Document:

Exhibit 4.1

 

 

 

 

 

 

AMENDMENT TO

THE SHAREHOLDER PROTECTION
RIGHTS AGREEMENT

dated as of

August 10, 2010

between

Forward Industries, Inc.

and

American Stock Transfer &
Trust Company LLC

 

 

 

 

 

 

 

	

 

 

 

 

 

This AMENDMENT TO THE SHAREHOLDER PROTECTION RIGHTS
AGREEMENT, dated as of August 10, 2010 (this “Amendment”), by and
between Forward Industries, Inc., a New York corporation (the “Company”),
and American Stock Transfer & Trust Company LLC, a New York limited
liability trust company, as Rights Agent (the “Rights Agent”, which term
shall include any successor Rights Agent).

WITNESSETH:

WHEREAS, the
Company and the Rights Agent have entered into that certain Shareholder
Protection Rights Agreement, dated as of June 9, 2010 (the “Rights Agreement”);

WHEREAS, the
Company has entered into that certain Settlement Agreement, dated August 10,
2010, with the parties listed on Exhibit A thereto and referred to therein as
the LaGrange Group, and has agreed, pursuant to Section 1(k)(ii) thereof, to
terminate the Rights Agreement;

WHEREAS, the
Company and the Rights Agent desire, and the Board of Directors of the Company
has determined that it is in the best interests of the Company and its
shareholders, to amend the Rights Agreement in the manner set forth below; and

WHEREAS, there
having been no Board Change of Control (as defined in the Rights Agreement) and
the date of this Amendment being prior to the close of business on the Flip-in
Date (as defined in the Rights Agreement), the Rights Agreement may be amended
in accordance with Section 5.4(i) thereof by the Company and the Rights Agent;

NOW THEREFORE, in consideration of the premises and the
respective agreements set forth herein, the parties hereby agree as follows:

Section 1.         
Certain Definitions.  For purposes of this Amendment, capitalized
terms used herein but not otherwise defined herein shall have the meanings
assigned to them in the Rights Agreement.

Section 2.         
Amendment to Section 1.1(k) of the Rights Agreement. 
Section 1.1(k) is hereby deleted in its entirety and the following
language is hereby inserted as a new Section 1.1(k):

“‘Expiration Time’ shall mean the earliest of (i) the
Exchange Time, (ii) the Redemption Time, (iii) 11:59 pm on August 10, 2010 and
(iv) immediately prior to the effective time of a consolidation, merger or
share exchange (each, a “Business Combination”) of the Company (A) into
another Person or (B) with another Person in which the Company is the surviving
corporation but Common Stock is converted into cash or securities of another
Person, in either case pursuant to an agreement entered into prior to a Flip-in
Date.”

Section 3.         
Descriptive Headings.  Descriptive headings appear herein for
convenience only and shall not control or affect the meaning or construction of
any of the provisions hereof.

 

	

 

 

 

 

 

Section 4.       
Governing Law.  This Amendment, including the interpretation and
construction of this Amendment and any disputes arising out of or in connection
with this Amendment, shall be governed by the laws of the State of New York
applicable to contracts made and performed entirely within the State of New
York, without regard to conflicts of laws principles.

Section 5.      
Counterparts.  This Amendment may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.

Section 6.       
Severability.  If any term or provision hereof or the application
thereof to any circumstance shall, in any jurisdiction and to any extent, be
invalid or unenforceable, such term or provision shall be ineffective as to
such jurisdiction to the extent of such invalidity or unenforceability without
invalidating or rendering unenforceable the remaining terms and provisions
hereof or the application of such term or provision to circumstances other than
those as to which it is held invalid or unenforceable.

[remainder of page intentionally left blank]

 

 

 

 

 

2

	

 

 

 

 

 

IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed as of the date first hereinabove written.

		
			FORWARD INDUSTRIES, INC.

			
	
			By:

				
			/s/ Brett M. Johnson

			
	
			Name:

				
			Brett M. Johnson

			
	
			Title:

				
			Chief Executive Officer

			
	
			AMERICAN STOCK TRANSFER & TRUST COMPANY LLC

			
	
			By:

				
			/s/ Paula Caroppoli

			
	
			Name:

				
			Paula Caroppoli

			
	
			Title:

				
			Vice-President

			
				

                                                                            

 

 

 

 

 

 

 

3Exhibit 10.1

 

 

 

 

 

 

SETTLEMENT AGREEMENT

This Settlement Agreement (this “Agreement”) is
made and entered into as of August 10, 2010, by and among Forward Industries,
Inc. (the “Company” or “FORD”) and the entities and natural
persons listed on Exhibit A hereto (collectively, the “LaGrange Group”)
(each of the Company and the LaGrange Group, a “Party” to this
Agreement, and collectively, the “Parties”).

RECITALS:

WHEREAS, the Company and the LaGrange Group have engaged
in various discussions and communications during the past several weeks
concerning, among other things, (i) the Company’s business, financial
performance and strategic plans and (ii) the LaGrange Group’s strategic plans
for operating the Company under new leadership.

WHEREAS, the LaGrange Group has filed preliminary consent
materials with the Securities & Exchange Commission (the “SEC”)
seeking to request that the Company call a special meeting of the Company’s
shareholders for the purpose of, among other things, to remove all members of
the current Board of Directors of the Company (the “Board”);

WHEREAS, the Company and the members of the LaGrange Group
have determined that the interests of the Company and its shareholders would be
best served at this time by, among other things, (i) avoiding a Board contest
at a special meeting or the 2010 annual meeting (the “2010 Annual Meeting”)
and the expense and disruption that may result therefrom and (ii) making
certain changes to the composition of the Company’s Board and management team
and to come to an agreement with respect to these and certain matters related
to the 2010 Annual Meeting and certain other matters, as provided in this
Agreement. 

NOW, THEREFORE, in consideration of the foregoing premises
and the mutual covenants and agreements contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound hereby, agree as follows:

1.         
Board Matters; Board Appointments; 2010 Annual Meeting; Committee
Appointments; Resignation of President, Chief Executive Officer and Chairman;
Appointment of new Chief Executive Officer; Repeal Bylaw Amendments;
Termination of Rights Agreement.

