination, which may be exercised (in the
case of options) or delivered (in the case of restricted stock) in accordance
with the terms of such plans and any applicable plan agreements with Executive;
and

 

 

 

 

 

 

 

(vii)      Executive’s reasonable,
documented out-of-pocket costs incurred in connection with a relocation of his
primary residence back to Florida (of the type set forth in clauses (d)(i) and
(ii) of Section 3 of this Agreement, plus leasehold rent in respect of his
California residence not to exceed 12 months of such rent actually incurred (and
not refunded or netted, directly or indirectly) subsequent to the notice
referred to in the following proviso; provided, however, that the
expenses enumerated in this clause (vii) shall be payable to Executive only if
notice of termination for Good Reason or without Cause is given (and not
subsequently withdrawn in accordance with the terms of this Agreement) within
the first 36 months after the date hereof. 

(b)       
Termination by the Executive for Good Reason shall be effected by his giving
prior written notice to the Company, in which case this Agreement shall
terminate on the date specified in such notice; provided, however, that
such notice shall specify (i) in reasonable detail the circumstances or event
asserted as the basis for termination for Good Reason and (ii) a date of
termination that shall be at least thirty (30) days after the date of delivery
of such notice; and provided, further, that the Company shall have the
right during such thirty (30) day period to remedy the circumstances or event
giving rise to the notice of termination for Good Reason prior to the date
specified in such notice, in which case no right of termination or other right
shall exist under this Section.  .  

(c)       
For purposes of this Agreement, the term “Good Reason” shall mean:

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

 

 

 

 

 

 

 

 

(ii) a decrease in annual
Salary rate or reduction in level of employee benefits that Executive currently
receives or entitlement to Bonus (subject always to the discretion of the
Compensation Committee to fix Target and define the formula under which
Executive may be eligible to receive Bonus);

(iii) failure to accord
Executive equal treatment in respect of responsibilities, reporting obligations
and other matters reflected in clause (i) above, in respect of benefits
generally, with any other executive officer having the same or similar
positions; 

(iv) direction that performance
of Executive’s responsibilities under this Agreement shall be performed at a
location (at the Company’s principal executive offices or otherwise) more than
30 miles distance from the location of the Company’s current executive offices
in Santa Monica, California.

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

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

6.         TERMINATION
FOR  DEATH OR DISABILITY

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

(i) subject to Section 6(b),
any earned and unpaid Salary accrued through the date of termination, payable
in a lump sum not later than 15 days following Executive’s termination of
employment; 

 

 

 

 

 

 

(ii) subject to Section 6(b),
compensation for any unused personal holidays and unused vacation days accrued
in the fiscal year in which termination occurs through the date of termination,
payable as in clause (i) of this Section 6;

 

(iii) subject to Section 6(b),
the ratable amount of Bonus, if any, to which Executive would otherwise have
been entitled in the current fiscal year to the date of termination under this
Section, payable at the time specified in Section 3(b);

(iv) any unpaid benefits
accrued through the date of termination that may be due the Executive under any
employee benefit plans or programs of the Company, payable in accordance with
the terms of such plans or programs, together with any documented, unreimbursed
business expenses, payable in accordance with Company policies; and

(v) any stock options, grants
of Common Stock, restricted share grants or other benefits under any of the
Company’s compensation plans that were vested as of 5:00 PM on the date
immediately prior to the date of termination, which may be exercised (in the
case of options) or delivered (in the case of restricted stock) in accordance with
the terms of such plans and any applicable plan agreements with Executive.

 

 

 

 

 

 

 

 

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

 

7.        
OBLIGATIONS UPON TERMINATION, ETC.

(a)       
Upon the termination of employment for any reason hereunder, all provisions of
this Agreement shall terminate except for Sections 7, 8, 9 and 10 of this
Agreement and the provisions contained in Exhibit I hereto, the terms of which
shall survive such termination, and the Company shall have no further
obligation to Executive hereunder, except as herein and therein expressly
provided.  The Company shall comply with the terms of settlement of all
deferred compensation arrangements to which Executive is a party in accordance
with his duly executed deferral election forms.  

