UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED)
For the Fiscal Year Ended September 30, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from _________ to __________
Commission File No. 0-16176
ASHA CORPORATION
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Exact Name of Registrant as Specified in its Charter
Delaware 84-1016459
- - ------------------------------- -----------------------------
State or Other Jurisdiction I.R.S. Employer Identification
of Incorporation or Organization Number
600 C Ward Drive
Santa Barbara, California 93111
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Address of Principal Executive Offices, Including Zip Code
Registrant's telephone number, including area code: (805) 683-2331
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock,
$.00001 par value
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No ---
As of December 29, 1995, 7,074,367 shares of the Registrant's Common Stock
were outstanding, and the aggregate market value of the shares held by non-
affiliates was approximately $18,600,000.
Indicated by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of Registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. ---
Documents incorporated by reference: None.
PART I
ITEM 1. BUSINESS
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GENERAL DEVELOPMENT OF BUSINESS
ASHA Corporation (the "Company") is a development stage enterprise
formed under the laws of the State of Delaware on January 28, 1986, under the
name "Capital Equity Resources, Inc." to seek and acquire a business
opportunity.
In May 1986, the Company completed a public offering of 235,294 Units,
each Unit consisting of one share of Common Stock, five Class A Warrants and
five Class B Warrants, at an offering price of $0.85 per Unit. The net
proceeds of the offering to the Company was approximately $163,000. On August
20, 1986, the Company's shareholders approved, among other things, a change in
the name of the Corporation to ASHA Corporation and an increase in the number
of authorized shares of Common Stock from 500,000,000 to 800,000,000.
On August 27, 1986, the Company acquired 100% of the outstanding shares
of ASHA Enterprises, Inc. ("ASHA") in exchange for 4,612,848 shares of the
Company's $0.00001 par value Common Stock. ASHA initially devoted all of its
efforts to the development of a full-time all-wheel drive, four passenger
sport utility automobile (Life Style Vehicle - LSV) which was developed around
a new automotive architecture invented by ASHA's President, Alain J-M Clenet.
ASHA has a royalty free license from Mr. Clenet to use this invention in
connection with the all-wheel drive vehicle. On August 27, 1986, the Company
changed its name to "ASHA Corporation" to reflect this acquisition. As a
result of this transaction, there was a complete change in control of the
Company.
Effective February 6, 1987, Class A and B warrants and the Common Stock
underlying the warrants were registered with the Securities and Exchange
Commission. The warrants were called by the Company and all warrants not
exercised were canceled. There are no warrants currently outstanding. As a
result of this registration, Class A and B warrants totaling 1,135,951 and
269,845 shares of common stock, respectively, were exercised resulting in cash
proceeds to the Company of $3,078,366 during the year ended September 30,
1987.
ASHA created a full size model of the Life Style Vehicle (LSV)
(pushmobile) and used this model for styling clinics and to introduce the
vehicle to various companies in the automobile industry. A chassis mule, or
full size driveable prototype was then developed and demonstrated to certain
interested parties.
On February 29, 1988, a manufacturing and license agreement was signed
with C&C Incorporated, a subsidiary of MASCO Industries, Inc. ("MASCO") for
the manufacture of the vehicle. This agreement granted to C&C Incorporated an
exclusive license to make or have made and market the ASHA vehicle in North
America and a non-exclusive license to market the vehicle throughout the rest
of the world. In consideration for this license, a non-refundable cash
payment of $750,000 was paid to ASHA in 1988. This agreement expired in
January 1991. In addition, C&C was granted a right of first refusal for the
manufacture and marketing of new products developed by or on behalf of ASHA or
its President, Alain J-M Clenet. This right was granted for a three year
period ending in January 1991. Payments received for this right totaled
$400,000, of which $150,000 was received in 1988 and 1989, and $100,000 in
1990. The right of first refusal terminated in January 1991, and has not been
renewed.
On December 9, 1993, the Company's shareholders approved a proposed
reverse split of the outstanding shares of the Company's Common Stock of 1 for
85. The reverse split was effective at the close of the market on February 1,
1994. All share data in this report gives a retroactive effect to the reverse
stock split.
On March 9, 1994, Brian Chang, an international businessman, purchased
235,924 of newly issued shares of the Company's Common Stock for $1,000,000.
Chang is currently a major shareholder in TAISUN Automotive, a Singapore based
company, which has formed a joint venture with ASHA. On July 29, 1994, Brian
Chang purchased 800,000 shares of ASHA Common Stock from an outside
shareholder at a negotiated price, and in October 1995, he purchased an
additional newly issued 181,181 shares for $750,000. Mr. Chang currently owns
approximately 17.2% of the Company's Common Stock.
On August 11, 1994, ASHA entered into a joint venture for the production
and sale of vehicles and for the licensing of GERODISC technology in China and
Malaysia and other activities. This joint venture has been formed as
ASHA/TAISUN PTE. LTD., a Singapore corporation, which is owned 50% by the
Company and 50% by TAISUN Automotive. The Company has contributed a license
agreement to the joint venture valued at $100,000. The Company and TAISUN
Automotive verbally agreed that the Company would contribute $900,000 in cash
and TAISUN Automotive would contribute $1,000,000 in cash to the joint
venture, and these contributions were made during the fiscal year ended
September 30, 1995. Alsoy during the fiscal year ended September 30, 1995,
the Company and TAISUN Automotive agreed that each party would contribute an
additional $295,000 to the joint venture.
PRODUCT DEVELOPMENT
THE ASHA GERODISC SYSTEM
The Company's primary product line is an automatic hydromechanical
traction control device which has been named The ASHA GERODISC System. It is
a self-activating device that can prevent wheel spin on all four types of
vehicle platforms: front-wheel drive, rear-wheel drive, four-wheel drive and
all-wheel drive.
GERODISC competes favorably with electronic traction control, a popular
but expensive option, and various less expensive mechanical and
hydromechanical limited slip differentials currently available for certain
applications. Unlike electronic traction control systems which reduce wheel
spin by limiting power to a vehicle's driven wheels, GERODISC transmits power
to the wheels in proportion to the traction available at each driven wheel.
The ability of GERODISC to provide a traction patch for each driven wheel also
differs from a conventional mechanical limited slip differential which only
provides one traction patch per axle. GERODISC is also smaller, lighter and
quicker acting than conventional traction control differentials and does not
introduce noise, vibration or harshness into a vehicle because of its
transparent engagement.
GERODISC is sensitive to, and controls speed differences between the
right and left wheels of the drive axle of front-wheel and rear-wheel drive
vehicles and speed differences between the front and rear axles of four-wheel
drive and all-wheel drive vehicles.
GERODISC is the only known limited slip technology that is tunable and
powerful enough to have universal application in all vehicle drive
architectures. GERODISC is compatible with electronic engine management
systems and with ABS. GERODISC is uniquely adaptable to front-wheel drive
vehicles in that its operation does not induce feedback to the driver through
the steering wheel and does not impart harsh forces into the vehicle drive
train. Conversely, Electronic Traction Control operates by applying the brake
to whichever wheel has lost traction. This technique pulses the brake, which
can be felt through the steering wheel, induces harmful torque spikes into the
axles and transmission, can overheat brakes, and is costly to manufacture and
repair.
For rear-wheel drive, GERODISC has proven to be the most powerful, yet
transparent, speed/torque sensitive limited slip device available.
Four-wheel drive (4WD) and all-wheel drive (AWD) vehicles are typically
expensive, heavy, incorporate drive train components that induce drive train/
transmission stresses, and affect fuel economy negatively. The ASHA GERODISC
System eliminates the expensive components, such as two differentials and/or
viscous couplings, as well as the elimination of a large portion of the
associated weight of a typical 4WD or AWD. With less weight, components,
mechanical stress and transmission windup, GERODISC provides better fuel
economy and maximum traction. In these vehicles, GERODISC eliminates a center
differential or viscous coupling. The secondary drive axle differential is
replaced by two GERODISC couplings. GERODISC activates automatically when
needed, without electronics. Similar to the GERODISC Limited Slip
Differential, the 4WD/AWD coupling system is self-activating and transparent
to the driver.
As of December 1995, approximately 55 individual GERODISC prototypes
have been built for evaluation by OEM's or first tier suppliers and another 17
prototypes are currently in production.
NEW VENTURE GEAR, INC. LICENSE AGREEMENT
On August 19, 1993, ASHA Corporation entered into a licensing agreement
with New Venture Gear, Inc. ("NVG") to market GERODISC. NVG is a joint
venture that is wholly owned by Chrysler and General Motors. The agreement
allows NVG to manufacture and sell the device in the next generation of four-
wheel drive transfer case products in North American and Europe, subject to
certain restrictions. The Company received a good faith deposit under this
agreement during the year ended September 30, 1993. The Company has received
two $250,000 payments from NVG to keep the agreement in force through 1994 and
1995, and NVG has committed to pay $450,000 by January 31, 1996, to keep the
agreement in force throughout the life of ASHA's patents.
In December 1994, the Company and NVG amended the license agreement to
provide that in the event NVG is awarded a production program by a major OEM,
NVG will pay $1,000,000 to the Company at the beginning of the first model
year of production. On December 24, 1994, NVG was awarded a production
program with a major OEM and the first model year is anticipated to be 1998.
During October 1995, the Company entered into an option agreement with
NVG which granted NVG a twelve month option to acquire non-exclusive licenses
for up to three different applications in North America. The three
applications are rear axles, transaxles and twin-disc front axles. If NVG
exercises any option, a license fee ranging from $700,000 to $1,900,000 will
be payable, depending on the application, and a per unit royalty will also be
payable. Although NVG must sell the GERODISC applications within North
America, the vehicles incorporating GERODISC may be sold anywhere in the
world.
DANA CORPORATION LICENSE AGREEMENT
On December 28, 1994, the Company entered into an agreement with DANA
Corporation in which the Company licensed DANA to manufacture and market
GERODISC for front axles exclusively and for rear axles non-exclusively in
North America, South America, Europe, South Korea and Taiwan. On February 2,
1995, the Company received a $1,000,000 license fee, and an additional
$1,000,000 payment was made during January 1996. In addition, the Company will
receive a royalty on each unit produced under the agreement.
AMERICAN AXLE AND MANUFACTURING, INC. OPTION AGREEMENT
On November 1, 1995, the Company entered into an option agreement with
American Axle and Manufacturing, Inc. which granted American Axle an eighteen
month option to acquire non-exclusive licenses for up to three different
applications world-wide. The three applications are rear axles, transaxles
and twin-disc front axles. If American Axle exercises any option, a license
fee ranging from $1,000,000 to $2,000,000 will be payable, depending upon the
application, and a per unit royalty will also be payable. American Axle paid
$1,150,000 for the option.
STEYR-DAIMLER-PUCH FAHRZEUGTECHNIK GMBH OPTION AGREEMENT
On October 9, 1995, the Company entered into an option agreement with
Steyr-Daimler-Puch Fahrzeugtechnik GmbH ("Steyr") which granted Steyr an
option to acquire, on a right of first refusal basis, licenses for up to five
different applications for the European market. The five applications are
rear axles, transaxles for FWD, AWD front axles, twin-disc front axles, and
AWD couplings. If Steyr exercises its option, a license fee will be payable
in an amount to be agreed upon, and a per unit royalty may also be payable.
Steyr is paying $100,000 for the option which will expire on June 30, 1996.
The Company also agreed to fabricate, assemble and test a GERODISC prototype
for Steyr for which the Company will be paid $30,000 following the completion
of engineering work and $50,000 upon final delivery and testing.
On May 10, 1994, the Company received GERODISC patent approval from the
U.S. Patent and Trademark Office. Other patents are pending and international
patents have been applied for.
LIFE STYLE VEHICLE - LSV
The Company was originally engaged in developing an all-wheel drive
sport utility vehicle suitable for on or off road use. The vehicle's engine
was placed midway between the axles and utilized a patented drive train to
transit power simultaneously to the front and rear. (U.S. patents 4,805,720 -
Drive train and 1,050,134 - Body Design, other U.S. and foreign patents
pending.)
A manufacturing and license agreement with C&C Incorporated relating to
the LSV expired in January 1991. Manufacturing rights, marketing efforts and
development costs have reverted to ASHA.
CIELO [TM]
CIELO is an all glass roof with retractable headliner, suitable for use
in a wide variety of vehicles including sedans, sports cars, vans, sport
utility vehicles and limousines and desiged to compete in the sunroof market.
Development work related to controlling and venting heat build-up within
the automobile, a common problem, was conducted in 1989 and 1990.
A prototype was developed and delivered to a European OEM in 1991.
Another prototype was made in the Spring of 1991 for a vehicle in production
in the U.S. This vehicle was shown at two marketing clinics in order to
obtain consumer reaction. These clinics revealed that CIELO is being compared
to sunroofs. Since CIELO does not open, it was perceived as unfavorable
compared to sunroofs.
As of January 1996, the CIELO technology is being offered for sale to
sunroof manufacturers and other automotive suppliers.
SOLARVENT [TM]
SolarVent is a solar powered flush mount ventilation system that is
unique as it allows for super heated air to escape, while restricting water
from entering the vehicle. The water management system is proprietary. It is
temperature controlled and totally passive, even when the vehicle is
unattended. Due to the design's simplicity, SolarVent can be offered as an
after market product and also can be offered as an option with a low retail
price to the consumer. SolarVent has been adapted to work on automobiles and
has applications with sun roofs, RV's, boats and other uses. Several OEM
suppliers have expressed interest in the product. No contracts have been
obtained to date, although a prototype was completed in December 1991, and
another prototype contract was completed in December 1992, both for OEM's.
As of January 1996, the SolarVent technology is being offered for sale
to OEM suppliers.
HIGH PERFORMANCE GERODISC [TM] APPLICATIONS
While the Company's goal is to develop products for license to
automotive OEM's or their suppliers, it has also determined to pursue
opportunities for the specialized application of GERODISC technology in high
performance and racing venues. These activities are expected to provide an
avenue to generate ongoing revenues that do not have contractual delays that
are typical of OEM agreements. To that end, ASHA offered GERODISC units to
several Indycar teams for consideration in their 1994 and 1995 racing
programs. On May 23, 1994, the Company successfully completed testing of a
GERODISC limited slip differential for race car use. ASHA personnel installed
two GERODISC LSD's, one torque/speed sensitive and one speed sensitive only.
The vehicles demonstrated significant improvements in computer recorded lap
times with improved directional stability in dry and wet conditions. The
Company intends to supply performance units on a lease only basis, thereby
protecting its proprietary technology and providing the Company with an
ongoing opportunity to review the durability of each unit throughout its
usefulness.
In August 1994, the race car team of Newmann-Haas used the GERODISC in
association with the Mid-Ohio race.
On April 19, 1995, the Company entered into an agreement with Hall
Racing, Inc., which granted Hall Racing the right to use GERODISC units on an
exclusive basis for the 1995 Indycar racing season on the Reynard chassis
vehicles owned by Hall Racing. On November 10, 1995, the Company and Hall
Racing entered into a similar agreement for the 1996 Indycar racing season.
The November 1995 agreement requires Hall Racing to pay $65,000 for the right
to use GERODISC on an exclusive basis for the 1996 racing season plus $18,000
per unit on an annual lease basis.
In September 1995, the Company completed development of a GERODISC
prototype to be used by a European race team.
ABC (ASHA BODY CONCEPT)
ABC, a system for assembling automobiles that reduces weight by allowing
lighter gauge steel while eliminating welding, is being developed. This
process for assembling and rust proofing steel space frames is a long-term
project with potential for improving the assembly of automobiles. ASHA/TAISUN
plans to manufacture and assemble vehicles specifically designed for the
Chinese and Southeast Asian markets utilizing this proprietary manufacturing
process. This process should allow ASHA/TAISUN to significantly reduce the
cost and start-up time of manufacturing automobiles in China and Southeast
Asia. ABC's lightweight space-frame technology requires a limited amount of
electrical power, a scarce commodity in many less developed areas. It relies
mostly on natural gas for manufacturing which is abundant in China and other
countries.
ASHA/TAISUN JOINT VENTURE
The Company has entered into a joint venture with Singapore based TAISUN
Automotive PTE LTD. ("TAISUN") for the production and sale of vehicles in the
Far East. TAISUN is a manufacturer of vehicles, ships, electrical motors,
fiberglass products, chemicals and properties. As part of the agreement, the
Company will provide exclusive marketing rights to ASHA/TAISUN PTE LTD.
("ASHA/TAISUN") to license GERODISC technology to automotive and bus
manufacturers in China and Malaysia. The license was granted as a
contribution of capital to the joint venture valued at $100,000. The license
agreement grants ASHA/TAISUN an exclusive license to use the GERODISC
technology in the Republic of China and Malaysia. The Company is to receive a
royalty of $5.00 per unit. Beginning in 1997, there will be a minimum royalty
of $250,000 per year.
ASHA/TAISUN is a majority owner of Jiaxing Independence Auto Design &
Development Co. Ltd. ("JIAD&D"), a corporation formed under the laws of the
Peoples Republic of China, for the purpose of engaging in the production and
sale of automobiles in China. ASHA/TAISUN presently holds an 85% interest in
JIAD&D, which includes a 25% interest being held in trust for the provincial
government of Zhejiang province.
JIAD&D intends to initially manufacture and sell taxis because of the
demand for such vehicles in China. The vehicle is being designed to have a
short turning radius with a long suspension to best accommodate driving
conditions in China and Southeast Asian countries.
The body design of the car will utilize the ASHA Body Concept ("ABC")
which is based on the use of a lightweight space-age composite fiber material.
Building a car with this material requires very little electrical power, which
is scarce in most China provinces. Instead, natural gas, which is abundant in
China, will be used.
The car will have strong side supports for safety, but manufacturing a
car for sale in China is much less expensive than it would be for cars to be
sold in the United States or Europe because it is not necessary to meet the
strict United States and European collision test procedures. In addition, the
Company's ABC technology is not volume sensitive, and is cost effective in
small or large volume production.
The engines to be used in the cars are already being manufactured in
China by another business and transmissions will also be available in China.
JIAD&D has acquired a manufacturing plant facility in Jiaxing City in
Zhejiang province in China, and a new 20,000 square foot three story building
has been completed to house engineering and administrative functions. JIAD&D
has the right to use the land on which these facilities are located for 50
years.
JIAD&D presently has approximately 40 employees including 12 workers and
28 engineers and administrators.
JIAD&D expects to produce up to 1,000 complete vehicles annually at the
facility in Jiaxing. It is also expected to produce complete knock down kits
(or CKD kits) at the same facility. A CKD kit includes all of the components
for one vehicle.
It is the intention of JIAD&D to sell CKD kits to businesses in other
provinces of China. The CKD kits will be shipped from the Jiaxing facility to
such businesses for assembly and sale. JIAD&D also expects to export the CKD
kits to assemblers in other countries in Southeast Asia, where the vehicle
will be assembled and sold outside of China.
ASHA is building the production tooling and molds at its Santa Barbara
facility before shipping them to the Jiaxing facility. ASHA is also building
the first prototype at its facility. The following prototypes and all
preproduction models will be built in Jiaxing. The Company expects that the
first taxis will be produced and available for sale during the first six
months of 1997.
JIAD&D's strategy is to design a vehicle that can be produced in China
by the Chinese in a manner in which they are accustomed to building products
and utilizing the resources which are most readily available, e.g., manual
labor. The frame of the vehicle will be made from tubular stainless steel and
the body will be made from a composite fiber. These materials can be
assembled using manual labor and they do not require the expensive process of
painting. Approximately 80% of the components in the vehicles will be
obtained from sources in China. The balance will come from sources in the
United States and Brazil.
MARKETING
An extensive marketing program has been developed. ASHA is increasing
marketing efforts in Detroit, Europe and Asia. A full-time Detroit based
marketing person was hired in January 1991. This person has extensive
experience in the automotive business. Claude Dubois, a race car driver and
automotive expert in Brussels, Belgium, was retained in April 1994 as a
consultant to market the GERODISC technology to auto makers in Europe. An
automotive import/export consultant was hired in August 1995 to locate sources
for automobile components in South America to eventually be used in China.
PATENT RIGHTS
ASHA has the following patents or pending patents:
1. Vehicle Drive train - All wheel drive system, U.S. patent
4,805,720, 11/27/88, U.S. patent pending 11/16/90, foreign patents applied
for.
2. Life Style Vehicle Design - U.S. patent 307,247, Great Britain
patent 1,050,134, applied for in other foreign countries.
3. CIELO [TM]-Electric - U.S. patent 4,923,244, foreign patents
applied for.
4. CIELO-Manual - U.S. patent 5,005,899.
5. CIELO name trademark granted to CAMI, Inc., a joint venture owned
50% by ASHA.
6. SolarVent [TM] - U.S. patent 5,081,912.
7. SolarVent [TM] - U.S. registered trademark 1,662,384.
8. GERODISC [TM] - Issued patent and pending patents.
9. GERODISC [TM] - U.S. registered trademark 1,755,203.
Patent applications are in progress in most industrial countries.
FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES
A SolarVent [TM] prototype was completed in January 1993, for a European
OEM. Revenue from this prototype was less than one hundred thousand dollars.
A GERODISC [TM] prototype was completed during the last fiscal year for
another European OEM. Revenue was less than one hundred thousand dollars.
ASHA/TAISUN completed negotiations for the acquisition of an existing
Chinese automotive company in early 1995. The initial pro-type of
ASHA/TAISUN's newly developed vehicle is anticipated for Spring 1996.
ASHA/TAISUN opened an office in Beijing on June 2, 1994, for licensing of
GERODISC technology in China and Malaysia. However, through September 30,
1995, no revenues have been produced from these activities.
MAJOR CUSTOMERS
During the year ended September 30, 1995, the allocation of the
Company's revenues were 39% received or accrued from licenses for research and
development and prototype development, 43% from DANA for licensing of
GERODISC, 15% from ASHA/TAISUN for development of the world car, 2% for
development of a racing GERODISC, 1% from a foreign OEM for research and
development and prototype development.
During the year ended September 30, 1994, the allocation of the
Company's revenues were 45% received from Ford Motor Company for research and
development and prototype development, 28% from licensing of GERODISC
technology, 20% from New Venture Gear for research and development and
prototype development, and 7% from a foreign OEM for research and development
and prototype development.
STAFF
ASHA has a staff of thirty-two people consisting of the Company's Chief
Executive Officer, automotive designers, engineers and fabricators, one full-
time marketing person based in Detroit, and three administrative support
personnel. Product ideas are reviewed and where market applications are
considered profitable and patent protection can be obtained, development work
is performed.
ITEM 2. PROPERTIES
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The principal offices of the Company are located at 600 C Ward Drive,
Santa Barbara, California 93111. This space is rented at a monthly rate of
$6,306 through January 1999. Beginning in January 1995 and every January
thereafter, the base rent will be adjusted in proportion to the percentage
increase or decrease of the official Consumers Price Index of the Bureau of
Labor Statistics, United States Department of Labor. In no event will the
rent be increased more than 8% for any one adjustment period nor shall rent be
less than the base rent. These facilities include office space, work areas
for designers and a shop and equipment suitable for performing design,
development and styling work. Approximately 12,936 square feet of space are
utilized under this lease.
ITEM 3. LEGAL PROCEEDINGS
- - --------------------------
The Company knows of no material pending legal proceedings to which the
Company is a party.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- - ------------------------------------------------------------
No matters were submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the three months ended September
30, 1995.
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
- - ------------------------------------------------------------------------------
PRINCIPAL MARKET OR MARKETS. The Company's Common Stock is traded in
the over-the-counter market and quotations are carried on the OTC Bulletin
Board. The following table sets forth the high and low bid price for the
Company's Common Stock for the periods indicated. These prices are believed
to be inter-dealer quotations and do not include retail mark-ups, mark-downs,
or other fees or commissions, and may not necessarily represent actual
transactions.
[CAPTION]
QUARTER ENDED HIGH BID LOW BID
[S] [C] [C]
December 31, 1993* $6.38 $3.40
March 31, 1994* $9.50 $4.50
June 30, 1994 $8.50 $3.75
September 30, 1994 $5.25 $3.00
December 31, 1994 $6.50 $2.00
March 31, 1995 $6.75 $4.00
June 30, 1995 $6.25 $4.375
September 30, 1995 $5.375 $3.50
December 31, 1995 $6.25 $2.25
__________________
* Gives retroactive effect to a 1 for 85 reverse stock split which was
effected on February 1, 1994.
APPROXIMATE NUMBER OF SHAREHOLDERS OF COMMON STOCK. The number of
holders of record of the Company's $.00001 par value Common Stock at
December 29, 1995, was 2,709. Many shares are registered in the names of
brokerage firms or other nominee names. As a result the Company estimates
that it has in excess of 6,000 shareholders.
