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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10SB
General Form For Registration of Securities
of Small Business Issuers Under Section 12(b)
or 12(g) of the Securities Act of 1934
COMPOSITE AUTOMOBILE RESEARCH, LTD.
----------------------------------
(Name of Small Business Issuer in It's Charter)
Alberta, BC 93-1202663
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
635 Front Street, El Cajon, CA 92020
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(Address of principal Executive Offices) (Zip Code)
(619)444-7254
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(Issuer's Telephone Number)
Securities to be registered under Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which
to be so Registered Each Class is to be Registered
------------------- ------------------------------
- -------------------------------- --------------------------------------
- -------------------------------- --------------------------------------
Securities to be registered under Section 12(g) of the Act:
Common Stock - No Stated Par Value
----------------------------------
(Title of Class)
10SB
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ITEM 1
DESCRIPTION OF THE BUSINESS
HISTORY OF THE COMPANY:
Composite Automobile Research, Ltd. ("CAR"), was incorporated in Calgary,
Alberta on January 5, 1996 to provide research and development as well as
financing for a new business venture in the automotive arena. CAR acquired the
shares of World Transport Authority, Inc., a Nevada Corporation ("WTA") on March
19, 1996. Through WTA, its wholly-owned subsidiary which performs all daily
operations, CAR offers entrepreneurs in developing countries licenses and
designs for the local manufacture of automobiles using advanced fiberglass and
composites.
BUSINESS DEVELOPMENT:
Composite Automobile Research, Ltd. ("CAR") is an automotive technology company
that sells a combination of products and services designed to enable its
licensees to manufacture, assemble and market rugged, low-cost vehicles
worldwide under the brand name WorldStar . CAR's target market consists of 189
developing nations with more than two-thirds of the world's population. Demand
for automobiles in developing nations is rising rapidly, especially at the basic
transportation end of the market. As a result, CAR is positioned to be a
significant player in one of the most dynamic global growth industries of the
21st century.
BUSINESS OF THE ISSUER:
OVERVIEW:
CAR sells a "Master License" for each predetermined geographic region (or each
country, depending on the estimated vehicle sales in the market). The price for
this Master License varies, again depending upon the population (2.5M persons
per facility), from $2,000,000 to $50,000,000 or greater. The Master License
holder is responsible for selling our manufacturing licenses only in their
country or region. They will provide all local support for the manufacturing
license holder's marketing, sales and training utilizing their knowledge of
local customs and language. The Master License holder reports directly to CAR
and is responsible to do whatever is necessary to make each license holder
successful.
CAR through its Master License holder sells each individual license to
manufacture our utility style vehicle. The current price for one license is
$372,000, of which the Master Licensee receives $112,000, and CAR receives
$260,000. For this price, the individual license holder owns 70% of the license,
and the Master Licensee owns 30%. CAR has determined this will unite the network
of Master License holders with their individual license holders in order to
provide the maximum incentive for success in every region and country. If, after
one year of successful operation, the individual license holder desires to buy
out the Master License's 30% interest, he may do so for $112,000.
If it is determined that a specific region or country is not large enough or
other factors prohibit the sale of a Master License, CAR acts as the Master
Licensee, providing all training and retaining a
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30% interest in the license. CAR controls and coordinates the ordering of all
required parts and materials from its network of international suppliers.
Shipments to the license holders are made using just-in-time inventory
management procedures.
CAR's decentralized "micro-enterprise" approach to auto-making is ideally suited
to the vehicle manufacturing needs of developing nations. The company sells and
services WorldStar(R) licenses, each of which include a turnkey
micro-manufacturing facility and a license to produce as many as 324 vehicles
every twelve months. CAR provides purchasing services that give it's licensees
the same just-in-time inventory management and buying power enjoyed by much
larger companies. CAR also conducts research and development to improve product
design and make available new models and options.
Composite technology developed in the United States makes the WorldStar(R) both
inexpensive and simple to produce on a small scale. Its design features an
engine cage supporting a Volkswagen "Boxer" engine and front-wheel-drive
transaxle, which attaches to a single-mold body made of fiberglass reinforced
plastic -- one of the strongest and most resilient materials available. The
result is an easily serviced, durable vehicle with fewer than 500 parts,
consisting of proven off-the-shelf technology.
Developing countries presently import vehicles from North America, Europe and
Eastern Asia. The average buyer of an import vehicle must contend with expensive
and hard to find spare parts and service. One of the advantages for a buyer of
the WorldStar(R) is the manufacturer is close by to provide local service and
spare parts. Because the vehicle is much simpler and has significantly fewer
parts that the standard small production vehicle of today service requirements
are greatly reduced.
THE WORLDSTAR(R) VEHICLE:
The vehicle, in its standard pickup configuration, is a 1500 lb. capacity truck
that can hold a driver and two passengers next to the driver. With the addition
of a snap-on van shell the WorldStar(R) then becomes a lockable delivery van.
Removal of the tailgate of the pickup and the addition of a simple bolt-in
seating module in the bed area of the truck transforms the WorldStar(R) into an
11-passenger taxi. CAR has specifically designed the vehicle in this manner and
believes it is the most inexpensive and practical utility vehicle produced
anywhere in the world.
The layout of the vehicle varies from a pickup to an open taxi to a van without
changing the basic structure or method of manufacture. The body is constructed
of inner and outer shells bonded together forming the desired vehicle. To that
structure the front drive package is bolted, then rear suspension, front body
shell, windshield, gages and wiring and the vehicle is ready to drive.
The WorldStar(R) is a composite vehicle manufactured from plastic resins,
structural foam, other core materials and fiberglass. The configuration of the
materials provide adequate structure and strength for the vehicle, and has been
proven by a Finite Element Analysis and the design and testing of the prototype
vehicles. The basic version is the pickup with the 1.6 liter VW Boxer engine.
The transaxle is a four speed front wheel drive. The engine/transaxle plus
suspension is bench assembled to a heavy duty tubular engine cage and then the
complete drive is assembled and attached to the composite body.
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The vehicle itself can evolve from a basic piece of transportation into a more
prestigious vehicle filled with amenities - but the method of construction
remains the same. Most major manufacturers shun this approach because their
investment is in steel, steel fabricating equipment, robotic welding equipment,
etc. and that investment is enormous.
THE MARKET:
There is a vast market for the WorldStar(R) . Over five billion people in the
world do not have automotive transportation. Automobile manufacturers have been
slow in meeting the transportation needs of this emerging market. When
traditional automobile manufacturers sell their vehicles in developing
countries, transportation costs and tariffs greatly inflate the selling price,
in many cases adding up to 200% to the price. The target market for the
WorldStar(R) is the developing nations of the world and not the industrially
advanced nations such as the United States, Canada and Western Europe. Existing
automobiles are designed for sophisticated roads and infrastructure and bear the
cost of extensive governmental regulation. The WorldStar(R) has been designed
for unimproved roads. It has up to 10 inches of ground clearance, will get over
35 miles to the gallon, or use propane where gasoline is not readily available.
The car will be manufactured, sold and serviced locally by persons who speak the
same language as the customer. The basic design of the WorldStar(R) can be made
in various colors and configured as a pickup, van or taxi. The WorldStar(R) is a
basic transportation vehicle.
"Emerging markets hold the key" stated a report released by the U.S. Office of
Automotive Affairs in 1996. "These markets accounted for almost 21 percent of
worldwide motor vehicle output and sales in 1995. Projected long-term growth
rates for motor vehicle sales in many emerging markets are ten to fifteen times
higher than those in the United States and Europe. Almost all this growth
represents new vehicle sales, rather than those of replacements. Governments of
the developing world now play a major role in shaping the global motor vehicle
industry through their efforts to develop local manufacturing capability." CAR's
mission is to aid these developing nations by strategically placing
micro-manufacturing facilities within their borders to build infrastructure,
create jobs, teach new skills and act as a magnet for new business rather than
importing vehicles from large factories located outside the country.
It is far more economical and efficient to ship bulk material and components to
local manufacturers than to transport completed vehicles from a distant
manufacturing facility. The WorldStar(R) has been designed for local manufacture
by semi-skilled workers. The local workers who build the WorldStar(R) can be
paid an above-average wage that allows them to also be buyers of these vehicles.
(The Henry Ford Plan).
THE COMPETITION:
There are very few automobiles in the world today with a selling price under
$10,000. The Volkswagen Beetle, manufactured in Mexico, is one of the lowest
priced automobiles at a selling price of approximately $8700. In the major
automobile manufacturing countries, Japan, Korea and the United States, the
entry level price is well above $10,000. The raw materials and components for
the WorldStar(R) will cost the local manufacturer about $4200. The manufacturer
adds 100-200 hours of labor at the local rate and sets the sales price. We
estimate the sales price of the WorldStar(R) to be approximately $6,000 to
$7,000 per vehicle. At a direst cost per vehicle of less
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than $5,000 before tariffs, the WorldStar(R) has a formidable price advantage
over its competition. We estimate that the total operating costs of the
WorldStar(R) are approximately one-third that of competing vehicles. Developing
nations often levy heavy import duties on finished products, but not on parts.
In many markets WorldStar(R) will thus have as much as a sixfold cost advantage
over its nearest competitors.