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

 

 

 

 

 

 

 

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

8.        
COVENANTS

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

 

 

 

 

 

 

 

 

(a)       
except as required in the course of performing his duties as an Executive
hereunder, disclose, copy, divulge, furnish, distribute or make available in
any medium whatsoever to any firm, company, corporation, organization, or other
entity or person (including but not limited to actual or potential customers or
competitors or government officials), or otherwise misappropriate trade
secrets, intellectual property, or other confidential or non-public information
of or concerning the Company, its Subsidiaries or affiliates or the business of
any of the foregoing, including without limitation, customer lists, product
designs and product know-how, launch information or plans pertaining to Company
or customer products, arrangements for supplying customers, methods of
operation and organization, sources of supply and arrangements with vendors,
product development, business plans and strategies; provided, however,
Executive may make disclosures as and to the extent required by applicable law
or compelled upon court or administrative order, provided, further,
however, that in the event that Executive is so required or compelled, he shall
notify the Company not fewer than ten (10) business days in advance of such
disclosure in order to afford it the reasonable opportunity to obtain a
protective order or other remedy to limit the scope of such disclosure (it
being understood and agreed that, if such disclosure is required by applicable
law, Executive shall upon the Company’s request furnish the source and
precedents with respect to such requirement).  For purposes of this
Section 8, information shall not be deemed confidential if it is within the
public domain or becomes publicly known other than through disclosure by
Executive in violation of this provision; (ii) 

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

 

 

 

 

 

 

 

 

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

(d)  own (or have any
financial interest in, actual, contingent, future, or otherwise), control,
manage, operate, participate, engage in, invest in or otherwise have any
interest in or through, or otherwise be connected with, in any manner, any
firm, company, corporation, organization, associate, business, enterprise,
venture or other entity, association or person that does or proposes to do any
one or more of the following as it relates to of the Company Business (as
hereinafter defined): (a)(i) engage in, do, or solicit business with, or (ii)
interfere with or affect the Company’s business opportunities with, any of the
customers with whom the Company has done business with during the most recent
two calendar years or (b)(i)  engage in, do, or solicit business with, or
(ii) interfere with or affect the Company’s business opportunities with, 
any of the vendors with whom the Company has done business with during the most
recent two calendar years.  The term “Company Business” shall mean the
business of designing, manufacturing, procuring the supply or manufacture of,
sourcing, selling, re-selling, and/or distributing (at wholesale, retail, or
otherwise) of carrying, protective, or portable cases or cover plates and
related carry case or other accessories supplied to the cellular telephone,
portable medical equipment, laptop computer, tablet, photography, firearms, aeronautic,
code reader, video or audio industries. Nothing in this Section 8 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.

 

 

 

 

 

 

 

 

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

(f)       In the event Executive shall violate or be in violation of any provision of
this Section 8 (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.

9.    
   SEPARABILITY

Executive agrees that the
provisions of Section 8 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.

10.     
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 Section 9
above, as a material inducement for its entering into this Agreement;

 

 

 

 

 

 

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

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

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

 

                                                  
 

11.       
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)        Relocation.       The
term “relocation” as used in this Agreement shall mean the date on which the
person enters into a definitive and irrevocable agreement pertaining to
occupancy or vacation of premises, as the case may be.              

 

 

 

 

 

 

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

(d)       
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.

 

 

 

 

 

 

(e)       
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.

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

(i)        
If to Executive to:

James O. McKenna at his address

set forth in the preamble to this Agreement or
such more recent address as advised to the Company in writing. 

   

  

(ii)       
If to the Company to:

the address set forth in the

preamble to this Agreement

Attention:
Chairman of the Compensation Committee

with
a copy to:

 

 

 

 

 

 

 

 

 

Steven
Malsin, Esq.

237
Upper Shad Road

Pound Ridge, NY 10576

 

Telecopy: 
(914) 764-1940

(g)      
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.

 

 

(h)       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 7, 8, 9, and 10 shall survive termination of this Agreement.

(i)       
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.

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

(k)        Headings.  The headings in this Agreement are for convenience of
reference only

 

IN WITNESS WHEREOF, the
parties have executed this Agreement as of the 1st day of April, 2011,
intending it to be effective on and as of the date hereof.

 

 

 

 

 

 

 

 

 

	
  JAMES
  O. McKENNA

  	
  FORWARD
  INDUSTRIES, INC.