DIVIDENDS. Holders of Common Stock are entitled to receive such
dividends as may be declared by the Company's Board of Directors. No
dividends have been paid with respect to the Company's Common Stock and no
dividends are anticipated to be paid in the foreseeable future.
ITEM 6. SELECTED FINANCIAL DATA
- - --------------------------------
The following table sets forth certain selected financial data with
respect to the Company and is qualified in its entirety by reference to the
financial statements and notes thereto, and Management's Discussion and
Analysis of Financial Condition and Results of Operations:
<TABLE>
<CAPTION>
At September 30,
- - -----------------------------------------------------------------
1995 1994 1993 1992
1991
- - -----------------------------------------------------------------
<S> <C> <C> <C> <C>
<C>
Balance Sheet Data:
Current Assets $1,706,492 $1,154,502 $700,372 $517,585
$913,578
Total Assets 3,112,946 1,251,868 829,369 609,789
974,911
Current Liabilities 323,409 92,505 76,484 377,580
2,581
Long-term Liabilities 8,946 -- -- --
--
Stockholder Equity 2,780,591 1,159,363 752,885 232,209
972,330
</TABLE>
<TABLE>
<CAPTION>
For the Year Ended September 30,
- - -----------------------------------------------------------------
1995 1994 1993 1992
1991
- - -----------------------------------------------------------------
<S> <C> <C> <C> <C>
<C>
Statement of Operations:
Licenses and right of
first refusal income $3,619,345 $ 250,000 $ 50,000 $ 0
$ 0
Contract service income 346,313 988,085 1,782,272 416,423
148,407
Interest and investment
income 100,095 22,258 11,896 33,571
90,194
Expenses:
Research and develop-
ment 1,067,795 715,337 520,064 424,286
314,601
Officer salaries 414,415 359,791 353,248 330,869
252,478
Consulting fees -- -- -- --
18,000
Legal and accounting 82,854 80,447 71,854 34,297
42,416
Patent applications 73,253 42,087 39,204 41,006
60,233
General and adminis-
trative 706,938 841,628 309,046 307,647
466,995
Taxes and licenses 98,946 81,231 53,727 46,354
46,245
Depreciation and
amortization 48,792 55,411 35,224 20,557
27,910
Income taxes 41,427 -- -- --
--
Net income (loss) 1,531,333 (915,589) 461,801 (755,022)
(990,277)
Net income (loss) per
common share $ .22394 $ (.13655) $ .07014 $ (.11573)
$ (.15000)
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- - ------------------------------------------------------------------------------
RESULTS OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1995 VERSUS YEAR ENDED SEPTEMBER 30, 1994
During the year ended September 30, 1995, the Company had revenue of
approximately $4,066,000 as compared to approximately $1,260,000 during the
year ended September 30, 1994. The substantial increase was due to license
and right of first refusal revenue of $3,619,345. This revenue was a result
of major licensing agreements - one with New Venture Gear, one with Dana
Corporation, and a third with a prominent Indycar Race Team - relating to the
Company's GERODISC technology. The Company had only $250,000 of similar
revenue during the last fiscal year.
Revenues from contract services were down in the year ended September
30, 1995, by approximately $567,000 as compared to the prior year. This is
due to the fact that the Company had no revenue from contract services during
the quarter ended December 31, 1994. During the quarter ended March 31, 1995,
the Company started work on the ASHA/TAISUN joint venture and on advanced
engineering on the GERODISC technology which resulted in the contract service
revenue reported.
Expenses for the year ended September 30, 1995, were up by approximately
$317,000 over the prior year. Research and development expenses increased by
approximately $352,000 as a result of the Company's work on the ASHA/TAISUN
joint venture and advanced development of the GERODISC technology. Officers'
salaries increased by approximately $55,000 partially as a result of the
addition of a new President of the Company.
General and administrative expenses for the year ended September 30,
1995, were approximately $707,000 as compared to approximately $842,000 during
the prior year. The decrease was primarly due to the fact that the Company
had a one-time expense related to a mass mailing which occurred during the
quarter ended March 31, 1994.
The net income of $1,531,333 during the year ended September 30, 1995,
was a substantial improvement over the net loss of $(915,589) during the year
ended September 30, 1994. The net income was a result of the license and
right of first refusal revenue recorded during the current year.
YEAR ENDED SEPTEMBER 30, 1994 VERSUS YEAR ENDED SEPTEMBER 30, 1993
During the year ended September 30, 1994, the Company had revenue of
approximately $1,260,000 as compared to approximately $1,844,000 during the
year ended September 30, 1993. The decrease was due to the reduction in
revenues from contract services which were down by approximately $794,000 as
compared to the prior year. This was due to a decrease in OEM prototype
development.
Expenses for the year ended September 30, 1994, were up by approximately
$794,000 over the prior year. Research and development expenses increased by
approximately $195,000 as a result of the Company's work on the advanced
development of the GERODISC technology.
General and administrative expenses for the year ended September 30,
1994, were approximately $841,000 as compared to approximately $309,000 during
the prior year. The increase was due to a number of factors. The Company had
a one-time expense related to a mass mailing which occurred during the quarter
ended March 31, 1994. Repairs and maintenance to the leased building
increased in order to accommodate the ASHA/TAISUN project. Unused portions of
the building were brought up to code in order to facilitate an efficient work
space. Seminars, educational and computer software purchases increased to
bring the staff and its equipment to comparable industry levels. A high
caliber public relations firm proficient in the automotive industry, along
with other shareholder benefits such as news releases, dedicated telephone
lines and potential shareholder support caused cash and non-cash expense. New
stock certificates were purchased as a result of the reverse stock split.
Board of Directors fees increased due to the addition of new board members.
This is a non-cash expense. Supplies increased to support out of state and
overseas marketing efforts. Telephone cost increased because of increased
public relations and marketing activities.
The Company reported a net loss during the year ended September 30, 1994
of $(915,589) as compared to net income of $461,801 in the prior year. The
loss in 1994 was directly related to a reduction in OEM prototype production
due to licensing negotiations, which had the effect of increasing expenses
while reducing revenues.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1995, the Company had working capital of
approximately $1,373,000. The Company believes that it has sufficient
liquidity to maintain the Company's current level of activities for the next
twelve months. However, the Company is exploring the possibility of raising
additional funds to finance additional marketing and other activities.
During the year ended September 30, 1995, cash used in operating
activities was approximately $(22,000) as compared to approximately $(393,000)
used in operating activities during the year ended September 30, 1994. The
reduced use of cash was a result of the net income for the year ended
September 30, 1995. The Company had an increase in receivables, a non-cash
asset, of approximately $2,264,000. This increase in non-cash assets was
partially offset by increases in accounts payable and other accounts.
Cash used in investing activities during the year ended September 30,
1995, was approximately $(739,650) as compared to approximately $(279,000)
used in investing activities during the year ended September 30, 1994. The
increase was primarily due to a $900,000 investment in the ASHA/TAISUN joint
venture.
Cash provided by financing activities for the year ended September 30,
1995, was approximately $149,000 as compared to approximately $999,000
provided by financing activities during the year ended September 30, 1994.
The reduction was due to the fact that the Company raised $1,000,000 from the
private sale of Common Stock during the year ended September 30, 1994, and had
no comparable stock sales in the current fiscal year.
During the year ended September 30, 1994, cash used in operating
activities was approximately $(393,000) as compared to approximately
$(227,000) provided by operating activities during the year ended September
30, 1993. The decrease was a result of the net loss for the year ended
September 30, 1994. The Company had a decrease in receivables, a non-cash
asset, of approximately $138,000.
Cash used in investing activities during the year ended September 30,
1994, was approximately $(279,000) as compared to approximately $(119,000)
used in investing activities during the year ended September 30, 1993. The
increase was primarily due to a $258,000 investment in the marketable equity
securities.
Cash provided by financing activities for the year ended September 30,
1994, was approximately $999,000 as compared to approximately $(287,000) used
in financing activities during the year ended September 30, 1993. The change
was due to the fact that the Company raised $1,000,000 from the private sale
of Common Stock during the year ended September 30, 1994.
The Company expects to invest an additional $750,000 in the ASHA/TAISUN
joint venture during calendar year 1996. The Company has no other
commitments to make material capital expenditures.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- - ----------------------------------------------------
The Independent Auditor's Report appears at page F-1 and the Financial
Statements and Notes to Financial Statements appear at pages F-2 through F-20
hereof.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
- - ------------------------------------------------------------------------------
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- - ------------------------------------------------------------
The Directors, Nominees for Director and Officers of the Company are as
follows:
NAME AGE POSITION
Alain J-M Clenet 51 Chairman of the Board and Chief Executive
Officer
John C. McCormack 64 President, Chief Operations Officer, Secretary
and Treasurer
Theo E. Shaffer 48 Executive Vice President
Kenneth R. Black 49 Vice President of Sales and Marketing
Sheila R. Ronis 45 Director
Robert J. Sinclair 63 Director
Neil McCarthy 46 Director
Lawrence Cohen 51 Director
There is no family relationship between any Director, executive Officer or
person nominated or chosen by the Company to become a Director or executive
Officer. The Company has no audit or nominating committee, but does have a
compensation committee which consists of Robert J. Sinclair, Sheila R. Ronis
and John C. McCormack.
ALAIN J-M CLENET. Mr. Clenet has served as President and a Director of
ASHA Enterprises, Inc. since its inception in June, 1986, and became President
and Chairman of the Board of Directors of ASHA Corporation on the date of the
acquisition of ASHA Enterprises, Inc. Mr. Clenet is President and a Director
of CAMI, Inc. He has also served as President and a Director of
Stehrenberger/Clenet, Inc. (S/C), an automotive design company, since its
inception in February 1983. S/C employed approximately 15 people in design,
engineering and fabricating trades. S/C was liquidated in early 1988 at the
formation of ASHA Corporation.
From 1983 until the sale of the business in November 1986, Mr. Clenet
also served as President and a Director of Wood, Ltd., a Michigan corporation
which manufactures automotive wood components. From July 1976 until September
1981, he served as President and a Director of Clenet Coachworks, Inc., a
company which designed, manufactured and sold approximately 500 Clenet
automobiles, until it filed for bankruptcy under Chapter 7 in September 1981.
Mr. Clenet founded Clenet Coachworks in 1976, created the products and the
tools and built it up to 185 employees at its peak. The 1979-1981 economic
downturn and very high interest rates as well as a dispute between Mr. Clenet
and the company's single financial backer resulted in the liquidation of the
company under Chapter 7 in 1982. The company was reactivated independent of
Mr. Clenet in Carpenteria, California, and is no longer in existence. From
1965 until 1975, Mr. Clenet conducted automotive design, research and
development in France and the United States. Mr. Clenet received a CAFAS
Degree from the Ecole des Beaux Arts, Angers, France in 1963 and an E.N.S.A.D.
Degree from the National Superior School of Design of Paris in 1965.
JOHN C. McCORMACK. Mr. McCormack has served as President and Chief
Operations Officer of ASHA since February 1, 1995, and as Secretary and
Treasurer since January 31, 1996. Mr. McCormack helped start American Honda
Motor Company in 1959 and he has been described as the driving force in its
rise to prominence in the U.S. motorcycle market. He was co-founder of U.S.
Suzuki Motor Corporation in 1964, and by 1967 this company was second in the
U.S. market for motorcycles, behind Honda. He served as President and CEO of
McCormack International Motors, Inc. from 1969 until 1975. McCormack
International Motors was the first to bring a wide range of motorized
recreational vehicles under one label, and it established some 925 dealers and
10 overseas distributors. From 1975 until 1980, he was a founder and
President of Jacwall Corporation. Mr. McCormack was a founder and served as
President and COO of Hirsch Electronics Corporation from 1980 to 1985, where
he guided product development to successful completion at less than budgeted
costs. These systems are now in use in the White House, Pentagon, IBM,
General Motors, FBI, British Secret Service, as well as many other secure
government and business installations around the world. He was a co-founder
and he served as President and CEO of the Napa Valley Railroad and the Napa
Valley Wine Train from 1985 until April 1991. From April 1991 until April
1994, he served as Vice President of Marketing and Sales for Mission
Industries, an industrial laundry business, and from April 1994 until January
1995, he was engaged in general business consulting under the name McCormack
and McCormack Consulting.
THEO E. SHAFFER. Mr. Shaffer was appointed to Executive Vice President
of ASHA Corporation in April of 1994. Prior to this appointment, Mr. Shaffer
was ASHA Corporation's Vice-President of Research and Development from April
of 1991, served as director of Research and Development from 1989, and
performed prototype design and fabrication functions from September 1986. For
the ten years prior to arriving at ASHA, he was Chief Designer for Tracy
Design, a California industrial design firm, and performed contract design and
prototype assignments with Toyota's California Design Studio, Catty Design.
Mr. Shaffer has also held general manager positions at a Jaguar service center
and a California residential/commercial construction company.
KENNETH R. BLACK. Mr. Black has served as the Company's Vice President
of Sales and Marketing since July 1992 after having served as the Sales
Director since January 1991. From 1985 until December 1990, he served as
President of Technologies International Ltd., a company he founded and which
was involved in market development and technology licensing for various
domestic and foreign clients. From 1979 until 1985, he served as a Director
of New Business Development for the Paint, Plastics and Vinyl Division of Ford
Motor Company.
SHEILA R. RONIS, PH.D. Dr. Sheila Ronis has served as a Director of
ASHA since 1989. She has been President of The University Group, Inc., a
technical and managerial services company since 1988. She is also an adjunct
professor at the University of Detroit where she teaches Strategic Management
and Business Policy in the M.B.A program. Her B.S. is in Physics and
Mathematics. She received an M.A. and Ph.D. degree in Organizational Behavior
from Ohio State University in 1976. Dr. Ronis consults for many organizations
as diverse as General Motors, Amertech, The White House, USCAR and the Center
for Strategic and International Studies in Washington.
ROBERT J. SINCLAIR. Mr. Sinclair has served as a Director of the
Company since April 1994. Mr. Robert J. Sinclair is retired Chairman and
Chief Executive Officer of Saab Cars USA, Inc. Early in his automotive career
he served as advertising manager and public relations manager of Saab, before
joining Volvo North America where he rose to President of Volvo's Western US
organization. He rejoined Saab as President in 1979, retiring as Chairman and
CEO in 1991. Mr. Sinclair consults for many organizations.
LAWRENCE COHEN. Mr. Cohen has served as a Director of the Company since
January 20, 1995. Mr. Cohen is Chairman of BioTime, Inc. He is the founder
and board member of Apollo Genetics, a research and development company
engaged in creating compounds to prevent brain cells from dying. Mr. Cohen's
experience includes 13 years as a corporate finance consultant specializing in
private placements, public offerings and mergers and acquisitions.
NEIL McCARTHY. Mr. McCarthy has served as a Director of the Company
since January 20, 1995. Mr. McCarthy is a private consultant to Falcon Cable
and other companies in the U.S. and other countries. He was previously vice
president of Falcon Cable. Mr. McCarthy also served as executive vice
president of North American operations for Capitol-EMI Music Inc. He also has
held senior level finance positions at Orion Pictures Corporation, The Walt
Disney Company and Marriott Corporation. A certified public accountant he
holds a Masters degree in Business Administration from St. John's University
and a Bachelors degree in Marketing from Villanova University. He is a member
of the Board of Directors of Phoenix House of California.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Based solely on a review of Forms 3 and 4 and amendments thereto
furnished to the Company during its most recent fiscal year, and Forms 5 and
amendments thereto furnished to the Company with respect to its most recent
fiscal year and certain written representations, no persons who were either a
director, Officer or beneficial owner of more than 10% of the Company's Common
Stock, failed to file on a timely basis reports required by Section 16(a) of
the Exchange Act during the most recent fiscal year, except as follows:
Kenneth R. Black filed one Form 4 reporting the grant of a stock option
late; Theo E. Shaffer filed one Form 4 reporting the sale of stock and one
Form 4 reporting the grant of a stock option late; Lawrence Cohen and Neil
McCarthy did not report that they held stock options in their initial reports
on Form 3, and subsequently amended such reports to include such options.
ITEM 11. EXECUTIVE COMPENSATION
- - --------------------------------
The following table sets forth information regarding the executive
compensation for the Company's Chief Executive Officer. No other executive
Officer received compensation in excess of $100,000 for the fiscal years ended
September 30, 1995, 1994 and 1993:
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
PAYOUTS
SECURI-
TIES
UNDERLY-
OTHER RE- ING
ALL
ANNUAL STRICTED OPTIONS/
OTHER
NAME AND PRINCIPAL COMPEN- STOCK SARs
LTIP COMPEN-
POSITION YEAR SALARY BONUS SATION AWARD(S) (NUMBER)
PAYOUTS SATION
<S> <C> <C> <C> <C> <C> <C>
<C> <C>
Alain J-M Clenet, 1995 $152,500 -0- -0- -0- -0-
- - -0- $3,035*
Chief Executive 1994 $152,500 -0- -0- -0- -0-
- - -0- -0-
Officer 1993 $139,156 -0- -0- -0- -0-
- - -0- -0-
____________________
* Includes $981 in medical expense reimbursements for Mr. Clenet and his
family, $857 paid for premiums on a $5 million umbrella liability insurance
policy for Mr. Clenet, and other expenses paid on his behalf.
</TABLE>
In April 1995, the Company entered into an Amended and Restated
Employment Agreement with Alain J-M Clenet, the Company's Chairman of the
Board and Chief Executive Officer, pursuant to which he receives a base annual
salary of $152,500. Mr. Clenet's base salary is subject to cost-of-living
adjustments and may be increased by the Board of Directors. The initial term
is through April 20, 2000, and will be automatically extended for additional
two year terms unless either party notifies the other at least six months in
advance. Mr. Clenet is entitled to participate in all insurance plans and
benefits of the Company and to also be reimbursed for all of his and his
family's medical and dental expenses not paid for under such programs. Mr.
Clenet also receives a $5 million umbrella liability insurance policy paid for
by the Company.
No other Executive Officers have employment agreements with the Company.
John C. McCormack, the Company's President and Chief Operations Officer,
presently receives a salary of $90,000 per year; Theo E. Shaffer, the
Company's Executive Vice President, presently receives a salary of $90,000 per
year; and Kenneth R. Black, the Company's Vice President of Sales and
Marketing, receives a salary of $85,000 per year. Each of these persons have
also received a $10,000 bonus during the fiscal year ending September 30,
1996.
Effective during the fiscal year ended September 30, 1995, the Company's
Directors do not receive fees for their attendance at Board or committee
meetings, but they have received options under the Company's 1994 Stock Option
Plan. Directors are also reimbursed for their reasonable expenses in
attending meetings of the Board of Directors and any committees thereof.
STOCK OPTION PLANS
1994 STOCK OPTION PLAN
On December 20, 1994, the Board of Directors approved the Company's 1994
Stock Option Plan. As approved by the Company's shareholders in April 1995,
240,000 shares of Common Stock were reserved for issuance upon the exercise of
options under the plan. In November 1995, the Board approved an increase in
the number of reserved shares to 750,000 subject to shareholder approval. The
purpose of this plan is two-fold. First, the plan will further the interests
of the Company and its shareholders by providing incentives in the form of
stock options to employees who contribute materially to the success and
profitability of the Company. Second, the plan will provide the Company
flexibility and the means to reward directors and consultants who render
valuable contributions to the Company. The Board has the power to determine
at the time the option is granted whether the option will be an incentive
stock option (an option which qualifies under Section 422 of the Internal
Revenue Code of 1986) or an option which is not an incentive stock option.
However, incentive stock options will only be granted to persons who are
employees of the Company. Vesting provisions are determined by the Board at
the time options are granted. The option price must be satisfied by the
payment of cash. The Board of Directors may amend the plan at any time,
provided that the Board may not amend the plan to materially increase the
number of shares available under the plan to materially change the eligible
class of employees without shareholder approval.
On December 20, 1994, the Board of Directors granted incentive stock
options to purchase an aggregate of 75,745 shares of Common Stock. These
options were exercisable at $4.00 per share and are fully vested. They expire
three years after the date of grant. Included in the options granted on
December 20, 1994, were incentive stock options granted to Theo E. Shaffer and
Kenneth R. Black, Officers of the Company, to purchase 3,098 and 2,788 shares,
respectively. Mr. Shaffer exercised his option on June 21, 1995. In
addition, non-qualified stock options were granted to Lawrence Cohen and Neil
McCarthy, Directors of the Company, each to purchase up to 25,000 shares of
Common Stock.
On October 31, 1995, the Board of Directors granted incentive stock
options to 16 employees of the Company. These options are exercisable at
$4.125 per share, are fully vested, and expire three years after the date of
grant.
On November 1, 1995, incentive stock options were granted to John C.
McCormack and Kenneth R. Black, Officers of the Company, to purchase 15,786
and 10,524 shares, respectively. In addition, non-qualified stock options
were granted to Sheila R. Ronis and Robert J. Sinclair, Directors of the
Company, and John C. McCormack each to purchase up to 25,000 shares of Common
Stock. The options granted on November 1, 1995, are all exercisable at $4.625
per share, are fully vested, and expire three years from the date of grant.
1993 STOCK OPTION PLAN
On August 12, 1993, the Company's Board of Directors approved a non-
qualified stock option plan in which any employee, officer, director or
consultant that the Board, in its sole discretion, designates is eligible to
participate. During the year ended September 30, 1993, options to purchase
64,706 shares of the Company's Common Stock at $1.28 per share were granted
to three officers. Theo E. Shaffer received an option of 23,530 shares. This
option was exercised on June 21, 1995. Kenneth R. Black exercised the option
he received for 17,648 shares on March 30, 1994. Valarie Valencia, former
Secretary/Treasurer of the Company, exercised 50% of her original option to
purchase 23,530 shares in February 1995, pursuant to a provision in the plan
that if the holder of the option terminates employment with the Company, the
option is reduced by one-half and expires two months after the termination of
employment.
Prior to the grant of the above options, had granted the same three
officers options to purchase 64,706 shares of his Common Stock at $1.28 per
share. The Board of Directors determined it was more appropriate for the
Corporation to recognize and reward the services of its officers and the
shareholder options were canceled upon grant of options by the Company.
1988 STOCK INCENTIVE PLAN
The Board of Directors approved a stock incentive plan during December
1988. This plan has reserved 47,059 shares of Common Stock for issuance to
participants under the plan, defined as any person or firm providing services
to the Company. The stock will be granted at the discretion of the management
and a cash payment equal to twenty percent of the value of the stock granted
will be paid to the participant. Granting of stock under this plan is
intended to encourage a continued relationship and services by the participant
and to reward creative or noteworthy efforts of the participant. The stock is
100% forfeitable if the services of the participant are terminated within two
years of the grant of the stock and 50% forfeitable if services are terminated
after two years but less than three years from the grant of the stock. The
stock incentive plan originally was scheduled to terminate on September 30,
1994. On September 2, 1994, the Company's Board of Directors approved
reserving an additional 11,765 shares of Common Stock for granting to
participants under this plan, for the year ending September 30, 1995. A
balance of 45,523 shares are available for issuance under this plan.
The plan was renewed for one year ending September 30, 1995, at
substantially the same terms. A total of 3,290 shares valued at $33,466 were
issued during 1989 under this plan to five individuals. A total of 10,012
shares valued at $25,530 were issued during 1990 under this plan to twelve
individuals. No shares were issued during 1991, 1992, 1993 and 1994 under
this plan.
401(K) PLAN
Effective October 1, 1995, the Company implemented a 401(K) Plan pursuant
to which all eligible employees may contribute up to 15% of their
compensation. The Company matches contributions in the amount of 10% of all
elective deferrals, and, at the Company's option, may contribute annually up
to 15% of the total compensation of all eligible employees. Executive
Officers of the Company are eligible to participate in this plan.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- - ------------------------------------------------------------------------
The following table sets forth the number and percentage of shares of the
Company's $.00001 par value Common Stock owned beneficially, as of December
29, 1995, by any person who is known to the Company to be the beneficial owner
of 5% or more of such Common Stock, and, in addition, by each Director of the
Company and by all Directors and Officers of the Company as a group.
Information as to beneficial ownership is based upon statements furnished to
the Company by such persons. Each person has sole voting and investment power
with respect to the shares shown except as noted.