Major automotive manufacturers, such as Chrysler, GM, Ford and Diahatsu (see
comparison chart below) have also identified this untapped market and begun
design of their concept vehicles, which they estimate to be ready for production
within 5 years. Not only does CAR believe the WorldStar(R) to be a superior
vehicle to any concept vehicle currently under development by these
manufacturers, CAR is also intent upon aiding the developing nations by placing
the micro-manufacturing facilities within their borders to build infrastructure,
create jobs, teach new skills and act as a magnet for new business rather than
importing vehicles from large factories located outside the country.
<TABLE>
<CAPTION>
Manufacturer: Regional Chrysler GM Ford Diahatsu Fiat
- ------------- -------- -------- -- ---- -------- ----
<S> <C> <C> <C> <C> <C> <C>
Vehicle WorldStar CCV Blue Macaw Ka Midget II Uno
Sticker Price $6,000 $6,000 $9,000 $11,000 $4,600 $10,000
Engine 1600cc VW 800cc Briggs 1000cc 1000cc 659cc unknown
Target Market Developing India, China Brazil Europe & Japan Mexico
Nations Dev. Nations Brazil
Truck Yes No No No Yes No
Payload 1500 lbs N/A N/A N/A limited N/A
Delivery Van Yes No No No No No
Passengers Up to 11 4 4 4 1 4
Fuel Gas/Propane Gas Only Gas Only Gas Only Gas Only Gas Only
# of Parts App. 500 ~1100 unknown ~4,000 unknown unknown
Locally built Yes Limited Brazil only Mexico only Japan only Italy
</TABLE>
THE MARKETING PLAN:
To be successful CAR must reach developing nation manufacturing entrepreneurs.
In order to accomplish this, CAR is marketing its WorldStar(R) directly to
developing nation's trade and privatization agencies. We are also utilizing our
network of business contacts within these nations as well as direct advertising
within each country. The local manufacturer will provide a manufacturing
facility which has electrical service (200amp) and at least 4,000 square feet of
enclosed manufacturing space and 1000-2000 feet of outside storage. CAR does not
manufacture the WorldStar(R), instead it licenses its unique micro-manufacturing
facility and provides for a complete turnkey business including tooling,
equipment and materials necessary to build the WorldStar(R). The regional
manufacturer also receives full documentation, including video tapes and a
TV/VCR to provide visual training for their employees. Two technicians from CAR
or its Master Licensee will assist the manufacturer in setting up the
manufacturing facility and training. Subsequent orders for material will be
provided through CAR and it's worldwide network of suppliers directly to the
licensee.
By meeting the expected and designed goal of producing one vehicle per day, per
each single license, or 324 vehicles per year, the license holder has the
ability to recover the cost of the license
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within one year. This makes the license an enticing business opportunity for
international entrepreneurs.
CAR's target market consists of 189 developing nations worldwide. CAR has sold
Master Sales Representative Licenses in Mexico and the Philippines. Negotiations
are currently ongoing with thirty other potential licensees, with final
negotiations currently in process for nine licenses in Mexico. As an example,
the license in Mexico will allow the owner to be the principal operating center
providing support for all marketing, sales and training for the expected 150
micro-manufacturing facilities throughout Mexico over the next three years.
Assuming a production of 324 vehicles per year, per facility, Mexico will
produce over 48,000 units per year with an anticipated return of $500 per
vehicle to CAR ($24.3M).
REGULATION:
The Company only licenses the proprietary right to manufacture the WorldStar(R)
vehicle within a specific country. The Company retains legal council through
each licensee as to its obligations for govenment regulations and taxes. Each
licensee is contractually responsible to obtain all required permits and
insurance within each country of domicile for the manufacture and sales of motor
vehicles.
ITEM 2
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
GENERAL:
The Company anticipates that current license sales and negotiations for
near-term license sales should provide sufficient cash flows for the foreseeable
future.
RESULTS OF OPERATIONS:
As of December 31, 1996, the Company had sold $1,338,125 worth of stock in order
to finance the development of the WorldStar(R) vehicle. As of December 31, 1997,
the Company had canceled $52,397 worth of stock in a sale of assets and sold an
additional $647,273 worth of stock in order to continue the development of the
WorldStar(R) vehicle. At the date of this filing, the Company had sold three
licenses for WorldStar(R) factories, with nine additional licenses in Mexico
pending financing.
LIQUIDITY AND CAPITAL RESOURCES:
ITEM 3
DESCRIPTION OF PROPERTY
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The Company with its wholly-owned subsidiary World Transport Authority, Inc.
leases administrative offices and training facility in 9,000 sq. ft. at 635
Front Street, El Cajon, CA USA 92020, for $9319.76 per month. The Company does
not intend to acquire a material amount of property in the future.
The Company's registered office in Canada is located at Suite 800 - 11012
MacLeod Trail S., Calgary, Alberta, Canada T2J 6A5.
EMPLOYEES
The Company, through its wholly-owned subsidiary WTA, currently employs five (5)
persons including technicians, secretary and receptionist.
ITEM 4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth information on the ownership of the Company's
voting securities by Officers, Directors and major shareholders as well as those
who own beneficially more than five percent of the Company's common stock:
<TABLE>
<CAPTION>
Name & Title or Amount Percent
Address Class Ownership Owned Owned Mgmt.
- ------- -------- --------- -------- ----- -----
<S> <C> <C> <C> <C> <C>
Dean Amaru Common Record 63,334 1.6% Pres.
20212 Modoc Rd.
Apple Valley, CA 92308
Maritime International, Ltd.* Common Record 726,667 18.3% None
635 Front Street
El Cajon, CA 92020
Rodger Ward Common Record 28,667 .7% V.P.
1329 Craigmont
El Cajon, CA 92019
Lyle Wardrop Common Record 13,810 .35% Director
19879 49th Avenue
Langley, BC V3A 3R5
Steven Wright Common Record 30,619 .8% Sec/Tres
2635 Camino del Rio South
Suite 211
San Diego, CA 92108
</TABLE>
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* Effective December 1, 1997, the 726,667 shares owned by Maritime
International, Ltd. were placed in a irrevocable trust. Any sale or transfer
of the shares requires the approval of C.A.R.'s Board of Directors.
ITEM 5
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS,
AND CONTROL PERSONS
The Directors and Officers of the Company, all of those whose terms will expire
6/30/98, or at such a time as their successors shall be elected and qualified
are as follows:
<TABLE>
<CAPTION>
Name & Address Age Position Date First Elected
- -------------- --- -------- ------------------
<S> <C> <C> <C>
Dean Amaru 54 President 6/1/96
20212 Modoc Road
Apple Valley, CA 92308
Steven R. Wright 53 Secretary, 6/1/96
13640 White Rock Station Rd. Treasurer &
Poway, CA 92064 Director
Rodger Ward 77 Vice President of 6/1/96
1329 Craigmont Public Relations
El Cajon, CA 92019
Lyle P. Wardrop 56 Director 3/19/96
19879 49th Avenue
Langley, B.C. Canada V3A 3R5
</TABLE>
Each of the foregoing persons may be deemed a "promoter" of the Company, as that
term is defined in the rules and regulations promulgated under the securities
and Exchange Act of 1933.
Directors are elected to serve until the next annual meeting of stockholders and
until their successors have been elected and qualified. Officers appointed to
serve until the meeting of the Board of Directors following the next annual
meeting of stockholders and until their successors have been elected and
qualified.
No Executive Officer or Director of the Corporation has been the subject of any
Order, Judgement, or Decree of any Court of competent jurisdiction, of any
regulatory agency enjoining him from acting as an investment advisor,
underwriter, broker or dealer in the securities industry, or as an affiliated
person, director or employee of an investment company, bank, savings and loan
association, or insurance company or from engaging in or continuing any conduct
or practice in connection with any such activity or in connection with the
purchase or sale of any securities nor has any such person been the subject of
any Order of a State authority barring or suspending for more than sixty (60)
days, the right of such a person to be engaged in such activities or to be
associated with such activities.
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No Executive Officer or Director of the Corporation has been convicted in any
criminal proceeding (excluding traffic violations) or is the subject of a
criminal proceeding which is currently pending.
RESUMES:
DEAN AMARU, PRESIDENT
1989 - Current Owner - URAMA SALES & MARKETING, HESPERIA CA - Company
provides all aspects of sales and marketing to small
businesses including consultation, product development,
market analysis, sponsorships, advertising and graphic
design from concept to design & printing.
1994 - Current Founder, President, Treasurer - VICTOR VALLEY MARKETING
GROUP, VICTORVILLE CA - Network of local business owners
and professionals who use ethical business practices and
fair market prices for honest work and goods. Organized
as an Advertising Club to increase quality and quantity
of member's business through networking, referrals,
group-buying power, publication and promotions.
1988 - 1989 Sales & Marketing Manager - TRIM-LOK INC., PARAMOUNT CA
Responsible for all aspects of sales and marketing for
vinyl extrusion edge trim for United States OEM and
wholesale market. Opened international distribution.
1986 - 1988 Sales Manager / Special Products & Projects - FORD
WHOLESALE COMPANY INC., SANTA ANA CA - Responsible for
sales program for roofing wholesaler with seven
California locations for all special products. Designed,
implemented and evaluated sales training & marketing
methods promoting new products in market.
1966 - 1986 Regional Sales Manager - GENSTAR / FLINTKOTE COMPANY, LOS
ANGELES CA - Responsible for regional sales of roofing
products and supervision of employees in production,
warehouse, office and sales. Established policies,
procedures and training promoting leadership skills.
Smoothly integrated new acquisition and personnel for
company.