  
	
  /s/___________________________________

  	
  By: 
  /s/________________________ 

  
	
  James
  O. McKenna III

  Vice
  President (Chief Financial Officer)

  	
  Brett M.
  Johnson

  President
  (Chief Executive Officer)

   

  
	
   

  	
   

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

EXHIBIT I

 

1. 
Release.  This Release of Claims (the “Release”) is entered into by
you as a condition precedent to receiving the severance and severance related
benefits provided in the Amended Employment Agreement to which this Exhibit I
relates (this “Agreement” or the “Employment Agreement”).  In exchange for
the receipt of the severance and severance related benefits, you for yourself,
your heirs and assigns and anyone else acting on your behalf, hereby
voluntarily, knowingly and irrevocably and forever discharge the Company, each
of its subsidiaries, and their respective successors, as well as their
respective present, former, and future officers, directors, shareholders, employees,
and agents, in both their individual and representative capacities, and each of
their heirs and assigns (the “Releasees”) from all actions, claims, demands,
causes of actions, obligations, damages, liabilities, expenses and
controversies  of any nature whatsoever, whether known or not now known or
suspected, which you had, have or may have against the Releasees from the
beginning of time up to and including the date you sign this Release (the
“Waived Claims”). The Waived Claims that you forever and irrevocably give up
and release when the Release becomes Effective  include, but are not
limited to, all claims related to (i)  your employment at each of the
Company and its subsidiaries or the termination of your employment, (ii) 
statements, acts or omissions by the Releasees, (iii)  any express or
implied agreement between you and the Releasees, (iv)  wrongful discharge,
defamation, slander, breach of express or implied contract, negligent and/or
intentional misrepresentation or infliction of emotional distress, breach of an
implied covenant of good faith and fair dealing, claims of intentional or
negligent interference  with economic, employment, or contractual rights
or promissory estoppel, (v)  any federal, state, or local law or regulation
prohibiting discrimination in employment or otherwise regulating employment,
including but not limited to, the Age Discrimination in Employment Act of 1967,
as amended (ADEA), the Older Worker Benefit Protections Act,  the Equal
Pay Act of 1963, Title VII of the Civil Rights Acts of 1964, as amended, 
the Civil Rights Act of 1991, the Family Medical Leave Act of 1993 (FMLA), the
Americans with Disabilities Act of 1990 (ADA), the Worker Adjustment and
Retraining Notification Act, the Fair Labor Standards Act of 1938, as amended,
the Employee Retirement Income Security Act of 1974 (ERISA), as amended, 42
U.S.C. Sections 1981 through 1988, the Consolidated Omnibus Reconciliation Act
of 1986 (COBRA) the New York State Human Rights Law and the New York City Human
Rights Act, (vi) any claim for wages, commissions, bonuses, incentive
compensation, vacation pay, employee benefits (except as set forth in paragraph
2 of this Exhibit1 and paragraphs 5 or 6, as the case may be, and paragraph 7
of the Employment Agreement), expenses or allowances of any kind, or any other
payment or compensation, according to the terms of each of those plans. You are
not waiving any claims with respect to your rights to enforce this Agreement.
You are not waiving or releasing any rights or claims that may arise after the
date that you sign this Release.  The date that you sign this Release
shall be the date on or about you are entitled to receive the severance and
other payments and other consideration as provided in the Employment Agreement
and is referred to herein as the “Effective Date”.

 

 

 

 

 

 

 

 

 

 

  

2. 
Termination and Severance Benefits. The Release does not affect your
vested rights and eligibility for benefits under the Company 401(k) Plan, or
any other employee benefit plan covered by ERISA (other than a severance plan).
Eligibility for benefits under these plans is determined by the applicable plan
documents.  The Release does not affect your right to reimbursement of
expenses incurred but not reimbursed prior to the date you sign the Release,
subject to the Company’s expense reimbursement policies.  In addition,
this Release does not affect your right to post-retirement medical coverage as
applicable.  In particular, this Agreement and the Release shall not
affect your right to the payment provided in Section 4, 5 or
6 of the Agreement, as the case may be, and Section 7 thereof, or the Executive
Release as set forth below.