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT
OF BENEFICIAL OWNERS BENEFICIAL OWNERSHIP OF CLASS
<S> <C> <C>
Alain J-M Clenet 2,011,464 28.4%
600 C Ward Drive
Santa Barbara, CA 93111
Sheila R. Ronis 38,596 <FN1> 0.5%
640 Rolling Green Circle
Rochester Hills, MI 48309
Robert J. Sinclair 36,177 <FN1> 0.5%
1025 North Ontare Road
Santa Barbara, CA 93103
Lawrence Cohen 25,000 <FN2> 0.4%
3311 NE 26th Avenue
Lighthouse Point, FL 33064
Neil McCarthy 25,000 <FN2> 0.4%
15th Floor
10900 Wilshire Boulevard
Los Angeles, CA 90024
Brian Chang 1,217,113 17.2%
1 Chatworth Road, No. 2421
Singapore 1024
All Directors and Executive 2,195,933 <FN3> 30.3%
Officers as a Group (5 persons)
<FN>
<FN1>
Includes 25,000 shares underlying stock options held by such person.
<FN2>
Represents shares underlying stock options held by these persons.
<FN3>
Includes shares beneficially owned by the following persons who are Executive
Officers of the Company; 40,786 shares underlying stock options held by John
C. McCormack; 5,598 hares underlying options held by Theo E. Shaffer; and
13,312 shares underlying options held by Kenneth R. Black.
</FN>
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- - --------------------------------------------------------
In August 1993, the Company loaned $53,000 to Valarie Valencia, who was
then an Officer of the Company, with principal and interest of 6% due on
February 15, 1994, collateralized by a second deed of trust on her personal
residence. Her debt to the Company has been reduced to $32,485, with
principal and interest of 6% due April 2, 1996, collateralized by a second
deed of trust on her personal residence and a pledge of 7,200 shares of the
Company's Common Stock.
On August 11, 1994, ASHA Corporation entered into a joint venture with
TAISUN Automotive of which Mr. Brian Chang is 85% shareholder. Mr. Chang is a
principal shareholder of the Company. The joint venture was formed as a
Singapore corporation named ASHA/TAISUN PTE LTD. ("ASHA/TAISUN"). The purpose
of this joint venture is for the licensing of the GERODISC technology in China
and Malaysia and also for the development of an automotive industry for China
and Southeast Asia. The Company, by entering into a licensing agreement,
received an initial credit of $100,000 for its investment in ASHA/TAISUN
during the year ended September 30, 1994. On February 23, 1995, the Company
invested an additional $900,000 in cash in ASHA/TAISUN.
ASHA/TAISUN, through its 60%-owned subsidiary, Jiaxing Independent Auto
Design and Development Co., Ltd., is developing automobile manufacturing
facilities in Jiaxing, China. ASHA/TAISUN has also contracted with the
Company for automobile design work. The Company was paid $705,000 during the
year ended September 30, 1995, for design work. Additional fees earned of
$110,000 were offset against capital investment requirements of the Company to
ASHA/TAISUN. Subsequent to September 30, 1995, design work fees of $185,000,
as earned, will be offset against the Company's capital investment
requirements.
In March 1994, Brian Chang purchased 235,924 shares of the Company's
Common Stock for $1,000,000 in cash. Mr. Chang in July of 1994 purchased
800,000 shares of ASHA Common Stock from a principal shareholder. On November
2, 1995, Mr. Chang purchased an additional 181,818 shares of ASHA Common Stock
for $750,000 in cash.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
- - -------------------------------------------------------------------------
(a) 1. FINANCIAL STATEMENTS. The following financial statements are
filed as part of this report:
[CAPTION]
PAGE(S)
Report of Independent Certified Public Accountants . . . . . . . . . .F-1
Consolidated Balance Sheets as of September 30, 1995 and 1994. . . . .F-2
Consolidated Statements of Operations for the years ended
September 30, 1995, 1994 and 1993, and for period of June 20,
1986 (inception) through September 30, 1995. . . . . . . . . . . . . .F-3
Consolidated Statements of Shareholders' Equity for the
years ended September 30, 1995, 1994 and 1993, and for the period
of June 20, 1986 (inception) through September 30, 1995. . . . . . .F-4 - F-6
Consolidated Statements of Cash Flows for the years ended
September 30, 1995, 1994 and 1993, and for the period of
June 20, 1986 (inception) through September 30, 1995 . . . . . . . . .F-7
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . .F-8 - F-20
(a) 2. FINANCIAL INFORMATION SCHEDULES. All schedules have been
omitted, as the required information is inapplicable or the information is
presented in the financial statements or the notes thereto.
(a) 3. EXHIBITS.
EXHIBIT
NUMBER DESCRIPTION LOCATION
3.1 Articles of Incorporation Incorporated by reference to the
Company's Registration Statement on
Form S-18 (SEC File No. 33-3135D)
3.2 Bylaws Incorporated by reference to the
Company's Registration Statement on
Form S-18 (SEC File No. 33-3135D)
10.1 License Agreement with Incorporated by reference to
New Venture Gear, Inc.* Exhibit 10.2 to the Company's
Annual Report on Form 10-K for the
fiscal year ended September 30, 1993
10.2 License Agreement with Incorporated by reference to
Dana Corporation Exhibit 10.3 to the Company's
Annual Report on Form 10-K for the
fiscal year ended September 30, 1993
year ended September 30, 1994
10.3 1994 Stock Option Plan Incorporated by reference to
Exhibit 10.4 to the Company's Annual
Report on Form 10-K for the fiscal
year ended September 30, 1994
10.4 License Agreement with Attached
ASHA/TAISUN Pte. Ltd.
10.5 Amended and Restated Attached
Employment Agreement
10.6 Lease Agreement, as Attached
amended
10.7 Option Agreement with Attached
American Axle and Manu-
facturing, Inc.
10.8 Option Agreement with Attached
Steyr - Daimler - Puch
Fahrzeugtechnick, Gmbh
10.9 Option Agreement with Attached
New Venture Gear, Inc.
23.1 Consent of McDirmid, Attached
Mikkelsen & Secrest,
P.S.
27. Financial Data Schedule Filed herewith electronically
___________________
* Portions of the this document have been excluded pursuant to a confidential
agreement request.
INDEPENDENT AUDITOR'S REPORT
Board of Directors
ASHA Corporation
Santa Barbara, California
We have audited the accompanying balance sheet of ASHA Corporation (a
development stage company) as of September 30, 1995 and 1994, and the related
statements of operations, changes in stockholders' equity and cash flows for
each of the three years in the period ended September 30, 1995, and for the
period from June 20, 1986 (date of inception) through September 30, 1995.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of ASHA Corporation
at September 30, 1995 and 1994, and the results of its operations and its cash
flows for each of the three years in the period ended September 30, 1995, and
for the period from June 20, 1986 through September 30, 1995 in conformity
with generally accepted accounting principles.
MCDIRMID, MIKKELSEN & SECREST, P.S.
/s/ McDirmid, Mikkelsen & Secrest, P.S.
January 11, 1996
ASHA CORPORATION
(a development stage company)
BALANCE SHEET, September 30, 1995 and 1994
__________
<TABLE>
<CAPTION>
ASSETS
1995 1994
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 12,804 $ 625,820
Marketable equity securities 246,546
Accounts receivable (Note 11) 1,624,272 207,393
Receivable from employees 14,066 2,687
Note receivable from officer (Note 3) 32,485 53,000
Stock option receivables (Note 9) 6,192
Prepaid expenses and deposits 16,673 19,056
Total current assets 1,706,492 1,154,502
Receivable from contract (Note 7) 829,345
Investment in affiliate (Note 17) 429,702
Property and equipment (Notes 6 and 11) 147,407 97,366
$3,112,946 $1,251,868
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable to bank (Note 11) $ 85,000
Related party debt (Note 12) 45,000
Accounts payable and bank overdraft 74,723 $ 31,503
Accrued payroll 92,683 55,519
Accrued payroll taxes 24,325 5,483
Obligations under capital lease due
within one year (Note 13) 1,678
Total current liabilities 323,409 92,505
Obligations under capital lease due after
one year (Note 13) 8,946
Stockholders' equity (Note 5):
Preferred stock, $.001 par value:
Authorized, 10,000,000 shares,
no shares issued
Common stock, $.00001 par value:
Authorized, 20,000,000 shares;
Issued and outstanding, 6,891,837
and 6,842,591 shares 69 68
Additional paid-in capital 5,139,936 5,009,087
Deficit accumulated during the
development stage (2,298,671) (3,830,004)
2,841,334 1,179,151
Less: Treasury stock, at cost 42,163 19,788
Stock options receivable (Note 9) 18,580
2,780,591 1,159,363
$3,112,946 $1,251,868
The accompanying notes are an integral part of the financial statements.
ASHA CORPORATION
(a development stage company)
STATEMENT OF OPERATIONS
for the years ended September 30, 1995, 1994 and 1993 and the period from June
20, 1986 (date of inception) through September 30, 1995
__________
</TABLE>
<TABLE>
<CAPTION>
June 20, 1986
(date of inception)
through
1995 1994 1993
September 30, 1995
<S> <C> <C> <C>
<C>
Revenues:
License and right of refusal
(Note 7) $3,619,345 $ 250,000 $ 50,000
$5,069,345
Contract and other services(Note 7) 346,313 988,085 1,782,272
4,731,433
Interest and investment income
(Note 2) 100,095 22,258 11,896
847,891
4,065,753 1,260,343 1,844,168
10,648,669
Expenses:
Research and development 1,067,795 715,337 520,064
4,494,755
Officers' salaries (Note 4) 414,415 359,791 353,248
2,410,633
Consulting services
440,132
Legal and accounting 82,854 80,447 71,854
614,801
Patent application 73,253 42,087 39,204
397,484
Taxes and licenses 98,946 81,231 53,727
428,574
General and administrative 706,938 841,628 309,046
3,807,704
Depreciation and amortization 48,792 55,411 35,224
291,530
2,492,993 2,175,932 1,382,367
12,885,613
Income (loss) before income taxes 1,572,760 (915,589) 461,801
(2,236,944)
Income taxes (Note 14) 41,427
61,727
Net income (loss) $1,531,333 $ (915,589) $ 461,801
$(2,298,671)
Net income (loss) per share $ .22394 $ (.13655) $ .07014
$ (.36438)
Weighted average common shares
outstanding 6,838,196 6,705,294 6,583,839
6,308,502
</TABLE>
The accompanying notes are an integral part of the financial statements.
ASHA CORPORATION
(a development stage company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
for each of the years from June 30, 1986 (date of inception) through September
30, 1995
__________
<TABLE>
<CAPTION>
Stock
Deficit
Options
Accumulated
Receivable
Common Stock Additional During the &
Shares Total
Par Paid-in Development Held
in Stockholders'
Shares Value Capital Stage
Treasury Equity
<S> <C> <C> <C> <C> <C>
<C>
Initial capitalization of
ASHA Corporation (Note 5) 4,994,574 $50 $ 146,253
$ 146,303
Common stock issued for
services 9 15,000
15,000
Net loss for the period from
June 30, 1986 (inception)
through September 30,1986 $ (234,668)
$ (234,668)
Balances at September 30,
1986 4,994,583 50 161,253 (234,668)
(73,365)
Common stock issued upon
exercise of warrants
(Note 5) 1,424,888 14 3,097,885
3,097,899
Net loss for the year
ended September 30, 1987 (618,476)
(618,476)
Balances at September 30,
1987 6,419,471 64 3,259,138 (853,144)
2,406,058
Common stock issued for
services 480 4,377
4,377
Common stock issued in
termination of
development contract 1,649 28,000
28,000
Net income for the year
ended September 30, 1988 360,417
360,417
Balances at September 30,
1988 6,421,600 64 3,291,515 (492,727)
2,798,852
Common stock issued for
services under a stock
incentive plan (Note 8) 3,290 33,466
33,466
Common stock issued for
services 37,666 1 191,999
192,000
Net loss for the year ended
September 30, 1989 (457,464)
(457,464)
Balances at September 30,
1989 6,462,556 65 3,516,980 (950,191)
2,566,854
Common stock issued for
services under a stock
incentive plan (Note 8) 10,012 25,530
25,530
Common stock issued for
services 14,741 31,343
31,343
Net loss for the year ended
September 30, 1990 (680,726)
(680,726)
Balances at September 30,
1990 6,487,309 65 3,573,853 (1,630,917)
1,943,001
Common stock issued for
services 28,469 19,606
19,606
Net loss for the year
ended September 30, 1991 (990,277)
(990,277)
Balances at September 30,
1991 6,515,778 65 3,593,459 (2,621,194)
972,330
Common stock issued for
services 21,200 14,901
14,901
Net loss for the year
ended September 30, 1992 (755,022)
(755,022)
Balances at September 30,
1992 6,536,978 65 3,608,360 (3,376,216)
232,209
Common stock issued for
services 4,338 17,625
17,625
Stock options granted by
officers (Note 9) 41,250
41,250
Net income for the year
ended September 30, 1993 461,801
461,801
Balances at September 30,
1993 6,541,316 65 3,667,235 (2,914,415)
752,885
Common stock issued for
cash 235,294 2 999,998
1,000,000
Common stock issued for
services 42,033 1 210,681
210,682
Common stock issued for
services under a director
stock compensation plan
(Note 10) 10,000 43,200
43,200
Stock options granted to
consultant for services
(Note 9) 65,473
65,473
Stock options exercised by
officers (Note 9) 17,648 22,500
22,500
Purchase of common stock
for treasury (3,700)
$(19,788) (19,788)
Net loss for the year ended
September 30, 1994 (915,589)
(915,589)
Balances at September 30,
1994 6,842,591 68 5,009,087 (3,830,004)
(19,788) 1,159,363
Common stock issued for
services 13,556 1 64,265
64,266
Stock options exercised
by officers (Note 9) 35,294 45,000
45,000
Common stock issued for
services under a stock
incentive plan (Note 9) 1,548 6,192
6,192
Stock options exercised
under 1994 Stock Option
Plan (Note 9) 3,848 15,392
15,392
Purchase of common stock
for treasury (5,000)
(22,375) (22,375)
Stock options receivable
(Note 9)
(18,580) (18,580)
Net income for the year
ended September 30, 1995 1,531,333
1,531,333
6,891,837 $69 $5,139,936 $(2,298,671)
$(60,743) $2,780,591
</TABLE>
The accompanying notes are an integral part of the financial statements.
ASHA CORPORATION
(a development stage company)
STATEMENT OF CASH FLOWS
for the years ended September 30, 1995, 1994 and 1993 and the period from June
30, 1986 (date of inception) through September 30, 1995
__________
<TABLE>
<CAPTION>
June 20, 1986
(date of
inception)
through
1995 1994 1993
Sept 30, 1995
<S> <C> <C> <C>
<C>
Cash flows from operating activities:
Net income (loss) $ 1,531,333 $ (915,589) $
486,801 $(2,298,671)
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization 48,792 55,411
35,224 291,530
Issuance of common stock for
services 70,458 253,882
17,625 706,188
Stock options granted to officers
41,250 41,250
Stock options granted to consultant 65,473
65,473
Investee loss reported 397
28,500
Gain on sale of equipment (2,401) (2,600)
(5,870)
Loss on sale of marketable equity
securities 1,121
1,121
Loss on joint venture 470,298
470,298
Reduction (increase) in carrying
value of marketable securities 11,500
11,500
Decrease (increase) in receivables (1,434,450) 138,219
314,701) (1,644,530)
Reduction of officer receivable 20,515
20,515
Increase in receivables from
contract (829,345)
(829,345)
Decrease (increase) in prepaid
expenses and deposits 2,383 (19,056)
(16,673)
Increase (decrease) in accounts
payable and bank overdraft 43,220 2,998
(23,938) 74,723
Decrease in interest payable
(1,034)
Increase in accrued payroll
and payroll taxes 56,006 17,023
10,804 117,008
Net cash provided by (used
in) operating activities (22,070) (392,739)
227,031 (2,966,983)
Cash flows from investing activities:
Investment in marketable equity
securities (7,782) (258,046)
(265,828)
Proceeds from sale of marketable
equity securities 253,207
253,207
Additions to property and equipment (90,575) (23,780)
(65,938) (432,508)
Deposits on equipment
(6,079)
Proceeds from sale of equipment 5,500 2,600
18,959
Loan to officer
(53,000) (53,000)
Investment in joint venture (900,000)
(928,500)
Additions to organization costs
(2,082)
Net cash used in investing
activities (739,650) (279,226)
(118,938) (1,415,831)
Cash flows from financing activities:
Net borrowing under line of
credit agreement 85,000
(290,928) 85,000
Additions to notes payable
23,516 23,516
Payments on notes payable (23,516)
(23,516)
Loan from (payments to) officer (4,000)
4,000
Increase in related party debt 45,000
45,000
Proceeds from issuance of common
stock 1,000,000
1,146,303
Proceeds of exercise of common
stock warrants
3,097,899
Proceeds of exercise of stock
options to officers 41,812 22,500
64,312
Purchase of common stock for
treasury (22,375) (19,788)
(42,163)
Principal payments on obligations
under capital lease (733)
(733)
Net cash provided by (used in)
financing activities 148,704 998,712
(286,928) 4,395,618
Net increase (decrease) in cash
and cash equivalents (613,016) 326,747
(178,835) 12,804
Cash and cash equivalents at
beginning of period 625,820 299,073
477,908
Cash and cash equivalents at
end of period $ 12,804 $ 625,820 $
299,073 $ 12,804
Supplemental schedule of cash
paid for:
Interest $ 1,446 $ 262 $
11,966 $ 17,322
Income taxes 41,427
61,727
Supplemental schedule of noncash
investing and financing activities:
Capital lease obligations incurred
under leases for equipment $ 11,357
$ 11,357
</TABLE>
The accompanying notes are an integral part of the financial statements.
ASHA CORPORATION
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
__________
1. The Company and Significant Accounting Policies:
ASHA Corporation (formerly Capital Equity Resources, Inc.) (the "Company")
(ASHA) was incorporated under the laws of the State of Delaware on January 28,
1986. Prior to August 27, 1986, the Company's principal purpose was to
actively seek and complete a merger or acquire business prospects. Principal
activities of the Company consisted of corporate organization and obtaining
equity capital. On August 27, 1986, the Company acquired 100% of the common
stock of ASHA Enterprises, Inc. (See Note 5). On December 31, 1989, ASHA
Enterprises, Inc. was liquidated and all assets and liabilities were
transferred to ASHA Corporation.
ASHA Enterprises, Inc. (formerly ASHA, Inc.) was incorporated on June 20,
1986, under the laws of the State of Delaware. The planned operations of the
Company include the design, development and marketing of automobiles,
automobile components and accessories. Manufacturing and distribution are
expected to be contracted to other companies through licensing, joint venture
or other arrangements.
ASHA has been in the development stage since its formation. Several products
are being developed and marketed to the automotive industry. Patents have
been obtained or have been applied for on these products. Although revenue
has been generated from development programs, prototype and licensing, no
contracts have been obtained which would generate a sustained cash flow for
the Company.
Costs associated with developing and testing new concepts and designs are
expensed as incurred until the economic viability of the product has been
established. All research and development and patent acquisition costs have
been expensed through September 30, 1995.
For purposes of balance sheet classification and statement of cash flows, the
Company considers all highly liquid debt instruments purchased with a maturity
of three months or less to be cash equivalents.
Marketable equity securities are stated at the lower of cost or quoted market
prices at the balance sheet date.
The Company grants credit to domestic and foreign original equipment
manufacturers, distributors, and end users.
Investment in affiliate is accounted for on the equity method (see Note 17).
Foreign currency gains and losses resulting from transactions with the
affiliated company are included in results of operations.
Property and equipment are stated at cost. Depreciation is computed on
straight-line and accelerated methods over estimated useful lives of five to
seven years.
Shares of common stock issued for other than cash have been assigned amounts
equivalent to the fair value of the service or assets received in the
exchange.
Net income or loss per share is computed by dividing net income or loss by the
weighted average number of common stock and common stock equivalent shares
outstanding during the period. Common stock equivalent shares consist of
common stock which may be issued upon exercise of outstanding stock options.
The assumed exercise of stock options granted to officers for the year ended
September 30, 1993 and stock options granted during the years ended September
30, 1995 and 1994 (see Note 9) does not result in material dilution and would
have been antidilutive for the period from inception through September 30,
1995. Stock options granted to MASCO Industries, Inc. (MASCO) (see Note 5)
were excluded from the computation because their inclusion would have been
antidilutive.
2. Marketable Equity Securities:
Marketable equity securities had a cost of $258,046 at September 30, 1994.
Included in interest and investment income for the year ended September 30,
1994 are net unrealized losses of $11,500. Net unrealized losses represent
the amount required to reduce the carrying amount of marketable equity
securities to market value.
3. Note Receivable from Officer:
In August 1993, the Company loaned $53,000 to Valarie Valencia, an officer of
the Company. Subsequent to September 30, 1994, her employment was terminated
with the Company. The debt was reduced to $32,485 with principal and interest
of 6% due on January 2, 1996 collateralized by a second deed of trust on her
personal residence and a pledge of 7,200 shares of the Company's common stock.
Subsequent to September 30, 1995 the Board of Directors agreed to extend the
maturity to April 2, 1996.
4. Related Party Transactions:
Prior to the acquisition of ASHA Enterprises, Inc. on August 27, 1986, ASHA
Corporation issued 23,529 and 2,941 shares of its common stock to its former
President and attorney, respectively, in exchange for salary and consulting
services previously provided. The Board of Directors valued the services at
$2,250.
The Company's President has received a U.S. patent on a drivetrain which is an
integral component of the all wheel drive sports utility vehicle, a product
developed by the Company. The Company acquired the North American licensing
and marketing rights to the drivetrain from the Company's President. Foreign
patents have been applied for on this product.
During the period from June 30, 1986 (date of inception) through September 30,
1987, the Company paid $490,000 under an automotive design services contract
to a company in which the President of ASHA owned a substantial interest. In
addition, $23,694 was paid to this company for preliminary styling and design
of other automobiles which could utilize the chassis and mechanical
configuration under development. Rent in the amount of $1,800 was also paid
to the related company under a one year rental agreement, which terminated
September 30, 1987. Thereafter, the Company rented this office space for
$2,835 per month, on a month-to-month basis through March 1988. In March
1988, the lease was assumed by ASHA. The related company was liquidated in
March 1988 and substantially all of its assets, consisting primarily of
equipment used in design and development activities, were sold to ASHA.
In August 1986, the Company entered into a five-year employment contract with
its President, Mr. Alain Clenet, providing for an annual salary of $42,000
subject to annual review by the Board of Directors. In addition, the contract
authorizes health insurance, medical reimbursements, expense accounts,
executive incentives and other fringe benefits. Effective September 1, 1987,
the annual salary was increased to $120,000 and effective February 1, 1990,
the salary was increased to an annual rate of $152,500 to reflect the nature
and extent of his services to the Company. This employment contract was
renewed for five years on November 6, 1991 at the existing terms and
compensation. On April 21, 1995, the employment contract was amended to
change the title of Mr. Alain Clenet to Chairman of the Board and Chief
Executive Officer.
5. Equity Transactions:
The Company successfully completed a public stock offering on May 8, 1986,
which raised $163,479 net of offering costs of $36,521. After paying expenses
of the offering, general and administrative costs and expenses related to the
acquisition of ASHA Enterprises, Inc., the total remaining proceeds of
$146,303 were transferred to ASHA Enterprises, Inc.
On August 18, 1986, ASHA Corporation entered into an agreement with ASHA
Enterprises, Inc. which provided for the shareholders of ASHA Enterprises,
Inc. to acquire 92.4% of the outstanding shares of the Company in exchange for
all the outstanding stock of ASHA Enterprises, Inc. In substance, the
exchange represented the issuance of common stock by ASHA Enterprises, Inc.,
for the net monetary assets of the Company and was reflected in the financial
statements as a recapitalization of ASHA Enterprises, Inc. The financial
statements were adjusted to eliminate the effect on operations of ASHA
Corporation prior to the recapitalization and accordingly, the financial
statements only reflect the activity of ASHA Enterprises, Inc. from its date
of inception on June 20, 1986. All costs and expenses of the Company through
August 27, 1986, were treated as costs related to the public stock offering
and recapitalization and netted with additional paid-in capital.
Effective February 6, 1987, class A and B warrants and the common stock
underlying the warrants were registered with the Securities and Exchange
Commission. As a result of this registration, class A and B warrants totaling
1,135,951 and 269,845 shares of common stock, respectively, were exercised
resulting in cash proceeds to the Company of $3,078,366 during the year ended
September 30, 1987. There are no warrants currently outstanding.
The Company sold warrants for the purchase of common stock to certain
participating NASD broker/dealers for $.00425 per warrant. A total of 19,092
shares of the Company's common stock were issued from the exercise of
underwriting warrants during the year ended September 30, 1987 at $1.02 per
share totaling $19,533, including the cost of the warrants.