(a)       Upon execution of this Agreement, the Company hereby confirms that three
current members of the Board, Douglas W. Sabra, Michael Schiffman and Bruce
Galloway, have resigned as members of the Board and agrees it shall take all
necessary actions to appoint Frank LaGrange Johnson, Stephen L. Key and Owen
P.J. King (the “New Appointees”) to fill the ensuing vacancies.

(b)       Upon execution of this Agreement, the LaGrange Group hereby withdraws
its preliminary consent materials filed with the SEC in connection with seeking
to call a special meeting of the Company’s shareholders.

 

 

 

 

(c)       The Company hereby confirms that effective as of the execution of this
Agreement Douglas W. Sabra has resigned as President, Chief Executive Officer
and Chairman of the Board of the Company. Upon execution of this Agreement, in
accordance with the Company’s Amended and Restated Bylaws, the Company shall
take all action necessary in furtherance of the appointment of Mr. Johnson as
the new Chairman of the Board.

(d)       Upon execution of this Agreement, in accordance with the Company’s
Amended and Restated Bylaws, the Company shall take all action necessary in
furtherance of the appointment of Brett M. Johnson as the Company’s President
and Chief Executive Officer on an at-will basis and with the same base
compensation and benefits as the Company’s previous President and Chief
Executive Officer pending the negotiation of a long-term employment agreement
by the Company’s Compensation Committee.

(e)       The Company agrees that prior to the time that it mails its definitive
proxy statement for the 2010 Annual Meeting it shall take all necessary actions
to nominate the New Appointees for election to the Board at the 2010 Annual
Meeting.  The Company further agrees it shall take no action to increase the
size of the Board above six (6) members prior to the final certification of the
results of the 2010 Annual Meeting unless such increase is approved by a
majority of the Board. 

(f)        The Company agrees that it will recommend, support and solicit proxies
for the election of the New Appointees in the same manner as for the Company’s
other 2010 Nominees up for election at the 2010 Annual Meeting.  The LaGrange
Group agrees that it will vote all of its shares of Company stock in favor of,
and otherwise support, the election of John F. Chiste, Fred Hamilton and Louis
Lipschitz (collectively, the “Continuing Directors”) at the 2010 Annual
Meeting.

(g)        At the first meeting of the Board following the execution of this
Agreement, the Company shall cause (i) the appointment of the New Appointees to
the committees of the Board such that the New Appointees have at least an equal
number of members as the Continuing Directors on each committee and (ii) the
appointment of Owen P.J. King as Chairman of the Nominating and
Governance Committee.  For any committee of the Board which is created after
the date of this Agreement, the Company agrees that the New Appointees shall
have at least an equal number of members as the Continuing Directors on any
such newly established committee.

(h)       If any New Appointee leaves the Board (whether by resignation or
otherwise) before the conclusion of the 2011 annual meeting (the “2011
Annual Meeting”), the LaGrange Group will be entitled to recommend to the
Board’s Nominating and Governance Committee replacement director(s) (each of
whom will be deemed a New Appointee for purposes of this Agreement) who will qualify
as “independent” pursuant to NASDAQ listing standards. The Board’s Nominating
and Governance Committee will not unreasonably withhold acceptance of any
replacement director(s) recommended by the LaGrange Group. In the event the
Nominating and Governance Committee does not accept a replacement director(s)
recommended by the LaGrange Group, the LaGrange Group will have the right to
recommend additional replacement director(s) for consideration by the
Nominating and Governance Committee. The Company will cause the Board to
appoint such replacement director(s) to the Board no later than five (5)
business days after the Nominating and Governance Committee’s recommendation of
such replacement director(s).

- 2 -

 

 

 

(i)          If any Continuing Director leaves the Board (whether by resignation or
otherwise) before the conclusion of the 2011 Annual Meeting, the remaining
Continuing Director(s) will be entitled to recommend to the Board’s Nominating
and Governance Committee replacement director(s) (each of whom will be deemed a
Continuing Director for purposes of this Agreement) who will qualify as
“independent” pursuant to NASDAQ listing standards. The Board’s Nominating and
Governance Committee will not unreasonably withhold acceptance of any
replacement director(s) recommended by the aforementioned remaining Continuing
Directors. In the event the Nominating and Governance Committee does not accept
a replacement director(s) recommended by the remaining Continuing Directors,
the remaining Continuing Directors will have the right to recommend additional
replacement director(s) for consideration by the Nominating and Governance
Committee. The Company will cause the Board to appoint such replacement
director(s) to the Board no later than five (5) business days after the
Nominating and Governance Committee’s recommendation of such replacement
director(s).

(j)         The LaGrange Group agrees that before the date that is fourteen (14)
days prior to the last date on which a shareholder of the Company may nominate,
in accordance with the applicable procedures set forth in the Company's Bylaws,
a person for election as a member of the Board at the 2011 Annual Meeting, it
shall not take any action in furtherance of seeking (i) additional Board
representation other than as provided herein or (ii) to call a special meeting
of the Company’s shareholders for any purpose.  The LaGrange Group shall not
enter into any agreement, understanding or arrangement with the purpose or
effect to cause or further any of the foregoing or otherwise engage in any
activities with the purpose or effect to cause or further any of the
foregoing.  

(k)        Upon execution of this Agreement, the Company hereby agrees it shall
take all necessary actions to (i) repeal any provision of the Amended and
Restated Bylaws of FORD (“the Bylaws”) in effect as of the date hereof that was
not included in the Bylaws that became effective on February 13, 2008 and were
filed with the Securities and Exchange Commission on December 5, 2007 and (ii)
terminate that certain Shareholder Protection Rights Agreement, dated as of
June 9, 2010, by and between the Company and American Stock Transfer &
Trust Company LLC, as Rights Agent.

(l)         Upon execution of this Agreement, the Company shall have entered into
(i) the Severance and Release Agreement with Douglas W. Sabra in the form
attached hereto as Exhibit B, (ii) the Retention Agreement with James O.
McKenna III in the form attached hereto as Exhibit C and (iii) the Employment
Agreement with James O. McKenna III in the form attached hereto as Exhibit D.