 

3.  Release.  This Executive
Release of Claims (the “Executive Release”) is entered into by the Company in
consideration of Executive entering into and performing the Agreement including
the terms of this Exhibit I.  In exchange for Executive’s performance of
the terms of the Agreement, including without limitation the terms of this
Exhibit I to be performed by him, and grant of the Release, Forward, for
itself, its subsidiaries, and their respective successors and assigns, the
accuracy of the representations set forth in paragraph 5 of this Exhibit I,
hereby voluntarily, knowingly and irrevocably and forever discharges Executive from
all actions, claims, demands, causes of actions, obligations, damages,
liabilities, expenses and controversies of any nature whatsoever, whether known
or not now known or suspected, which it had, have or may have against the
Executive in his capacity as executive officer from the beginning of time up to
and including the Effective Date of this Agreement (the “Executive Waived
Claims”). The Executive Waived Claims that the Company and its subsidiaries
forever and irrevocably give up and release when the Executive Release becomes
Effective  include, but are not limited to, all claims related to
(i)  Executive’s employment at each of the Company and its subsidiaries or
the termination of said employment, (ii)  statements, acts or omissions by
Executive, (iii)  any express or implied agreement between the Company and
its subsidiaries and you, other than agreements that by their terms survive the
Employment Agreement, and (iv) defamation, slander, breach of express or
implied contract, negligent and/or intentional misrepresentation or infliction
of emotional distress, breach of an implied covenant of good faith and fair
dealing. By entering into this Agreement or granting this Executive Release
neither Forward nor any subsidiary hereby waives any claim with respect to its
rights to enforce this Agreement. Neither the Company nor any subsidiary waives
or releases any rights or claims that may arise after the date that it executes
this Release.

 

4. 
No suit. You represent and warrant that as of the Effective Date, you
nor anyone acting on your behalf has made or filed, commenced, maintained,
prosecuted or participated in any action, suit, charge, grievance, complaint or
proceeding of any kind against the Company, any subsidiary thereof, and/or
Releasees in any federal, state or local court, agency or investigative
body.  You acknowledge that based on the foregoing, you hereby waive all
relief available to you, including, without limitation, monetary damages,
attorney’s fees and costs, equitable relief and reinstatement, under any claims
released pursuant to paragraph 1 above.

 

 

 

 

 

 

 

 

 

 

 

5.  Representations.
You acknowledge and agree that:

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

(b) You
are executing this Exhibit to Agreement freely and voluntarily;

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

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

(e) You
have not, during the term of your employment under the Employment Agreement or
thereafter performed any act, or directed any other person or entity to perform
any act on your or their behalf, the intended or proximate result of which
would constitute a violation of the covenants to be performed by you referred
to or set forth in Section 8 of this Agreement, nor are there any agreements,
arrangements, or understandings, written or oral, that would, if performed or
acted upon, constitute such a violation. 

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

(g) You
will have had a period of five (5) days from the date of receipt of the terms
of this Exhibit I to consider them. After you sign this Exhibit by sending a
written notice of revocation via overnight mail or hand delivery to:

 

President

c/o
Forward Industries, Inc.

3110 Main St.

Santa
Monica, CA 90405

 

 

6.  Covenants
Under Employment Agreement.  You further acknowledge and agree that
the Confidentiality, Non-Compete, Non-Solicitation, Separability, and Specific
Performance provisions in Section 8, 9, and 10, of the Employment Agreement are
hereby reaffirmed and shall survive the termination of your employment for
whatever reason, and continue as set forth in the Employment
Agreement.  

   

 

 

 

 

 

 

7. 
Non-Disparagement.  You agree that you will not make disparaging
remarks about Forward, any of its subsidiaries, or their officers, or directors
in their individual and representative capacities, or the Company Business.
Forward and its subsidiaries will not, and they shall cause their respective
officers and directors not to, make disparaging remarks about you.  None
of the parties to this Agreement will issue or cooperate with issuance of any
article, memorandum, release, interview, publicity, or statement, whether oral
or written of any kind, to the public, the press or the media, which in any way
concerns in a disaparaging, offensive, or prejudicial manner the other party,
including any accusation of impropriety or unlawful conduct made directly or by
authorizing others to make such accusations. “Disparaging remarks” when used in
this Agreement shall mean the publication of matter that is untrue or adversely
affects the subject’s reputation, image or good will, or is designed to induce
others not to do business with you, Forward, or any of its subsidiaries, as the
case may be. This subparagraph will not be construed to prevent you from
complying with any lawfully served and binding subpoena, provided however, that
you forward a copy of said subpoena(s) to the Company within seventy-two (72)
hours of receipt of the same, unless expressly prohibited by law from doing so.