During 1988, options for up to 588,236 shares of the Company's common stock
were granted to MASCO, in connection with various product development and
licensing agreements. The options are exercisable over a seven year period
beginning February 26, 1988 at prices from $8.50 to $34.00 per share. An
option on 58,824 common shares exercisable at $8.50 per share expired in
February, 1989. An option on 235,295 common shares exercisable at $17.00 per
share expired in February, 1992. The remaining options are exercisable at a
price of $34.00 per share, and expired on February 26, 1995. No options were
exercised by MASCO.
On December 9, 1993, the Company's Board of Directors approved a 1 for 85
reverse split of the Company's common stock effective at the close of the
market on February 1, 1994. The stated par value of each share was not
changed from $.00001. A total of $5,493 was reclassified from the Company's
common stock account to the Company's additional paid-in capital account. All
references in the financial statements to common shares outstanding and
related prices, per share amounts, common stock issued and stock option plan
data have been restated to retroactively reflect the reverse split. In
connection with the reverse split, the Board of Directors approved amending
the Certificate of Incorporation to reduce the authorized common stock of the
Company from 800,000,000 shares to 20,000,000 shares.
6. Property and Equipment:
Property and equipment at September 30, 1995 and 1994, consisted of the
following:
[CAPTION]
1995 1994
[S] [C] [C]
Vehicles $ 33,196 $ 53,196
Furniture and fixtures 98,945 91,198
Machinery and equipment 234,974 160,322
Leasehold and improvements 31,374 15,000
-------- --------
398,489 319,716
Accumulated depreciation and
amortization 251,082 222,350
-------- --------
$147,407 $ 97,366
-------- --------
-------- --------
Machinery and equipment includes property leased under a capital lease of
$11,357 at September 30, 1995 (see Note 13). Accumulated amortization for
this property at September 30, 1995 was $2,271.
7. Licensing and Right of First Refusal Agreements:
In February 1988, the Company entered into an agreement with C & C
Incorporated (Formerly Cars and Concepts, Inc., a subsidiary of MASCO)
granting C & C Incorporated an exclusive license to manufacture and market the
ASHA vehicle in North America, and a right of first refusal for the
manufacture and marketing of other products developed by or on behalf of the
Company. The Company received total payments of $1,150,000 under these
agreements which expired in January 1991 with all product rights reverting to
ASHA. In addition, C & C Incorporated paid the Company a total of $987,210
for consulting services during the term of these agreements.
In September 1989, the Company entered into a joint venture with C & C
Incorporated for the continued development of one of its products. The joint
venture has been dormant since 1991, and the Company has no plans to provide
further investment.
In August 1993, the Company entered into a licensing agreement with New
Venture Gear, Inc. (NVG) to manufacture and market one of its products in
North America and Europe, subject to certain restrictions. The Company
received a good faith deposit under this agreement during the year ended
September 30, 1993 and $250,000 during both years ended September 30, 1995 and
1994. In addition, during the year ended September 30, 1995, NVG committed to
pay $450,000 to keep the agreement in force through 1996.
In addition, the Company received $126,531, $237,213 and $200,110 from NVG for
research and development work during the years ended September 30, 1995, 1994
and 1993, respectively.
In December 1994, the Company and NVG amended the license agreement to provide
that in the event NVG is awarded a production program by a major OEM, NVG will
pay $1,000,000 to the Company at the beginning of the first model year of
production in addition to the amounts discussed above. On December 24, 1994,
NVG was awarded a production program with a major OEM and the first model year
is scheduled to be 1998. Receivable from contract represents the $1,000,000
payment due discounted to present value of $829,345 as of September 30, 1995.
On December 28, 1994, the Company entered into an agreement with DANA
Corporation in which the Company licensed DANA to manufacture and market
GERODISC for front axles exclusively and for real axles non-exclusively in
North America, South American, Europe, South Korea and Taiwan. The license
agreement provides for a licensing fee of $2,000,000 of which $1,000,000 was
paid in February 1995 and the balance of $1,000,000 is due January 1, 1996.
In addition, the Company will receive a royalty on each unit produced under
the agreement.
On April 19, 1995, the Company entered into an agreement with Hall Racing,
Inc., which granted Hall Racing the right to use GERODISC units on an
exclusive basis for the 1995 IndyCar racing season on the Reynard chassis
vehicles owned by Hall Racing.
8. Stock Incentive Plans:
In January 1986, the Company's Board of Directors authorized an Incentive
Stock Option Plan and have reserved 117,647 shares of the Company's $.00001
par value common stock for key employees. The Board of Directors is
authorized to determine the exercise price, the time period, the number of
shares subject to the option and the identity of those eligible to receive the
options. No options have been granted under this plan.
The Board of Directors approved a stock incentive plan during December 1988.
This plan has reserved 47,059 shares of common stock for issuance to partici-
pants under the plan, defined as any person or firm providing services to the
Company. The stock will be granted at the discretion of the Board of
Directors and a cash payment equal to twenty percent of the value of the stock
granted will be paid to the participant. Granting of stock under this plan is
intended to encourage a continued relationship and services by the participant
and to reward creative or noteworthy efforts to the participant.
The stock is 100% forfeitable if the services of the participant are termin-
ated within two years of the grant of the stock and 50% forfeitable if
services are terminated after two years but less than three years from the
grant of the stock. During February 1989, a total of 3,290 shares of common
stock valued at $33,466 were issued to five individuals. A total of 10,012
shares valued at $25,530 were issued during 1990 under this plan to twelve
individuals. No stock was issued under this plan since February of 1989.
On September 2, 1994 the Company's Board of Directors approved reserving an
additional 11,765 shares of authorized, but unissued, common stock for
granting to participants under this plan for the year ending September 30,
1995. A balance of 45,522 shares are available for issuance under this plan.
9. Stock Option Plans:
On August 12, 1993, the Company's Board of Directors approved a nonqualified
stock option plan in which any employee, officer, director or consultant that
the Board, in its sole discretion, designates is eligible to participate.
During the year ended September 30, 1993, options to purchase up to 64,706
shares of the Company's common stock at $1.275 per share were granted to three
officers. Options may be exercised at any time from February 2, 1994 through
January 15, 1997 at which time all options terminate. If the holder of the
option terminates employment with the Company, the option shall be reduced by
one-half and terminate completely two months after the termination of employ-
ment.
Compensation expense charged to operations upon grant of these options was
$41,250 during the year ended September 30, 1993. Options for a total of
35,294 and 17,648 shares of common stock were exercised, at a value of $45,000
and $22,500 during the year ended September 30, 1995 and 1994, respectively.
At September 30, 1995, stock options receivable of $3,188 is shown as a
reduction to stockholders' equity.
On May 1, 1994, the Company's Board of Directors approved the issuance of a
common stock option to a consultant as additional compensation to purchase up
to 11,765 shares of the Company's common stock, at an exercise price of $1.275
through September 30, 1995. On September 6, 1995, an agreement was approved
which replaced the option previously granted and extended the exercise date
through September 30, 1996. All other terms and conditions remained the same.
Public relations expense charged to operations upon grant of these options was
$65,473 during the year ended September 30, 1994.
On December 20, 1994, the Company's Board of Directors approved the 1994 Stock
Option Plan. The plan authorizes the Company to grant options to grant up to
240,000 shares of common stock and will terminate on December 19, 2004. The
Board determines the number of shares subject to each stock option, the manner
and time of exercise, and the purchase price per share. At September 30,
1995, options covering 120,349 shares were outstanding at an exercise price of
$4.00 per share. During the year ended September 30, 1995, 5,396 shares of
common stock were exercised at a value of $21,584. Stock options receivable
under this plan of $6,192 as of September 30, 1995 were subsequently collected
in cash. The balance of the stock options receivable of $15,392 is shown as a
reduction to stockholders' equity.
10. Director Stock Compensation Plan:
On June 1, 1994, the Company's Board approved a director stock compensation
plan and have reserved 20,000 shares of the Company's common stock for
issuance in exchange for services provided to the Company outside of their
regular duties as directors. All members of the Board of Directors will be
eligible to receive shares under the plan. During June, 1994 a total of
10,000 shares valued at $43,200 were issued.
11. Note Payable to Bank:
The Company maintains a revolving line of credit agreement with the Bank of
Montecito. The agreement provides for up to $500,000 of borrowings through
February 15, 1996, with interest due monthly at 1.5% in excess of the Wall
Street Journal prime rate (10.25 at September 30, 1995). The note is
collateralized by accounts receivable, business assets, and licensing
agreements. On October 25, 1995, the line of credit was paid in full.
12. Related Party Debt:
Related party debt at September 30, 1995 consisted of an unsecured note
payable of $45,000 to Taisun Automotive Pte. Ltd., which is 85% owned by a
major stockholder of ASHA. The note is due September 27, 1996, including
11.75% interest.
13. Obligations Under Capital Lease:
In March 1995, the Company entered into a capital lease agreement for
telephone equipment. Monthly payments are $289 through March 2000.
Future minimum lease payments are as follows:
[CAPTION]
Years ending September 30
-------------------------
[S] [C]
1996 $ 3,468
1997 3,468
1998 3,468
1999 3,468
2000 1,734
-------
$15,606
Less amounts representing interest 4,982
-------
$10,624
-------
-------
14. Income Taxes:
Effective October 1, 1993, the Company has adopted Statement of Financial
Accounting Standards No. 109 "Accounting for Income Taxes." The adoption of
this statement has no effect on income before taxes or net income for the year
ended September 30, 1995 or for years ending prior to October 1, 1995.
The Company recognizes no deferred income tax benefit due to the uncertainty
of realization of various deferred tax attributes. As of September 30, 1995,
the Company has remaining federal ordinary net operating loss carryovers of
$1,793,000. Net operating losses may be carried forward fifteen years and
used to offset ordinary taxable income in future. If not utilized, the net
operating loss carryovers begin expiring September 30, 2007. The current tax
provision includes a federal liability for alternative minimum tax arising
from the overall limitation on the offset of tentative minimum taxable income
by the alternative minimum tax net operating loss deduction.
As of September 30, 1995, the Company has fully utilized all California net
operating losses. The net operating loss deduction, together with the write-
off of expired research and development costs previously capitalized for
California tax purposes reduced California tax consequences to $5,513 in
ordinary income tax. Accordingly, the Company's provision for income taxes at
September 30, 1995 is composed as follows:
[S] [C]
Federal alternative minimum tax $35,914
California corporation income tax 5,513
-------
Provision for income taxes $41,427
-------
-------
Prepaid taxes receivable are included in prepaid expenses on the balance sheet
as follows:
[S] [C]
Federal prepayment $14,086
California prepayment 1,287
-------
$15,373
-------
-------
The prepaid taxes will be applied to the 1995 estimated taxes.
15. Commitments:
The Company leases its facilities under an operating lease agreement for
monthly payments of $4,573 through January 1994. A portion of the facility
was subleased to a third party through September 30, 1993, at which time the
sublease expired. Effective April 1, 1994, the Company renewed the lease
agreement at the existing terms for a period of five years through January
1999. On September 30, 1995, the lease was amended for additional facility
space. Base rent increases to monthly payments of $6,306 commencing December
1, 1995. Rent expense under these lease agreements, net of sublease income,
was $54,562, $54,876, and $45,348 for the years ended September 30, 1995, 1994
and 1993, respectively.
In April 1993, the Company entered into an operating lease agreement for a
vehicle for monthly payments of $459 through March 1995. Total payments under
this agreement were $2,754, $5,508 and $2,754 for the years ended September
30, 1995, 1994 and 1993, respectively. In May 1995, the Company entered into
another lease for the same vehicle extending the lease term for two additional
years. Monthly payments are $228 through May 1997. Total payments under this
agreement were $1,140 for the year ended September 30, 1995.
Future minimum lease payments under these agreements are as follows:
[CAPTION]
Years ending September 30
-------------------------
[S] [C]
1996 $ 74,942
1997 77,268
1998 75,672
1999 25,224
--------
$253,106
--------
--------
16. Preferred Stock:
Preferred stock may be issued by the Board of Directors in one or more series.
The Board shall determine the distinguishing features of each, including
preferences, rights and restrictions, upon the establishment of such series.
17. Investment in Affiliate:
On August 11, 1994, the Company entered into a joint venture agreement with
TAISUN Automotive Pte. Ltd., a Singapore corporation. The joint venture is
operated through ASHA-TAISUN Pte. Ltd. (ASHA-TAISUN), a Singapore corpor-
ation, which is owned 50% by the Company and 50% by Taisun Automotive, Pte.
Ltd. The purpose of this joint venture is for the licensing of the GERODISC
technology in China and Malaysia and also for the development of an automotive
industry for China and Southeast Asia. The Company, by entering into the
licensing agreement, received an initial credit of $100,000 for its investment
in ASHA-TAISUN for the year ended September 30, 1994. On February 23, 1995,
the Company invested an additional $900,000 in cash to ASHA-TAISUN.
ASHA-TAISUN is a holding company which through its 60%-owned subsidiary,
Jiaxing Independence Auto Design and Development Co., Ltd., is developing
automobile manufacturing facilities in Jiaxing, China. ASHA-TAISUN has also
contracted with the Company for automobile design work. The Company was paid
$705,000 during the year ended September 30, 1995 for design work. Additional
fees earned of $110,000 were offset against capital investment requirements of
ASHA-TAISUN. Subsequent to September 30, 1995, design work fees of $185,000,
as earned, will be offset against capital investment.
The Company has accounted for its investment in ASHA-TAISUN using the equity
method. All significant intercompany transactions and accounts have been
eliminated. Summarized consolidated balance sheet and operations information
for ASHA-TAISUN and its subsidiary at September 30, 1995 and for the year then
ended were as follows:
[CAPTION]
Summarized balance sheet:
[S] [C]
Current assets $ 751,871
Land, buildings and construction in progress 621,863
Deferred start-up costs and other assets 164,144
----------
Total assets $1,537,878
----------
----------
Liabilities $ 1,434
Stockholders' equity 1,536,444
----------
$1,537,878
----------
----------
Summarized statement of operations:
Revenues $ -0-
----------
Operating loss $ 940,596
----------
----------
The Company has recorded its investment in ASHA-TAISUN at its invested cash
amount of $900,000 less its share of the operating loss of $470,298. Included
in the operating loss is $25,375 resulting from foreign currency transactions.
The operating loss has been netted against contract and other services
revenues on the statement of operations for the year ended September 30, 1995.
18. Continued Operations:
Management is continuing its marketing and development activities with the
goal of generating revenue through prototype and product development and the
eventual sale or license of its products. The Company expects to collect
receivables of $450,000 from New Venture Gear, Inc. and $1,000,000 from DANA
Corporation during January 1996. In addition, the Company has signed
agreements with American Axle and Hall Racing (see Note 19).
Management believes that continuation of strong marketing and product
development efforts will provide the best opportunity to generate sufficient
revenue and cash flows to sustain future operations.
19. Subsequent Events:
On October 9, 1995, the Company and Steyr-Daimler-Puch Fahrzeugtechnik, GmbH,
entered into an option agreement to use GERODISC applications. Steyr paid
$75,000 on the contract's effective date and an additional $25,000 is due by
January 31, 1996.
On November 1, 1995, the Company entered into an option agreement with
American Axle and Manufacturing, Inc. which granted American Axle an eighteen
month option to acquire non-exclusive licenses for up to three different
applications world-wide. The three applications are rear axles, transaxles
and twin-disc front axles. If American Axle exercises any option, a license
fee ranging from $1,000,000 to $2,000,000 will be payable, depending upon the
application, and a per unit royalty will also be payable. In November 1995,
American Axle paid $1,150,000 for the option.
On November 2, 1995, Mr. Brian Chang, an 85% shareholder of Taisun Automotive
Pte. Ltd., purchased an additional 181,818 shares of ASHA common stock for
$750,000 in cash.
On November 10, 1995, the Company and Hall Racing entered into an agreement
for the 1996 IndyCar racing season. The November 1995 agreement requires Hall
Racing to pay $65,000 for the right to use GERODISC on an exclusive basis for
the 1996 racing season.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed
on its behalf by the undersigned thereunto duly authorized.
ASHA CORPORATION
Dated: February 9, 1996 By /s/ Alain J-M Clenet
Alain J-M Clenet, Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated.
SIGNATURES TITLE DATE
/s/ Alain J-M Clenet Chairman of the Board, February 9, 1996
Alain J-M Clenet Chief Executive Officer
(Principal Financial and
Accounting Officer), and
Director
/s/ Sheila R. Ronis Director February 9, 1996
Sheila R. Ronis
/s/ Robert J. Sinclair Director February 9, 1996
Robert J. Sinclair
/s/ Neil McCarthy Director February 9, 1996
Neil McCarthy
/s/ Lawrence Cohen Director February 9, 1996
Lawrence Cohen
LICENSE AGREEMENT
THIS AGREEMENT is made and entered into as of the 29 day of September, 1994 by
and between ASHA Corporation, a Delaware corporation ("LICENSOR"), with
offices located at 600 C Ward Drive, Santa Barbara, California 93111 and
ASHA-TAISUN PTE. LTD., a Singapore company ("LICENSEE"), with offices located
at Beijing International Aviation Center, 200 West Airport Rd., Chao Yang
District, Beijing 100015, China.
IN CONSIDERATION of the mutual covenants of the parties set forth herein,
LICENSOR and LICENSEE hereby agree, as follows:
1. DEFINITIONS.
1.1 Terms in this Agreement (other than GERODISC [TM], the names of parties
and paragraph headings) in upper case letters have the meanings defined in
this Section 1.
1.2 LICENSED PRODUCT(S) means certain GERODISC [TM] hydraulic limited slip
differential devices described in Exhibit A.
1.3 EXCLUSIVE TERRITORY means the People's Republic of China and the
Republic of Malaysia.
1.4 LICENSED PATENT(S) means all patents (including improvements, divisions,
reissues, continuations, renewals and extensions relating to the foregoing),
patent applications, and patents issued from applications as to:
1.4.1 which the LICENSOR has at any time during the term of this Agreement
the right to grant licenses;
1.4.2 which cover inventions or designs applicable to the LICENSED PRODUCTS;
and,
1.4.3 which are applicable to the EXCLUSIVE TERRITORY, including those which
claim priority from or are issued from the patent applications identified in
Exhibit B.
1.5 PROPRIETARY DATA shall include, without limitation, designs, drawings,
blueprints, specifications, test data, charts, graphs, operation sheets,
routing sheets, bills of materials, hardware and prototypes made therefrom,
and all other technical information, quality standards, prices, catalogues,
advertising, and application information relating to the design, manufacture,
use, and sale of LICENSED PRODUCTS as presently owned by LICENSOR and as
LICENSOR may acquire and transmit to LICENSEE during the term of this
Agreement. PROPRIETARY DATA shall also mean additional data furnished to
LICENSEE with respect to a specific use, design, or manufacture of LICENSED
PRODUCTS.
2. EXCLUSIVE GRANT TO LICENSEE.
2.1 LICENSOR grants to the LICENSEE under the LICENSED PATENTS, and for the
lives of the LICENSED PATENTS, an exclusive license within the EXCLUSIVE
TERRITORY to practice the methods and make, have made, use and sell LICENSED
PRODUCTS, subject to the applications and limitations set forth in Exhibit A.
2.2 LICENSEE may grant sublicenses to third parties within the scope of the
grant set forth above within the EXCLUSIVE TERRITORY subject to the following
conditions:
2.2.1 LICENSEE shall submit to LICENSOR for approval the terms of each
proposed sublicense. LICENSEE shall not grant or convey any sublicense or
right with respect to the LICENSED PRODUCTS, the LICENSED PATENTS or the
PROPRIETARY DATA or enter into any sublicense with any third party without
obtaining prior written consent approval of the terms thereof from LICENSOR.
2.2.2 LICENSOR shall have and retain the right to terminate any sublicense in
accordance with Section 9 of this Agreement, and the foregoing shall be set
forth as a condition in any such sublicense.
2.3 LICENSEE shall not export or permit any sublicensees to export LICENSED
PRODUCTS beyond the borders of the EXCLUSIVE TERRITORY unless approved by both
parties.
3. QUALITY CONTROL.
3.1 The Parties agree that the LICENSED PRODUCTS include precision technology
and that improper quality control will materially impair operational
capabilities of LICENSED PRODUCTS.
3.2 LICENSEE agrees to submit samples of all final production prototypes and
detailed, dimensioned drawings of LICENSED PRODUCTS for approval by LICENSOR
prior to the manufacture and sale of LICENSED PRODUCTS by LICENSEE. LICENSOR
shall not unreasonably withhold approval of LICENSED PRODUCTS which meet
LICENSOR's quality standards, and if LICENSOR disapproves any prototype,
LICENSOR shall advise LICENSEE of the reasons for disapproval in writing,
postmarked within sixty (60) days of receipt of the prototype. LICENSEE shall
not sell LICENSED PRODUCTS until final prototypes thereof are approved by
LICENSOR. If no final prototype is approved within twenty-four (24) months of
the date of this Agreement, LICENSOR shall have the option to terminate this
Agreement in accordance with Section 9.
3.3 LICENSEE agrees to submit any plans for alteration or improvement of
LICENSED PRODUCTS for approval by LICENSOR in accordance with paragraph 3.2.
4. PROPRIETARY DATA.
4.1 LICENSOR shall furnish to LICENSEE the PROPRIETARY DATA in the English
language and in English units of measurement as determined by LICENSOR as is
sufficient to enable LICENSEE to manufacture and sell the LICENSED PRODUCTS
and to sublicense the LICENSED PATENTS.
4.2 The parties agree that it is not practical or desirable to duplicate all
of the above identified PROPRIETARY DATA. Accordingly, LICENSOR agrees to
provide all the particular PROPRIETARY DATA which LICENSEE from time to time
may specifically request and which LICENSOR possesses and knows to be relevant
to begin the manufacture and/or sale of particular LICENSED PRODUCTS it knows
LICENSEE to be intending to manufacture and/or sell.
4.3 LICENSEE shall pay all expenses related to conversion of PROPRIETARY
DATA as supplied by LICENSOR to any other language or unit of measurement
required by LICENSEE.
5. CONFIDENTIALITY AND NON-COMPETE COVENANT
5.1 LICENSEE covenants that LICENSEE its employees, agents, representatives,
and sublicensees shall keep secret and retain in strictest confidence any
PROPRIETARY DATA, information or other matters relating to the business of
LICENSOR or regarding the LICENSED PRODUCTS learned by the LICENSEE, its
employees, agents, representatives and sublicensees before or after the
execution of this Agreement. LICENSEE shall obtain non-disclosure agreements
from its clients.
5.2 LICENSEE shall not use for its benefit, or for the benefit of any
others, except as provided in this Agreement, any PROPRIETARY DATA or
information or other matters relating to the business of LICENSOR or the
LICENSED PRODUCTS.
5.3 During the course of this Agreement, LICENSEE acknowledges that it will
have acquired substantial knowledge of confidential information and/or trade
secrets of LICENSOR's products, processes and business. Therefore, LICENSEE
covenants and agrees that for a four (4) year period following expiration of
the last to expire of the LICENSED PATENTS or termination of this Agreement
under the provisions of Section 9, whichever is later:
5.3.1 LICENSEE shall not compete directly or indirectly with LICENSOR with
respect to LICENSOR's then existing clients or customers, and
5.3.2 LICENSEE shall not, with respect to LICENSOR's then existing clients
or customers, call on, solicit, take away, attempt to do business with or
accept them as clients or customers in connection with the conduct of a
business which is the same as or substantially similar to that of LICENSOR, or
cause or attempt to cause any customer to terminate, limit, modify or fail to
enter into any actual or potential business relationship with LICENSOR.
5.4 LICENSEE agrees that if any of its employees, agents, representatives or
sublicensees violate any of the terms of this confidentiality and non-compete
covenant, such violation shall constitute a material breach of this Agreement.
LICENSEE agrees that such violation will cause LICENSOR irreparable harm and
injury and that money damages will not necessarily adequately compensate
LICENSOR. Accordingly, LICENSEE agrees that LICENSOR will be entitled, in
addition to any monetary damages, to all equitable relief a court deems
appropriate under the circumstances. Such relief shall not be exclusive of
any other rights or remedies LICENSOR may have. The rights and remedies under
this covenant are in addition to and without limitation of those rights and
remedies available under common law for protection of confidential information
which constitutes "trade secrets" as construed under controlling law. It is
the responsibility of LICENSEE to pursue the defense of the proprietary rights
to the satisfaction of the LICENSOR.
6. DELIVERY OF SHARES, ROYALTIES AND REPORTS.
6.1 LICENSEE hereby represents and confirms that it has received the
equivalent of U.S. $100,000 from TAISUN Automotive against which has been
issued and delivered 50,000 shares of stock from TAISUN PTE. LTD.