2.         
Representations and Warranties of the Company.

The Company represents and warrants to the LaGrange Group that (a) the Company
has the corporate power and authority to execute the Agreement and to bind it
thereto, (b) this Agreement has been duly and validly authorized, executed and
delivered by the Company, constitutes a valid and binding obligation and
agreement of the Company, and is enforceable against the Company in accordance
with its terms, except as enforcement thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
similar laws generally affecting the rights of creditors and subject to general
equity principles and (c) the execution, delivery and performance of this
Agreement by the Company does not and will not (i) violate or conflict with any
law, rule, regulation, order, judgment or decree applicable to it, or
(ii) result in any breach or violation of or constitute a default (or an event
which with notice or lapse of time or both could become a default) under or
pursuant to, or result in the loss of a material benefit under, or trigger a
change in control under, or give any right of termination, amendment,
acceleration or cancellation of, any organizational document, agreement,
contract, commitment, understanding or arrangement to which the Company is a
party or by which it is bound, other than any agreement relating to the
employment by the Company of Mr. Sabra as its President and Chief Executive
Officer.

- 3 -

 

	

 

 

 

 

 

3.          
Representations and Warranties of the LaGrange Group.

The LaGrange
Group shall cause its Affiliates to comply with the terms of this Agreement. 
Each member of the LaGrange Group represents and warrants to the Company that
(a) this Agreement has been duly authorized, executed and delivered by
each member of the LaGrange Group, and is a valid and binding obligation of
each member of the LaGrange Group, enforceable against each member of the
LaGrange Group in accordance with its terms, except as enforcement thereof may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or similar laws generally affecting the rights of
creditors and subject to general equity principles, (b) the execution of
this Agreement, the consummation of any of the transactions contemplated hereby,
and the fulfillment of the terms hereof, in each case in accordance with the
terms hereof, will not conflict with, or result in a breach or violation of the
organizational documents of any member of the LaGrange Group as currently in
effect and (c) the execution, delivery and performance of this Agreement
by each member of the LaGrange Group does not and will not violate or conflict
with (i) any law, rule, regulation, order, judgment or decree applicable
to it, or (ii) result in any breach or violation of or constitute a
default (or an event which with notice or lapse of time or both could become a
default) under or pursuant to, or result in the loss of a material benefit
under, or give any right of termination, amendment, acceleration or
cancellation of, any organizational document, agreement, contract, commitment,
understanding or arrangement to which such member is a party or by which it is
bound.

4.          
Press Release.

Promptly following the execution of this Agreement, the
Company and the LaGrange Group shall jointly issue a mutually agreeable press
release (the “Mutual Press Release”) announcing the terms of this
Agreement, in the form attached hereto as Exhibit E.  Prior to the
issuance of the Mutual Press Release, neither the Company nor the LaGrange
Group shall issue any press release or public announcement regarding this
Agreement without the prior written consent of the other party.

5.          
Specific Performance.

Each of the members of the LaGrange Group, on the one
hand, and the Company, on the other hand, acknowledges and agrees that
irreparable injury to the other party hereto would occur in the event any of
the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached and that such injury would not be adequately
compensable in damages.  It is accordingly agreed that the members of the
LaGrange Group or any of them, on the one hand, and the Company, on the other
hand (the “Moving Party”), shall each
be entitled to specific enforcement of, and injunctive relief to prevent any
violation of, the terms hereof, and the other party hereto will not take action,
directly or indirectly, in opposition to the Moving Party seeking such relief
on the grounds that any other remedy or relief is available at law or in equity.

- 4 -

 

	

 

 

 

 

 

6.          
Expenses.

The Company shall reimburse the LaGrange Group for its
reasonable, documented out-of-pocket fees and expenses (including legal
expenses) incurred in connection with the matters related to its consent
solicitation, its Schedule 13D position and related filings and the negotiation
and execution of this Agreement, provided that such reimbursement shall not
exceed $150,000 in the aggregate. 

7.          
Severability.

If any term, provision,
covenant or restriction of this Agreement is held by a court of competent jurisdiction
to be invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated. It is hereby
stipulated and declared to be the intention
of the parties that the parties would have executed the remaining terms,
provisions, covenants and restrictions without including any of such which may
be hereafter declared invalid, void or unenforceable. In addition, the parties
agree to use their best efforts to agree upon and substitute a valid and
enforceable term, provision, covenant or restriction for any of such that is
held invalid, void or enforceable by a court of competent jurisdiction.

8.          
Notices.

Any notices, consents, determinations, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered:
(i) upon receipt, when delivered personally; (ii) upon receipt, when
sent by facsimile (provided confirmation of transmission is mechanically or
electronically generated and kept on file by the sending party); or
(iii) one (1) business day after deposit with a nationally recognized
overnight delivery service, in each case properly addressed to the party to
receive the same. The addresses and facsimile numbers for such communications
shall be:

If to the Company:

Forward Industries, Inc.

1801 Green Road, Suite E

Pompano Beach, FL  30064

Attention:   Chairman, Nominating and Governance
                                                      Committee of the Board of
Directors

Facsimile:  (954) 360-6409

 

With a
copy to:

 

Duane
Morris LLP

30 South
17th Street

Philadelphia,
PA  19103

Attention: 
Richard A. Silfen, Esquire

Facsimile: 
215-689-4385

 

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If to the LaGrange Group or any member of the LaGrange
Group:

 

            LaGrange
Capital Partners, L.P.  

            570
Lexington Avenue, 27th Floor 

            New
York, New York 10022 

            Attention:
Frank LaGrange Johnson

            Telephone:

                                    Facsimile: 

 

With a copy to:

 

Olshan
Grundman Frome Rosenzweig & Wolosky LLP

Park Avenue
Tower

65 East
55th Street

New
York, New York 10022

Attention:
Steven Wolosky, Esq.