8. 
Equitable Relief.  You agree that the violation of the obligations
in paragraphs 6 and 7 of this Exhibit I would be a material breach of this
Agreement, and the Company shall have no adequate remedy at law and will be
able to enforce these obligations by seeking an injunction, including without
limitation an ex parte preliminary and/or temporary restraining order, and such
other relief as may be deemed just and proper, including monetary damages. 

 

9. 
Cooperation.  You agree that you will cooperate with Forward,
its subsidiaries, and each of their respective attorneys or other legal
representatives (“Company attorneys”) in connection with any claim, litigation,
or judicial or arbitral proceeding which is now pending or may hereinafter be
brought against Forward or any of its subsidiaries by any third party. Your
duty of cooperation shall include, but not be limited to (i) meeting with 
Company attorneys by telephone or in person, at mutually convenient times and
places,  in order to state truthfully your knowledge of matters at issue
and recollection of events; (ii) appearance by you (that does not conflict with
the needs or requirements of your then current employer or occupation) as a
witness at depositions or trials, without necessity of a subpoena, in order to
state truthfully your knowledge of matters at issues; and (iii) signing, upon
the request of Company attorneys, declaration or affidavits that truthfully
state matters of which you have knowledge.  The Company shall promptly
reimburse you for your actual and reasonable travel or other expenses that you
may incur in complying with your obligations pursuant to this paragraph.

 

10.  Law Governing.  The terms
of this Exhibit I shall be deemed to have been made within the State of New
York, and shall be interpreted and construed and enforced in accordance with
the law of the State of New York and before the courts of the State of New
York.  This Agreement is not an admission of any liability or wrongdoing
by you, the Company and/or any Releasee.

 

11.  Return of Property.  You
acknowledge that by executing this Agreement that you have returned to the
Company all property and all copies of Confidential Information belonging or
pertaining to, or arising out of your employment by, the Company or any of its
subsidiaries in your custody or possession.

 

12.  No Reinstatement. 
By  entering into this Agreement, you acknowledge that you (i)  waive
any claim to reinstatement and/or future employment with the Company and
(ii)  are not and shall not be entitled to any payments, benefits or other
obligations from the Company or any subsidiary thereof whatsoever (except as
expressly set forth herein).

 

Your signature below
acknowledges that you knowingly and voluntarily agree to all of the terms and
conditions contained in this Exhibit I and the Agreement.

 

 

 

 

 

 

 

 

	
  EXECUTIVE   

  	
  FORWARD
  INDUSTRIES, INC.  

  
	
   

  	
   

  
	
   

  	
   

  
	
   By:                     
            

  	
  By:                                                    
   

  
	
  James O.
  McKenna 

  	
  Brett M.
  Johnson

  
	
   Vice
  President (Chief Financial Officer)

  	
  President
  (Chief Executive Officer)

  

 

 

 

 

 

 

 

SCHEDULE 1

 

 

 

 

 

	
  Phase out of Housing
  Allowance.

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Jim McKenna

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  As approved by the
  Board of Directors March 7, 2011

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Current base - post
  relocation

  	
   $     225,000 

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Phase out Base

  	
   

  	
   $     400,000 

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Difference

  	
   

  	
   

  	
   $     175,000 

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Housing Allowance
  (annual) - Note (1)

  	
   

  	
   

  	
   

  	
   $     90,000 

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Phase out the
  allowance based on % 

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
     increases in base
  pay-over the first $175,000

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
     of raises Note
  (2)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  For Example Only:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  %   

  	
   $     

  	
   New 

  	
   % reduction  

  	
   $ Reduction  

  	
   Next Year's 

  	
   Net  $  

  	
  Net % 

  
	
  Year

  	
   	
  Raise

  	
   Raise 

  	
   Base 

  	
   in Allowance 

  	
   in Allowance 

  	
   Allowance 

  	
  Increase

  	
  Increase

  
	
  2012

  	
   

  	
  11%

  	
   $         24,975 

  	
   $     249,975 

  	
  14%

  	
   $         12,844 

  	
   $     77,156 

  	
   $ 12,131 

  	
  4.9%

  
	
  2013

  	
   

  	
  5%

  	
   $         12,499 

  	
   $     262,474 

  	
  7%

  	
   $           6,428 

  	
   $     70,728 

  	
   $   6,071 

  	
  2.4%

  
	
  2014

  	
   

  	
  6%

  	
   $         15,748 

  	
   $     278,222 

  	
  9%

  	
   $           8,099 

  	
   $     62,629 

  	
   $   7,649 

  	
  2.9%

  
	