EDUCATION
UNIVERSITY OF LAS VEGAS
Major: Business Administration
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STEVEN R. WRIGHT, SECRETARY TREASURER & DIRECTOR
1978 - Present Owner - WRIGHT & GEIS, INC. CERTIFIED PUBLIC
ACCOUNTANTS, SAN DIEGO, CA - Serve as director and
financial officer for two public companies. Responsible
for all aspects of accounting, Securities & Exchange
filing, taxes and strategic planning. Corporate tax
specialist responsible for corporation, individual,
partnership and fiduciary federal and multi-state income
tax returns. Manage client contact, quality control, tax
review and planning, research, and audit representation.
Provide management advisory services in design and
installation of data processing systems, budgets, job
costing, estimating, financial planning, analysis and
personnel management. Extensive experience with financial
institutions, creditors and investors for financing and
cash management.
1976 - 1978 Manager of Financial Planning - CAMPBELL INDUSTRIES,
INC., SAN DIEGO, CA - Responsible for financial
projections and strategic planning for board of
directors. Developed project budgets with projected cash
flow, estimating, and cost accounting for new
construction and ship repair work. Supervised cost
accounting and financial planning staff.
1974 - 1976 Senior Accountant - ROHR INDUSTRIES, INC., CHULA VISTA,
CA Responsible for accounting for three subsidiaries.
Prepared accounting entries, subsidiary ledgers, general
ledgers, financial statements, cash and sales forecasts
and account analysis.
EDUCATION
SAN DIEGO STATE UNIVERSITY
B.S. Accounting, 1974
SAN DIEGO STATE UNIVERSITY
B.A. Public Administration,1970
LYLE P. WARDROP, DIRECTOR
1963 - Present President - GOLDEN MILE MOTORS, LTD. & UNITED AUTO
BROKERS, LTD. - Both companies are involved in the sale
of used trucks and autos.
1972 - Present President - SURREY LAND CENTER, VANCOUVER, B.C. - This
company is involved in the sale, development, and rental
of industrial land and warehouse space.
1976 - 1986 President - INTERNATIONAL WATERBED DISTRIBUTORS - This
company was involved in the manufacture, distribution,
and retail sale of waterbeds and bedroom furniture and
became Canada's largest waterbed wholesaler.
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1978 - 1983 Treasurer - CANADIAN WATERBED MANUFACTURING ASSOCIATION -
This association represented the manufacturing companies
in the waterbed industry.
1993 - Present Chairman Used Car Division - AUTOMOTIVE RETAILERS
ASSOCIATION OF BRITISH COLUMBIA - This association
represents the automotive retail sector in dealing with
government and private agencies.
1994 - Present Director and Board Member - AUTOMOTIVE RETAILERS
ASSOCIATION OF BRITISH COLUMBIA - This association
represents 1300 member companies in six divisions
employing over 25,000 people.
RODGER WARD, VICE PRESIDENT OF PUBLIC RELATIONS
1990 - Present Chief Steward - AMERICAN INDYCAR SERIES
1986 - Present Owner - RODGER WARD & ASSOCIATES - Auto and race car
restoration business, President Vintage Racing.
1983 - 1985 President - CITIZENS SECURITY SYSTEMS, DALLAS TX
1979 - 1982 Team Manager - CIRCUS CIRCUS HOTEL, LAS VEGAS NV -
Manager of the Unlimited Hydroplane Race Team.
1972 - 1976 Owner - RODGER WARD TIRE CENTERS, Rosemead & Monrovia CA
1969 - 1972 Director of Public Relations - ONTARIO MOTOR SPEEDWAY,
ONTARIO CA
1967 - 1970 Owner - FIRESTONE TIRE CENTER, SPEEDWAY IN
1946 - 1966 PROFESSIONAL RACE CAR DRIVER - Accomplishments include
National Stock Car Championship 1951, Indianapolis 500
Winner 1959 & 1962, and USAC Champion 1959 & 1962.
1990 - Present BOARD OF DIRECTORS - SAN DIEGO AUTOMOTIVE MUSEUM
1972 - 1976 BOARD OF DIRECTORS - SUPERIOR INDUSTRIES
1958 - 1968 CHAMPION SPARK PLUG CO. HIGHWAY SAFETY PROGRAM
1958 - 1966 BOARD OF DIRECTORS - USAC
1941 - 1946 U.S. AIR FORCE
Item 6
EXECUTIVE COMPENSATION
No Officer or Director of the Corporation has had or currently has aggregate
renumeration exceeding $50,000.00 per year from the Corporation. No renumeration
other than this is proposed to be paid in the future directly or indirectly by
the Corporation to any Officer or Director under any
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plan which is presently existing.
There are no annuity, pension or retirement benefits proposed to be paid to
officers, directors or employees of the Corporation in the event of retirement
at normal retirement date pursuant to any presently existing plan provided or
contributed to by the Corporation or any of its subsidiaries, if any.
MANAGEMENT OPTIONS TO PURCHASE SECURITIES:
<TABLE>
<CAPTION>
Name Title Options Price Per Share
- ---- ----- ------- ---------------
<S> <C> <C> <C>
Dean Amaru President 16,667 $1.50
Dean Amaru President 16,667 $2.25
Dean Amaru President 16,667 $3.00
Steven Wright Sec. Treas. 33,333 $1.05
Lyle Wardrop Director 33,333 $1.05
Rodger Ward V.P. 33,333 $1.05
</TABLE>
Item 7
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
Item 8
PENDING LEGAL PROCEEDINGS
The Company entered into binding arbitration with a former business partner (an
individual) regarding the consideration for the disposition by the Company of
Thunder Ranch, Inc., a corporation sold back to its sole original shareholder in
September, 1996. The Company has denied the individual the right to any
additional shares of stock for that sale. The arbitration was summarily
dismissed in favor of the Company on November 24, 1997. The Company is currently
in the process of litigation in Superior Court in San Diego, California
regarding the same matter. The Company's attorneys have filed for a dismissal of
all litigation based upon the binding arbitration determination.
Item 9
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company, as of July 24, 1997 has filed for trading on the NNOTC Electronic
Bulletin Board (EBB) which is sponsored by the National Association of
Securities Dealers (NASD). The EBB is a network of security dealers who buy and
sell stock. The dealers are connected by a computer network which provides
information on current "bids" and "asks" as well as volume information.
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As of December 31, 1997, the Company had 159 shareholders of record.
The Company has paid no cash dividends.
ITEM 10
RECENT SALES OF UNREGISTERED SECURITIES
On January 5, 1996 the Company issued 1,320,000 shares of its common stock in
return for cash and other assets.
Between January 15, 1996 and June 30, 1997, the Company sold 2,013,975 shares to
126 U.S. Citizens and 9 foreign residents. In issuing the stock, the Company
relied on an exemption from registration contained in Section 4(2) of the 1933
Securities Act, as amended, for sales not involving a public offering. These
shares were sold through directors of the Company to persons who were business
or personal acquaintances.
In July of 1997, the Company sold 292,793 shares to 12 U.S. Citizens and 5
foreign residents. In issuing the stock, the Company relied on an exemption from
registration contained in Section 4(2) of the 1933 Securities Act, as amended,
for sales not involving a public offering. These shares were sold through
directors of the Company to persons who were business or personal acquaintances.
In August of 1997, the Company sold 84,524 shares to 2 U.S. Citizens and 3
foreign residents. In issuing the stock, the Company relied on an exemption from
registration contained in Section 4(2) of the 1933 Securities Act, as amended,
for sales not involving a public offering. These shares were sold through
directors of the Company to persons who were business or personal acquaintances.
In September of 1997, the Company sold 38,286 shares to 1 U.S. Citizens and 2
foreign resident. In issuing the stock, the Company relied on an exemption from
registration contained in Section 4(2) of the 1933 Securities Act, as amended,
for sales not involving a public offering. These shares were sold through
directors of the Company to persons who were business or personal acquaintances.
In October of 1997, the Company sold 14,285 shares to 3 U.S. Citizens. In
issuing the stock, the Company relied on an exemption from registration
contained in Section 4(2) of the 1933 Securities Act, as amended, for sales not
involving a public offering. These shares were sold through directors of the
Company to persons who were business or personal acquaintances.
In November of 1997, the Company sold 16,524 shares to 5 U.S. Citizens. In
issuing the stock, the Company relied on an exemption from registration
contained in Section 4(2) of the 1933 Securities Act, as amended, for sales not
involving a public offering. These shares were sold through directors of the
Company to persons who were business or personal acquaintances.
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In December of 1997, the Company issued 195,144 shares to 10 U.S. Citizens and 4
foreign residents. The shares were issued to employees and contractors for
services rendered. In issuing the stock, the Company relied on an exemption from
registration contained in Section 4(2) of the 1933 Securities Act, as amended,
for sales not involving a public offering.
NOTE: PER A VOTE OF THE SHAREHOLDERS OF RECORD ON JUNE 3, 1997, THE DIRECTORS OF
COMPOSITE AUTOMOBILE RESEARCH WERE AUTHORIZED TO COMPLETE A 3 TO 1 REVERSAL OF
ALL SHARES, OPTIONS AND WARRANTS. ALL REFERENCES TO A NUMBER OF SHARES IN THIS
DOCUMENT REFLECT THAT REVERSAL.