Facsimile:
(212) 451-2222

 

9.         
Applicable Law.

This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York without reference
to the conflict of laws principles thereof. Each of the Parties hereto
irrevocably agrees that any legal action or proceeding with respect to this
Agreement and the rights and obligations arising hereunder, or for recognition
and enforcement of any judgment in respect of this Agreement and the rights and
obligations arising hereunder brought by the other party hereto or its
successors or assigns, shall be brought and determined exclusively in the New
York courts and any state appellate court therefrom within the State of New
York.  Each of the Parties hereto hereby irrevocably submits with regard to any
such action or proceeding for itself and in respect of its property, generally
and unconditionally, to the personal jurisdiction of the aforesaid courts and
agrees that it will not bring any action relating to this Agreement in any
court other than the aforesaid courts. Each of the parties hereto hereby
irrevocably waives, and agrees not to assert in any action or proceeding with
respect to this Agreement, (i) any claim that it is not personally subject
to the jurisdiction of the above-named courts for any reason, (ii) any
claim that it or its property is exempt or immune from jurisdiction of any such
court or from any legal process commenced in such courts (whether through
service of notice, attachment prior to judgment, attachment in aid of execution
of judgment, execution of judgment or otherwise) and (iii) to the fullest
extent permitted by applicable legal requirements, any claim that (A) the
suit, action or proceeding in such court is brought in an inconvenient forum,
(B) the venue of such suit, action or proceeding is improper or
(C) this Agreement, or the subject matter hereof, may not be enforced in
or by such courts. 

- 6 -

 

 

 

 

10.       
Counterparts.  This Agreement may be executed in one or more
counterparts which together shall constitute a single agreement. 

11.       
Entire Agreement; Amendment and Waiver; Successors and Assigns. 

This Agreement contains the entire understanding of the
parties hereto with respect to its subject matter.  There are no restrictions,
agreements, promises, representations, warranties, covenants or undertakings
between the parties other than those expressly set forth herein.  No
modifications of this Agreement can be made except in writing signed by an
authorized representative of each the Company and the LaGrange Group. No
failure on the part of any party to exercise,
and no delay in exercising, any right, power or remedy hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of such right,
power or remedy by such party preclude any other or further exercise thereof or
the exercise of any other right, power or remedy.  All remedies hereunder are cumulative and are not exclusive of
any other remedies provided by law.  The terms and conditions of this Agreement
shall be binding upon, inure to the benefit of, and be enforceable by the
parties hereto and their respective successors, heirs, executors, legal
representatives, and permitted assigns. No
party shall assign this Agreement or any rights or obligations hereunder
without, with respect to any member of the LaGrange Group, the prior written
consent of the Company, and with respect to the Company, the prior written
consent of the LaGrange Group.

 

[The
remainder of this page intentionally left blank]

 

 

 

 

 

 

 

 

 

 

 

 

 

 - 7 -

 

	

 

 

 

 

 

IN WITNESS WHEREOF, this Agreement
has been duly executed and delivered by the duly authorized signatories of the
parties as of the date hereof.

		
			FORWARD INDUSTRIES, INC.

			
	
			 

			
	
			
				By:   
				/s/ Fred Hamilton

			
	
			        
Name:  Fred Hamilton   

	
			         Title:     Director, duly authorized by the Board

			

THE LAGRANGE GROUP:

 

	
		 

			
		LaGrange Capital Partners,
  L.P.

	
		 

			
		 

		
	
		 

			
		By:

			
		LaGrange Capital
  Management, L.L.C.

		its General Partner

		 
		

	 	
		By:	
		
			/s/ Frank LaGrange Johnson

		
	 	 	Frank LaGrange Johnson,
its sole Member

 

	
		 

			
		LaGrange Capital
  Management, L.L.C.

	
		 

			
		 

		
	 	
		By:	
		
			/s/ Frank LaGrange Johnson

		
	
		 

			
		 

			
		
		Frank LaGrange Johnson,
its sole Member

 

 

	
		 

			
		LaGrange Capital Partners
  Offshore Fund, Ltd.

	
		 

			
		 

		
	
		 

			
		By:

			
		LaGrange Capital
  Administration, L.L.C. 

		its Investment Manager

		
	
		 

			
		 

		
	 	
		By:	
		
			/s/ Frank LaGrange Johnson

		
	
		 

			
		 

			
		Frank LaGrange Johnson,
its Managing Member

		

 

 

- 8 -

 

	

 

 

 

 

 

 

	
		 

			
		LaGrange Special Situations
  Yield Master Fund, Ltd.

	
		 

			
		 

		
	
		 

			
		By:

			
		LaGrange Capital
  Administration, L.L.C. 

		its Investment Manager

		 

		
	 	
		By:	
		
			/s/ Frank LaGrange Johnson

		
	
		 

			
		 

			
		Frank LaGrange Johnson,
its Managing Member

		

 

 

	
		 

			
		LaGrange Capital
  Administration, L.L.C.

	
		 

			
		 

		
	 	
		By:	
		
			/s/ Frank LaGrange Johnson

		
	
		 

			
		 

			
		Frank LaGrange Johnson,
its Managing Member

		

 

 

	 	 	
		
			/s/ Frank LaGrange Johnson

		
	
		 

			
		 

			
		FRANK LAGRANGE JOHNSON

		

 

 

 

 

 

 

 

 

 

 

 

 

 

 

- 9 -

 

	

 

 

 

 

 

 

 

SCHEDULE A

The LaGrange Group

 

 

LAGRANGE CAPITAL PARTNERS,
L.P.

LAGRANGE CAPITAL PARTNERS
OFFSHORE FUND, LTD.

LAGRANGE SPECIAL SITUATIONS
YIELD MASTER FUND, LTD.

LAGRANGE CAPITAL MANAGEMENT,
L.L.C.

LAGRANGE CAPITAL
ADMINISTRATION, L.L.C.

FRANK LAGRANGE JOHNSON

 

 

 

 

 

 

 

 

 

- 10 -

 

	

 

 

 

 

 

EXHIBIT B

SEVERANCE AND RELEASE AGREEMENT
WITH DOUGLAS W. SABRA

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

- 11 -

 

	

 

 

 

 

 

                                                                                   

SEVERANCE AND RELEASE AGREEMENT

 

            This
Severance and Release Agreement
(this “Agreement”) is entered into as of this 10th day of August 2010
(“Effective Date”),  by and between Douglas W. Sabra, residing at 7441
Brunswick Circle, Boynton Beach, Florida 33472 ("Executive" or
“you”), and Forward Industries, Inc., a New York corporation (“Forward”),
having its principal offices at 1801 Green Road, Suite E, Pompano Beach,
Florida 33064 (Forward, together with its wholly-owned subsidiaries Forward
Innovations, Koszegi Industries, Inc., and Koszegi, Asia, Ltd., are referred to
herein as the "Company").

