CONFIDENTIAL

 

 

MEMORANDUM OF UNDERSTANDING

ThisMemorandum of Understanding, made as of the 21st day of June, 2012,by and between FORWARD INDUSTRIES, INC. a New York corporation (hereafterreferred to as “Forward”), having an address at 3110 Main Street, Suite 400,Santa Monica, CA 90405 and G-Form, LLC, a Rhode Island limited liabilitycompany (hereinafter referred to as “G-Form”) having an address at 1 DavolSquare, Providence, RI 02903.

WHEREAS, Forward has established a global retaildistribution infrastructure in the consumer electronics accessories market; and

WHEREAS, G-Form has developed a line of consumerelectronic accessory products incorporating proprietary technology for retaildistribution; and

WHEREAS, Forward desires to (1) exit its retail businessentirely within sixty (60) days from the date of this Memorandum ofUnderstanding, (2) sell off its inventory on hand and on order in an amountequal to or greater than its book value, and (3) reduce or eliminate itsseverance obligations with regard to certain of its employees; and G-Formdesires to expand and enhance its distribution capability by (1) potentiallyhiring certain of Forward’s employees, (2) leveraging Forward’s vendor ofrecord status to immediately facilitate distribution of its products with BestBuy, and (3) purchasing certain remaining “G-Form” inventories from Forward and(4) continuing to service sales channels that have been established; theparties desire to enter into this Memorandum of Understanding, subject to allof the terms and conditions set forth herein; and

WHEREAS, the parties desire to terminate their previousMemorandum of Understanding dated as of August 26, 2011 (the “Prior MOU”).

NOW, THEREFORE, the parties hereto, in consideration ofthe foregoing and of the mutual covenants contained herein, the receipt andsufficiency of which are hereby acknowledged, and intending to be legally boundby this Memorandum of Understanding, agree as follows:

**1.     ****EMEA Personnel**
    -  Subject to the provisos and conditions contained in this Section 1, afterexecution of this Memorandum of Understanding, and during the period betweensuch execution and July 15, 2012, G-Form shall use commercially reasonableefforts to offer employment, intended to commence on July 31, 2012 to thefollowing individuals (the “EMEA Personnel”), 
    -  Astrid Immerz 
    -  Patrick Kastelic 
    -  Andreas Wagner 
    -  Robert Gebicki 
    -  Radek Bilski 
    -  Ripunjay Gajjar 
    -  Brian Johnson 

 

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    -  Tara McLoughlin 
    -  Pete Morley 
    -  Eshi Jerome 
    -  A.R. Prasanna 
    -  Dmitry Brilliantov 
    -  Theterms of any such offer shall be in G-Form’s sole discretion and neither theindividuals nor G-Form shall be under any obligation to enter into anemployment relationship, nor shall there be any obligation or liability toForward on the part of either G-Form or the EMEA Personnel in connection withany such offer or any such eventual employment (except for the documentpreparation assistance described in Section 1d. below); provided that the basecompensation and reasonable automobile allowances offered to the EMEA Personnelshall be commensurate with the amounts that Forward has represented to G-Formthat it is currently paying to such individuals.  The parties acknowledge thatall other elements of such compensation including, without limitation,benefits, potential severance and non-monetary items offered will be at thediscretion of G-Form and may or may not be commensurate with what the EMEAPersonnel are currently receiving from Forward.
    -  Underno circumstances shall G-Form be responsible for any remuneration, benefits,severance or other compensation of any kind related to the EMEA Personnel orany other former employee of Forward in connection with their employment withForward and/or the cessation of their employment with Forward; provided,however, that G-Form will reimburse Forward for the base salary paid and costof standard benefits and reasonable automobile allowances provided to suchemployee for the period between July 1, 2012 and July 31, 2012 in connectionwith EMEA Personnel who accept employment with G-Form and who remain employedby Forward during the entire period between July 1, 2012 and July 31, 2012. Such reimbursement shall not include commissions, bonuses, severance or othermonetary or non-monetary compensation of any kind.
    -  Priorto entering into an employment relationship with any of the EMEA Personnel,G-Form will require receipt of a document, in a form reasonably acceptable toG-Form, executed by the applicable EMEA Personnel individual and Forwardevidencing that both of such parties acknowledge that neither of them owes anycontinuing obligation, monetary or otherwise, to the other party and that theindividual EMEA Personnel is free to enter into an employment relationship withG-Form, and G-Form is free to enter into an employment relationship with theindividual EMEA Personnel without any obligation or liability to Forward or tothe individual EMEA Personnel (other than the employment parameters agreed uponby the individual and G-Form in connection with the individual’s subsequentemployment with G-Form).  For a period of two (2) years after execution of thisMemorandum of Understanding, G-Form will not offer employment to any individualEMEA Personnel who has not provided such documentation to G-Form.