  2015

  	
   

  	
  5%

  	
   $         13,911 

  	
   $     292,133 

  	
  8%

  	
   $           7,154 

  	
   $     55,474 

  	
   $   6,757 

  	
  2.4%

  
	
  2016

  	
   

  	
  8%

  	
   $         23,371 

  	
   $     315,504 

  	
  13%

  	
   $         12,019 

  	
   $     43,455 

  	
   $ 11,351 

  	
  3.9%

  
	
  2017

  	
   

  	
  5%

  	
   $         15,775 

  	
   $     331,279 

  	
  9%

  	
   $           8,113 

  	
   $     35,342 

  	
   $   7,662 

  	
  2.4%

  
	
  2018

  	
   

  	
  5%

  	
   $         16,564 

  	
   $     347,843 

  	
  9%

  	
   $           8,519 

  	
   $     26,824 

  	
   $   8,045 

  	
  2.4%

  
	
  2019

  	
   

  	
  5%

  	
   $         17,392 

  	
   $     365,235 

  	
  10%

  	
   $           8,945 

  	
   $     17,879 

  	
   $   8,448 

  	
  2.4%

  
	
  2020

  	
   

  	
  5%

  	
   $         18,262 

  	
   $     383,497 

  	
  10%

  	
   $           9,392 

  	
   $      8,487 

  	
   $   8,870 

  	
  2.4%

  
	
  2021

  	
   

  	
  5%

  	
   $         19,175 

  	
   $     402,672 

  	
  11%

  	
   $           8,487 

  	
   $           -   

  	
   $ 10,688 

  	
  2.8%

  
	
  2022

  	
   

  	
  5%

  	
   $         20,134 

  	
   $     422,805 

  	
  0%

  	
   $               
  -   

  	
   $           -   

  	
   $ 20,134 

  	
  5.0%

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

 

 

 

 

	
  Note (1)

  	
   

  	
  This amount reflects the agreed upon cost differential, including the
	tax impact

  	
   

  	
   

  
	
  Note (2)

  	
   

  	
  Based upon the view that the housing allowance should not be paid once
	Executive's compensation equals or exceeds $400/000 and should be phased out
	over the differential between the starting base pay and the $400,000
	($400,000 - $225,000=$175,000).  The above example reflects how the
	$90,000 annual allowance would be reduced each time the Executive receives
	an adjustment to base compensation. While such amounts are reflected above
	on an annual basis for illustrative purposes the actual adjustments will be
	made on a per pay period basis.exh10-1.htm

EXHIBIT 10.1

PROFESSIONAL SERVICES AGREEMENT

THIS AGREEMENT is made and entered into effective as of 20th day of January, 2011 (the “Effective Date”) by and between Crosby (Hong Kong) Limited, a merchant banking entity having an office and place of business at 2401 Winsome House, 73 Wyndham Street, Central, Hong Kong (“Crosby") and Evergreen Energy Inc. having an office and place of business at 1225 Seventeenth Street, Suite 1300, Denver, Colorado, 80202 ("Company"); Company and Crosby being hereinafter sometimes referred to collectively as the "Parties".

RECITALS

WHEREAS, the Company is considering various financial and strategic alternatives and desired to engage  Crosby to advise the Company on regarding these alternatives.

THEREFORE, in consideration of the premises and of the obligations to be performed and covenants to be kept by the Parties, the Parties agree that Crosby will provide the services set forth below and is qualified and willing to perform the services in accordance with the provisions of this Agreement.

ARTICLE I

SCOPE OF WORK

1.1           The Work.  Subject to the terms and conditions of this Agreement, the Company hereby engages Crosby to provide financial advisory services to the Company regarding financial and strategic alternatives.  Crosby shall not discuss its services with any person or entity that has not been approved by the Company. Unless covered by a Confidentiality Agreement, Crosby is not authorized to give any information or to make any representation that is material non-public information.  Such services, as they may be amended from time to time by written agreement of the Parties, are hereinafter sometimes referred to herein as (the "Work").

1.2           Compliance with Laws.  Crosby shall perform the Work in a professional and competent manner, in accordance with the terms of this Agreement and all applicable laws, rules, orders and regulations of any governmental or quasi-governmental agency having jurisdiction over the Work or the Parties.