 

RECITALS:

 

Executive has
been continuously employed by the Company as an executive since May 2000;

 

Executive has
served as director of Forward since 2006;

 

Executive has been party to employment agreements with
Company whereby he has been employed as its Chief Financial Officer commencing
January 2001; as such agreement was amended and restated in September 2003, and
again in December 2005. Executive was then appointed Company’s President and
Chief Executive Officer and entered into a new employment agreement with
Company effective January 2008 which was extended and restated on August 12,
2008 and extended again without further modification effective January 2010
(the agreement dated as of August 12, 2008, is referred to herein as the “Prior
Agreement”); 

 

In such executive capacities Executive has had access to
confidential and valuable non-public information relating to the Company’s
customer lists, supplier lists, sourcing and pricing know-how, other
non-public, proprietary information relating to product pricing, product
proposals, product design proposals, product sourcing information, and other
information relating to the Company Business (as defined herein);

 

The Company and Executive have mutually agreed that
Executive will terminate his employment with the Company in the capacities
under the Prior Agreement and as a Director of the Company as of the Effective
Date, and the Company has agreed to the payment, confirmation of benefits, and
grant of the Executive Release (as defined herein) set forth below in
paragraphs enumerated as 1, 3 and 4, respectively, hereof in consideration of
the Release and covenants in this Agreement; and

 

This Agreement will govern all aspects of the termination
and severance arrangements between Executive and the Company arising out of or
relating to the Prior Agreement and, as hereinafter set forth, shall supersede
any provisions thereof that are inconsistent with this Agreement, the
inconsistent terms of the Prior Agreement being null and void:

 

 

1

 

	

 

 

 

 

 

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

 

1.  Consideration.  In consideration
of
Executive’s execution and performance of this Agreement,
the Company agrees to (i) pay Executive $500,000.00 (five
hundred thousand US Dollars) less applicable withholding and payroll taxes; of which half ($250,000.00) shall be paid on the Effective
Date  and the remaining half ($250,000.00) shall be paid in 12 equal monthly
installments of approximately $20,833.33 each commencing on September 1, 2010
and continuing on the first business day of each month through August 1, 2011,
(ii) immediately vest and eliminate all restrictions on 26,666 shares of
restricted Common Stock previously granted to Executive under Company’s Equity
Incentive Plan, (iii) immediately vest the option to purchase 10,000 shares of
Common Stock at $2.02 per share, previously granted to Executive under the
Company’s Equity Incentive Plan, with the right to immediately exercise such
option  in accordance with the stock option award agreement and (iv) grant the
Executive Release.  Capitalized terms used in the Prior Agreement that are not
otherwise defined herein shall have the meanings ascribed to such terms when
used in this Agreement.  The parties hereto confirm the survival of Sections 9,
10, 11, and 12 of the Prior Agreement.

 

2. 
Release. 
This release of claims (the “Release”) set forth in this Agreement is entered
into by you as a condition precedent to receiving the severance and severance
related benefits herein.  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, including without limitation 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 on the Effective Date include,
but are not limited to, all claims related to (i) your employment at the
Company, including without limitation 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
3 of this 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 Agreement.

 

 

2

 

	

 

 

 

 

3.  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 this Agreement, subject to the Company’s expense reimbursement
policies.  In addition, this Agreement 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 paragraph 1 of this Agreement.

 

4. 
Release. 
This release of claims (the “Executive Release”) set forth in this Agreement is
entered into by the Company in consideration of Executive entering into and
performing this Agreement.  In exchange for Executive’s performance of the
terms of this Agreement and grant of the Release, Company, for itself, its
subsidiaries, and their respective successors and assigns, subject to the last
sentence of the first paragraph of paragraph 1 hereof and the accuracy of the
representations set forth in paragraph 6 hereof, hereby voluntarily, knowingly
and irrevocably and forever discharges Executive from all actions, claims,
demands, causes of actions, obligations, damages, liabilities, 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 on the
Effective Date include, but are not limited to, all claims related to (i)
Executive’s employment at the Company, including without limitation its
subsidiaries, or the termination of said employment, (ii) statements, acts or
omissions by Executive, (iii) any express or implied agreement between the
Company, including without limitation, its subsidiaries and you, other than
agreements that by their terms survive the Prior 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 Company 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 Agreement.

 

 

 

3

 

	

 

 

 

5. 
No
suit. You represent and warrant that as of the date you enter into this
Agreement, 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 2 above.

 

6. 
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 Agreement;

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

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

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

	(e)	
		You have not, during the term of your employment
under the Prior 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 terms referred
to or set forth in paragraph 7 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 this Agreement to consider it.
Please indicate your acceptance by signing the agreement and sending it via
overnight mail or hand delivery to:

 

James O.
McKenna

c/o Forward
Industries, Inc.

1801 Green
Road, Suite E,

Pompano
Beach, FL 33064

 

With
a copy to:

Chairman of the Compensation
Committee

c/o Forward Industries, Inc.

1801 Green Road, Suite E,

Pompano Beach, FL 33064

 

 

 

4

 

	

 

 

 

7.  Covenants Under Prior
Agreement.  You further acknowledge and agree that the Confidentiality,
Non-Compete, Non-Solicitation, Separability, and Specific Performance
provisions in Sections 9, 10, and 11, of the Prior Agreement are hereby
reaffirmed and shall survive the termination of your employment for whatever
reason, and continue as set forth in the Prior Agreement. 

8. 
Non-Disparagement. 
You agree that you will not make disparaging remarks about Company, any of its
subsidiaries, or their current and future officers, or directors in their
individual and representative capacities, or the Company Business. Company and
its subsidiaries will not, and they shall cause their respective current and
future 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 disparaging, 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, Company, or any of
its subsidiaries, as the case may be. This paragraph 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.