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    -  Tothe extent that there is any gross profit remaining on the sale of Forward’s inventoryafter Forward has awarded discretionary bonuses to the EMEA Personnel, suchremaining gross profit shall be credited to G-Form as an offset to the July,2012 EMEA Personnel reimbursement describe in Section 1.d. above.
    -  Forward hereby indemnifies and holds harmless G-Form, its directors,officers, employees, members, representatives and agents from any and allclaims, liabilities and expenses (including reasonable attorneys’ fees) inconnection with Forward’s employment of the EMEA Personnel or any other formeremployee of Forward and/or with the cessation of such individuals’ employmentwith Forward and/or from any claim Forward may allege in connection with thehiring of such individuals by G-Form.  G-Form shall be responsible for anyother of its own legal and other costs necessary to extend offers of employmentto the EMEA Personnel.
    -  Inthe event that G-Form enters into an employment relationship with any of the EMEA Personnel, the parties agree to work together to ensure a successfultransition of such employees from Forward to G-Form; provided that any suchtransition shall not include the assumption by G-Form of any liabilities,obligations or expenses owed by Forward to the EMEA Personnel other than thatdescribed in Section 1.d. above.  
    -  Forwardshall issue a “letter of no objection” and/or other documents required forG-Form to make its own application for a license in UAE and shall assist withany other documents with respect to G-Form offering employment to Eshi Jeromeand Prasanna A.R.  To the extent that it is legally and commercially practicalto transfer Forward’s currently licensed leased premises in JAFZA to G-Formtogether with any necessary and appropriate documentation in connectiontherewith, G-Form will assume the costs associated with such transfer andresulting occupancy up to a maximum of twelve (12) months and a maximum expenseof two thousand five hundred United States dollars ($2,700) per month duringsuch 12-month period.  G-Form will have no other responsibility with respect topayment of Forward’s occupancy obligations or any obligations with respect toForward’s JAFZA office.

 

**2.     ****EMEA Inventory**
    -  Within five (5) business days of signing this MOU, G-Form and Forwardshall use commercially reasonable efforts to agree on quantities of G-Formproducts of which Forward has in inventory (“Forward G-Form Inventory”).  Uponsuch agreement, G-Form will issue a purchase order to Forward to purchase allof Forward’s inventory of G-Form branded products at a price equal to Forward’sacquisition cost from G-Form of such inventory.  To the extent that suchinventory is not in G-Form original packaging, Forward shall be responsible forall costs to repackage the inventory into G-Form packaging.  It is estimatedthat the value of Forward G-Form Inventory on hand as of May 31stwas approximately three hundred sixty thousand United States dollars (U.S. $360,000))minus any of the above repackaging costs. The payment for this Forward G-FormInventory will be made by G-Form to Forward within sixty (60) days afterdelivery of the inventory to G-Form. 

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    -  From the period from the signing of this Memorandum of Understandingthrough July 31, 2012 the parties anticipate that Forward, utilizing the EMEAPersonnel who are still employed by Forward, and with reasonable consultationassistance from G-Form if requested by Forward, shall exercise its commerciallyreasonable efforts to selling Forward’s inventory on hand and on order with itssuppliers.  Forward may at its discretion offer any sales commissions and bonusto the EMEA Personnel still under its employ during this time to incentivizethese sales.  G-Form shall have no obligation or liability in connection withany such incentives.
    -  Forward represents that within sixty (60) days after execution of thisMemorandum of Understanding, Forward shall execute a hard shut down of its EMEAretail business and any remaining Forward Inventory, with the exception of anyForward inventory of G-Form products described in Section 2a above, will remainthe property of Forward to be disposed of in any manner Forward chooses. G-Form will have no obligation to purchase any Forward inventory unless byseparate mutual agreement.

**3.     ****USInventory and Best Buy Arrangement**
    -  Uponexecution of this Memorandum of Understanding, G-Form and Forward shallexercise commercially reasonable efforts to enable G-Form to achieve vendor ofrecord status with Best Buy with a goal of achieving such status withinforty-five (45) days.