Concurrently, 50,000 shares will be issued to ASHA Corporation.
6.2 A Minimum Royalty shall be payable to LICENSOR by LICENSEE each year in
accordance with the following schedule:
January 1, 1997 and each succeeding January 1: U.S. $250,000
6.3 LICENSEE will pay LICENSOR royalties at the rate of U.S. $5.00 per unit
of LICENSED PRODUCTS produced during the term of this Agreement. Royalties
paid in any calendar year shall be applied to the Minimum Royalty required in
paragraph 6.2.
6.4 LICENSEE agrees to deliver written reports to LICENSOR quarterly within
thirty (30) days following the end of each calendar quarter during the life of
this Agreement. Each report shall include, at a minimum, the number and
description of LICENSED PRODUCTS produced during the preceding calendar
quarter and upon which royalties are payable as provided in paragraph 6.3. The
first report shall include all such LICENSED PRODUCTS sold between the date of
this Agreement and the date of the report.
6.5 Concurrently with the making of a report under paragraph 6.4, LICENSEE
shall pay to LICENSOR royalties in U.S. funds at the rate specified in
paragraph 6.3 at a bank designated by LICENSOR.
6.6 LICENSED PRODUCTS shall be considered to be produced when final assembly
thereof is complete, except that upon expiration of any patent covering such
LICENSED PRODUCT or upon any termination of this license, all LICENSED
PRODUCTS for which production has commenced shall be considered as produced
and subject to royalty.
6.7 LICENSEE shall keep records showing the production of LICENSED PRODUCTS
in sufficient detail to enable the royalties payable by LICENSEE to be
determined, and shall permit its books and records to be examined by LICENSOR
or its representative from time to time to the extent necessary to verify the
reports provided for in paragraph 6.4. All records shall be maintained for
the term of this Agreement plus four (4) years thereafter.
6.8 LICENSEE shall provide LICENSOR with an annual balance sheet and profit
and loss statement within three (3) months after the close of LICENSEE's
fiscal year.
7. LICENSOR's WARRANTY.
7.1 Subject to LICENSOR's agreement with Ford Motor Company ("FORD"), a copy
of which has been provided to LICENSEE, pursuant to which LICENSOR has granted
an option to FORD to acquire certain rights in LICENSED PATENTS, LICENSOR
represents and warrants that it has the legal power and authority to extend
the rights granted to LICENSEE in this Agreement and that it has not made any
commitments to others inconsistent with or in derogation of such rights.
LICENSOR also warrants to the best of its knowledge that LICENSED PRODUCTS do
not infringe upon any valid claim of any existing patents in the EXCLUSIVE
TERRITORY. LICENSOR makes no other express or implied representations or
warranties.
8. LITIGATION.
8.1 If LICENSEE receives notice of a claim for infringement of a third
party's rights in respect to the LICENSED PRODUCTS manufactured and/or sold by
LICENSEE or its sublicensees, LICENSEE shall notify LICENSOR and provide
LICENSOR with all information which it has relating to such claim at the time
of sending such notice. LICENSEE shall defend in its EXCLUSIVE TERRITORY all
such claims at its expense in a timely and good-faith manner. LICENSOR shall
have the absolute right to consent to the settlement of all claims or suits.
Any award or reimbursement of legal fees or expenses shall be apportioned
equitably between LICENSEE and LICENSOR in relation to the respective
contributions of LICENSEE and LICENSOR to the defense of any such suit or
action.
8.2 If LICENSEE believes that a third party has unlawfully manufactured,
used or sold products using the LICENSED PATENTS, LICENSEE shall immediately
notify LICENSOR and provide as many facts as LICENSEE has to support its
belief. LICENSEE is empowered:
8.2.1 to bring suit in its own name or, if required by law, jointly with
LICENSOR, for infringement of the LICENSED PATENTS in the EXCLUSIVE TERRITORY;
8.2.2 in any such suit, to enjoin infringement and to collect for its own
use, damages, profits and awards of whatever nature recoverable for such
infringement. LICENSEE shall pay to LICENSOR fifty percent (50%) of any
recovery, after deduction of LICENSEE's reasonable attorney fees and costs
actually paid by LICENSEE and after reimbursement to LICENSOR of LICENSOR's
reasonable attorney fees and costs actually paid by LICENSOR; and
8.2.3 with the mutual consent of LICENSOR to settle any claim or suit for
infringement of the LICENSED PATENTS.
8.3 In the event LICENSOR shall bring to the attention of LICENSEE any
infringement of the LICENSED PATENTS, and LICENSEE shall not, within six (6)
months:
8.3.1 secure cessation of the infringement; or
8.3.2 file suit against the infringer; or
8.3.3 provide LICENSOR with evidence of the pendency of bona fide
negotiations for settlement, then LICENSOR shall have the right to sue for the
infringement at LICENSOR's own expense, and to collect for its own use all
damages, profits and awards of whatever nature recoverable for such
infringement.
9. TERMINATION.
9.1 Unless otherwise terminated as provided below, this Agreement shall run
to the end of the life of the last to expire of the LICENSED PATENTS and shall
then expire.
9.2 If either LICENSOR or LICENSEE is in material default of any obligation
under this Agreement, the non-defaulting party, at its option, may give
written notice specifying the material default or defaults and indicating its
intention to terminate this Agreement in thirty (30) days. Unless the
defaulting party has cured the default or defaults within the thirty (30) day
period, to the reasonable satisfaction of the non-defaulting party, this
Agreement shall automatically terminate upon the expiration of the thirty (30)
day period.
9.3 This Agreement and any sublicense hereunder may be terminated by
LICENSOR by providing written notice to LICENSEE if:
9.3.1 LICENSEE files a petition or application under the provisions of
Chapter 7 of the United States Bankruptcy Code or any state or national
insolvency laws having similar effect; or
9.3.2 a receiver is appointed for LICENSEE's business; or
9.3.3 LICENSEE makes an assignment for the benefit of creditors; or
9.3.4 LICENSEE or its sublicensees have not commenced production of LICENSED
PRODUCTS within twenty-four (24) months of the date of this Agreement.
9.3.5 Any sublicensee is in material default of any obligation under any
sublicense agreement or causes LICENSEE to default in its obligations under
this Agreement.
9.4 Upon termination of this Agreement in accordance with paragraphs 9.2 or
9.3, LICENSEE and all sublicensees shall cease manufacturing and selling
LICENSED PRODUCTS except to the extent reasonably necessary to fulfill
contracts in effect on the date of termination.
9.5 Upon termination of this agreement in accordance with paragraphs 9.2 or
9.3, the following obligations will continue:
9.5.1 LICENSEE's obligation to allow LICENSOR to inspect LICENSEE's books of
account for the period during which royalties are payable; and
9.5.2 LICENSEE's obligation to pay royalties for the period up to and
including the effective date of termination for the LICENSED PRODUCTS
manufactured and sold by LICENSEE:
9.5.2.1 in fulfilling contracts in effect on the date of termination; and
9.5.2.2 during any period of default.
9.5.3 LICENSEE'S confidentiality and non-compete covenant as specified in
Section 5.
9.6 LICENSEE shall promptly take all necessary and appropriate steps to
terminate a sublicense agreement if LICENSOR exercises its rights herein to
terminate this Agreement or such sublicense agreement.
10. INDEMNITY.
10.1 LICENSEE shall indemnify and hold LICENSOR harmless against and from
all cost, expenses, liabilities and damages of any nature and kind, regardless
of fault, arising from claims for injury to person, property or reputation
arising out of LICENSEE's manufacture and sale of LICENSED PRODUCTS.
10.2 The parties agree that they will periodically review the potential for
product liability claims related to the LICENSED PRODUCTS; and if either party
believes that product liability insurance is necessary, then LICENSEE shall
obtain product liability insurance naming LICENSOR as a co-insured. The
policy limits shall be in amounts sufficient to ensure full performance of the
terms of paragraph 10.1. If LICENSEE fails to obtain the required insurance,
LICENSOR shall have the option to terminate this Agreement in accordance with
Section 9.
11. BEST EFFORTS.
11.1 LICENSEE shall use its best efforts to manufacture and to sell LICENSED
PRODUCTS throughout the term of this Agreement.
11.2 Within twenty-four (24) months following the effective date of this
Agreement, LICENSEE shall sublicense in accordance with this Agreement the
LICENSED PRODUCTS on a non-exclusive basis to at least one axle or automobile
manufacturer within the EXCLUSIVE TERRITORY.
11.3 LICENSOR may terminate this Agreement in accordance with Section 9 at
its sole and exclusive option if LICENSEE or its sublicensees cease for any
reason to manufacture or sell LICENSED PRODUCTS for a period of three (3)
consecutive months following commencement of production.
12. TRANSFERABILITY OF RIGHTS AND OBLIGATIONS.
12.1 Any license granted in this Agreement by a party in respect of a
LICENSED PATENT shall be binding upon any successor or assign of the grantee
thereof.
13. LICENSEE'S DEVELOPMENTS AND TRAINING.
13.1 LICENSOR and LICENSEE agree to keep each other regularly and fully
informed about new applications and other developments relating to the
manufacture, use and sale of LICENSED PRODUCTS, including technical
information and data relating thereto. Any such new applications or
developments by LICENSEE, whether or not patented or patentable, will be
offered to LICENSOR in the form of an irrevocable, royalty-free, nonexclusive
license, for the entire world with the exception of the EXCLUSIVE TERRITORY,
with the right to grant sublicenses to LICENSOR's other licensees.
13.2 LICENSEE shall promptly notify LICENSOR in writing of any inventions or
improvements which relate to any of the LICENSED PRODUCTS, or to the
manufacture or use thereof, and in which LICENSEE is entitled to claim a
proprietary right therein, including those inventions or improvements made by
any employee of LICENSEE or by any contractor or sublicense of LICENSEE to
whom LICENSEE has subcontracted work or sublicensed rights relating to the
LICENSED PRODUCTS. Within a period of forty-five (45) days after each such
notification, LICENSEE shall elect by notifying LICENSOR in writing whether or
not LICENSEE intends to file for patent protection on such invention or
improvements, and specify the countries in which patent applications are to be
filed. LICENSEE's failure to notify LICENSOR of an election to file for
patent protection within the forty-five (45) day period shall constitute an
election of LICENSEE not to file for patent protection.
13.3 In the event LICENSEE shall elect not to file for patent protection on
any invention or improvements in any countries or to file on any inventions or
improvements only in certain countries, LICENSOR shall have the right to file
for patent protection in any and all countries which LICENSEE has not elected
to file in; provided, however, that if LICENSOR obtains patent rights in any
country of the EXCLUSIVE TERRITORY of this Agreement, LICENSOR, at the request
of LICENSEE, shall grant to LICENSEE a royalty-free, nonexclusive,
nontransferable license to make, have made, use or sell under such patents
within such country for the full life of the patents.
As to any countries which LICENSEE elects to file in for patent protection on
any inventions or improvements and in which countries LICENSEE obtains
patents, LICENSEE, at the election of LICENSOR, shall grant to LICENSOR an
irrevocable, royalty-free, nonexclusive license, to make, have made, use or
sell under such patents within such countries for the life of the patents;
with the exception, however, that during the term of this Agreement, LICENSEE
shall have no obligation to grant such a license to LICENSOR within the
EXCLUSIVE TERRITORY. Subsequent to the cancellation or termination of this
Agreement, LICENSEE, at the election of LICENSOR, shall additionally grant to
LICENSOR an irrevocable, royalty-free, nonexclusive license to make, use, or
sell in the EXCLUSIVE- TERRITORY under all patents relating to the LICENSED
PRODUCTS which are owned by LICENSEE in the EXCLUSIVE TERRITORY for the life
of such patents.
13.4 LICENSOR shall have the right to grant sublicenses under any license
granted hereunder by LICENSEE without any obligation to pay any moneys to
LICENSEE.
13.5 In any instance where LICENSEE is a proprietor but not the sole
beneficial owner of an invention, improvement, or patent to which paragraphs
13.2 and 13.3 are applicable, it shall use all reasonable endeavors to obtain
the consent of all others interested in the invention, improvement, or patent
to LICENSEE performing its obligations as stipulated. In the event, however,
that such consent is not forthcoming, such obligations shall not be
enforceable against LICENSEE and LICENSOR shall have no claim for
nonperformance thereof.
13.6 LICENSEE, to the best of its ability, shall obtain the assignment to
LICENSEE from its employees or other persons under its control of all
inventions and improvements relating to the LICENSED PRODUCTS which result
from LICENSEE's activities under this Agreement, provided, however, LICENSEE
shall not be obliged to give any consideration for such assignment, other than
payment of the incidental costs thereof.
13.7 LICENSOR shall train and assist LICENSEE in the engineering and
manufacture of the LICENSED PRODUCTS by instructing and advising such
reasonable number of LICENSEE's personnel for a period not exceeding thirty
(30) days per year as LICENSEE may desire to send at LICENSEE's expense to
LICENSOR's facilities in the United States. LICENSEE agrees to send at least
two (2) persons to be instructed and advised within the first year of this
Agreement. Thereafter, LICENSOR will instruct and advise such additional
number of personnel of LICENSEE as are from time to time agreed upon by
LICENSOR and LICENSEE. LICENSOR shall be entitled to receive from LICENSEE
its usual fees for training then in effect for such assistance.
14. GENERAL.
14.1 Failure by either party to this Agreement to exercise or enforce or to
insist upon the strict performance of any of the terms or conditions of this
Agreement will not constitute a waiver of that party's rights to enforce each
and every term and condition of this Agreement for any subsequent breach or
default of the terms of this Agreement.
14.2 All notices required or allowed to be given under this Agreement shall
be given in writing and delivered by registered mail to a party at the address
set forth above, or to such other addresses either party may instruct to the
other party in writing, and any notice shall be deemed to be received ten (10)
days after mailing.
14.3 This Agreement constitutes the entire Agreement between the parties
relating to the subject matter of this Agreement. There are no terms,
obligations, covenants, representations, statements or conditions other than
those contained in this Agreement. No modification of this Agreement or
waiver of any of the terms or provisions of this Agreement will be deemed
valid, unless in writing and signed by all parties to this Agreement.
14.4 This Agreement shall be construed and interpreted in accordance with
the laws of the State of California. Any dispute arising under this Agreement
which is not amicably settled by the parties shall be subject to arbitration
by and in accordance with the rules of the American Arbitration Association in
Los Angeles, California, and any award rendered by such association may be
enforced by either party in a court of competent jurisdiction.
14.5 Provided that any further agreements or documents are not inconsistent
with the terms and conditions of this Agreement, the parties to this Agreement
agree to enter into and execute any and all such further agreements and
documents and to do such things as may be necessary or beneficial to carry out
the purpose of this Agreement.
14.6 In the event that any of the provisions contained in the Agreement
shall be held to be invalid, illegal or unenforceable, this Agreement shall be
construed as if such provisions were not contained in this Agreement and the
remaining provisions of this Agreement shall continue to be valid and
enforceable to the fullest extent permitted by law.
IN WITNESS WHEREOF, the parties hereto execute this Agreement by duly
authorized officers as of the day and year first above written.
LICENSEE LICENSOR
By /s/ Brian Chang By /s/ Alain J-M Clenet
Brian Chang, Director Alain J-M Clenet, President
EXHIBIT A
LICENSED PRODUCTS
GERODISC [TM]
GERODISC [TM], a self activating coupling device, for use by LICENSEE and its
sublicensees solely as a limited slip differential for traction control in
vehicle rear axles. Other applications, including, but not limited to,
transfer cases, transaxles and all-wheel drive are excluded.
The GERODISC [TM] unit consists of a gerotor pump, a set of clutches and
self-contained control devices. No electronics or exotic fluids are involved.
EXHIBIT B
LICENSED PATENT(S)
File No. Title Serial No. Filing Date
ASHA 0128 PUS Hydraulic Limited 855,728 03/20/92
(United States) Slip Differential for
Drive Axle of
Vehicle Drivetrain
ASHA 0129 PUS Hydraulic Coupling 855,727 03/20/92
(United States) for Auxiliary Drive
Axle of Vehicle
Drivetrain
ASHA 0134 PUS Vehicle Drivetrain 016,168 02/10/93
(United States) Hydraulic Coupling
ASHA 0134 PCT Vehicle Drivetrain PCT/US93/02098 03/08/93
(Patent Hydraulic Coupling (Claims priority of:
Cooperation U.S.S.N. 07/855,727, filed
03/20/92
Treaty) U.S.S.N. 07/855,728, filed
03/20/92
U.S.S.N. 08/016,168, filed
02/10/93
Covers all available countries
and regions of the Patent
Cooperation Treaty)
ASHA 0134 PMX Vehicle Drivetrain 94 0391 01/11/94
(Mexico) Hydraulic Coupling
ASHA 0134 PCN Vehicle Drivetrain (Docket 02/09/94
(People's Republic Hydraulic Coupling CPME934953)
of China)
ASHA 0135 PUS Vehicle Drivetrain 03/03/94
(United States) Hydraulic Coupling
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT between ASHA CORPORATION, a
Delaware corporation, hereinafter referred to as "ASHA," and ALAIN J-M CLENET,
an individual, hereinafter referred to as "Clenet", dated and entered into
this 21st day of April, 1995.
WHEREAS:
A. ASHA has employed Clenet since November 6, 1991 pursuant to a certain
"Employment Agreement" which the parties desire to amend and restate as herein
set forth; and
B. ASHA will employ Clenet and Clenet will accept employment by ASHA as its
Chairman of the Board and Chief Executive Officer pursuant to the terms
hereof;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
1. SCOPE OF EMPLOYMENT. Clenet will manage and direct the business of ASHA
and will preside at the meetings of the Board of Directors and shareholders
and will have full authority as provided by the laws of the State of Delaware,
subject to appropriate review or approval by the Board of Directors, if
applicable, to direct long-term planning and product development and to
participate in decisions regarding people, plans, policies, practices,
organization, facilities, and other matters generally determined by the Chief
Executive Officer of a corporation.
2. OTHER BUSINESS. Clenet will devote the substantial portion of his time,
attention and effort to ASHA's business. However, subject only to the
restrictions of this paragraph, this commitment shall not prevent or restrict
Clenet from carrying on other businesses, from acting as a director or officer
of other companies, or from participating in other business opportunities.
The foregoing rights reserved to Clenet are subject to the following
restrictions and limitations:
(a) The exercise of such rights by Clenet shall not take over fifteen percent
(15%) of his business time; and
(b) Such rights shall not be exercised with respect to automobiles which, for
this purpose, shall conclusively be defined as four-wheeled highway vehicles,
however powered.
3. TERM. The initial term of Clenet's employment shall be from April 21,
1995 to April 20, 2000. Thereafter Clenet's employment shall be automatically
renewed for successive two (2) year terms unless either party gives to the
other six (6) months notice that the employment or this agreement in its then
current form will not be renewed at the end of the term; provided, however,
this automatic renewal shall not be effective unless at least eight (8)
months, and not more than twelve (12) months before the end of the term
written advice is given by an officer of ASHA to all members of ASHA's Board
of Directors and Clenet, or is given orally at a duly called and held meeting
of such Board of Directors in accord recorded in the minutes that the
six-month notice will expire on an applicable date specified in such advice.
4. COMPENSATION. Clenet's compensation shall consist of a base salary, a
bonus and options as follows:
(a) The annual base salary, before all customary and proper payroll
deductions, shall be $12,708.33 per month initially. Thereafter the base
salary shall be adjusted annually as of the anniversary date hereof to fully
reflect any percentage increase in the cost-of-living index published by the
United States government for the Los Angeles-Long Beach-Anaheim Metropolitan
Area, "All Items", during the prior year.
(b) ASHA's Board of Directors shall review Clenet's base salary at least
annually and may adjust it, depending on ASHA's size and profitability and the
general level of compensation in similar companies; provided that Clenet's
base salary shall not be reduced during the initial five (5) year term hereof
below the amount provided in paragraph 4(a) above.
(c) Bonuses will be set annually by the Board of Directors to fairly reflect
the progress and profitability of ASHA.
5. OPTIONS. The Board of Directors of ASHA shall formally consider at least
once a year the granting of options to Clenet in accordance with his and
ASHA's performance, but such options shall not be used in lieu of a salary
increase and/or bonus otherwise appropriate.
6. INDEMNIFICATION. ASHA agrees, to the extent permitted by law, that it
will indemnify Clenet against liability as an officer and director of ASHA,
that it will obtain liability insurance coverage with respect thereto from a
responsible insurance company if obtainable for reasonable terms.
7. INSURANCE. During the term of this agreement ASHA will, at its expense,
extend to Clenet all insurance plans and programs which are or may become
available to ASHA employees and, in addition, will reimburse Clenet (to the
extent not already covered by insurance) for his and his family's expenses for
medical and hospital services, including but not limited to dental care, eye
glasses and prescription drugs, health insurance not paid for under regular
ASHA programs. In addition, ASHA shall provide Clenet with a $5 million
umbrella policy.
8. ASHA SERVICES. During the term of this agreement Clenet will be entitled
to participate in fringe benefit programs available to other ASHA executives
and shall have in addition a reasonable expense account, legal, estate, and
tax counsel. Memberships and dues in professional societies, business clubs,
or other organizations, company car, pension, profit sharing and option plans,
executive incentive compensation plans, life insurance plans, medical and
health insurance plans, vacation and such other programs as shall hereafter be
provided specifically to Clenet by action of the Board of Directors of ASHA
(or any person or committee appointed by the Board of Directors to determine
the fringe benefit programs), including reasonable periods of absence when
required by reason of sickness or disability. The above benefits shall be
provided in an amount consistent with general industry practice for similar
positions, and Clenet shall be required to account to the Board semi-annually
for such expenditures for approval or adjustment.
9. ARBITRATION. Any controversy or claim arising out of or relating to this
agreement, or a breach hereof, shall be settled by arbitration in Santa
Barbara, California before a panel of arbitrators selected as follows: within
ten (10) days of demand by either party for arbitration, each party will
select one arbitrator and those two will select a third arbitrator, and those
three shall constitute the panel. The arbitrators' decision will be by a
majority vote. The arbitration shall not be appealable de novo by either
party.
10. ENTIRE AGREEMENT. The foregoing constitutes the entire agreement between
the parties and no modification of any of the provisions hereof shall be
binding upon either Clenet or ASHA unless in writing signed by the party
against whom such modification is sought to be enforced.
11. INTERPRETATION. This agreement has been submitted to the scrutiny of all
parties hereto and of counsel. This agreement shall be controlled by the laws
of the State of California.
"ASHA" "CLENET"
ASHA CORPORATION
By/s/ John C. McCormack /s/ Alain J-M Clenet
John C. McCormack
President and CEO
LEASE
THIS LEASE (the "Lease") is made this 1st day of April 1994, by and between
Motel 6 Operating L.P., a Delaware limited partnership organized and existing
under the laws of the State of Delaware, whose address is 14651 Dallas
Parkway, Suite 500, Dallas, Texas 75240 ("Lessor"), and ASHA Corporation
("Lessee") who agree as follows:
1. LEASING, DESCRIPTION OF PREMISES. Lessor for and in consideration of the
rents herein reserved, and of the covenants and agreements herein contained
to be performed by Lessee, does hereby demise and lease to Lessee, subject to
all the terms and conditions hereinafter expressed, the space commonly
referred to as 600 Ward Drive, Suite C, Santa Barbara, California 93 11 1,
which consists of approximately 8639 square feet of floor space as shown on
Exhibit "A", attached hereto. Said space shall be referred to herein as (the
"Premises"). Lessee shall have access to and use the parking area to the
building in common with Lessor and others. Should this Lease be subject to a
"Master Lease", the terms and provisions hereof, which conflict with such
Master Lease (if any), shall be considered null and void. Any termination of
the Master Lease shall cause termination of this Lease.
2. TERM. The term of this Lease shall commence on January 15, 1994 (the
"Commencement Date"), and shall continue until January 14,1999, a Period of
five (5) years.
3. DELAY IN-POSSESSION. Notwithstanding the Commencement Date, if for any
reason Lessor cannot deliver possession of the Premises to Lessee on
Commencement Date, then Lessor shall not be subject to any liability
therefore, nor shall such failure affect the validity of this Lease or the
obligations of Lessee hereunder or extend the ten-n hereof, but in such case,
Lessee shall not be obligated to pay rent until possession of the Premises is
tendered to Lessee; provided, however, that if Lessor has not delivered
possession of the Premises within sixty (60) days from said Commencement
Date, Lessee may, at Lessee's option, by notice in writing to Lessor within
ten (10) days thereafter, cancel this Lease, in which event the parties shall
be discharged from all obligations hereunder; provided further, however, that
if such written notice of Lessee is not received by Lessor within said ten
day period, Lessee's right to cancel this Lease hereunder shall terminate and
be of no further force or effect.