9. 
Equitable Relief.  You agree that the violation of the obligations in
paragraphs 7 and 8 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. 

 

10. 
Cooperation.  You agree that you will cooperate with the
Company, including without limitation 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 the Company, including
without limitation, 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
reasonable 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.

 

 

 

5

 

	

 

 

 

 

 

 

11.  Law Governing.  This Agreement 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.

 

12.  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, as defined
in Section 9(a) of the Prior Agreement, in your custody or possession.

 

13.  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
Agreement.

 

 

 

           
Agreed to and Accepted this 10th day of August, 2010

 

 

                                                           

Douglas W.
Sabra

 

 

FORWARD
INDUSTRIES, INC.

(on its own
behalf and behalf of each

subsidiary
thereof)

 

 

 

                                                              

By: Fred
Hamilton

By direction
of the Board of Directors

 

 

 

 

6

 

	

 

 

 

 

EXHIBIT C

RETENTION AGREEMENT
WITH JAMES O. MCKENNA III

 

 

 

 

 

 

 

 

 

 

- 12 -

 

	

 

 

 

 

RETENTION AGREEMENT

 

            This
Retention Agreement (this
“Agreement”) is entered into as of this 10th day of August 2010 (“Effective
Date”),  by and between James O. McKenna III, residing at 951 Mill Creek Drive,
Palm Beach Gardens, Florida 33410 ("Executive" or “you”), and Forward
Industries, Inc., a New York corporation (“Forward”) having its principal
offices at 1801 Green Road, Suite E, Pompano Beach, Florida 33064 (Forward,
together with its wholly-owned subsidiaries Forward Innovations, Koszegi Industries,
Inc., and Koszegi, Asia, Ltd., are referred to herein as the
"Company").

 

RECITALS:

 

Executive has
been continuously employed as an executive of the Company since December 2003;

 

Executive is party to an employment
agreement with Company effective August XX, 2010 (the “Employment Agreement”) whereby
he is employed as its Chief Financial Officer; Capitalized
terms defined in the Employment
Agreement that are not otherwise defined herein shall have the meanings
ascribed to such terms when used in this Agreement;  

 

Provided that Executive performs his duties under the
Employment Agreement in the capacities stipulated therein until at least March 1,
2011 (the “Payment Date”), the Company and Executive agree that Executive will be
entitled to receive a retention bonus of $175,000.00;

 

In consideration of the foregoing, and in consideration of
the obligations undertaken and benefits received and to be received herein and pursuant
to the Employment Agreement, the parties hereto agree as follows:

 

1.  Retention
Payment.  In consideration for Executive to continue his employment until the Payment Date, or such
later date as Executive and the Company shall agree, and otherwise to execute
and perform this Agreement and the Employment Agreement, the
Company agrees to pay Executive $175,000.00 (one hundred seventy five thousand
US Dollars) less applicable withholding and payroll taxes,
on March 2, 2011 (the “Retention Payment”).  

 

2.  Termination
Prior to Payment Date.  In the event that, prior to the Payment Date, Executive’s
employment is terminated by the Executive for good reason (as such term is
defined in the Employment Agreement) under Section 5 of the Employment
Agreement, subject to the terms thereof, Executive shall be entitled to the
Retention Payment upon the effective date of termination.  In addition, upon
any such termination Executive shall be entitled to such other benefits and
consideration as is provided under Section 5 of the Employment Agreement.

 

 

 

	

 

 

 

 

 

 

3.  Covenants Under Employment
Agreement.  Executive further acknowledges and agrees that the Retention
Payment is made in consideration of Executive’s performance under the
Employment Agreement, including the Confidentiality, Non-Compete, Non-Solicitation,
Separability, and Specific Performance provisions in Sections 8, 9, and 10 thereof. 

 

4.  Law Governing.  This Agreement 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.

 

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

 

 

           
Agreed to and Accepted this 10th day of August, 2010

 

                                                            

James O. McKenna III

 

 

FORWARD
INDUSTRIES, INC.

(on its own
behalf and behalf of each

subsidiary
thereof)

 

                                                            

By Fred
Hamilton

Director, duly authorized by the
Board

 

 

 

	

 

 

 

 

 

 

EXHIBIT D

 

 

EMPLOYMENT AGREEMENT
WITH JAMES O. MCKENNA III

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

- 13 -

 

	

 

 

 

 

 

 

 

EMPLOYMENT
AGREEMENT

 

EMPLOYMENT AGREEMENT (this “Agreement”), dated as of
the 10th day of August, 2010, between Forward Industries, Inc., a New York
corporation having its principal offices at 1801 Green Road, Suite E, Pompano
Beach, Florida 33064 (the “Company”), and James O. McKenna, residing at 951
Mill Creek Drive, Palm Beach Gardens, FL 33410 (“Executive”).

W I T N
E S S E T H:

WHEREAS, Executive is party to an employment agreement
with the Company dated as of August 12, 2008 (the “Prior Agreement”), and the
Company wishes to secure the services of Executive upon the terms and
conditions of employment as set forth in this Agreement, with effect from the
Effective Date (as such term is hereinafter defined), the Prior Agreement
thereupon becoming of no further force or effect;

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

1.         EMPLOYMENT
TERM; PRIOR AGREEMENT

Unless earlier terminated in accordance with the terms of
this Agreement, the term of employment hereunder (the “Term”) shall
commence on the Effective Date and expire December 31, 2011.  The
Effective Date shall mean the date on which the Company, or the Special
Committee of the Board of Directors of the Company on behalf of the Company,
and LaGrange Capital Partners L.P. enter into a definitive and binding
settlement agreement relating to management of the Company and certain other
matters.  Upon the Effective Date, this Agreement shall become effective and
the Prior Agreement shall be null and void and of no further force or effect
whatsoever.  Upon expiration of the Term, this Agreement shall be automatically
renewed for successive terms of one year each; provided, however, that
if either party provides written notice to the other party of its or his
determination not to so renew not later than 90 (ninety) days prior to the
expiration of the Term, or any renewal thereof, as the case may be, this
Agreement and Executive’s employment shall terminate at the end of the Term or
such renewal term, as the case may be.  In the event that the Company is
the party giving notice of non-renewal, this shall be treated as a termination
without Cause and governed by the terms of Section 5.