ITEM 11
DESCRIPTION OF SECURITIES
COMMON STOCK:
The Company's Certificate of Incorporation authorizes the issuance of unlimited
Shares of Common Stock, no stated par value per share, of which 3,975,531 shares
were outstanding as of December 31, 1997. Holders of shares of Common Stock are
entitled to one vote for each share on all matters to be voted on by the
stockholders. Holders of Common Stock have cumulative voting rights. Holders of
shares of Common Stock are entitled to share ratable in dividends, if any, as
may be declared, from time to time by the Board of Directors in its discretion,
from funds legally available therefor. In the event of a liquidation,
dissolution, or winding up of the Company, the holders of shares of Common Stock
are entitled to share pro rata all assets remaining after payment in full of all
liabilities. Holders of Common Stock have no preemptive or other subscription
rights, and there are no conversion rights or redemption or sinking fund
provisions with respect to such shares. All of the outstanding Common Stock is,
and the shares offered by the Company pursuant to this offering will be, when
issued and delivered, fully paid and non-assessable.
PREFERRED STOCK:
There is no preferred stock authorized.
TRANSFER AGENT:
The Company's transfer agent is Pacific Corporate Trust Company, Suite 830 - 625
Howe Street, Vancouver, BC Canada, V6C 3B8. Telephone number is (604) 689-9853.
The Company acts as its own registrar.
ITEM 12
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's By-Laws allow for the indemnification of Company Officers and
Directors in regard to their carrying out the duties of their offices. The
By-Laws also allow for reimbursement of certain legal defenses.
14
<PAGE> 15
As to indemnification for liabilities arising under the Securities Act of 1933
for directors, officers or persons controlling the Company, the Company has been
informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy and unenforceable.
ITEM 13
FINANCIAL STATEMENTS
EXPERTS:
The financial statements of the Company and related notes which are included in
this offering have been examined by Harlan & Boettger, Independent Certified
Public Accountants, and have been so included in reliance upon the opinion of
such accountants given upon their authority as an expert in auditing and
accounting.
ITEM 14
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING CONTROL
AND FINANCIAL DISCLOSURE
None.
ITEM 15
FINANCIAL STATEMENTS AND EXHIBITS
(i) Audited statement for year end April 30, 1997.
(ii) Audited statement for initial period ended June 30, 1996.
SIGNATURES
In accordance with Section 12 of the Securities and Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
Composite Automobile Research, Ltd.
Date 1-26-97 By /s/ DEAN AMARU
---------------- ------------------------------
Dean Amaru,
President
15
<PAGE> 16
Date 1/26/97 By /s/ STEVEN R. WRIGHT
-------------- -----------------------------
Steven R. Wright,
Director, Secretary & Treasurer
16
<PAGE> 17
FINANCIAL STATEMENTS
17
<PAGE> 18
COMPOSITE AUTOMOBILE RESEARCH, INC.
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997 AND 1996
<PAGE> 19
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report........................................... F-2
Consolidated Financial Statements:
Consolidated Balance Sheets as of
June 30, 1997 and June 30, 1996..................................... F-3
Consolidated Statements of Operations for the
years ended June 30, 1997 and June 30, 1996......................... F-4
Consolidated Statements of Changes in Stockholders' Equity
for the years ended June 30, 1997 and June 30, 1996................. F-5
Consolidated Statements of Cash Flows for the years ended
June 30, 1997 and June 30, 1996..................................... F-6
Consolidated Notes to Financial Statements.......................... F-7 - F-12
</TABLE>
F-1
<PAGE> 20
[HARLAN & BOETTGER LLP LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS OF
COMPOSITE AUTOMOBILE RESEARCH, INC.:
We have audited the accompanying consolidated balance sheets of Composite
Automobile Research, Inc. (a Canadian corporation) (Note A) as of June 30, 1997
and June 30, 1996, and the related consolidated statements of operations,
changes in stockholders' equity, and cash flows for the years then ended. 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 Composite Automobile Research,
Inc. as of June 30, 1997 and June 30, 1996, and the results of its operations
and cash flows for the years then ended in conformity with generally accepted
accounting principles.
/s/ HARLAN & BOETTGER LLP
San Diego, California
September 8, 1997
F-2
<PAGE> 21
COMPOSITE AUTOMOBILE RESEARCH, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
As of As of
June 30, 1997 June 30, 1996
------------- -------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 25,280 $ 117,194
Accounts receivable -- 3,149
Inventory (Note C) -- 132,953
Prepaid expenses 675 675
----------- -----------
TOTAL CURRENT ASSETS 25,955 253,971
PROPERTY AND EQUIPMENT, net of accumulated
depreciation of $56,463 and $23,974 (Note D) 301,215 332,724
OTHER ASSETS
Note receivable - stockholder (Note G) 200,000 --
Goodwill, net of accumulated amortization (Note E) -- 82,751
License -- 10,000
Consulting contract (Note G) 100,000 --
Miscellaneous 29,018 4,347
----------- -----------
TOTAL OTHER ASSETS 329,018 97,098
----------- -----------
$ 656,188 $ 683,793
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 55,081 $ 49,854
Accrued liabilities 7,124 77,891
Related party debt (Note G) 40,436 --
Customer advance payments on orders -- 131,460
----------- -----------
TOTAL CURRENT LIABILITIES 102,641 259,205
COMMITMENTS AND CONTINGENCIES (Note H) -- --
STOCKHOLDERS' EQUITY: (Note I)
Common stock, no par value, unlimited shares
authorized; 3,333,975 and 4,346,141 shares
issued and outstanding, respectively 1,933,001 167,614
Special warrants, 0 and 2,693,815 warrants
issued and outstanding, respectively -- 576,610
Retained deficit (1,379,454) (319,636)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 553,547 424,588
----------- -----------
$ 656,188 $ 683,793
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 22
COMPOSITE AUTOMOBILE RESEARCH, MC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the year For the year
ended ended
June 30, 1997 June 30, 1996
------------- -------------
<S> <C> <C>
NET SALES $ 67,278 $ 27,140
COST OF SALES 17,800 9,450
----------- -----------
GROSS PROFIT 49,478 17,690
OPERATING EXPENSES:
Selling, general, and administrative 665,365 56,550
Depreciation and amortization 42,779 23,974
Other operating expenses 180,263 --
----------- -----------
TOTAL OPERATING EXPENSES 888,407 80,524
----------- -----------
NET LOSS FROM OPERATIONS (838,929) (62,834)
OTHER EXPENSES
Loss on sale of equipment 198,646 --
Loss on write-off of capitalized costs -- 253,503
Loss on write-off of goodwill 21,443 --
----------- -----------
Interest expense -- 2,499
TOTAL OTHER EXPENSES 220,089 256,002
NET LOSS BEFORE INCOME TAXES (1,059,018) (318,836)
INCOME TAXES (Note F) 800 800
----------- -----------
NET LOSS $(1,059,818) $ (319,636)
=========== ===========
NET LOSS PER AVERAGE COMMON SHARE $ (.39) $ (.09)
=========== ===========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 2,736,194 3,450,441
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 23
COMPOSITE AUTOMOBILE RESEARCH, NC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock
and Special Warrants Total
------------------------------- Retained Stockholders'
Shares Amount Deficit Equity
----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
DATE OF INCEPTION, JANUARY 5, 1996 -- $ -- $ -- $ --
Common stock issued in acquisition
(Notes B and I) 1,652,326 167,614 -- 167,614
Special warrants issued for cash (Note I) 2,693,815 576,610 -- 576,610
Net loss for the year -- -- (319,636) (319,636)
----------- ----------- ----------- -----------
BALANCE, JUNE 30, 1996 4,346,141 744,224 (319,636) 424,588
Special warrants issued for cash (Note I) 3,280,834 1,298,434 -- 1,298,434
Common stock repurchased (Notes A and I) (2,500,000) (52,397) -- (52,397)
Common stock canceled (Note J) (1,793,000) (57,260) -- (57,260)
Net loss for the year -- -- (1,059,818) (1,059.818)
BALANCE, JUNE 30, 1997 3,333,975 $ 1,933,001 $(1,379,454) $ 553,547
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 24
COMPOSITE AUTOMOBILE RESEARCH, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the year For the year
ended ended
June 30, 1997 June 30, 1996
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,059,818) $ (319,636)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 42,779 5,890
Amortization -- 18,084
Loss on disposal of equipment 198,646 --
Changes in assets and liabilities:
Accounts receivable 3,149 (3,149)
Inventory 132,953 (132,953)
Consulting contract (100,000)
Note receivable - stockholder (200,000) --
Prepaid expenses -- (675)
Goodwill from acquisition 82,751 (82,751)
Miscellaneous assets (14,671) (14,347)
Accounts payable 5,227 49,854
Accrued liabilities (70,767) 77,891
Customer advance payments on orders (131,460) 131,460
----------- -----------
NET CASH USED IN OPERATING ACTIVITIES (1,111,120 (270,332)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (209,916) (356,698)
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (209,916) (356,698)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in related party debt 40,436 --
Repurchase of common stock (52,397) --
Common stock issued in acquisition -- 167,614
Proceeds from issuance of common stock and special warrants 1,241,174 576,610
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,229,213 744,224
----------- -----------
NET (DECREASE) INCREASE IN CASH (91,914) 117,194
CASH AT BEGINNING OF YEAR 117,194 --
----------- -----------
CASH AT END OF YEAR $ 25,280 $ 117,194
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 25
COMPOSITE AUTOMOBILE RESEARCH, INC.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Organization and Nature of Operations
In January 1996 Composite Automobile Research, Inc. (the "Company") was
incorporated pursuant to the Alberta Business Corporations Act. The Company
was incorporated to facilitate an initial public offering. Subsequent to
incorporation the Company acquired Thunder Ranch, Inc., ("Thunder") and
World Transport Authority, Inc. ("WTA"). These acquisitions have been
accounted for under the purchase method with any difference between fair
market value of assets purchased and liabilities assumed being reflected as
goodwill.