4. USE OF LEASED PREMISES. Lessee agrees that the leased Premises shall be
used for the sole purpose of operating an automobile design and engineering
company (which may develop and/or assemble prototypes) and for no other
purpose whatsoever. No heavy manufacturing will be allowed.
5. OPERATION OF BUSINESS. Lessee shall continuously, during the term of this
Lease, operate said business with due diligence and efficiency.
6. CONDITION OF PREMISES; MAINTENANCE AND REPAIR. Lessee accepts the entire
Premises in a strictly "as is" condition, and Lessee represents that it has
seen and inspected the Premises prior to execution hereof. Lessee accepts
responsibility to maintain the Premises in a neat, clean, orderly and safe
condition during the term hereof. Lessee agrees that it will, at its own
expense and cost, perform all maintenance necessary and make all repairs of
any nature necessary to keep the interior of the Premises in first class
condition, operation and repair. Lessee's obligation in this regard shall
include, but not be limited to, maintenance and repair of the electrical
system and interior. Lessee shall make no change in or to the decor or style
of the Premises without the prior written consent of Lessor. Lessor shall be
responsible for all exterior and structural maintenance and repair and the
HVAC system.
Lessee agrees that any and all alterations shall become the property of Lessor
at expiration of the Lease.
LESSOR MAKES NO WARRANTY OR REPRESENTATIONS EXPRESS OR IMPLIED WITH RESPECT TO
THE CONDITION OR FITNESS FOR ANY PURPOSE OF THE PREMISES OR ANY PART THEREOF.
7. RIGHT TO INSPECT. Lessee agrees to permit Lessor and its authorized
representatives to enter upon the leased Premises at all reasonable times
during business hours for the purpose of inspecting the same.
8. BASE RENT. Base rent upon the Premises shall be due in the amount of Four
Thousand Five Hundred Seventy Three Dollars ($4,573.00) per month, each and
every month of the Term of this Lease. Said rent shall commence on January 1,
1994 and shall be due and payable on the first day of each and every month
thereafter throughout the term. Rent shall be adjusted pursuant to paragraph
25 of this Lease. Rent shall be paid to Lessor at the following address:
Motel 6 Operating L.P., P.0. Box 911444, Dallas, Texas 75391-1444.
9. HOLDOVER. Any holdover by Lessee at the termination of this Lease shall
be treated as a month-to-month tenancy with rental due in the amount of One
Hundred Twenty Five percent (125%) of the amount set forth herein. All other
terms of this Lease shall remain unchanged during any such holdover period,
except that any right of option shall not apply.
10. UTILITIES AND SERVICES. Lessee shall pay to Lessor additional rent for
utility service calculated as follows:
(a) Each month Lessor shall bill Lessee an amount equal to 28% of all utility
bills incurred by the building containing the leased Premises (excluding gas
for which Lessee shall pay 20% of the monthly gas bill); and
(b) Lessor shall not be liable for failure to furnish utilities or services
to the Premises when the failure results from causes beyond Lessor's
reasonable control, but in case of the failure, Lessor will take all
reasonable steps to restore the interrupted utilities and service.'
11. INSURANCE PROVISIONS.
(a) INDEMNITY. Lessee shall indemnify and hold harmless Lessor, its agents,
servants and employees, from and against any and all losses, expenses,
demands and claims sustained by any guest, invitee, licensee or other
individual patronizing or otherwise conducting business or visiting the
Premises, resulting from Lessee's activities and operations on the Premises,
including Lessor's adjacent property or within common areas. 2
<PAGE>
(b) INSURANCE. Lessor shall obtain and keep in force during the term of this
Lease fire and extended coverage insurance covering loss or damage to the
structural components of the building where the Premises are located, but such
insurance shall not include Lessee's personal property, fixtures, equipment or
tenant improvements. Lessee, at its own cost and expense, shall maintain the
following forms of insurance in force during the term of the Lease:
1. Workers Compensation Insurance covering all employees of Lessee, with
statutory limits.
2. Employers Liability Insurance protecting against suits by or on behalf of
employees with minimum limits of $500,000.
3. Comprehensive General Liability Insurance protecting against claims for
bodily injury and property damage liability including but not limited to all
of the following:
(a) Premises and operation liability
(b) Independent contractor's liability
(c) Products/completed operations liability
(d) Fire legal liability
(e) Minimum limits of $1,000,000 Combined Single Limits
4. Property and Casualty Insurance on an all risk basis for full replacement
value on all personal property owned by Lessee or leased to Lessee for the
conduct of its operations on the Premises.
Lessor shall be named as an additional named insured as its interests may
appear on all policies of insurance required in paragraphs 3, 4 and 5 above.
AU policies required in paragraphs 1 though 5 above shall contain a clause
that the insurer will not cancel or change coverages without at least thirty
(30) days prior written notice to Lessor.
All policies of insurance shall be placed with insurance companies
satisfactory to Lessor.
Lessee shall provide Certificates of Insurance to evidence insurance coverage
in force for all policies of insurance required in paragraphs 1 through 5
above, signed by authorized representatives 'of the insurance companies
providing coverage. Such Certificates shall be furnished to Lessor prior to
commencement of this Lease, and renewal Certificates shall be furnished at
least thirty (30) days prior to policy expiration dates throughout the term of
this Lease.
Lessor shall not be liable or responsible to Lessee for any loss or damage to
any property or person occasioned by theft, fire, act of God, public enemy,
injunction, riot, strike, insurrection, war, court order, requisition or order
of governmental authority, or for any damage or inconvenience which may arise
through repair of any part of the building or failure to make such repairs
beyond the reasonable control of Lessor.
12. DAMAGE OR DESTRUCTION. If, during the term of this Lease, the Premises
are totally or partially destroyed, rendering the Premises totally or
partially inaccessible or unusable, Lessor may terminate this Lease. If
Lessor decides to rebuild the Premises, Lessor shall notify Lessee, within
sixty (60) days of the destruction, of Lessor's decision to rebuild. Lessor
shall be responsible for rebuilding the structural components of the building
in which the Premises are located. In the event Lessor rebuilds the
structural components of the building, Lessee shall restore the interior of
the Premises to substantially the same condition as they were immediately
before destruction, whether or not the insurance proceeds are sufficient to
cover the actual costs of restoration. In such an event, such destruction
shall not terminate this Lease. Rent shall not accrue during a reasonable
period in which repairs are being made.
13. CONDEMNATION. If the Premises are totally taken by condemnation, this
Lease shall terminate on the date of taking. If any portion of the Premises
is taken by condemnation, the Lease shall remain in effect, unless the
remaining building is not of sufficient size to permit Lessee to continue the
operation of its business therein, or by reason of the taking of all or any
part of the land herein described, building cannot be used by Lessee for the
purpose of conducting its business therein, then Lessee, at its option, may
cancel this Lease and thereupon the same will terminate. In no event shall
Lessee be entitled to any part of the award or compensation or damages for
such taking of the building or land, but the original owner shall receive the
entire amount thereof, free of any estate or interest of Lessee.
14. TAXES. Lessor shall pay all the taxes and special assessments levied on
the real estate during the term of this Lease. Lessee shall pay all taxes
levied on the fixtures, equipment or other personal items used in the
operation of the business and all taxes on the operation of the business or on
the income derived therefrom.
15. ASSIGNMENT AND LEASE. Lessee shall not assign this Lease or any interest
hereunder nor sublet the Lease or any interest hereunder, without prior
written consent of Lessor, such consent shall not be unreasonably withheld.
16. INSOLVENCY. If any proceedings in bankruptcy or insolvency be filled
against Lessee or if any writ of attachment or writ of execution be levied
upon the interest herein of Lessee and such proceedings or levy shall not be
released or dismissed within sixty (60) days thereafter, or if any sale of the
leasehold interest hereby created or any part thereof should be made under any
assignment for benefit of creditors, or should Lessee voluntarily institute
bankruptcy or insolvency proceedings, Lessor, at its election, may re-enter
and take possession of said Premises and remove all persons therefrom and may
at its option terminate this Lease.
17. ATTORNEYS' FEES. In the event of any litigation between the parties
hereto arising out bf this Lea@, or the leased Premises, the prevailing party
therein shall be allowed all reasonable attorneys'' fees expended or incurred
in such litigation to be recovered as a part of the costs therein.
18. DEFAULT. This Lease is made upon the express condition that if Lessee
fails to pay the rental reserved hereunder or any part thereof after the same
shall become due, or if Lessee fails or neglects to perform, meet or observe
any of Lessee's other obligations hereunder, then Lessor at any time
thereafter, by written notice to Lessee, may lawfully declare the termination
hereof and re-enter said Premises or any part thereof, and by due process of
law, expel and remove Lessee or any person or persons occupying said Premises
and may remove all personal property therefrom without prejudice to any
remedies which might otherwise be used for the collection of arrears of rent
or for preceding breach of covenant or conditions. Notwithstanding any other
provision of the Lease, where the curing of an alleged default requires more
than the payment of money, and the work of curing said default cannot
reasonably be accomplished within the time otherwise permitted herein, and
where Lessee has commenced upon the said work of curing said default and is
diligently pursuing same, then Lessee shall be entitled to reasonable time
extensions to permit the completion of said work of curing said default, as a
condition precedent to any re-entry by Lessor or termination of this Lease by
Lessor, and any defect that is cured shall not thereafter be grounds for
re-entry or for termination.
19. NON-WAIVER OF DEFAULT. The subsequent acceptance of rent hereunder by
Lessor shall not be deemed a waiver of any preceding breach or any obligation
hereunder by Lessee other than the failure to pay the particular rental so
accepted, and the waiver of any breach of any covenant or condition by Lessor
shall not constitute a waiver of any other breach regardless of knowledge
thereof.
20. ABANDONMENT. Lessee agrees not to vacate or abandon the Premises at any
time during the demised term. Should Lessee vacate or abandon said Premises
or be dispossessed by process of law or otherwise, such abandonment vacation,
or dispossession shall be a breach of this Lease, and, in addition to any
other rights which Lessor may have, Lessor may remove any personal property
belonging to Lessee which remains on the demised Premises and store the same,
such removal and storage to be for the account of Lessee.
21. LAWS AND REGULATIONS. Lessee at his own cost and expense shall comply
promptly with all laws, rules and orders of all federal, state and municipal
governments or departments, which may be applicable to the leased Premises,
and shall likewise promptly comply with the requirements of the Board of Fire
Underwriters concerning the Premises.
22. NOTICES. Any notices or other communications required or permitted
hereunder shah be effective: (i) when delivered in person; (ii) two days
following the date when sent by certified or registered mail, postage prepaid
addressed to the parties at the following addresses; and (iii) when received
if by facsimile transmission, and shall be given as follows: Lessee - Motel 6
Operating L.P., 14651 Dallas Parkway , Suite 500, Dallas, Texas 75240, Attn:
Assistant General Counsel, Fax No. (214) 991-2979; Lessor - ASHA Corporation,
600 Ward Drive, Suite C, Santa Barbara, California 93111, or to such other
address as shall be furnished in writing by such party; provided that any
notice or communication changing any of the addresses set forth above shall be
effective and deemed given only upon its receipt.
23. RELATIONSHIP OF PARTIES. It is understood and agreed that the
relationship of the parties hereto is strictly that of landlord and tenant and
that Lessor has no ownership in Lessee enterprise and that this Lease shall
not be construed as a joint venture or partnership. Lessee is not and shall
not be deemed to be an agent or representative of Lessor.
24. SECURITY DEPOSIT. Lessee shall deposit with Lessor upon execution hereof
Two Thousand Eight Hundred Thirty Five Dollars ($2,835.00) as security for
Lessee's faithful performance of Lessee's obligations hereunder. If Lessee
fails to pay rent or other charges due hereunder, or otherwise defaults with
respect to any provision of this Lease, Lessor may use, apply, or retain all
or any portion of said deposit for the payment of any rent or other charge in
default or for the payment of any other sum to which Lessor may become
obligated by reason of Lessee's default, or to compensate Lessor for any loss
or damage which Lessor may suffer thereby. If Lessor so uses or applies all
or any portion of said deposit, Lessee shall within ten (10) days after
written demand therefor deposit cash with Lessor in an amount sufficient to
restore said deposit to the full amount hereinabove stated and Lessee's
failure to do so shall be a material breach of this Lease. Lessor shall not
be required to keep said deposit separate from its general accounts. If
Lessee performs all of Lessee's obligations hereunder, said deposit, or so
much thereof as has not theretofore been applied by Lessor, shall be returned,
without payment of interest or other increment for its use, to Lessee (or, at
Lessor's option, to the last assignee, if any, of Lessee's interest hereunder)
at the expiration of the term hereof, and after Lessee has vacated the
Premises. No trust relationship is created herein between Lessor and Lessee
with respect to said Security Deposit.
25. RENT ADJUSTMENT. Beginning on January 1, 1995 and every lst day of
January thereafter to the end of the term of this Lease, rent shall be
subject to the adjustment set forth below: The parties hereto shall
ascertain the official Consumer's Price Index (All Urban Consumers, 1967 Base)
of the Bureau of Labor Statistics, United States Department of Labor, U.S.
Cities Average, and published by it in its official publication for the month
in which the within Lease becomes effective. The parties hereto shall further
determine said Index for the month of December of each year and shall further
determine the percentage increase or decrease of said Index at said time as
compared with the Index for the month in which the within Lease became
effective, or the month rent was last adjusted, as the case may be. The base
rent shall be adjusted in proportion to the percentage increase or decrease of
said Index as determined in accordance with the preceding sentence and said
base rent as so adjusted shall be payable for each and every month of the
calendar year, beginning with the January 1, 1995 payment. In no event shall
the rent be increased more than eight percent (8%) for any one adjustment
period, nor shall base rent be less than the rent set out in paragraph 8
hereof.
26. SECURITY MEASURES. Lessee hereby acknowledges that the rental payable to
Lessor hereunder does not include the cost of guard service or other security
measures, and that Lessor shall have no obligation whatsoever to provide same.
Lessee assumes all responsibility for the protection of Lessee, its agents and
invitees from acts of third parties.
27. ENCUMBRANCES. Lessee shall not mortgage the Premises, use the Premises as
security Of any kind, nor in any other way encumber the Premises or any part
thereof in any manner or fashion.
28. SIGNS. Lessee shall not place any sign upon the Premises without Lessor's
prior written consent.
29. EFFECTIVE DATE. The effective date of this Lease shall be January 1,
1994.
30. SUBORDINATION.
(a) GENERAL. This Lease and Lessee's rights under this Lease are subject and
subordinate to any first mortgage, first deed of trust or other first hen
encumbrance or indenture, together with any renewals, extensions,
modifications, consolidations and replacements of them, which now or at any
subsequent time affect the Premises, any interest of Lessor in the Premises or
Lessor's interest in this Lease and the estate created by this Lease (except
to the extent that any such instrument expressly provides that this Lease is
superior to it). This provision will be self-operative and no further
instrument of subordination will be required in order to effect it.
Nevertheless, Lessee will execute, acknowledge and deliver to Lessor, at any
time and from time to time, upon demand by Lessor, any documents that may be
requested by Lessor, any ground lessor or underlying lessor, or any mortgagee
or any holder of a deed of trust or other instrument described in this
Section, to confirm or effect the subordination. If Lessee fails or refuses
to execute, acknowledge and deliver any such document within twenty (20) days
after written demand, Lessor, its successors and assigns will be entitled to
execute, acknowledge and deliver the document on behalf of Lessee as Lessee's
attorney-in-fact. Lessee constitutes and irrevocably appoints Lessor, its
successors and assigns, as Lessee's attorney-in-fact to execute, acknowledge
and deliver on behalf of Lessee any documents described in this Section.
(b) ATTORNMENT. If any holder of any mortgage, indenture, deed of trust or
other similar instrument succeeds to Lessor's interest in the Premises, Lessee
will pay to it all rents subsequently payable under this Lease. Lessee will,
upon request of anyone so succeeding to the interest of Lessor, automatically
become Lessee of, and attorn to, the successor in interest without change in
this Lease. Upon request by the successor in interest and without costs to
Lessor or the successor in interest, Lessee will execute, acknowledge and
deliver an instrument or instruments confirming the attornment in accordance
with the terms contained herein. The instrument of attornment will also
provide that the successor in interest will not disturb Lessee in its use of
the Premises in accordance with this Lease. If Lessee fails or refuses to
execute, acknowledge and deliver the instrument within twenty (20) days after
written demand, the successor in interest will be entitled to execute,
acknowledge and deliver the document on behalf of Lessee as Lessee's
attorney-in-fact. Lessee constitutes and irrevocably appoints the successor
in interest as Lessee's attorney-in-fact to execute, acknowledge and deliver
on behalf of Lessee any document described in this Section.
(c) NON-DISTURBANCE. Lessor shall use its best efforts to obtain the
agreement of all mortgagees that have an interest in the Premises that, so
long as Lessee is not in default (beyond any period given Lessee under this
Lease to cure such default) in the payment of rent, additional charges or
other charges or in the performance of any of the terms, covenants or
conditions of this Lease. Lessee's possession of the Premises and Lessee's
rights and privileges under this Lease or any extension hereof shall not be
diminished or interfered with by such mortgagees. Such agreements shall also
state that Lessee will attorn to any such mortgagee as Lessee's landlord if a
foreclosure occurs.
31. TERMINATION OF EXISTING LEASE. Lessee currently lease the Premises from
Lessor pursuant to a lease dated November 15, 1985. The parties agree the
current lease will automatically terminate upon the effective date of this
Lease. This Lease shall not be valid or binding unless and until it is
executed by a duly authorized officer of Motel 6 Operating L.P.
IN WITNESS WHEREOF, the parties have executed this agreement on the 1st day of
April, 1994.
LESSEE: LESSOR:
ASHA CORPORATION MOTEL 6 OPERATING L.P., a Delaware
Limited Partnership
By: Motel 6 G.P., Inc.
By /s/ Valarie Valencia Managing General Partner
Valarie Valencia
Secretary/Treasurer By /s/ Kevin P. Hanley
Kevin P. Hanley
Senior Vice President
Development and Real Estate
EXHIBIT A - ASHA CORPORATION (pg 1 of 2)
600 Ward Drive
First Floor
[Drawing]
EXHIBIT A - ASHA CORPORATION (pg 2 of 2)
600 Ward Drive
Second Floor
[Drawing]
LEASE AMENDMENT
On or about April 1, 1994, Motel 6 Operating L.P., a Delaware limited
partnership ("Lessor"), and ASHA Corporation ("Lessee") entered into a lease
of certain premises in the City of Santa Barbara, California ("Lease").
WHEREAS, the Lease demised to Lessee certain space in the building bearing a
common address of 600-C Ward Drive, Santa Barbara, CA 93111; and
WHEREAS, the parties hereto now desire to add more space to the demised
premises and have agreed to modify the Lease as set forth below.
NOW, THEREFORE, for good and valuable consideration paid to each other, the
parties hereto agree to modify and amend the Lease as follows:
1. Exhibit "A" of the Lease is hereby replaced with Exhibit "A", attached
hereto for all purposes. Exhibit A is a drawing of the demised premises leased
under the Lease. It is the intention of the parties that the leased premises
be expanded to now include Suites C-1 and H-1 as shown on Exhibit A, said new
space containing approximately 2,666 square feet of space.
2. Section 8 of the Lease is hereby amended to provide for Base term rent
upon the premises to be $6,305.90 per month. The new rent shall commence on
December 1, 1995.
3. Section 10 of the Lease is hereby amended to provide that Lessee shall pay
Lessor 35% of all utility bills incurred by the building containing the
demised premises, except for gas for which Lessee shall pay 25% of the monthly
gas bill.
The Lease is hereby ratified and shall be unaffected by this amendment in all
respects not specifically amended by this document.
The parties hereto have executed this Amendment to Lease on this 30th day of
September, 1995.
LESSEE: LESSOR:
ASHA CORPORATION MOTEL 6 OPERATING L.P., a Delaware
Limited Partnership
By: Motel 6 G.P., Inc.
By /s/ John C. McCormack Managing General Partner
John C. McCormack
President and CEO
By /s/ Michael A. Ferraro
Michael A. Ferraro
Vice President
Real Estate and Development
EXHIBIT A - ASHA CORPORATION (pg 1 of 2)
600 Ward Drive
First Floor
[Drawing]
EXHIBIT A - ASHA CORPORATION (pg 2 of 2)
600 Ward Drive
Second Floor
[Drawing]
GERODISC
OPTION AGREEMENT
THIS AGREEMENT is effective on November 1, 1995, and is by and between ASHA
CORPORATION, a Delaware corporation with an office and place of business at
600 C Ward Drive, Santa Barbara, California 93111 ("ASHA"), and AMERICAN AXLE
& MANUFACTURING, INC., a Delaware corporation with and office and place of
business at 1840 Holbrook, Detroit, Michigan 48212 ("AAM").
RECITALS
A. ASHA has developed certain technology and owns patents and patent
applications relating to hydromechanical limited slip mechanisms adapted for
use in couplings, differentials, drive axles, transaxles, and transfer cases.
These hydromechanical limited slip mechanisms are known as GERODISC
mechanisms.
B. AAM wishes to obtain an option for certain rights, including licenses
under certain patents, to use the GERODISC technology throughout the world,
and also wishes to obtain prototypes that embrace the technology for
evaluation purposes.
C. ASHA is willing to grant certain options to AAM and provide certain
prototypes in accordance with the terms and conditions of this Agreement.
TERMS AND CONDITIONS
1. LICENSE OPTION.
A. Upon execution of this Agreement and payments as per Section l.B, ASHA
grants to AAM an option to acquire a non-exclusive worldwide license to make,
have made, and use GERODISC mechanisms in each of the Applications of Section
l.B that is selected by AAM, and sell such mechanisms.
B. AAM shall pay to ASHA at the signing of this Agreement the following
option fees:
APPLICATION OPTION FEE
Rear Axles $250,000
Transaxles 600,000
Twin-disc Front Axles 300,000
C. The option of the preceding section shall expire on the last day of the
eighteenth month after the effective date of this Agreement.
D. AAM shall have the right to extend the option for six months for any or
all Applications by notifying ASHA in writing prior to the expiration of this
Agreement and payment to ASHA of the following extension fees with such
notice:
APPLICATION OPTION FEE
Rear Axles $ 75,000
Transaxles 100,000
Twin-disc Front Axles 50,000
E. If AAM enters into a license agreement for any of these Applications
during the term of this Agreement defined by Section I.C, the extension fee of
Section l.D shall be waived for the other applications. AAM nonetheless will
notify ASHA of its intention to extend the options for the other'
Applications.
F. During the term of this Option Agreement, including the term of any
extension under Section l.D, 'and the term of any definitive LICENSE AGREEMENT
in the form attached, ASHA will not enter into any option or license agreement
with General Motors regarding the GERODISC mechanisms that are covered by this
Option Agreement. Notwithstanding the preceding sentence, it is understood
that ASHA may discuss GERODISC mechanisms with General Motors at any time when
accompanied by AAM and may furnish prototypes of GERODISC mechanisms to
General Motors as ASHA, AAM, and General Motors might agree.
2. LICENSE.
In the event that AAM chooses to exercise its option with respect to one or
more of the Applications of the foregoing sections, AAM and ASHA will enter
into a definitive LICENSE AGREEMENT for each Application in the form attached
as Exhibit A and which provides for fees and payments not to exceed the
following:
INITIAL OPTION NET ROYALTY
APPLICATION LICENSE FEE CREDIT LICENSE FEE PER UNIT
Rear Axles $1,500,000 $100,000 $1,400,000 $2.50
Transaxles 2,000,000 100,000 1,900,000 3.50
Twin-disc
Front Axle 1,000,000 100,000 900,000 5.00
3. PROTOTYPES.
A. Upon execution of this Agreement, AAM will designate the priority of
prototype development Applications that it wishes to pursue.
B. AAM may order prototypes of two unique designs of GERODISC mechanisms for
the Rear Axle and Twin-disc Front Axle Applications, and three unique designs
of GERODISC mechanisms for the Transaxle Applications, that are selected by
AAM pursuant to Section 1. Each unique design will be jointly agreed upon by
AAM and ASHA. AAM may order up to four Rear Axle prototypes, up to four
Transaxle prototypes, and up to two Twin-disc Front Axle prototypes. AAM will
pay ASHA an additional fee of $50,000 for each additional unique design of
each Application and will include the additional fee with the order.
C. ASHA will install the prototypes in commercially available rear axles,
transaxles, or front axles as appropriate, that AAM supplies and ships to ASHA
facilities at Santa Barbara, California. AAM may have its technical people
present during assembly of the prototypes.