 

 

	

 

 

 

2          EMPLOYMENT
DUTIES AND SERVICES

 

(a)        On the terms
and conditions herein set forth, the Company hereby employs Executive as its
chief financial officer and treasurer for the term of this Agreement and any
renewal(s) thereof, and Executive hereby accepts such employment. 
Executive shall perform such duties and responsibilities of a chief financial
officer nature for the Company as shall be consistent with the provisions of
the Company’s By-laws in effect from time to time and as are customary for a
chief financial officer of corporations of similar size and business as the
Company, subject to the direction of the Company’s President (chief executive
officer), or in his absence, the Board of Directors 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. 

 

 

	

 

 

 

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

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

 3.         COMPENSATION
AND EXPENSE REIMBURSEMENT

(a)        Salary. 
Executive shall be entitled to receive for all services rendered by Executive
in any and all capacities in connection with his employment hereunder a salary
(as it may be adjusted, “Salary”) of $175,000 per annum, payable in equal
installments in accordance with the prevailing practices of the Company (but
not less frequently than monthly). 

 

 

 

 

	

 

 

 

 

 

(b)        Bonus;
Calculation and Payment.  The Executive shall be eligible to receive a
(“Bonus”) with respect to each full fiscal year or part thereof (except to the
extent expressly provided in Section 3(b), 4, 5, or 6(b) hereof) in respect of
his employment hereunder, as set forth in this Section 3.  The amount of
Bonus, if any, that Executive may earn in any fiscal year during the Term
hereof pursuant to this Section 3(b) shall be based on the terms of the bonus
plan that the Company adopts, with approval by the Compensation Committee of
the Board of Directors (the “Compensation Committee”), 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 pursuant to Section 3(b)
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 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”). 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
pursuant to Section 4, Termination for Cause, he shall not be entitled to any
Bonus compensation in respect of the fiscal year during which such notice of
termination was given or during which such termination becomes effective.

 

 

	

 

 

 

 

 

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

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

 

 

 

 

 

	

 

 

 

 

 

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

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

4.         TERMINATION
BY THE COMPANY FOR CAUSE

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

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

 

 

	

 

 

 

 

 

          

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

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

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

 

 

 

	

 

 

 

 

 

 

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; and

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

 

 

 

	

 

 

 

 

 

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

(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 Pompano Beach,
Florida.

(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 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 or affiliates.

(d)  own (or have any financial interest in, actual,
contingent, future, or otherwise), control, manage, operate, participate,
engage in, invest in or otherwise have any interest in or through, or otherwise
be connected with, in any manner, any firm, company, corporation, organization,
associate, business, enterprise, venture or other entity, association or person
that does or proposes to do any one or more of the following as it relates to
of the Company Business (as hereinafter defined): (a)(i) engage in, do, or
solicit business with, or (ii) interfere with or affect the Company’s business
opportunities with, any of the customers with whom the Company has done
business with during the most recent two calendar years or (b)(i)  engage
in, do, or solicit business with, or (ii) interfere with or affect the
Company’s business opportunities with,  any of the vendors with whom the
Company has done business with during the most recent two calendar years. 
The term “Company Business” shall mean the business of designing,
manufacturing, procuring the supply or manufacture of, sourcing, selling,
re-selling, and/or distributing of carrying or portable cases or cover plates
and related carry case accessories supplied to the cellular telephone, portable
medical equipment, laptop computer, photography, video or audio industries.
Nothing in this Section 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)        Assignment;
Successors.  This Agreement is not assignable by Executive without the
prior written consent of the Company and any purported assignment by Executive
of Executive’s rights and/or obligations under this Agreement shall be null and
void.  Except as provided below, this Agreement may be assigned by the
Company at any time, upon delivery of written notice to Executive, to any
successor to the business of the Company, or to any Subsidiary or affiliate of
the Company.  In the event that another corporation or other business
entity becomes a Successor of the Company, then this Agreement may not be
assigned to such Successor unless the Successor shall, by an agreement in form
and substance reasonably satisfactory to the Executive, expressly assume and
agree to perform this Agreement in the same manner and to the same extent as
the Company would be required to perform if there had been no Successor. The
term “Successor” as used herein shall mean any corporation or other business
entity that succeeds to substantially all of the assets or conducts the
business of the Company, whether directly or indirectly, by purchase, merger,
consolidation or otherwise. This Agreement shall be binding upon and inure to
the benefit of the parties and their respective heirs, executors,
administrators, personal representatives, successors and permitted assigns.

 

 

 

	

 

 

 

 

 

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

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

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

(i)        
If to Executive to:

James O. McKenna at his address

set forth in the preamble to this
Agreement

 

 

 

	

 

 

 

 

 

(ii)       
If to the Company to:

the
address set forth in the

preamble
to this Agreement

Attention: Chairman of the
Compensation Committee

with a copy to:

Steven Malsin, Esq.

237 Upper Shad Road

Pound
Ridge, NY 10576

 

Telecopy:  (914) 764-1940

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

 

 

 

 

 

 

 

 

 

 

 

	

 

 

 

 

 

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

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

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

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

 

IN WITNESS WHEREOF, the parties have executed this
Agreement as of the __th day of August 2010, intending it to be
effective on and as of the Effective Date.

	
		JAMES O. McKENNA
	
		
		FORWARD INDUSTRIES, INC.

	
		 	
		
		By:

	
		 

			
		Fred Hamilton

		Director, duly authorized by the Board

		

 

 

	

 

 

 

 

 

 

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 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.