In February 1997, the Company sold certain assets and liabilities to a
stockholder in exchange for common stock of the Company and promises to
pay. The transaction has been accounted for by the purchase method (Note
G).
The Company, through its wholly owned subsidiaries, is in the business of
designing, manufacturing, and selling specialty automobile body kits in
markets around the world.
Basis of Consolidation
For purposes of consolidation and presentation, all significant
intercompany transactions and account balances have been eliminated.
Basis of Accounting
The Company's policy is to use the accrual method of accounting and to
prepare and present financial statements which conform to generally
accepted accounting principles. The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and reported amounts of
revenues and expenses during the reporting periods. Actual results could
differ from those estimates.
Cash and Equivalents
For purpose of the statements of cash flows, all highly liquid investments
with a maturity of three months or less are considered to be cash
equivalents. There were not cash equivalents as of June 30, 1997 and 1996.
Inventory
The inventory is valued at the lower of cost or market. Cost is determined
under the first-in, first out (FIFO) method.
F-7
<PAGE> 26
COMPOSITE AUTOMOBILE RESEARCH, INC.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
Property and Equipment
Property and equipment are recorded at cost. Depreciation and amortization
of property and equipment is provided using the straight line method over
estimated useful lives ranging from five to seven years. Upon retirement or
disposal of depreciated assets, the cost and related depreciation are
removed and the resulting gain or loss is reflected in income. Major
renewals and betterments are capitalized while maintenance costs and
repairs are expensed in the year incurred.
Revenue Recognition
Revenues derived from the sale of specialty automobile body kits are
recorded upon completion of the kits and final payment from the customer.
Customer advance payments on orders are deferred and shown in the
accompanying financial statements as part of current liabilities.
Net Loss Per Share
The net loss per share is computed by dividing the net loss by the weighted
average number of shares outstanding during the period.
Income Taxes
Income taxes are provided for using the liability method of accounting in
accordance with Statement of Financial Accounting Standards No 109 (SFAS
109), "Accounting for Income Taxes." A deferred tax asset or liability is
recorded for all temporary differences between financial and tax reporting.
Deferred tax expense (benefit) results from the net change during the year
of deferred tax assets and liabilities.
B. ACQUISITION:
During 1996 the Company completed the purchases of Thunder and WTA, which
have been accounted for by the purchase method as follows:
<TABLE>
<CAPTION>
<S> <C>
Assets $ 533,199
Liabilities relieved (448,336)
---------
Net assets 84,863
Purchase price 167,614
---------
Excess of purchase price over net assets
book value $ 82,751
=========
The excess of purchase price over net asset book value
has been allocated as follows:
Goodwill $ 82,751
=========
</TABLE>
F-8
<PAGE> 27
COMPOSITE AUTOMOBILE RESEARCH, INC.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
B. ACQUISITION: (CONTINUED)
The fair values of the net assets acquired and the purchase price
discrepancy were allocated in accordance with generally accepted accounting
principles and based on the recent transactions, as the best estimate of
market value of the net assets acquired.
C. INVENTORY:
Inventory is comprised of the following:
<TABLE>
<CAPTION>
June 30, June 30,
1997 1996
-------- --------
<S> <C> <C>
Stocked inventory $ -- $ 62,904
Work in process -- 70,049
Finished goods -- --
-------- --------
$ -- $132,953
======== ========
</TABLE>
During the year ended June 30, 1997, the Company sold all its inventory to
a stockholder. (See Note A).
D. PROPERTY AND EQUIPMENT:
Property and equipment is summarized as follows:
<TABLE>
<CAPTION>
June 30, June 30,
1997 1996
--------- ---------
<S> <C> <C>
Machinery and equipment $ 54,617 $ 202,594
Automobiles -- 11,019
Office furniture and equipment 17,164 8,228
Leasehold improvements 8,630 3,097
Demo equipment and vehicles 277,267 131,760
--------- ---------
357,678 356,698
Less accumulated depreciation (56,463) (23,974)
--------- ---------
Property and equipment, net $ 301,215 $ 332,724
========= =========
</TABLE>
E. GOODWILL:
The Company recorded goodwill as a result of the purchases of Thunder and
WTA. It is being amortized over its estimated useful life of seven years.
As a result of the sale of assets and liabilities to a stockholder during
the year ended June 30, 1997, the goodwill related to these assets was
written off.
F-9
<PAGE> 28
COMPOSITE AUTOMOBILE RESEARCH, INC.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
F. INCOME TAXES:
The provision for income taxes for the years ended June 30, 1997 and June
30, 1996 consists solely of the $800 minimum California franchise tax.
The Company's total deferred tax asset as of June 30, 1997 is as follows:
<TABLE>
<CAPTION>
1997
---------
<S> <C>
Net operating loss carryforward $ 257,536
Valuation allowance (257,536)
---------
Net deferred tax asset $ --
=========
</TABLE>
G. RELATED PARTY TRANSACTIONS:
The Company has agreed to accept consulting services from a stockholder as
part of the sale of certain assets and liabilities (Note A), the value of
which was determined by actual consulting services this stockholder has
performed in the past. This asset is being amortized using the
straight-line method over an estimated period of fourteen months.
The Company is owed $200,000 as of June 30, 1997 from a stockholder for the
purchase of certain assets (Note A). This note is non-interest bearing and
is due on demand.
Related party debt at June 30, 1997 consists of amounts loaned to the
Company by a stockholder. There are no formal repayment terms and it is
classified as a current liability as the Company intends to repay the
amount in full within one year.
H. COMMITMENTS AND CONTINGENCIES:
The Company leases its office facilities under an operating lease that
expires in March 2001. This lease was entered into on March 1, 1996. Future
minimum lease payments due under this operating lease are as follows:
<TABLE>
<CAPTION>
Year ending
June 30,
-----------
<S> <C>
1998 $107,856
1999 107,856
2000 107,856
2001 26,964
--------
Total $350,532
========
</TABLE>
This operating lease provides that the Company pay, in addition to the base
rent, 83% of common area operating expenses as determined by a prorated
share of total square footage of the building.
F-10
<PAGE> 29
COMPOSITE AUTOMOBILE RESEARCH, INC.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
I. STOCKHOLDERS' EQUITY:
Since inception through the year ended June 30, 1997, the Company has
issued shares of common stock warrants in exchange for $1,875,044 in cash.
Additionally, the amount of shares authorized by the articles of
incorporation was amended to an unlimited amount of common and preferred
shares.
Changes in common stock warrants during the years ended June 30, 1997 and
June 30, 1996 consisted of the following:
<TABLE>
<CAPTION>
Warrants Price Range
-------- -----------
<S> <C> <C>
Outstanding at January 5, 1996 -- --
Issued 2,693,815 $.10-$0.35
Exercised -- --
Outstanding at June 30, 1996 2,693,815 $.10-$0.35
Issued 3,280,834 $.10-$1.04
Exercised (5,974,649) $.10-$1.04
Outstanding at June 30, 1997 -- --
</TABLE>
Additionally, under the terms of the purchases of Thunder and WTA (Note A,
B and G), the Company received 2,500,000 of its common stock as
consideration. The value of these shares was determined by the difference
between the assets given up and liabilities relieved and recorded as a
reduction in stockholders' equity.
All equity disclosures have been retroactively restated to effect a 3 for 1
reverse stock split as of June 30, 1997.
J. LICENSE AGREEMENTS:
During the year ended June 30, 1997, the Company entered into two
agreements with unrelated third party representatives in Mexico and
Honduras whereby the Company has issued licenses to the representatives to
build and sell vehicles on behalf of the Company in that country. As
consideration for these agreements, the Company will receive $260,000 for
each license and a per-vehicle royalty of $275.00. For the year ended June
30, 1997, performance on these agreements was pending.
F-11
<PAGE> 30
COMPOSITE AUTOMOBILE RESEARCH, INC.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
K. SUBSEQUENT EVENTS:
The Company has entered into binding arbitration with a former business
partner (an individual) regarding payment of certain expenses incurred on
behalf of Thunder Ranch, Inc. The Company previously had agreed to issue
1,793,000 shares of common stock to this individual. However, as of June
30, 1997 the stock had been canceled as recorded by the stock transfer
agent, Pacific Corporate Trust. Pending resolution of arbitration, these
shares could be reinstated, reissued, or remain canceled.
In September 1997, the Company entered into an additional licensing
agreement with an unrelated third party representative in the Philippine
Islands under similar terms as those outlined in Note J.
F-12
<PAGE> 31
COMPOSITE AUTOMOBILE RESEARCH, LTD.
