AMENDED AND RESTATED EMPLOYMENT AGREEMENT

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this “Agreement”), dated as of the 12th day of August, 2008, between Forward Industries, Inc., a New York corporation having its principal offices at 1801 Green Road, Suite E, Pompano Beach, Florida 33064 (the “Company”), and Douglas W. Sabra, residing at 7441 Brunswick Circle, Boynton Beach FL 33437 (“Executive”).

W I T N E S S E T H :

WHEREAS , Executive has been rendering services to the Company pursuant to an employment agreement between him and the Company dated as of December 27, 2005, effective as of October 1, 2005, and amended as of January 2, 2008 (the “Prior Agreement”);

WHEREAS , the Company and Executive desire to amend and restate the Prior Agreement in order to reflect their current agreements as to the terms of employment, with effect from the date of execution of this Agreement (“Effective Date”);

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

1.         PRIOR AGREEMENT

The parties hereto hereby agree that (a) the terms of this Amended and Restated Agreement shall govern the terms of employment of Executive by the Company, and (b) the Company has no obligations to Executive under the Prior Agreement that have not been discharged except in respect of accrued and unpaid salary to the date of execution hereof, unused personal days and vacation time accrued in respect of the fiscal year ended September 30, 2008, and pension, medical benefits, and other benefits granted to all employees generally as such benefits have accrued on behalf of Executive consistent with the terms of the Prior Agreement and as continued pursuant to this Agreement.

2.         EMPLOYMENT TERM

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 on December 31 , 2009.  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 6 or Section 8, as the case may be.

3          EMPLOYMENT DUTIES AND SERVICES

(a)        On the terms and conditions herein set forth, the Company hereby employs Executive as its President (chief executive officer) 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 executive 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 executive officer of corporations of similar size and business as the Company, subject to the direction of the Company’s Board of Directors (the “Board”).  Subject to election thereto by the shareholders of the Company at the annual or other meeting from time to time, for so long as he serves as President Executive shall serve as a member of the Board, for which he shall not be entitled to additional compensation.  Executive shall serve the Company faithfully and to the best of his ability and shall devote his full business time and attention to the business and affairs of the Company, subject to reasonable absences for vacation and illness as determined by the Compensation Committee of the Board (the “Compensation Committee”).  Executive will not engage, directly or indirectly, in any other business or occupation during the Term.

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(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, (iii) engaging in charitable and civic activities, and (iv) engaging in such other limited activities on behalf of family interests as have been or 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.

4.         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 $250,000 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 (“Bonus”) with respect to each full fiscal year or part thereof (except to the extent expressly provided in Section 4(b), 5, 6, or 7(b) hereof) in respect of his employment hereunder, as set forth in this Section 4.  The amount of Bonus, if any, that Executive may earn in any fiscal year during the Term hereof pursuant to this Section 4(b) shall be based on the extent to which, if any, the Company achieves all or a percentage of, or exceeds, Target (as defined below) in each such fiscal year, in accordance with guidelines, or a formula, for earning such bonus as fixed by the Compensation Committee in its sole discretion not later than the date referred to in the next paragraph.

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“Target” means, with respect to any fiscal year, the amount of pre-tax income or other measure of operating results of the Company as determined by the Compensation Committee of the Board in its sole discretion, projected for achievement, in whole or in part, in such fiscal year by the Compensation Committee for the purpose of establishing Executive’s right to receive Bonus compensation in respect of such fiscal year.  The Compensation Committee shall determine the Target, together with the formulas for earning Bonus hereunder, after the Board has adopted the Annual Budget in respect of each fiscal year during the Term hereof but not later than the 75 ^th day of each such fiscal year.  The Compensation Committee may determine that the amount of Bonus for such purposes may be pro rated based on Target being achieved, exceeded, or missed.

Bonus compensation, if any, payable pursuant to Section 4(b) shall be payable to Executive not earlier than the date on which the Company’s audited financial statements relating to the fiscal year in respect of which such Bonus compensation is payable are first filed with the Securities and Exchange Commission (the “Commission”) pursuant to Section 13 or 15(d) under the Securities Exchange Act of 1934 (“Exchange Act”) nor later than the tenth (10 ^th ) business day after such date.  If Executive is otherwise entitled to payment of a Bonus pursuant to this Section 4(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 2; and provided , further, that if Executive’s employment was terminated as a result of notice pursuant to Section 5, 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.

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(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 entitled to a monthly allowance, subject to the approval and discretion of the Compensation Committee, to defray the expense of the lease of an automobile (including monthly lease cost, maintenance, insurance, and operating expense) for Executive’s use in connection with the discharge of his duties under this Agreement, the amount of which allowance shall be includible in Executive’s W-2 statements and be subject to applicable income tax withholding regulations..

 (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.

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(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.

5.         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 5(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;

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            (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 5 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 5, termination shall be effective on the thirtieth (30 ^th ) day after the notice referred to in the first sentence of this Section 5 is given to Executive, unless the Executive shall have, prior to such thirtieth (30 ^th ) 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;

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(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 5;

(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 5 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.

6.         TERMINATION BY EXECUTIVE FOR GOOD REASON OR TERMINATION WITHOUT CAUSE PRIOR TO CHANGE IN CONTROL

(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 (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), in either case prior to a Change in Control (as hereinafter defined), the Executive shall be entitled to receive, and his sole remedies under this Agreement shall be:

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(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), for a period of (A) in case of executive’s termination for Good Reason, six months following such termination, or (B) in case of termination by the Company without cause, the greater of (x) six months or (y) the balance of the Term (or renewal thereof, as the case may be) remaining after the date of termination set forth in such notice, in either case 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 4(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