ARTICLE II

SCHEDULE OF WORK

2.1           Commencement of Work.  The Work shall be commenced by Crosby on or before the Effective Date.

2.2           Unforeseeable Delays.  Whenever the time for performance of any act hereunder is limited, prevented or delayed by any unforeseeable factor or circumstances beyond the reasonable control of the party obliged to perform and which said party could not

  

1

  

have avoided by the use of reasonable diligence, such as acts of God, fires, floods, strikes, shortage of materials and supplies, labor interruptions in delivery or transportation, inclement weather, insurrections, or mob violence, embargoes, war or other disabling causes, the time for the performance of any or such act or obligation shall be extended for the period equal to the extent of such delay.

ARTICLE III

COMPENSATION

3.1            Cash Fee.   The Company shall pay Crosby a one time fee of USD $663,750.00 as consideration for the advisory services provided under this Agreement, such fee due and payable on or before March 1, 2011.

 

3.2             Warrants. As additional compensation for its Work, the Company will issue to Crosby or its assigns, for an aggregate consideration of $1.00, warrants to purchase 283,654 shares of Company stock at a strike price of $2.60/share and a three year term.  The Warrants shall be issued concurrently with the payment of the cash fee.

 

ARTICLE IV

INDEPENDENT CONTRACTOR RELATIONSHIP,

INDEMNIFICATION AND AUTHORITY

4.1           Independent Contractor.  The Work shall be performed by Crosby as an independent contractor.  Crosby shall not constitute or be deemed to be an employee, servant, agent or representative of Company for any purpose whatsoever unless and except as specifically so provided in this Agreement.  All employees, agents and permitted subcontractors of Crosby shall be under the direct charge of Crosby and shall also be independent contractors as regards their relationship with Company.

4.2           Indemnification.  Crosby assumes full risk and responsibility for all activities undertaken pursuant to this Agreement and agrees to indemnify and hold Company, its officers, directors, employees and affiliated companies harmless from any loss, injury, damage, liability or claim of any third party of any kind or character arising out of Crosby's negligent performance of its services hereunder or the payment of any compensation to Crosby.  This provision shall survive termination of this Agreement.

ARTICLE V

TERM AND TERMINATION

5.1           Termination.  This Agreement shall terminate on the first of the following events to occur:

	
5.1.1

	
Agreement by the Parties.

	
5.1.2

	
Completion of the Work and payment by the Company of Crosby's final statement.

  

2

  

	
5.1.3

	
The 30th day after Notice of Termination given by either Party to the other Party.

 

ARTICLE VI

NOTICE

6.1           All formal notices ("Notices") shall be addressed as set forth in the first paragraph.  All Notices shall be given by (1) personal delivery or by electronic communication with a confirmation copy sent by mail, return receipt requested or (2) by registered or certified mail, return receipt requested.  All Notices shall be effective and shall be deemed delivered (i) if by personal delivery on the date of delivery, (ii) if by electronic communication on the next business day following transmittal, and (iii) if solely by mail on the date of actual receipt.  Company or Crosby may change its address for notice from time to time by so notifying the other in accordance with this Article.

ARTICLE VII

SOLE AGREEMENT AND MODIFICATION

7.1           This Agreement contains and sets forth the entire agreement between Company and Crosby with respect to the subject matter hereof, all previous agreements between them with respect to the subject matter hereof being expressly superseded and replaced hereby.  Except as provided in Article IV, no modification, alteration, or extension of this Agreement shall be effective unless in writing executed by the Parties subsequent to the date of this Agreement.

ARTICLE VIII

CONTROLLING LAW

8.1           This Agreement shall be governed by and interpreted in accordance with the laws of the State of Colorado except those addressing conflicts of law.

ARTICLE IX

SUCCESSORS AND ASSIGNS

9.1           This Agreement shall be binding upon and inure to the benefit of the respective successors and permitted assigns of Company and Crosby.

IN WITNESS of this Agreement the Parties have set forth their signatures below.

	
COMPANY:

	  	
CROSBY:

	  	  	  
	
Evergreen Energy Inc.

	  	
Crosby (Hong Kong) Limited

	  	  	  
	  	  	  
	
By:   /s/ Thomas H. Stoner, Jr.

	  	
By:  /s/ Waseem Shiraz

	  	  	  
	
Name: Thomas H. Stoner, Jr.

	  	
Name: Waseem Shiraz

	
Title: CEO

	  	
Title: Director

 

 

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