AGREEMENT IN PRINCIPLE
THIS AGREEMENT in Principle ("Agreement") is entered into, as of the 11th day
of April, 1997, by and between TURBODYNE SYSTEMS, INC., Nevada Corporation,
with offices located at 0000 Xxxxxxxxxxx Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxxx 00000,
XXX, hereinafter called "Turbodyne" and XX XXXXXX, XXXX & XXXXXX, a German
Aktien gesellshaft, with offices located at Hessheimer Strasse 2m D-67227
Frankenthal, Germany, hereinafter called "KKK".
WHEREAS, Turbodyne is in the business of design, development, manufacturing and
sales of electrically driven turbochargers and turbo compressors and has
established test and development programs with various engine, auto, and truck
manufacturers, and is the owner and beneficiary of several patents, patent
applications and other intellectual property related to its technology; and
WHEREAS, KKK is established in the business of design, development,
manufacturing and sales of turbochargers for the automotive market; and
WHEREAS, Turbodyne has been conducting design, development, prototype
manufacturing and test and evaluations with various engine manufacturers with
respect to motor driven turbochargers; and
WHEREAS, several engine manufacturers have expressed a desire for incorporation
of motor-driven turbochargers in their automotive products and have suggested a
joint cooperation between Turbodyne and a turbocharger manufacturer for joint
design, development and marketing of motor assisted turbochargers.
THEREFORE, in consideration of the mutual covenants and conditions contained
herein, and other good and valuable consideration, the parties agree as
follows:
1. DESIGN AND DEVELOPMENT
----------------------
Turbodyne has developed various versions of brushless motor designs for
incorporation into various turbochargers. Under the terms of this
Agreement, Turbodyne will, in cooperation with KKK and at Turbodyne's own
sole cost and expense, design, develop and manufacture prototype motor and
electronic controller units, as well as the appropriate light metal
castings, as a sub-system for incorporation into turbochargers which will
be specifically designed, developed and prototype manufactured by KKK at
its sole cost and expense. During the design, development and prototype
manufacturing phase, KKK will make space available to Turbodyne engineers
for fabrication and testing at KKK facilities at no cost. Turbodyne will,
however, be responsible for salaries and other related expenses of its own
personnel.
2. SCOPE OF WORK
-------------
The parties will start the implementation of this agreement for mutually
selected customers as soon as possible and will each use their best
efforts in that regard. It is, however,
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contemplated that by mutual agreement of the parties, similar programs may
be started for additional customers.
3. CUSTOMER EVALUATION
-------------------
During the design and development stage, the parties shall work closely
with mutually selected customers and will conduct testing and evaluation
at Turbodyne, KKK and customer facilities, as required and at each parties
own expense.
4. MANUFACTURING
-------------
The parties recognize that there are various benefits associated with
motor-driven turbochargers on commercial engine applications, including
creating more sales due to improved engine performance. In an effort to
increase the market share of the device and maintain a competitive edge in
the market place (recognizing that the field of automotive supply is an
extremely competitive business), the parties agree to establish a joint
manufacturing policy with the objective of reaching minimum cost to afford
maximum flexibility in penetrating the market and without detriment to
either party. The parties, therefore, agree to conduct the manufacturing
operations on a joint venture basis so that components contributed by each
party to the join-venture will be at cost, based on a cost formula to be
agreed on by the parties and made part of this agreement. Cost of
assembly, marketing and other related costs are to be borne by the join-
venture, which will be added to the unit cost. Details of the commercial
aspects of the joint venture will be mutually agreed upon and finalized
prior to manufacture.
5. MARKETING AND SALES
-------------------
KKK will have the overall responsibility for all marketing and sales of
the joint venture products, and Turbodyne personnel will assist in all
evaluation and sales activities as needed. All such marketing and sales
costs are to be borne by the joint venture under a formula to be agreed to
by the parties.
The parties agree to share proportionately in the profits derived from the
sale of the products in relation to the respective parties' cost
contributions, under a formula to be agreed to by the parties. The join-
venture shall be responsible for administration of all warranty and
services programs. The respective parties shall be responsible to the
joint-venture for any defects in components contributed to the joint-
venture.
6. EXCLUSIVITY
-----------
The parties recognize that extensive resources will be allocated by them
for the development, manufacturing and sale of the joint venture products.
Furthermore, the benefits of motor-driven turbochargers, such as
elimination of turbolag, improvements in performance and
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reduction in pollution, will encourage auto and truck manufactures to
utilize turbochargers on a larger percentage of their engines,
particularly in cases where turbocharging has been avoided due to
consumers dislike of turbolag. Therefore, while the parties endeavor to
promote expansion of the market, it is important that the parties also
enjoy the benefits of exclusivity. Accordingly, Turbodyne will grant an
exclusive license of its technology to the joint venture for the design,
manufacture and sale of motor-driven turbochargers in Europe for such
automotive manufacturers and in such other territories as KKK and
Turbodyne shall mutually agree shall be commercially beneficial for the
joint venture.
7. TECHNOLOGY
----------
Turbodyne will grant a royalty-free license of its technology to the joint
venture for the purposes set forth above and for the term of the joint
venture. Such license will include any continuations of and improvements
in Turbodyne's technology, and Turbodyne shall have the sole
responsibility for any additional patent filings to cover such
continuations and improvements.
8. TERMINATION AND CONTINUATION OF TECHNOLOGY LICENSE
--------------------------------------------------
If the joint venture shall be terminated at some date, KKK will have the
option to continue the use of the technology licensed hereunder by
Turbodyne, for period of three years from the date of such termination.
KKK will pay a royalty to Turbodyne for such license for the three-year
period under a formula to be agreed to by the parties.
9. FINAL DOCUMENTATION
-------------------
The parties agree to work diligently to finalize and execute a mutually
acceptable Joint Venture Agreement based upon the terms set forth in this
Agreement.
TURBODYNE SYSTEMS, INC.
"XXXXXX X. XXXXXX"
------------------------------------
By: Xxxxxx X. Xxxxxx
President
XX XXXXXX, XXXX & XXXXXX
"XXXX XXXXXX"
-------------------------------------
By: Xxxx Xxxxxx
Ex. V.P. AG KKK
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