BALANCE SHEETS
<TABLE>
<CAPTION>
12-31-96 12-31-97
<S> <C> <C>
ASSETS
CURRENT ASSETS
CASH 52,277 3,913
PREPAID EXPENSES 9,653 675
----------------------------
TOTAL CURRENT ASSETS 61,930 4,588
FIXED ASSETS
M & E PLUS FURNITURE 80,411 80,411
DEMO EQUIP 378,839 232,701
MASTER MOLDS 231,881
LESS DEPRECIATION -66,416 -104,137
----------------------------
NET FIXED ASSETS 392,834 440,856
OTHER ASSETS
ORGANIZATION COSTS 712 712
CONSULTING CONTRACT 100,000 100,000
DEPOSITS 3,884 33,818
NOTE RECV - SHAREHOLDER 200,000 200,000
LESS AMORTIZATION -71 -251
----------------------------
TOTAL OTHER ASSETS 304,525 334,279
----------------------------
TOTAL ASSETS 759,289 779,723
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
ACCOUNTS PAYABLE 101,927 140,666
ACCRUED LIABILITIES 1,600 18,774
----------------------------
TOTAL CURRENT LIABILITIES 103,527 159,440
LONG TERM LIABILITIES
SHAREHOLDER LOANS 36,150 117,135
----------------------------
TOTAL LONG TERM LIABILITIES 36,150 117,135
----------------------------
TOTAL LIABILITIES 139,677 276,575
STOCKHOLDERS EQUITY
COMMON STOCK 1,360,427 2,593,428
BEGINNING RETAIN EARNINGS -319,636 -1,379,454
NET INCOME -421,179 -710,826
ENDING RETAIN EARNINGS -740,815 -2,090,280
----------------------------
TOTAL STOCKHOLDERS EQUITY 619,612 503,148
----------------------------
TOTAL LIAB & STKHLDR'S EQUITY 759,289 779,723
</TABLE>
<PAGE> 32
COMPOSITE AUTOMOBILE RESEARCH, LTD.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
12-31-96 12-31-97
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
NET LOSS -421,179 -710,826
LESS DEPREC & AMORTIZATION 29,579 47,746
LOSS ON DISPOSAL OF EQUIPMENT 198,646
DECREASE IN ACCTS RECVB 3,149
DECREASE IN INVENTORY 132,953
(INCREASE) IN CONSULTING CONTRACT -100,000
(INCREASE) IN NOTE RECV - SHRLDR -200,000
(INCREASE) IN PREPAID EXPENSES -8,978
DECREASE IN ACQUIRED GOODWILL 38,999
(INCREASE) IN MISCELLANEOUS ASSETS -250
INCREASE IN ACCOUNTS PAYABLE 52,073 85,585
INCREASE (DECREASE) IN ACCRUED LIABILITIES -76,291 11,650
(DECREASE) IN CUSTOMER DEPOSITS -131,460
----------------------------
NET CASH USED IN OPERATING ACTIVITIES -482,759 -565,845
CASH FLOWS FROM INVESTING ACTIVITIES
PURCHASE OF FIXED ASSETS -102,552 -192,648
----------------------------
NET CASH USED IN INVESTING ACTIVITIES -102,552 -192,648
CASH FLOWS FROM FINANCING ACTIVITIES
STOCK ISSUED 593,901 660,427
STOCK CANCELED -109,657
LOANS - SHAREHOLDERS 36,150 76,699
----------------------------
NET CASH PROVIDED FROM FINANCING ACTIVITIES 520,394 737,126
----------------------------
NET INCREASE (DECREASE) IN CASH -64,917 -21,367
BEGINNING CASH 117,194 25,280
ENDING CASH 52,277 3,913
</TABLE>
<PAGE> 33
COMPOSITE AUTOMOBILE RESEARCH, LTD.
INCOME STATEMENTS
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
12-31-96 12-31-97
<S> <C> <C>
NUMBER LICENSES 1
CUMULATIVE TOTAL 3
REVENUE
LICENSE FEES - WORLDSTAR 31,250
REVENUE - T RANCH 52,446
----------------------------
TOTAL REVENUE 52,446 31,250
COST OF SALES
COSTS - T RANCH 17,800
----------------------------
TOTAL COST OF SALES 17,800 0
----------------------------
GROSS PROFIT 34,646 31,250
OPERATING EXPENSES
SALARIES & WAGES 66,679 32,455
SALARIES - OFFICERS 8,176 30,290
ADVERTISING & MARKETING 14,177 220,482
AMORTIZATION 72 72
DEPRECIATION 29,507 47,674
OUTSIDE SERV 89,636 210,842
OTHER G & A 48,132 203,283
----------------------------
TOTAL OPERATING EXPENSES 256,379 745,098
----------------------------
INCOME FROM OPERATIONS -221,733 -713,848
OTHER INCOME & EXPENSE
LOSS SALE EQ - T RANCH -198,646
INTEREST EXP -178
RENTAL INCOME 3,200
----------------------------
TOTAL OTHER INCOME & EXPENSE -198,646 3,022
----------------------------
INCOME BEFORE TAXES -420,379 -710,826
CALIF FRANCHISE TAX 800
----------------------------
NETLOSS -421,179 -710,826
</TABLE>
<PAGE> 34
EXHIBITS
2). Plan of Reorganization none
3). Articles of Incorporation and Bylaws included
4). Instruments defining the rights of holders none
7). Opinion regarding liquidation preference none
9). Irrevocable Stock Trust included
10). Material Contracts included
a). Honduras
b). Mexico
c). Philippines
11). Statement re: computation of per share earnings See Financial Statements
14). Material foreign patents none
16). Letter on change certifying accountant none
24). Power of Attorney none
27). Financial Data Schedule not required
28). Information from reports furnished to
State insurance regulatory authorities none
18
<PAGE> 1
EXHIBIT 3
ARTICLES OF INCORPORATION AND BYLAWS
19
<PAGE> 2
================================================================================
CORPORATE ACCESS NUMBER
20679460
ALBERTA
GOVERNMENT OF ALBERTA
BUSINESS CORPORATIONS ACT
CERTIFICATE
OF
INCORPORATION
COMPOSITE AUTOMOBILE RESEARCH LTD.
WAS INCORPORATED IN ALBERTA ON JANUARY 5, 1996
[SIG]
--------------------------------------
Registrar of Corporations
[SEAL
REGISTRIES
GOVERNMENT OF ALBERTA]
================================================================================
<PAGE> 3
BUSINESS CORPORATIONS ACT FORM I
(SECTION 6)
ALBERTA
CONSUMER AND CORPORATE AFFAIRS ARTICLES OF INCORPORATION
- --------------------------------------------------------------------------------
1. NAME OF CORPORATION:
COMPOSITE AUTOMOBILE RESEARCH LTD.
2. THE CLASSES, AND ANY MAXIMUM NUMBER OF SHARES THAT THE CORPORATION IS
AUTHORIZED TO ISSUE:
The Corporation is authorized to issue an unlimited number of shares
designated as Common Shares and an unlimited number of shares designated
as Preferred Shares.
(a) Common Shares
The Common Shares shall have attached to them the rights, privileges,
restrictions and conditions as hereinafter set forth.
(i) Except for meetings at which only holders of another specified class
or series of shares of the Corporation are entitled to vote separately
as a class or series, each holder of a Common Share is entitled to
receive notice of, to attend and to vote at all meetings of the
shareholders of the Corporation.
(ii) Subject to the rights of the holders of the Preferred Shares, the
holders of the Common Shares are entitled to receive dividends if, as
and when declared by the directors of the Corporation.
(iii) Subject to the rights, privileges, restrictions and conditions
attached to any other class of shares of the Corporation, the holders of
the Common Shares are entitled to share equally in the remaining
property of the Corporation upon liquidation, dissolution or winding-up
of the Corporation.
(b) Preferred Shares
The Preferred Shares shall have attached to them, as a class, the
rights, privileges, restrictions and conditions as hereinafter set
forth.
(i) The Preferred Shares may from time to time be issued in one or more
series and, subject to the following provisions, and subject to the
sending of articles of amendment in prescribed form and the issuance of
a certificate of amendment in respect thereof, the directors may fix
from time to time and before issue of a series of Preferred Shares, the
number of shares which are to comprise that series and the designation,
rights, privileges, restrictions and conditions to be attached to that
series of Preferred Shares including without limiting the generality of
the foregoing, the rate or amount of dividends or the method of
calculating dividends, the dates of payment of dividends, the
FILED(E)
JAN 5 1996
Registrar of Corporations
Province of Alberta
<PAGE> 4
ARTICLES OF INCORPORATION
Page 2
redemption, purchase and/or conversion prices and terms and conditions
of redemption, purchase and/or conversion, and any sinking fund or other
provisions.
(ii) The Preferred Shares of each series shall, with respect to the
payment of dividends and the distribution of assets or return of capital
in the event of liquidation, dissolution or winding-up of the
Corporation, whether voluntary or involuntary, or any other return of
capital or distribution of the assets of the Corporation among its
shareholders for the purpose of winding up its affairs, rank on a parity
with the Preferred Shares of every other series and be entitled to
preference over the Common Shares and over any other shares of the
Corporation ranking junior to the Preferred Shares. The Preferred Shares
of any series may also be given other preferences, not inconsistent with
these articles, over the Common Shares and any other shares of the
Corporation ranking junior to the Preferred Shares of a series as may be
fixed in accordance with clause 2(b)(i).
(iii) If any cumulative dividends or amounts payable on the return of
capital in respect of a series of Preferred Shares are not paid in full,
all series of Preferred Shares shall participate rateably in respect of
accumulated dividends and return of capital.
(iv) Unless the directors otherwise determine in the articles of
amendment designating a series of Preferred Shares, the holder of each
share of a series of Preferred Shares shall not, as such, be entitled to
receive notice of or vote at any meeting of shareholders, except as
otherwise specifically provided in the Business Corporations Act
(Alberta).
3. RESTRICTIONS ON SHARE TRANSFERS (IF ANY):
No shares in the capital of the Corporation may be transferred without
the prior consent of the directors of the Corporation expressed by
resolution.