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    -  Followingexecution of this Memorandum of Understanding, Forward agrees that it willcooperate with G-Form to invoice Best Buy for shipments of G-Form products soldto Best Buy with Forward as the Vendor Of Record.  Forward will usecommercially reasonable efforts to assign payment for such shipments directlyto G-Form and will instruct Best Buy to remit payment directly to G-Form.  Inthe event that despite such efforts and such instructions, Forward receives anypayments from Best Buy in connection with G-Form products, Forward shall remitto G-Form the full gross amount of all receipts it receives from Best Buy (lessa five percent (5%) processing fee) within ten (10) days of the date Forwardreceives such funds from Best Buy.
    -  Duringthe transition period from the signing of this MOU and until G-Form achievesits vendor of record status with Best Buy, G-Form shall be responsible forconducting all the necessary operational and logistics activities to processorders from Best Buy, as well as the coordination and delivery of suchproducts. All products sold under this arrangement with Forward relating toBest Buy shall be accepted only with the agreement of G-Form and shalldrop-ship directly from G-Form to Best Buy.  Any payments for any program coststo Best Buy or any other payments required to Best Buy relating to the shipmentsmade under this arrangement will be the sole responsibility of G-Form.
    -  Providedthat Forward has obtained written approval from G-Form for orders shipped toBest Buy, has obtained written approval from G-Form for any returns sought byBest Buy, and has not had any involvement in the physical transfer of G-Formproducts from G-Form to Best Buy, G-Form agrees to indemnify and hold harmlessForward and its agents from any claims, liabilities or expenses arising fromthe sale of G-Form products to Best Buy or the return of such defective or unsaleable G-Form products. 
    -  G-Formwill use commercially reasonable efforts to provide Best Buy directly withpayment for marketing funds or programs that are required to be made inconnection with the sale of the G-Form Products to Best Buy under Forward’svendor of record number in an amount not to exceed that previously representedby Forward to G-Form.  In the event that, despite such efforts, Forward isrequired to make such payments directly to Best Buy, G-Form shall promptlyreimburse Forward for such payments in the amount not to exceed that previouslyrepresented by Forward to G-Form.  
    -  Forward shall continue to allow shipments under its Best Buy Vendornumber as agreed above until such time as G-Form is able to transition thisbusiness or sixty (60) days after the signing of this Memorandum ofUnderstanding, whichever is earlier.

**4.     ****AdvancedRoyalties**
    -  	Subjectto agreement by the parties on the final amount owed, within five (5) businessdays of the signing of this Memorandum of Understanding, G-Form shall return toForward the net amount of Forward’s previous payment to G-Form of advancesagainst royalties in the amount of five hundred United States dollars(U.S.$500,000), pursuant to the Prior MOU, less amounts applied towardthe previously executed Sam’s Club shipment of approximately three hundredthousand United States dollars (U.S.$300,000), and less royalties owedto G-Form for unpaid royalties to date of approximately fifty thousand UnitedStates dollars (U.S. $50,000); for an expected net payment to Forward ofapproximately one hundred thousand United States dollars (U.S.$150,000).  Theparties shall use good faith efforts to agree on the final amount of such netpayment before any amount becomes payable from G-Form.

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**5.     ****ProductDevelopment Charges**
    -  Forwardacknowledges that it may, by nature of the development discussions it has hadwith G-Form, have been exposed to or participated in discussions involvinginventions or ideas relating to G-Forms background technology – specificallyrelating to constructing products using molded rate dependent foam or G-FormRPT or RPT composites.  Forward agrees that all potentially joint inventions(whether or not patents are applied for) involving molded rate dependent foamstructures or G-Form’s products, that are or were invented through interactionswith G-Form at any time prior to the date of termination of this Memorandum orany extensions thereto are the property of G-Form, and Forward agrees toexecute, and/or have executed by necessary or appropriate parties, inventionassignment documents for such joint inventions confirming G-Form’s ownership insuch intellectual property.  Subject to Forward executing any and all documentsdeemed appropriate by G-Form to confirm G-Form’s ownership of all intellectualproperty resulting from any joint development activities with which Forward orits employees or representatives may have participated, G-Form shall waivepayment for any past product development charges and other fees for which itmay believe Forward was responsible, 