D. AAM will provide to ASHA, at AAM's cost, such engineering data, drawings,
and components, including half-shafts, as may be reasonably required by ASHA
to facilitate the engineering design, fabrication, and assembly of any
GERODISC prototypes developed under this Agreement.
E. ASHA requires two weeks for conducting packaging reviews of each unique
design. ASHA will ship, at its cost, prototype units of the first unique
design to AAM within ten to fourteen weeks of receipt of the axles or
transaxles and the engineering data, drawings, and components of the preceding
section. Shipping schedules for each additional unique design will be delayed
by an incremental period of two weeks. The GERODISC mechanisms will reflect
ASHA technology as developed and reasonably available on the Effective Date of
this Agreement.
F. ASHA will provide drawings and specifications to enable AAM to fabricate
up to fifteen additional prototypes for testing and evaluation in AAM's
laboratories except for the drawings and specifications of the controlling
mechanisms and valving. ASH-A will supply the controlling mechanisms and
valving required for these additional prototypes at no additional cost.
G. AAM will test and evaluate the prototypes in accordance with reasonable
automotive engineering standards. AAM may furnish the prototypes of Section
3.C to General Motors for testing and evaluation by General Motors. AAM will
furnish summaries of the testing and evaluations, including summaries prepared
by General Motors and obtained by AAM, to ASHA within a reasonable time after
the testing and evaluation is completed.
4. TECHNICAL ASSISTANCE.
From time to time during any period in which AAM has an option under this
Agreement, ASHA will inform AAM of significant developments in GERODISC
technology. ASHA will provide to AAM reasonable technical assistance to
support the development, testing, and marketing of the additional prototypes
of Section 3.F in AAM's laboratories and customer demonstrations, as required,
at no additional cost.
5. CONFIDENTIALITY.
A. Each party covenants that it and its employees, agents, and contractors
will keep secret and retain in strictest confidence, the technical information
relating to GERODISC mechanisms transferred to it by the other party and other
matters relating to the business of the other party that it acquires in the
course of activities pursuant to this Agreement, for the term of this
Agreement and for a period of five years after expiration or termination of
this Agreement.
B. Neither party shall have any obligation under the preceding subsection for
information that:
(1) it knew at the time of the transfer,
(2) it shows to be publicly known through no wrongful act of the other party,
(3) it receives from a third party that has the right to transfer the
information,
(4) the other party furnishes to any third party without restrictions,
(5) it independently develops,
(6) is approved for disclosure by the other party,
(7) is required by court order or governmental agency to be disclosed, in
which case the party receiving notice thereof shall provide prompt notice to
the other party so that such party may seek an appropriate protective order or
take such other action as it deems appropriate to protect its information.
C. Notwithstanding the foregoing, AAM may furnish information transferred to
it by ASHA in the course of activities under this Agreement to General Motors
Corporation after General Motors Corporation agrees to handle the information
in accordance with provisions equivalent to those of Section 5.A and 5.B.
6. INDEPENDENT CONTRACTORS.
Both parties are independent contracting parties. This Agreement does not
make either party the agent or legal representative of the other and does not
grant either party any authority to assume or create any obligation on behalf
of or in the name of the other.
7. ENTIRE AGREEMENT AND AMENDMENT.
This Agreement and the License Agreement referenced herein contain the entire
understanding between the parties relating to the subject matter. There are
no terms, obligations, covenants, statements, representations, or conditions
other than those contained in this Agreement and the License Agreement. This
Agreement may be modified only by a written amendment that is signed by an
authorized representative from each party.
8. APPLICABLE LAW.
This Agreement shall be governed by the law of the State of Michigan, and
litigation on contractual clauses arising from it shall be brought only in the
State of Michigan.
9. NOTICES.
Notices required by this Agreement shall be delivered to a designated agent of
the party and shall be effective upon actual receipt.
10. PRIOR AGREEMENT.
This Agreement replaces the letter agreement dated May 4, 1995, and entered
into by the parties for the purpose of facilitating discussions relative to
the possibility of jointly developing or exploring the potential license by
AAM of certain technology of ASHA relating to the manufacture of differential
cases, and that letter agreement is terminated and of no further force and
effect. All information transferred under the May 4 letter agreement shall be
covered by the provisions of this Agreement.
11. ASSIGNMENT.
This Agreement is personal in nature and shall not be assigned or transferred
without the written consent of the parties.
IN WITNESS WHEREOF, the parties hereto execute this Agreement by duly
authorized representatives.
AMERICAN AXLE & MANUFACTURING, INC. ASHA CORPORATION
By /s/ Daniel V. Sagady By /s/ John C. McCormack
Daniel V. Sagady John C. McCormack
Its: Executive Director Its: President and CEO
Product Engineering
EXHIBIT A TO
GERODISC TECHNOLOGY TRANSFER AND LICENSE AGREEMENT
THIS AGREEMENT is effective on _________, 199_, and is by and between ASHA
CORPORATION, a Delaware corporation with an office and place of business at
600 C Ward Drive, Santa Barbara, California 93111 ("ASHA"), and AMERICAN AXLE
& MANUFACTURING, INC., a Delaware corporation with an office and place of
business at 1840 Holbrook, Detroit, Michigan 48212 ("AAM").
RECITALS
A. ASHA developed and owns certain technology and patents and patent
applications relating to hydromechanical limited slip mechanisms adapted for
use in couplings, differentials, drive axles, transaxles, and transfer cases.
These hydromechanical limited slip mechanisms are known as GERODISC
technology.
B. AAM wishes to obtain information relating to GERODISC technology and
licenses under ASHA patents to use the technology throughout the world.
C. ASHA is willing to furnish technology and grant certain licenses to AAM in
accordance with the terms and conditions of this Agreement.
TERMS AND CONDITIONS
1. TECHNOLOGY TRANSFER.
A. Within one month after the Effective Date of this Agreement, ASHA will
transfer to AAM the technical information relating to GERODISC mechanisms in
applications of [rear axles, transaxles, and twin-disc front axles] that ASHA
has in tangible form. This technical information will include drawings,
specifications, engineering data, bills of materials, process sheets, computer
programs and software, and quality standards.
B. ASHA will provide reasonable assistance to AAM during the period of three
years immediately following the Effective Date to assist AAM in understanding
and applying the technical information of the preceding section.
C. From time to time during the term of this Agreement up to the fifth
anniversary of the Effective Date, ASHA will transfer to AAM developments in
GERODISC mechanisms that are made by ASHA.
D. At AAM's option the transfers and assistance of this Section 1 shall be at
either ASHA's facilities in California or AAM's facilities in Michigan. Each
party shall bear its own costs of the transfers and assistance of this Section
1.
E. ASHA hereby grants to AAM nonexclusive rights to use the technical
information transferred pursuant to this section to design and develop
GERODISC mechanisms within the United States of America for [rear axles,
transaxles, and twin-disc front axles] and to make, have made, use, sell, and
service GERODISC mechanisms throughout the world for such [rear axles,
transaxles, and twin-disc front axles].
2. CONFIDENTIALITY.
A. Each party covenants that it and its employees, agents, and contractors
will keep secret and retain in strictest confidence, the technical information
relating to GERODISC mechanisms transferred to it by the other party and other
matters relating to the business of the other party that it acquires in the
course of activities pursuant to this Agreement, for the term of this
Agreement and for a period of five years after expiration or termination of
this Agreement.
B. Neither party shall have any obligation under the preceding subsection for
information that:
(1) it knew at the time of the transfer,
(2) it shows to be publicly known through no wrongful act of the other party,
(3) it receives from a third party that has the right to transfer the
information,
(4) the other party furnishes to any third party without restrictions
(5) it independently develops,
(6) is approved for disclosure by the other party,
(7) is required by court order or governmental agency to be disclosed, in
which case the party receiving notice thereof shall provide prompt notice to
the other party so that such party may seek an appropriate protective order or
take such other action as it deems appropriate to protect its information.
C. Notwithstanding the foregoing, AAM may furnish information transferred to
it by ASHA in the course of activities under this Agreement to its customers
and potential customers that agree to handle the information in accordance
with provisions equivalent to those of Section 2.A and 2.B.
3. LICENSES.
A. ASHA hereby grants to AAM non-exclusive licenses under the patents listed
in Attachment A and patents issuing from the patent applications listed in
Attachment A, to make, have made, use, and sell GERODISC mechanisms in [rear
axles, transaxles, and twin-disc front axles] for original equipment and
service and replacement throughout the world. The grant of this section
includes divisions, reissues, continuations, renewals, and extensions of the
patents.
B. ASHA hereby grants to AAM non-exclusive licenses under patents obtained by
ASHA during the term of this Agreement up to the fifth anniversary of its
Effective Date that are improvements to GERODISC mechanisms covered by the
patents and patent applications listed in Attachment A, to make, have made,
use, and sell GERODISC mechanisms in [rear axles, transaxles, and twin-disc
front axles] for original equipment and service and replacement throughout the
world. The grant of this section includes divisions, reissues, continuations,
renewals, and extensions of the patents.
C. The licenses of this Section shall extend to the last to expire of the
patents licensed under this Section.
D. During the term of this Agreement, ASHA will not enter into any option or
license agreement with General Motors regarding the GERODISC mechanisms that
are covered by this Agreement. Notwithstanding the preceding sentence, it is
understood that ASHA may discuss GERODISC mechanisms with General Motors at
any time when accompanied by AAM and may furnish prototypes of GERODISC
mechanisms to General Motors as ASHA, AAM, and General Motors might agree.
4. AFFILIATED COMPANIES.
AAM may transfer and grant rights to use the technology obtained from ASHA
hereunder, and may grant sublicenses under patents licensed to AAM hereunder,
to Affiliated Companies of AAM, by entering into agreements with the
Affiliated Companies that contain provisions equivalent to the provisions of
this Agreement. AAM shah own not less than twenty percent of each Affiliated
Company that receives the technology and sublicenses at the time of the
transfer and sublicense, and the rights and sublicenses shall remain in effect
only while AAM maintains this level of ownership interest. AAM will notify
ASHA of each agreement with each Affiliated Company under this section. AAM
shall be responsible for the royalties due and payable for GERODISC mechanisms
manufactured and sold by such Affiliated Companies in accordance with other
provisions of this Agreement.
5. FEES, ROYALTIES, AND REPORTS.
A. AAM will pay ASHA a lump sum fee in accordance with the following
schedule:
(1) $XXX on the Effective Date of this Agreement, and
(2) $XXX on the first anniversary of the Effective Date of this Agreement.
B. The fees of Section 5.A are committed and irrevocable.
C. During the term of this Agreement up to the fifth anniversary of the
Effective Date, AAM will pay ASHA a royalty not to exceed the royalty
specified in the following table for each GERODISC mechanism sold or
transferred by AAM and Affiliated Companies of AAM that (i) embodies any of
the technical information transferred to AAM pursuant to Section 1 of this
Agreement which is proprietary to ASHA, or (ii) is covered by a claim of any
of the patents of Section 2 of this Agreement which has not been declared
invalid by a court with jurisdiction Over such matters.
APPLICATION ROYALTY PER UNIT
Rear Axles $2.50
Transaxles $3.50
Twin-disc Front Axle $5.00
D. During the term of this Agreement following the fifth anniversary of the
Effective Date and extending to the expiration date of the last to expire of
the patents licensed under Section 2, AAM will pay ASHA a royalty not to
exceed the royalty specified in the following table for each GERODISC
mechanism sold or transferred by AAM and Affiliated Companies of AAM that is
covered by a claim of any of the patents licensed under Section 2 of this
Agreement which has not been declared invalid by a court with jurisdiction
over such matters.
APPLICATION ROYALTY PER UNIT
Rear Axles $2.50
Transaxles $3.50
Twin-disc Front Axle $5.00
E. The royalty fees are due and payable upon sale or transfer of the GERODISC
mechanisms by AAM and Affiliated Companies. AAM shall calculate the royalty
fees for each calendar quarter and the royalty fees are due and payable one
month after the end of each calendar quarter during the term of this Agreement
and the two year period immediately following expiration or early termination
of this Agreement. AAM shall accompany each payment with a written statement
showing by Application the number of GERODISC mechanisms manufactured during
the calendar quarter, the number of GERODISC mechanisms sold during the
calendar quarter, and a computation of the amounts payable. AAM may take
appropriate credits for returned goods. If no payment is due for any calendar
quarter, AAM shall render to ASHA a written statement to such effect in
accordance with the timing of this subsection. In the event that AAM has
manufactured GERODISC mechanisms prior to the date of any expiration or
termination of this Agreement but has not sold those mechanisms prior to such
date, AAM will pay the royalty fees of this section upon sale or transfer
thereof.
F. AAM shall keep true books of account consistent with generally accepted
accounting principles that contain an accurate record of all data necessary
for the determination of the royalty fees payable under this section. At any
time during the three year period following any written statement of the
previous section, ASHA may examine AAM's books of account at reasonable times
and upon reasonable advance notice during normal working hours for the purpose
of independently calculating the royalty fees due and payable to ASHA.
G. In no event shall AAM be required to pay royalties based solely upon a
patent claim which has been held invalid by the decision, unappealed or
unappealable, of a court of competent jurisdiction.
H. If ASHA grants to another rights and licenses substantially equivalent to
the rights and licenses granted to AAM by this Agreement at royalty rates
lower than the royalty rates of this Section 5, ASHA will offer the lower
royalty rates to AAM effective with AAM's sales of GERODISC mechanisms
subsequent to the grant.
6. REPRESENTATIONS AND WARRANTIES.
A. ASHA represents and warrants that technical information transferred to AAM
and patents licensed to AAM hereunder, excluding any material deviations made
by AAM to processes or hardware that are based on ASHA's technology or
patents, do not infringe any enforceable right of any other party and that
ASHA has not received any notice or claim of infringement with respect
thereto. If ASHA, during the term of this Agreement, receives any such notice
or claim, it will promptly provide a copy thereof to AAM and the parties will
meet as soon as practicable thereafter to discuss the matter. As provided in
Section 6.B below, ASHA shall have the right to reasonably determine whether
processes and hardware proposed for manufacture by AAM contain any material
deviations to the processes and hardware that are covered by ASHA's technical
information and patents.
B. AAM will disclose to ASHA the processes and hardware it proposes to use in
its final design of GERODISC mechanisms six (6) months prior to AAM's expected
commercial production of such mechanisms. ASHA will promptly examine such
processes and hardware within sixty (60) days, and if such processes and
hardware do not materially deviate from the technology or patents licensed by
ASHA to AAM under Section 3 above or otherwise expose ASHA to liability beyond
the level of exposure undertaken by ASHA pursuant to Section 6A above, ASHA
shall extend in writing the representations and warranties of Section 6A to
such processes and hardware of AAM. Should ASHA determine in good faith that
such processes and hardware are not covered by ASHA's patents and technical
information, ASHA shall notify AAM that the mechanisms are outside the scope
of this Agreement. Any GERODISC mechanism which is produced by AAM without
ASHA's written representations or warranties as provided above will not enjoy
the benefits of such representations and warranties.
C. ASHA and AAM each represent and warrant 'that it has the legal power and
authority to enter into this Agreement and that it has not made any
commitments to others inconsistent with or in derogation of its obligations
under this Agreement. ASHA represents and warrants that ASHA has proprietary
rights to technical information transferred to AAM under Section 1 and is the
owner of the patents and patent applications listed in Attachment A.
D. ASHA makes no other express or implied representations or warranties.
7. LITIGATION.
A. If AAM receives notice of a claim for infringement of third party's rights
in respect to the GERODISC technical information and patents as they relate to
mechanisms manufactured and/or sold by AAM, AAM shall notify ASHA and provide
ASHA with all information which it has relating to such claim at the time of
sending such notice. ASHA shall defend all such claims at its expense in a
timely and good-faith manner, and AAM shall cooperate with and provide
assistance to ASHA in such defense.
B. If AAM believes that a third party is manufacturing, using, or selling
GERODISC mechanisms that infringe any claim licensed to AAM under Section 3 of
this Agreement that has not been declared invalid, the parties will proceed in
accordance with the following:
(1) AAM shall notify ASHA of the identity of the third party and provide all
information known to AAM regarding the nature and extent of the infringing
activities.
(2) ASHA will investigate the claim of infringement and will report the
results of its investigation to AAM.
(3) If ASHA does not initiate actions, including negotiations or litigation,
to stop infringement by a competitor of AAM within nine (9) month of the
notice, AAM may suspend paying the royalties to ASHA that are specified in
Section 5 of this Agreement until the infringement has stopped. If ASHA has
initiated actions to stop the infringement and is pursuing such actions
diligently, AAM's obligations to pay royalties shall not be suspended and
shall continue in full force and
(4) Instead of suspending payment of royalties under the preceding subsection
3, AAM at its option shall be entitled, at its sole expense to bring suit in
its own name or, if required by law, jointly will ASHA, to stop such
infringement. AAM shall be entitled to retain all damages, settlements, and
awards of whatever nature that it recovers on such suit.
8. ENTIRE AGREEMENT AND AMENDMENT.
This Agreement contains the entire understanding between the parties relating
to its subject matter. There are no terms, obligations, covenants, statements,
representations, or conditions other than those contained in this Agreement.
This Agreement may be modified only by a written amendment that is signed by
an authorized representative from each party.
9. NOTICES.
Notices required by this Agreement shall be effective only when a writing is
actually received by the designated representative of the parties as follows:
To ASHA:
Mr. Jack McCormack, President
ASHA Corporation
600 C Ward Drive
Santa Barbara, CA 93111
To AAM:
Mr. Daniel V. Sagady, Executive Director
Product Engineering
American Axle & Manufacturing, Inc.
Technical Center
2965 Technology Drive
Rochester Hills, MI 48309-6578
With a copy to:
Patrick S. Lancaster, Esq.
General Counsel
American Axle & Manufacturing, Inc.
1840 Holbrook Avenue
Detroit, MI 48212-3488
Each party may change its designated representative from time to time by
notice to the other party.
10. ASSIGNMENT.
This Agreement is personal in nature and shall not be assigned or transferred
without the written consent of the other pa@ except in connection with the
sale of the entire line of business relating to GERODISC mechanisms.
11. WAIVER.
Failure by either party to this Agreement to exercise or enforce or to insist
upon the strict performance of any of the terms or conditions of this
Agreement will not constitute a waiver of that party's rights to enforce each
and every term and condition of this Agreement for any subsequent breach or
default of the terms of this Agreement.
12. APPLICABLE LAW.
This Agreement shall be governed by the law of the State of Michigan and
litigation on contractual clauses arising from it shall be brought only in the
State of Michigan and shall be construed in accordance with and governed by
the law of the State of Michigan.
13. DISPUTE RESOLUTION.
A. If a dispute arises between the parties relating to this Agreement, the
parties will meet within ninety days at a more senior level in a good faith
effort to resolve the dispute. If the meeting is not successful, the parties
will meet within thirty days at a more senior level in another good faith
effort to resolve the dispute. Each meeting must be attended by employees and
representatives of each party with authority to agree on reasonably
anticipated actions to resolve the dispute, but neither party shall be
obligated to include its chief executive officer in a meeting.
B. If the dispute is not resolved, either party may proceed in accordance
with applicable law.
14. OPTION AGREEMENT.
This Agreement supersedes the portion of the Option Agreement entered into by
ASHA and AAM relating to the Applications licensed in this Agreement. To the
extent that the Option Agreement has not expired for other Applications, such
Option Agreement shall remain in full force and effect. All information
transferred under the Option Agreement shall be covered by the provisions of
this Agreement.
15. TERMINATION.
A. Unless otherwise terminated as provided below, this Agreement shall
continue in effect until expiration of the last-to-expire of the patents
licensed under Section 3.
B. If either ASHA or AAM is in default of 'any obligation under this
Agreement, the parties will proceed in accordance with the Dispute Resolution
procedure of Section 13. If the Dispute Resolution procedure does not resolve
the default, the other party, at its option, may terminate this Agreement by
giving written notice specifying the nature and extent of the default and
stating its intention to terminate this Agreement not less than three months
from the date of the notice.
C. AAM may terminate this Agreement at any time by providing notice to ASHA
at least two months in advance of a termination date.
D. Upon termination AAM and all Affiliated Companies shall cease
manufacturing and selling GERODISC mechanisms except to the extent reasonably
necessary to fulfill contracts in existence on the date of the notice and
provided that AAM continues to comply with the obligations of Section 5 of
this Agreement.
IN WITNESS WHEREOF, the parties hereto execute this Agreement by duly
authorized representatives.
AMERICAN AXLE & ASHA CORPORATION
MANUFACTURING, INC.
By: By:
Its: Its:
FOR IMMEDIATE RELEASE CONTACT:
Alain J-M C1enet
Chairman and CEO
ASHA Corporation
(213) 930-0811
Maura K. Schafer
Director of Investor Relations
GCI Spindler
(213) 930-0811 xIO3
MAJOR EUROPEAN AUTOMOTIVE SUPPLIER
SIGNS OPTION AGREEMENT FOR ASHA'S GERODISC
SANTA BARBARA, Calif., December 13,1995 - ASHA Corporation (OTC:ASHA) today
announced Steyr-Daimler-Puch has signed an option agreement for future license
applications of ASHA's GERODISC traction control system. The company has
declined to disclose the dollar value of the agreement.
Steyr-Daimler-Puch, headquartered in Gratz, Austria, is engaged in the
development and production of all-wheel-drive components and all-wheel-drive
vehicles.
ASHA, headquartered in Santa Barbara, is engaged in the development of
advanced technology products for the automotive industry.
ATTACHMENT A
<TABLE>
CAPTION>
ASHA NO. TITLE SERIAL NO. PATENT NO. ISSUE
DATE
<S> <C> <C> <C> <C>
0128 PUS Hydraulic Limited Slip 07/855,728
Differential for Drive Axle
of Vehicle Drivetrain
0129 PUS Hydraulic Coupling for 07/855,727
Auxiliary Drive Axle of
Vehicle Drivetrain
0134 PUS Vehicle Drivetrain 08/016,168 U.S. 5,310,388
5/10/94
Hydraulic Coupling
0134 PCT Vehicle Drivetrain PCT/US9
Hydraulic Coupling 302098
0134 PMX Vehicle Drivetrain 94 0391
Hydraulic Coupling
0134 PCN Vehicle Drivetrain
Hydraulic Coupling
0135 PUS Vehicle Drivetrain
Hydraulic Coupling
</TABLE>
OPTION AGREEMENT
THIS AGREEMENT is effective on October 9, 1995 and is by and between ASHA
CORPORATION, a Delaware corporation with an office and place of business at
600 C Ward Drive, Santa Barbara, California 93111 ("ASHA"), and STEYR-
DAIMLER-PUCH FAHRZEUGTECHNIK, GmbH, a Austrian corporation with an office and
place of business at 317 Liebenauer Haupstrasse, Graz, Austria A-8041
("STEYR").
RECITALS
A. ASHA has developed certain technology and owns patents and patent
applications relating to hydromechanical limited slip mechanisms adapted for
use in couplings, differentials, drive axles, transaxles, and transfer cases.
These hydromechanical limited slip mechanisms are known as GERODISC
mechanisms.
B. STEYR wishes to obtain an option for certain rights, including licenses
under certain patents, to use the GERODISC technology for certain markets, and
also wishes to obtain prototypes that embrace the technology for evaluation
and demonstration purposes.
C. ASHA is willing to grant certain options to STEYR and provide certain
prototypes in accordance with the terms and conditions of this Agreement.
TERMS AND CONDITIONS
1. LICENSE OPTION & PAYMENTS.
a. Upon execution of this Agreement and payments as per Section l.b.ii, ASHA
grants to STEYR an option, on a right of first refusal basis, to acquire a
licenses for the European market to make, have made, and use GERODISC
mechanisms in each of the Applications of Section l.b.i selected by STEYR, and
to sell such mechanisms for original equipment and service.
b. STEYR shall pay to ASHA license option fees according to the following
schedule and ASHA will reserve license options for Steyr in the following
GERODISC Applications:
i. Applications:
Transaxles for FWD Twin-disc Front Axles AWD
Rear Axles AWD Coupling
AWD Front Axle
ii. Option Payments:
Due on effective Date: $75,000 /USD
Due by 1/31/96 $25,000 /USD
c. ASHA will complete the fabrication, assembly, and testing of a GERODISC
prototype and Steyr will pay to ASHA $30,000 /USD at the completion of the
Engineering phase of the development proposal to include agreement on
packaging and performance specifications and $50,000 /USD at delivery,
following installation and subject to performance verification by Steyr.
d. ASHA will attempt to reach agreement with Rover Ltd. for the supply of a
GERODISC prototype. Should such a development program eventuate, ASHA agrees
to cooperate with STEYR in the design, fabrication and testing specifications
of such a prototype. ASHA agrees to cooperate with STEYR in the demonstration
of this prototype development to Rover. ASHA agrees to keep STEYR informed as
to the status of this potential development program.
e. The option of the preceding Section shall expire on June 30, 1996 if all
payments of Section i.b.i are made by Steyr to ASHA.