4. NUMBER, OR MINIMUM AND MAXIMUM NUMBER, OF DIRECTORS THAT THE CORPORATION
MAY HAVE:
A minimum of 1 and a maximum of 15.
5. IF THE CORPORATION IS RESTRICTED FROM CARRYING ON A CERTAIN BUSINESS, OR
RESTRICTED TO CARRYING ON A CERTAIN BUSINESS, SPECIFY THE
RESTRICTION(S):
None.
6. OTHER RULES OR PROVISIONS (IF ANY):
(a) The number of shareholders of the Corporation, exclusive of persons
who are in its employment or that of an affiliate and persons who,
having been formerly in the employment of the Corporation or that of an
affiliate, were, while in that employment,
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ARTICLES OF INCORPORATION
Page 3
shareholders of the Corporation and have continued to be shareholders of
the Corporation after termination of that employment, is limited to not
more than 50 persons, 2 or more persons who are the joint registered
owners of 1 or more shares being counted as 1 shareholder.
(b) Any invitation to the public to subscribe for securities of the
Corporation is prohibited.
(c) The directors may, between annual general meetings, appoint 1 or
more additional directors of the Corporation to serve until the next
annual general meeting, but the number of additional directors shall not
at any time exceed 1/3 of the number of directors who held office at the
expiration of the last annual meeting of the Corporation.
7. DATE:
January 4, 1996
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ADDRESS
INCORPORATORS' NAMES: (INCLUDING POSTAL CODE) SIGNATURE
SARA-LANE SIREY 1600, 407 - 2nd Street. S.W.
Calgary, Alberta /s/ SARA-LANE SIREY
T2P 2Y3 -------------------
</TABLE>
FOR DEPARTMENTAL USE ONLY
CORPORATE ACCESS NUMBER INCORPORATION DATE
==========================
FILED(E)
JAN 5 1996
REGISTRAR OF CORPORATIONS
PROVINCE OF ALBERTA
==========================
<PAGE> 6
COMPOSITE AUTOMOBILE RESEARCH LTD.
(the "Corporation")
The undersigned, being all of the Shareholders of the Corporation, sign
the following resolutions pursuant to section 136 of the Business Corporations
Act (Alberta).
AMENDMENT OF ARTICLES
IT IS RESOLVED THAT:
1. The provisions in Article 3 be repealed and the words "No restriction" be
substituted in its place.
2. The provisions in Article 4 be changed from "a minimum of 1 director and a
maximum of 15" to "a minimum of three directors and a maximum of twelve".
3. The provisions in Article 6 be amended by deleting paragraphs (a) and (b) in
their entirety, and renaming paragraph "6(c)" as "6(a)."
4. The President of the Corporation is authorized to execute and deliver any and
all documents and to take all actions including the filing of the Articles of
Amendment pursuant to the Business Corporations Act (Alberta) as may be required
to give effect to these resolutions.
DATED this 10th day of April, 1997.
MARITIME INTERNATIONAL, LTD.
Per: [SIG]
-----------------------------------
/s/ JAHAN BETEKHAR
-----------------------------------------
JAHAN BETEKHAR
/s/ MAJID MEHRAFAZ
-----------------------------------------
MAJID MEHRAFAZ
/s/ ADRIAN CORBETT
-----------------------------------------
ADRIAN CORBETT
/s/ JACK H. NORMAN
-----------------------------------------
JACK H. NORMAN
/s/ DOUGLAS W. NORMAN
-----------------------------------------
DOUGLAS W. NORMAN
/s/ THOMAS WM. MCBURNIE
-----------------------------------------
THOMAS WM. MCBURNIE
/s/ RODGER WARD
-----------------------------------------
RODGER WARD
<PAGE> 7
BY-LAW NUMBER 1
A BY-LAW RELATING GENERALLY
TO THE TRANSACTION OF THE
BUSINESS AND AFFAIRS OF
COMPOSITE AUTOMOBILE RESEARCH LTD.
<PAGE> 8
CONTENTS
SECTION 1.
DEFINITIONS AND INTERPRETATION
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(1) Definitions.......................................................... 1
(2) Interpretation....................................................... 2
(3) Headings............................................................. 2
(4) By-laws Subject to the ABCA.......................................... 2
SECTION 2.
BUSINESS OF THE CORPORATION
(1) Execution of Documents............................................... 2
(2) Cheques, Drafts and Notes............................................ 2
(3) Corporate Seal....................................................... 2
(4) Banking Arrangements................................................. 3
SECTION 3.
BORROWING
(1) Borrowing Power...................................................... 3
SECTION 4.
DIRECTORS
(1) Management of Business............................................... 3
(2) Number of Directors.................................................. 3
(3) Election and Term.................................................... 4
(4) Removal of Directors................................................. 4
(5) Ceasing to Hold Office............................................... 4
(6) Filling Vacancies.................................................... 4
(7) Remuneration and Expenses............................................ 4
(8) Annual Financial Statements.......................................... 5
SECTION 5.
MEETINGS OF DIRECTORS
(1) Calling Meetings..................................................... 5
(2) Notice............................................................... 5
(3) Notice of Adjourned Meeting.......................................... 5
(4) Meetings Without Notice.............................................. 5
(5) Waiver of Notice..................................................... 6
(6) Quorum............................................................... 6
(7) Chairperson of Meetings.............................................. 6
(8) Decision on Questions................................................ 6
(9) Meeting by Telephone................................................. 6
(10) Resolution in Lieu of Meeting........................................ 6
</TABLE>
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SECTION 6.
OFFICERS
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(1) Appointment of Officers............................................... 7
(2) Term of Office........................................................ 7
(3) Duties of Officers.................................................... 7
(4) Remuneration.......................................................... 7
SECTION 7.
LIABILITY AND INDEMNIFICATION
(1) Limitation of Liability............................................... 8
(2) Indemnity............................................................. 8
(3) Insurance............................................................. 9
SECTION 8.
SECURITIES
(1) Shares................................................................ 9
(2) Securities Register................................................... 9
(3) Security Certificates................................................. 9
(4) Entitlement to a Security Certificate................................. 10
(5) Securities Held Jointly............................................... 10
(6) Replacement of Security Certificates.................................. 10
SECTION 9.
MEETINGS OF SHAREHOLDERS
(1) Annual Meeting of Shareholders....................................... 10
(2) Special Meetings of Shareholders..................................... 10
(3) Special Business..................................................... 10
(4) Place and Time of Meetings........................................... 11
(5) Notice of Meetings................................................... 11
(6) Notice of Adjourned Meetings......................................... 11
(7) Waiver of Notice..................................................... 11
(8) Chairperson of Meetings.............................................. 12
(9) Procedure at Meetings................................................ 12
(10) Persons Entitled to be Present....................................... 12
(11) Quorum............................................................... 12
(12) Joint Shareholders................................................... 12
(13) Decision on Questions................................................ 12
(14) Voting............................................................... 13
(15) Meeting by Telephone................................................. 13
(16) Resolution in Lieu of Meeting........................................ 13
SECTION 10.
NOTICES
(1) Method of Notice..................................................... 13
(2) Notice to Joint Shareholders......................................... 13
(3) Failure to Give Notice............................................... 14
</TABLE>
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(4) Execution of Notices................................................. 14
</TABLE>
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SECTION 1.
DEFINITIONS AND INTERPRETATION
(1) Definitions
In the By-laws, unless the context otherwise requires:
(a) "ABCA" means the Business Corporations Act (Alberta), as amended;
(b) "appoint" includes elect and vice versa;
(c) "Articles" includes the original or restated articles of incorporation,
articles of amendment, articles of amalgamation, articles of
continuance, articles of reorganization, articles of arrangement,
articles of dissolution and articles of revival of the Corporation, and
any amendment to any of them;
(d) "Board" means the board of directors of the Corporation;
(e) "By-laws" means this by-law and all other by-laws of the Corporation
from time to time in force;
(f) "Corporation" means Composite Automobile Research Ltd.;
(g) "Director" means an individual who is elected or appointed as a director
of the Corporation;
(h) "Indemnified Party" has the meaning set out in section 7 for purposes of
that section;
(i) "Officer" means an officer of the Corporation appointed by the Board;
(j) "Recorded Address" means:
i) in the case of a Shareholder, the Shareholder's latest address as
shown in the Corporation's records,
ii) in the case of joint Shareholders, the latest address as shown in
the Corporation's records in respect of those joint holders, or the
first address appearing if there is more than one address,
iii) in the case of a Director, the Director's latest address as shown
in the Corporation's records or in the last notice of directors filed
with the Registrar, and
iv) in the case of an Officer or auditor of the Corporation, that
person's latest address as shown in the Corporation's records;
(k) "Regulations" means the Regulations, as amended, in force from time to
time under the ABCA; and
(1) "Shareholder" means a shareholder of the Corporation.
<PAGE> 12
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(2) INTERPRETATION
In the By-laws, except if defined in this section or the context does not
permit:
(a) words and expressions defined or used in the ABCA have the meaning or
use given to them in the ABCA;
(b) words importing the singular include the plural and vice versa;
(c) words importing gender include masculine, feminine and neuter genders;
and
(d) words importing persons include bodies corporate.
(3) HEADINGS
The headings used in the By-laws are inserted for convenience of reference only.
The headings are not to be considered or taken into account in construing the
terms of the By-laws nor are they to be deemed in any way to clarify, modify or
explain the effect of any term of the Bylaws.