**6.     ****ConfidentialInformation**
    -  Forward recognizes andacknowledges that Forward may receive certain confidential information andtrade secrets concerning the business and affairs of G-Form and/or itsofficers, executives, and affiliates which may be of great value to G-Form. Forwardagrees not to disclose, for the term of this Memorandum of Understanding and aperiod of four (4) years thereafter, unless required by law or legal order, anysuch information relating to G-Form, G-Form’ personnel or operations, or anyidea, project or other property being considered for use by G-Form or beingused by G-Form and/or produced by G-Form, or any of the terms or conditions ofthis Memorandum (including this Memorandum in its entirety or any documentsdelivered in accordance herewith), to any third party other than Forward’slegal and financial advisors who need to know such information in order torender services on behalf of Forward, or in any way use such information in anymanner which could adversely affect G-Form’ business.

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    -  G-Form recognizes andacknowledges that G-Form may receive certain confidential information and tradesecrets concerning the business and affairs of Forward and/or its officers,executives, and affiliates which may be of great value to Forward. Therefore,G-Form agrees not to disclose, for the term of this Memorandum and a period offour (4) years thereafter, unless required by law or legal order, any suchinformation relating to Forward, Forward’s personnel or operations, or anyidea, project or other property being considered for use by Forward or beingused by Forward and/or produced by Forward, or any of the terms or conditionsof this Memorandum (including this Memorandum in its entirety or any documentsdelivered in accordance herewith), to any third party other than G-Form’s legaland financial advisors who need to know such information in order to renderservices on behalf of G-Form, or in any way use such information in any mannerwhich could adversely affect Forward’s business.
    -  Confidentialinformation does not include information or material that: (i) is or becomesgenerally known or available to the public through no fault of the partyreceiving the information (“Receiving Party”); (ii) was already known toReceiving Party without restriction, prior to receipt from or on behalf of theparty disclosing the information (“Disclosing Party”); (iii) is lawfullydisclosed to Receiving Party by a third party who is not known to the ReceivingParty to be under any obligation, whether contractual, fiduciary, statutory, orotherwise, of confidentiality to Disclosing Party with respect to such confidential information; (iv) is at any time developed by Receiving Partyindependently without use of, or reference to, the confidential information ofthe other Party; or (v) is required to be disclosed pursuant to the order orrequirement of a court, administrative agency or other governmental body withproper jurisdiction; provided, however, that Receiving Party uses diligentefforts to limit such disclosure and notifies Disclosing Party within three (3)days of receipt of such court order or requirement to enable Disclosing Partyto seek a protective order or otherwise prevent or restrict such disclosure. 

**7.     ****Other**
    -  Afterexecution of this Memorandum of Understanding, the parties shall usecommercially reasonable efforts to issue a press release announcing thetransaction outlined in this MOU to the marketplace.  No press release orannouncement of any kind concerning the existence or terms of this Memorandumof Understanding will be made, released or issued in any medium without theagreement of both parties. 

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    -  ThisMemorandum of Understanding shall be governed by the internal substantive lawsof the State of Rhode Island.  G-Form and Forward each hereby consent to thepersonal jurisdiction of, and confer non-exclusive jurisdiction upon, any stateor federal court for or within the State of Rhode Island, over any action,suit, or proceeding arising out of or related to this Agreement, and G-Form andForward each hereby irrevocably waive any objection which they may now orhereafter have to the laying of venue of any such action, suit, or proceedingarising out of or related to this Agreement brought in any such court, and herebyeach further irrevocably waive any claim that any such action, suit orproceeding in such a court has been brought in an inconvenient forum.
    -  Partiesagree to use commercially reasonable efforts to expeditiously replace thisMemorandum of Understanding with a full length purchase and settlementagreement that will include the above points and such other terms andprovisions as are generally necessary and appropriate for such an agreement. 
    -  Theparties agree that upon execution of this Memorandum of Understanding, thePrior MOU shall be terminated and have no further force and effect.

 

 

 

 

 

Accepted by:
|   | **FORWARD INDUSTRIES, INC.** |
|--------|------------------------------|
|   | By:                          |   |
|   | Name:                        |   |
|   | Title:                       |   |
|   | Date:                        |   |

 

 
|   | **G-FORM, LLC** |
|--------|-----------------|
|   | By:             |   |
|   | Name:           |   |
|   | Title:          |   |
|   | Date:           |   |

 

 

 

 

 

 

 

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