1801 Green
Road, Suite E,

Pompano
Beach, FL 33064

 

 

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:                                                      
	
		James O. McKenna 
	Fred Hamilton
	
		 

			By direction of the Board of Directors

 

 

 

 

	

 

 

 

 

 

 

 

 

EXHIBIT E

 

 

PRESS RELEASE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

- 14 -

 

	

 

 

 

 

 

 

		
			Media
Contact:         
	
			
			Stefan Prelog

	
			
	
			
			Walek
		& Associates 

	
			 

				
			
			212-590-0523

	 	
			
			sprelog@walek.com

	 	
			 

FOR IMMEDIATE RELEASE

FORWARD
INDUSTRIES NAMES NEW CHAIRMAN, CEO

•  
Excited About
Future Opportunities for Company

•   Outgoing CEO
Praises New Management Team and Corporate Plan

 

New York, August 10, 2010 – Forward
Industries, Inc. (NASDAQ: FORD) (“the Company” or “Forward”) and LaGrange
Capital Partners announced today that LaGrange founder and general partner
Frank LaGrange “Grange” Johnson will assume the role of Chairman of the Board
of Forward Industries, a technology solutions provider that designs, markets
and distributes carrying cases and accessories for the handheld consumer
electronics and medical device industries.  Additionally, Brett M. Johnson will
take over as CEO.  

Doug Sabra made the announcement that he is immediately stepping down as
Acting Chairman and CEO.  In addition, Owen King and Stephen Key are joining
the Board of Directors, replacing Bruce Galloway and Michael Schiffman.  Mr.
Schiffman has agreed to serve as an ongoing advisor to the Company.

The company has also repealed all corporate actions taken on June 9th,
2010, including the adoption of the Shareholder Protection Rights
Agreement and certain amendments to the Company’s Bylaws.

LaGrange,
the largest shareholder of Forward with 26.40% of the shares outstanding, is
pleased with the positive changes and believes the new management team can
create shareholder value.  

 

Grange Johnson wished Sabra and
the outgoing board members well and thanked them for their years of dedicated service. 
“We are excited about the opportunity ahead of us and we appreciate the support
of the Company going forward,” said Johnson.

 “With this new leadership team, we are excited to grow Forward’s
existing original equipment manufacturer business and to expand with new
product channels and geographies,” said Brett M. Johnson.  “We believe that
these represent significant and exciting opportunities for the Company. Over
the course of the next few years, we are looking to transform Forward into a
leader in the technology accessories category.”

 

	

 

 

 

 

 

In a letter to the Company, Sabra noted that “Brett M. Johnson brings an
exceptional amount of industry experience and is the best possible person to
execute the strategy recently adopted by the board.”  

“You will have a terrific management team in place to lead the way and,
with your support, the plan is a guaranteed winner,” Sabra added in the letter.

Brett M. Johnson is the founder of Benevolent Capital Partners (“BCP”),
a diversified investment company whose investments include Yak Pak and
Terracycle.  Prior to founding BCP, Mr. Johnson was the President of Targus
Group International, a global supplier of notebook carrying cases and
accessories, from 2001 to 2004, during which time he led a comprehensive
restructuring of the business and grew EBITDA from a loss of $2m in 2000 to a
profit of $42m in 2004.  Prior to that he was managing director of Targus, EMEA
and APAC regions where he increased sales from $25m to $125m and opened 18
international offices.  Under Johnson’s leadership, Targus was a two-time
winner of the Queen's Award for Enterprise and a six-time winner of Gartner
Group's Best Vendor Award at RetailVision and VarVision.  

Stephen Key heads up Key Consulting, a financial consulting firm, and
serves on the board of directors for a number of companies and organizations. 
He was previously Executive Vice President and Chief Financial Officer of
Textron and ConAgra, Inc. Key also worked for Ernst and Young for 24 years and
was managing partner of their New York office.

Owen King is the founder and CEO of Stonehurst Management, an
SEC-registered investment adviser founded in 2002.  Prior to Stonehurst,
King managed the global asset allocation program and served on the investment
committee of one of the largest independent RIAs in the U.S.  Previously, King was Senior Vice President of P.G. Corbin & Company where he advised
many of the largest municipalities in the U.S. on their financing
programs.  He also worked as an investment banker for Prudential
Securities.

 

About LaGrange Capital Partners

Founded by Frank LaGrange “Grange” Johnson in 2000, the firm manages
LaGrange Capital Partners, an event driven/special situations fund focused on
areas with a high return potential, and LaGrange Special Situations Yield Fund,
a special situations fund focused on yield and value-oriented investments.
LaGrange Capital Partners is based in New York.

About Forward Industries

Forward Industries, Inc. designs and distributes custom carrying case
solutions for hand held electronic devices. Forward’s products can be viewed
online at   www.fwdinnovations.com and
www.forwardindustries.com. 

 

 

 

 

	

 

 

 

 

 

Note Regarding Forward-Looking Statements

In addition to the historical information contained herein, this news
release contains forward-looking statements (within the meaning of the Private
Securities Litigation Reform Act of 1995) that are subject to risks and uncertainties.
Actual results may differ substantially from those expressed or implied in such
forward looking statements due to a number of factors. Such risk factors
include but are not limited to those discussed in Item 2, Part I, “Management's
Discussion and Analysis of Financial Condition and Results of Operations” in
our Quarterly Report on Form 10-Q filed on August 10, 2010 with the SEC, as
well as in “Risk Factors” included in our Annual Report on Form 10-K for the
fiscal year ended September 30, 2009, which factors are incorporated herein by
reference. 

Such risk factors include, among others: the loss of any key customer or
material sales in our Diabetic Products line, where customer and sales
concentration are high; a significant change in the Company’s relationship with
one or more key customers (including changes affecting their businesses); the
loss of a key sales personnel who has significant influence on our
relationships with some of our largest customers; whether important customers
reduce or discontinue inclusion of carry solutions “in box” with their
electronic products; the concentration of our accounts receivable in a small
number of customers and our ability to collect payment; the adverse impact of
customer pricing pressures on gross margins ; fluctuations in foreign currency
exchange rates that could result in increased costs or reduced revenues; levels
of demand and pricing generally for electronic devices sold by our customers
for which we supply carry solutions; the development of quality control,
delivery, or pricing issues involving our Asian suppliers; uncertainties in the
financial and credit markets; changes in, governmental regulations; variability
in order flow from our OEM customers; the impact on our business of an
acquisition or the failure to make an acquisition; and losses on our uninsured
cash balances at commercial banks where a failure occurs.

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