2. LICENSE.
a. In the event that STEYR chooses to exercise its option of the foregoing
Sections, STEYR and ASHA will enter into a definitive license agreement that
will provide for the following:
i. transfer to STEYR of ASHA technology and knowhow regarding GERODISC
mechanisms, and grants to STEYR of exclusive or non-exclusive licenses for the
European market under patents owned or controlled by ASHA and covering
GERODISC mechanisms, to make, have made, and use GERODISC mechanisms in each
of the Applications of Section 1 that was selected by STEYR, and sell such
mechanisms for original equipment and service.
ii. cooperative efforts by STEYR and ASHA to develop GERODISC mechanisms for
the Applications.
iii. STEYR's Commitment to transfer to ASHA technical information regarding
GERODISC mechanisms developed or obtained by STEYR and to grant back to ASHA
nonexclusive licenses under patents obtained by STEYR on GERODISC improvements
against payment of a license fee to be agreed upon. It is understood that
ASHA will have the right to transfer the technical information, and grant
sublicenses under the patents, to other licensees after the second anniversary
of the transfer to ASHA.
iv. Any license fee to be paid by STEYR to ASHA according to Section 2.a.i as
well as any grantback license fee to be paid by ASHA to STEYR for rights
according to Section 2.a.iii are to be mutually agreed upon.
v. the cost of any prototypes developed under this Agreement, and paid to
ASHA by STEYR, shall be deducted from the fee for any license granted by ASHA
to STEYR.
vi. other rights and obligations as agreed by the parties.
3. PROTOTYPES.
a. STEYR will provide to ASHA, at STEYR's cost, such engineering data,
drawings, and components, including half-shafts, as may be required by ASHA to
facilitate the engineering design, fabrication, and assembly of any GERODISC
prototypes developed under this Agreement.
b. ASHA will complete the design and engineering review submitting drawings
and specifications of same to STEYR for agreement and approval as per the
Development Proposal attached as Attachment A to this proposal to facilitate
the fabrication of prototypes designed for an Audi A4, 2.8 liter, 5-speed
manual transmission.
c. Based upon the agreement and approval in Section 3b, ASHA will complete
fabrication, assembly and testing of units with up to 3 unique tunings and
submit same to STEYR.
d. ASHA will assist STEYR in the installation of the units at STEYR into a
STEYR test vehicle and cooperate with STEYR in the demonstration of
performance to the specifications agreed to by the parties in Section 3b
above.
e. STEYR will test and evaluate the prototypes in accordance with reasonable
automotive engineering standards. STEYR shall furnish summaries of the
testing and evaluations to ASHA within a reasonable time after such testing
and evaluation is completed.
f. ASHA will provide to STEYR during the term of this Agreement such cost
information, vendor information and design information to facilitate
production tooling and cost information required for internal purposes and to
answer requests for such information from perspective clients.
4. TECHNICAL ASSISTANCE.
a. ASHA will inform STEYR during any period in which STEYR has an option
under this Agreement, of significant developments in GERODISC technology.
b. During the term of this Agreement, ASHA will provide to STEYR reasonable
technical assistance as may be required by STEYR to test and demonstrate
GERODISC mechanisms.
5. CONFIDENTIALITY.
The signed and executed Exchange of Proprietary Information and Non-Disclosure
Agreement, attached as Attachment B to this Agreement, shall govern and
prescribe the conduct of the parties with respect to Confidentiality, and the
Exchange and Non-disclosure of Proprietary Information.
6. INDEPENDENT CONTRACTORS.
Both parties are independent contracting parties. This Agreement does not
make either party the agent or legal representative of the other, and does not
grant either party any authority to assume or create any obligation on behalf
of or in the name of the other.
7. AMENDMENT.
This Agreement may be modified only by a written amendment that is signed by
an authorized representative from each party.
8. APPLICABLE LAW.
a. This Agreement shall be governed by and shall be interpreted in accordance
with the laws of Switzerland.
b. All disputes between the Parties in connection with or arising out of the
existence, terms, validity, construction, performance and termination of this
Agreement, which ASHA and STEYR are unable to resolve between themselves,
shall be finally settled by arbitration. The arbitration shall be held in
Geneva, Switzerland in accordance with the Rules of Conciliation and
Arbitration of the International Chamber of Commerce by one or more
arbitrators appointed in accordance with said Rules.
The proceedings shall be held in the English language.
9. NOTICES.
Notices required by this Agreement shall be delivered to a designated agent of
the party and shall be effective upon actual receipt.
10. ASSIGNMENT.
This Agreement is personal in nature and shall not be assigned or transferred
without the written consent of the parties.
11. REPRESENTATION AND WARRANTIES.
ASHA represents and warrants that ASHA has proprietary rights to the technical
information transferred to STEYR during the term of this Agreement, and is the
owner of the patents and patent applications listed in Attachment C. ASHA also
represents and warrants that it has the legal power and authority to grant the
rights granted to STEYR in this Agreement, and to perform under this Agreement
and, that it has not made any commitments to others inconsistent with or in
derogation of such rights and licenses.
ASHA makes no other express or implied representations or warranties.
ASHA CORPORATION STEYR-DAIMLER-PUCH FAHRZEUGTECHNIK
GES.m.b.H.
By /s/ Kenneth R. Black /s/ H. Leinfellner
/s/ Dr. Koch
ATTACHMENT A
DEVELOPMENT PROPOSAL
PROPOSAL DESCRIPTION:
GERODISC Limited Slip prototype development packaging, fabrication, and
implementation into an Audi A4 differential per preliminary drawing and
hardware review. STEYR to supply detailed, current, differential engineering
drawings and hardware for modification, by ASHA Corporation to GERODISC
specifications.
PHASE I, ENGINEERING
A. ENGINEERING DEVELOPMENT:
1. Review of axle engineering drawings. Disassembly of supplied
axle differential, inspection, and measurement for modifi-
cation to accept GERODISC configuration. 24 hours
2. GERODISC design and engineering per lubricant viscosity and
required torque transfer. 72 hours
3. Engineering of GERODISC interface within existing packaging. 192 hours
4. Intake port design. 36 hours
5. Oil feed and pickup design. 72 hours
6. Material matrix for prototype differential. 18 hours
7. Component drawings. 48 hours
TOTAL PHASE I ENGINEERING DEVELOPMENT $ 26,796.00
(462 Hrs. @ $58/Hr.)
PHASE II, FABRICATION
A. PROTOTYPE FABRICATION:
1. Machining billet GERODISC assembly, carrier, and
associated hard components. 232 hours
2. Machining and fabrication of oil feed and pickup. 96 hours
3. Trial assembly and fit of all components. 28 hours
4. Remove and replace differential from vehicle for test. 12 hours
5. Rework contingency (hrs. x 10%). 36.8 hours
TOTAL FABRICATION: $ 12,054.54
(172.8 hrs. @ $48/hr.)
(232 hrs. @ $55/hr.)
B. PROJECT COMPONENTS:
1. Material and parts.
TOTAL COMPONENTS: $ 5,452.40
TOTAL PHASE II FABRICATION: $ 26,506.80
PHASE III, TESTING
A. PRELIMINARY TESTING AND TUNING AT ASHA CORPORATION:
1. Fabricate test bench interface. 80 hours
2. Bench test. 36 hours
3. R&R GERODISC for test sequences. 24 hours
4. Post test disassembly, inspection, and reassembly (multiple). 96 hours
5. Monitor, collate, and evaluate test data. 36 hours
6. Post test rework contingency (hrs. x 10%). 27.2 hours
TOTAL PRELIMINARY TESTING: $ 14,721.60
(263.2 hrs. @ $48/hr.)
(36 hrs. @ $58/hr.)
B. IN-VEHICLE TESTING, DURABILITY, AND PERFORMANCE:
1. Vehicle GERODISC installation (multiple). 12 hours
2. In-vehicle tuning evaluation. (Subject to revision
based on currently unknown performance criteria as
may be required by client specification). 8 hours
3. Post test disassembly, inspection, and reassembly. 96 hours
4. Monitor, collate, and evaluate test data. 36 hours
5. Post test rework contingency (hrs. x 10%). 15.2 hours
TOTAL IN-VEHICLE TESTING: $ 8,465.60
(123.2 hrs. @ $48/hr.)
( 44.0 hrs. @ $58/hr.)
C. PROJECT COORDINATION:
1. Project director. 54 hours
TOTAL PROJECT COORDINATION: $ 3,510.00
(54 hrs. @ $65/hr.)
TOTAL PHASE III TESTING: $ 26,697.00
RECAP AND PROGRAM TOTALS
TOTAL PHASE I ENGINEERING DEVELOPMENT $ 26,796.00
TOTAL PHASE II FABRICATION DEVELOPMENT $ 26,506.80
TOTAL PHASE III TESTING $ 26,697.20
TOTAL PROJECT DEVELOPMENT $ 80,000.00
Overall project completion within 12 weeks from receipt of p.o., engineering
drawings, primary development axle, customer supplied , components, including
half-shafts.
ATTACHMENT B
EXCHANGE OF PROPRIETARY INFORMATION AND NON-DISCLOSURE AGREEMENT
This Agreement is entered into by and between:
ASHA Corporation
600 C Ward Drive
Santa Barbara, California 93111
USA
(hereinafter referred to as "ASHA")
and
Steyr-Daimler-Puch
Fahrzeugtechnik Ges.m.b.H.
Liebenauer HaupstraBe 317
A-8041 Graz/Austria
(hereinafter referred to as "SFT")
(hereinafter individually or collectively referred to as ("the Party(ies)").
WITNESSETH
WHEREAS, ASHA and SFT wish to pursue exploratory discussions within the frame
of the application of ASHA's GERODISC System to one of SFT's prototype
vehicles; and
WHEREAS, during the course of discussions it may become desirable or necessary
for the Parties hereto to disclose to each other certain technical or business
information of a proprietary or confidential nature, hereinafter referred to
as Proprietary Information; and
WHEREAS, the Parties hereto are willing to provide for the conditions of such
disclosure of Proprietary Information and the rules governing the use and the
protection thereof.
NOW, THEREFORE, the Parties agree as follows:
1. As used in this Agreement the term "Proprietary Information" shall mean
any information or data disclosed by either Party to the other, pursuant to
this Agreement, either in writing or orally, subject to the conditions set
forth hereafter, and including without limitation any written or printed
documents, samples, models, or any means of disclosing such Proprietary
Information that ASHA and SFT may elect to use during the life of this
Agreement.
2. Nothing in this Agreement may be construed as compelling either Party
hereto to disclose any Proprietary Information to the other, or to enter into
any further contractual relationship.
3. Each Party, to the extent of its right to do so, shall disclose to the
other Party only such Proprietary Information which the disclosing Party deems
appropriate to fulfill the objectives of this Agreement as defined in the
preamble. ASHA and SFT hereby represent that the disclosure of Proprietary
Information by and between themselves is not contrary to the laws and
regulations of their respective countries. Furthermore the Parties hereby
acknowledge and agree that any disclosure of Proprietary Information hereunder
is for evaluation purpose only and shall not be construed as an inducement to
further business arrangements which are or could be regarded as contrary to
lawful trade practices or competition protection laws, rules or regulations
and that they shall at all times comply with such laws, rules, or regulations.
4. Any information or data in whatever form disclosed by either Party to the
other and which when disclosed in writing is designated as proprietary to the
disclosing Party by an appropriate stamp, legend or any other notice in
writing, or when disclosed orally, has been promptly (thirty (30) days at the
latest) confirmed and designated in writing as Proprietary Information of the
disclosing Party, shall be subject to the relevant terms and conditions of
this Agreement.
5. The receiving Party hereby covenants that, for a period of ten (10) years
from the effective date of this Agreement, the Proprietary Information
received from the disclosing Party shall:
(a) be protected and kept in strict confidence by the receiving Party which
must use the same degree of precaution and safeguards as it uses to protect
its own Proprietary Information of like importance, but in no case any less
than reasonable care;
(b) be only disclosed to and used by those persons within the receiving
Party's organization who have a need to know and solely for the purpose
specified in this Agreement;
(c) not be used in whole or in part for any purpose other than the purpose of
this Agreement as specified in paragraph 3 above without the prior written
consent of the disclosing Party;
(d) neither be disclosed nor caused to be disclosed whether directly or
indirectly to any third party or persons other than those mentioned in
subparagraph (b) above;
(e) neither be copied, nor otherwise reproduced nor duplicated in whole or in
part for the use of persons other than those mentioned in paragraph 8
hereafter where such copying, reproduction or duplication have not been
specifically authorized in writing by the disclosing Party.
6. Any Proprietary Information and copies thereof disclosed by either Party
to the other shall remain the property of the disclosing Party and shall be
returned by the receiving Party immediately upon request.
7. The receiving Party shall have no obligations or restrictions as mentioned
above with respect to any Proprietary Information which the receiving Party
can prove:
(a) has come into the public domain prior to or after the disclosure thereof
and in such case through no wrongful act of the receiving Party; or
(b) is already known to the receiving Party, as evidenced by written
documentation in the files of the receiving Party; or
(c) has been lawfully received from a third party without restrictions or
breach of this Agreement; or
(d) has been or is published without violation of this Agreement; or
(e) is approved for release or use by written authorization of the disclosing
Party; or
(f) is not properly designated or confirmed as proprietary.
8. With respect to any exchange of Proprietary Information which may occur as
a result of this Agreement, it is expressly understood and agreed that the
below listed employees shall, on behalf of the respective Parties, be the
exclusive individuals authorized to receive and/or transmit Proprietary
Information under the Agreement:
SFT ASHA
Herwig Leinfellner Theodore Shaffer
Baldur Heckel Kenneth Black
Heribert Lanzer Murat Okcuoglu
Karl Friedrich
9. As regards the individuals identified in paragraph 8, above, each Party
shall have the right and power to redesignate such persons within their
organizations as are authorized to receive and/or transmit Proprietary
Information exchanged under this Agreement. Any such redesignations which are
made by either party shall be effected by rendering written notice of such
change to the other Party.
10. Any Proprietary Information disclosed by the parties under this Agreement
which is classified information shall be identified by the disclosing Party as
classified information at the time of disclosure and the disclosure;
protection, use and handling of such information shall be in accordance with
security procedures prescribed by the appropriate Government.
11. It is expressly understood and agreed by the Parties hereto that the
disclosure and provision of Proprietary Information under this Agreement by
either party to the other shall not be construed as granting to the receiving
Party any rights whether express or implied by license or otherwise on the
matters, inventions or discoveries to which such Proprietary Information
pertains or any copyright, trademark or trade secret rights.
12. The execution, existence and performance of this Agreement shall be kept
confidential by the parties hereto and shall not be disclosed by either party
without the prior written consent of the other.
13. This Agreement including all rights and obligations of the parties hereto
except the obligations specified in paragraph 15 below may be terminated by
either Party at any time on thirty (30) day prior written notice to the other.
14. Unless earlier terminated as aforesaid in paragraph 13 hereof, this
Agreement shall expire one (1) year from its effective date.
15. The end or termination of this Agreement shall not relieve the receiving
Party of complying with the obligations imposed by paragraph 5 thereof with
respect to the use and protection of the Proprietary Information received
prior to the date of the termination or end of this Agreement. Such
obligations shall continue for the period applicable as set forth in said
paragraph.
16. This Agreement shall be governed by and shall be interpreted in
accordance wit the laws of Switzerland.
17. All disputes between the parties in connection with or arising out of the
existence, validity, construction, performance and termination of this
Agreement (or any terms hereof), which the Parties are unable to resolve
between themselves, shall be finally settled by arbitration. The arbitration
shall be held in Geneva (Switzerland) in accordance with the Rules of
Conciliation and Arbitration of the International Chamber of Commerce by one
or more arbitrators appointed in accordance with said Rules.
The proceedings hall be held in the English language.
18. The foregoing constitutes the entire agreement between the Parties with
respect to the subject matter hereof and supersedes and cancels all prior
representations, negotiations, commitments, undertakings, communications
whether oral or written, acceptances, understandings and agreements between
the Parties with respect to or in connection with any of the matters or things
to which such agreement applies or refers.
19. The effective date of this Agreement shall be the date on which it is
executed by both Parties hereto.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed by its duly authorized officers or representatives.
ASHA Corporation Steyr-Daimler-Puch
Fahrzeugtechnik Ges.m.b.H.
Name: Kenneth R. Black Name:
Title: V.P. Sales and Marketing Title:
Signature: /s/ Kenneth R. Black Signature: /s/ H. Leinfellner
/s/ Dr. Koch
Date: October 9, 1995 Date: October 12, 1995
ATTACHMENT C
DATE
ASHA NO. TITLE SERIAL NO. PATENT NO. ISSUED
0128 PUS Hydraulic Limited Slip 07/855,728
Differential for Drive
Axle of Vehicle Drive-
Train
0129 PUS Hydraulic Coupling for 07/855,727
Auxiliary Drive Axle of
Vehicle Drivetrain
0134 PUS Vehicle Drivetrain 08/016,168 USS,310,388 05/10/94
Hydraulic Coupling
0134 PCT Vehicle Drivetrain PCT/US93
Hydraulic Coupling 02098
0134 PMX Vehicle Drivetrain 94 0391
Hydraulic Coupling
0134 PCN Vehicle Drivetrain
Hydraulic coupling
0135 PUS Vehicle Drivetrain
Hydraulic Coupling
OPTION AGREEMENT
THIS AGREEMENT is effective on October 1, 1995 and is by and between ASHA
CORPORATION, a Delaware corporation with an office and place of business at
600 C Ward Drive, Santa Barbara, California 93111 ("ASHA") , and NEW VENTURE
GEAR, INCORPORATED, a Delaware corporation with an office and place of
business at 1650 Research Drive, Troy, Michigan 48083 ("NVG").
RECITALS
A. ASHA has developed certain technology and owns patents and patent
applications relating to hydromechanical limited slip mechanisms adapted for
use in couplings, differentials, drive axles, transaxles, and transfer cases.
These hydromechanical limited slip mechanisms are known as GERODISC
mechanisms.
B. NVG wishes to obtain an option for certain rights, including licenses
under certain patents, to use the GERODISC technology, and also wishes to
obtain prototypes that embrace the technology for evaluation purposes.
C. ASHA is willing to grant certain options to NVG in accordance with the
terms and conditions of this Agreement.
TERMS AND CONDITIONS
1. LICENSE OPTION.
a. Upon execution of this Agreement ASHA grants to NVG an option to acquire
non-exclusive licenses for North America to make, have made, and use GERODISC
mechanisms in each of the Applications of Section lb that is selected by NVG,
and sell such mechanisms within North America. Vehicles incorporating such
mechanisms may be sold anywhere in the world.
b. Upon execution of this Agreement ASHA grants to NVG an option for the
Application segments below within North America:
Applications:
Rear Axles
Transaxles
Twin-disc Front Axles
c. The option of the preceding section shall expire one year from the
effective date of this Agreement.
2. LICENSE.
a. In the event that NVG elects to exercise its option of the foregoing
sections, NVG will give notice to ASHA of such election and NVG and ASHA will
enter into a definitive license agreement for each Application selected by
NVG, within a reasonable period following such notice, which provides for fees
and payments as follows:
APPLICATION LICENSE FEE W/CREDIT ROYALTY UNIT
Rear Axles $1,050,000 $2.50
Transaxles-North America 1,090,000 3.50
Transaxles-Chrysler Only 750,000 3.50
Twin-disc Front Axles 700,000 5.00
b. Should NVG exercise its option of the foregoing sections, ASHA will
transfer to NVG ASHA technology and knowhow regarding GERODISC mechanisms, and
grants to NVG of nonexclusive licenses under patents owned or controlled by
ASHA, and patent applications covering GERODISC mechanisms, to make, have
made, and use GERODISC mechanisms for each of the Applications of Section 1
that was selected by NVG, and sell such mechanisms for original equipment and
service.
C. The license and royalty fees of section 2a shall be subject to a Most
Favored Nation provision whereby ASHA guarantees that NVG will pay license and
royalty fees no higher than the lowest fees charged by ASHA to any other
customer for any given Application manufactured or sold within North America.
3. PROTOTYPES.
a. NVG may elect to acquire prototypes for evaluation and demonstration
purposes during the term of this Agreement. ASHA and NVG agree that these
prototypes will be provided to NVG under terms and conditions agreeable to
both parties, and that delivery of such prototypes will be determined by
ASHA's prevailing leadtimes at the time of any prototype request by NVG.
4. TECHNICAL ASSISTANCE.
From time to time during any period in which NVG has an option under this
Agreement, ASHA will inform NVG of significant developments in GERODISC
technology.
5. CONFIDENTIALITY.
During the term of this Agreement, and for five years thereafter, each party
agrees to treat any work performed hereunder and all confidential or
proprietary information received from the other party as confidential and will
not use, disclose or exploit such information in any way, directly or
indirectly, except as authorized herein or in writing by the disclosing party.
Such information may only be disclosed to those employees who have a need to
know and only to the extent necessary to perform any work hereunder. Each
party agrees to take all reasonable steps to maintain the secrecy of the
information at least as stringent as that party uses to safeguard its own
confidential information. The foregoing obligations will not apply to
information which is or becomes available to the public through no fault of
the recipient, is previously known or developed independently by the recipient
as evidenced by prior written and dated documentation, or is received from a
third party without secrecy obligation to either party, or is information that
would be disclosed to NVG's parents or to potential customers in the ordinary
course of business.
6. INDEPENDENT CONTRACTORS.
Both parties are independent contracting parties. This Agreement does not
make either party the agent or legal representative of the other and does not
grant either party any authority to assume or create any obligation on behalf
of or in the name of the other.
7. AMENDMENT.
This Agreement may be modified only by a written amendment that is signed by
an authorized representative from each party.
8. APPLICABLE LAW.
This Agreement shall be governed by the law of the State of Michigan, and
litigation on contractual clauses arising from it shall be brought only in the
State of Michigan.
9. NOTICES.
Notices required one party under by this Agreement shall be delivered to the
Chief Executive Officer of the other party and shall be effective upon actual
receipt.
10. RESOLUTION OF DISPUTES.
In the event of any dispute, controversy or question arising between the
parties in connection with this Agreement, or any clause or the interpretation
thereof, or the rights, duties or obligations of any party, then and in every
case, the parties shall attempt to resolve or settle such dispute,
controversy, or question in good faith prior to filing suit for adjudication
of the matter.
11. ASSIGNMENT.
This Agreement shall be binding upon and inure to the benefit of the
successors, but will not be otherwise assignable without the written consent
of the other party, which consent will not be unreasonably withheld.
12. REPRESENTATIONS AND WARRANTIES.
ASHA represents and warrants that it has the legal power and authority to
grant the rights granted to NVG in this Agreement, and to perform under this
Agreement, and that it has not made any commitments to others inconsistent
with or in derogation of such rights.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.
ASHA CORPORATION NEW VENTURE GEAR, INC.
By/s/ John C. McCormack By/s/ Erick A. Reichert
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We hereby consent to the incorporation of our report dated January 11,
1996 appearing in the Annual Report on Form 10-K of ASHA Corporation for the
fiscal year ended September 30, 1995, in the following registration Statements
on Form S-8:
SEC File No. Name of Plan Date of Filing
33-76908 1993 Stock Option Plan March 25, 1994
33-81688 Consulting Agreement Shares July 18, 1994
33-93678 1994 Stock Option Plan June 20, 1995
MCDIRMID, MIKKELSEN & SECREST, P.S.
/s/ McDirmid, Mikkelsen & Secrest, P.S.
February 6, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
balance sheets and statements of operations found on pages F-2 and F-3 of
the Company's Form 10-K for the fiscal year ended September 30, 1995, and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> SEP-30-1995
<CASH> 12,804
<SECURITIES> 0
<RECEIVABLES> 1,677,470
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,706,492
<PP&E> 398,489
<DEPRECIATION> 251,082
<TOTAL-ASSETS> 3,112,946
<CURRENT-LIABILITIES> 323,409
<BONDS> 0
0
0
<COMMON> 69
<OTHER-SE> 2,841,265
<TOTAL-LIABILITY-AND-EQUITY> 3,112,946
<SALES> 3,965,658
<TOTAL-REVENUES> 4,065,753
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,492,993
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,572,760
<INCOME-TAX> 41,427
<INCOME-CONTINUING> 1,531,333
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,531,333
<EPS-PRIMARY> .224
<EPS-DILUTED> .224