(4) BY-LAWS SUBJECT TO THE ABCA
The By-laws are subject to the ABCA and the Regulations, to any unanimous
shareholder agreement and to the Articles, in that order.
SECTION 2.
BUSINESS OF THE CORPORATION
(1) EXECUTION OF DOCUMENTS
Documents may be executed on behalf of the Corporation in the manner and by the
persons the Board may designate by resolution.
(2) CHEQUES, DRAFTS AND NOTES
Cheques, drafts or orders for the payment of money, notes, acceptances and bills
of exchange must be signed in the manner and by the persons the Board may
designate by resolution.
(3) CORPORATE SEAL
The Board may, by resolution, adopt a corporate seal containing the name of the
Corporation as the corporate seal. A document issued by or executed on behalf of
the Corporation is not invalid only because the corporate seal is not affixed to
that document. A document requiring authentication by the Corporation does not
need to be under seal.
<PAGE> 13
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(4) BANKING ARRANGEMENTS
The Board may open any bank accounts the Corporation may require at a financial
institution designated by resolution of the Board. The Board may adopt,
authorize, execute or deposit any document furnished or required by the
financial institution and may do any other thing as may be necessarily
incidental to the banking and financial arrangements of the Corporation.
SECTION 3.
BORROWING
(1) BORROWING POWER
Without limiting the borrowing power of the Corporation provided by the ABCA,
the Board may, without authorization of the Shareholders:
(a) borrow money on the credit of the Corporation;
(b) issue, reissue, sell or pledge debt obligations of the Corporation;
(c) subject to section 42 of the ABCA, give a guarantee on behalf of the
Corporation to secure performance of an obligation of any person; and
(d) mortgage, hypothecate, pledge or otherwise create a security interest in
all or any property of the Corporation, owned or subsequently acquired,
to secure any obligation of the Corporation.
The Directors may, by resolution, delegate to a Director, a committee of
Directors or an Officer all or any of the powers conferred on them by this
section.
SECTION 4.
DIRECTORS
(1) MANAGEMENT OF BUSINESS
The Board shall manage the business and affairs of the Corporation. Every
Director must comply with the ABCA, the Regulations, the Articles and the
By-laws.
(2) NUMBER OF DIRECTORS
The Board is to consist of that number of Directors permitted by the Articles.
In the event the Articles permit a minimum and maximum number of Directors, the
Board is to consist of the number of Directors the Shareholders determine by
ordinary resolution. The number of Directors at any one time may not be less
than the minimum or more than the maximum number permitted by the Articles.
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(3) ELECTION AND TERM
Each Director named in the notice of directors filed at the time of
incorporation holds office from the issue of the certificate of incorporation
until the first meeting of Shareholders. The Shareholders are to elect Directors
by ordinary resolution at the first meeting of Shareholders and at each
succeeding annual meeting at which an election of Directors is required. The
elected Directors are to hold office for a term expiring not later than the
close of the next annual meeting of Shareholders following the election. A
Director not elected for an expressly stated term ceases to hold office at the
close of the first annual meeting of Shareholders following the Director's
election. If Directors are not elected at a meeting of Shareholders, the
incumbent Directors continue in office until their respective successors are
elected.
(4) REMOVAL OF DIRECTORS
The Shareholders may by ordinary resolution passed at a special meeting of
Shareholders remove a Director from office. Any vacancy created by the removal
of a Director may be filled at the meeting at which the Director was removed,
failing which the vacancy may be filled by a quorum of Directors.
(5) CEASING TO HOLD OFFICE
A Director ceases to hold office when:
(a) the Director dies or resigns;
(b) the Director is removed from office by the Shareholders who elected the
Director; or
(c) the Director ceases to be qualified for election as a Director under
the ABCA.
A Director's resignation is effective at the time a written resignation is sent
to the Corporation, or at the time specified in the resignation, whichever is
later.
(6) FILLING VACANCIES
A quorum of Directors may fill a vacancy in the Board, except a vacancy
resulting from an increase in the number or minimum number of Directors or from
a failure to elect the number or minimum number of Directors required by the
Articles. If there is not a quorum of Directors, or if there has been a failure
to elect the number or minimum number of Directors required by the Articles, the
Directors then in office must immediately call a special meeting of Shareholders
to fill the vacancy. If the Directors fail to call a meeting, or if there are no
Directors then in office, the meeting may be called by any Shareholder.
(7) REMUNERATION AND EXPENSES
The Directors are entitled to receive remuneration for their services in the
amount the Board determines. Subject to the Board's approval, the Directors are
also entitled to be reimbursed for travelling and other expenses incurred by
them in attending meetings of the Board or any committee of Directors or in the
performance of their duties as Directors.
<PAGE> 15
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Nothing contained in the By-laws precludes a Director from serving the
Corporation in another capacity and receiving remuneration for acting in that
other capacity.
(8) ANNUAL FINANCIAL STATEMENTS
The Board must place before the Shareholders at every annual meeting of
Shareholders financial statements which have been approved by the Board as
evidenced by the signature of one or more of the Directors, the report of the
auditor, if any, and any further information respecting the financial position
of the Corporation and the results of its operations that is required by the
ABCA, the Regulations, the Articles, the By-laws or any unanimous shareholder
agreement.
SECTION 5.
MEETINGS OF DIRECTORS
(1) CALLING MEETINGS
The Chairperson of the Board, if any, the President or any Director may call a
meeting of Directors. A meeting of Directors or of a committee of Directors may
be held within or outside of Alberta at the time and place indicated in the
notice referred to in subsection (2).
(2) NOTICE
Notice of the time and place of a meeting of Directors or any committee of
Directors must be given to each Director or each Director who is a member of a
committee not less than 48 hours before the time fixed for that meeting. Notice
must be given in the manner prescribed in section 10.
(3) NOTICE OF ADJOURNED MEETING
Notice of an adjourned meeting of Directors is not required if a quorum is
present at the original meeting and if the time and place of the adjourned
meeting is announced at the original meeting. If a meeting is adjourned because
a quorum is not present, notice of the time and place of the adjourned meeting
must be given as for the original meeting. The adjourned meeting may proceed
with the business to have been transacted at the original meeting, even though a
quorum is not present at the adjourned meeting.
(4) MEETINGS WITHOUT NOTICE
No notice of a meeting of Directors or of a committee of Directors needs to be
given:
(a) to a newly elected Board following its election at an annual or special
meeting of Shareholders; or
(b) for a meeting of Directors at which a Director is appointed to fill a
vacancy in the Board,
if a quorum is present.
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(5) WAIVER OF NOTICE
A Director may waive, in any manner, notice of a meeting of Directors or of a
committee of Directors. Attendance of a Director at a meeting of Directors or of
a committee of Directors is a waiver of notice of the meeting, except when the
Director attends the meeting for the express purpose of objecting to the
transaction of any business on the grounds that the meeting is not lawfully
called.
(6) QUORUM
The Directors may fix the quorum for meetings of Directors or of a committee of
Directors, but unless so fixed, a majority of the Directors or of a committee of
Directors constitutes a quorum. No business may be transacted unless at least
half of the Directors present are resident Canadians.
(7) CHAIRPERSON OF MEETINGS
The chairperson of any meeting of Directors is the first mentioned of the
following Officers (if appointed) who is a Director and is present at the
meeting: Chairperson of the Board or President. If neither of the foregoing
Officers is present, the Directors present may choose one of their number to be
chairperson of the meeting.
(8) DECISION ON QUESTIONS
Every resolution submitted to a meeting of Directors or of a committee of
Directors must be decided by a majority of votes cast at the meeting. In the
case of an equality of votes, the chairperson does not have a casting vote.
(9) MEETING BY TELEPHONE
If all the Directors consent, a Director may participate in a meeting of
Directors or of a committee of Directors by means of telephone or other
communication facilities that permit all persons participating in the meeting to
hear each other. A Director participating in a meeting by means of telephone or
other communication facilities is deemed to be present at the meeting.
(10) RESOLUTION IN LIEU OF MEETING
A resolution in writing signed by all the Directors entitled to vote on that
resolution at a meeting of Directors or committee of Directors is as valid as if
it had been passed at a meeting of Directors or committee of Directors. A
resolution in writing takes effect on the date it is expressed to be effective.
A resolution in writing may be signed in one or more counterparts, all of which
together constitute the same resolution. A counterpart signed by a Director and
transmitted by facsimile or other device capable of transmitting a printed
message is as valid as an originally signed counterpart.
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SECTION 6.
OFFICERS
(1) APPOINTMENT OF OFFICERS
The Directors may designate the offices of the Corporation, appoint as officers
individuals of full capacity, specify their duties and delegate to them powers
to manage the business and affairs of the Corporation, except powers to:
(a) submit to the Shareholders any question or matter requiring the approval
of the Shareholders;
(b) fill a vacancy among the Directors or in the office of auditor;
(c) issue securities, except in the manner and on the terms authorized by
the Directors;
(d) declare dividends;
(e) purchase, redeem or otherwise acquire shares issued by the Corporation,
except in the manner and on the terms authorized by the Directors;
(f) pay a commission in connection with the sale of shares of the
Corporation;
(g) approve a management proxy circular;
(h) approve any financial statements; or
(i) adopt, amend or repeal By-laws.
An Officer does not have to be a Director. The same individual may hold two or
more offices of the Corporation.
(2) TERM OF OFFICE
An Officer holds office from the date of the Officer's appointment until a
successor is appointed or until the Officer's resignation or removal. An officer
may resign by giving written notice to the Board. All Officers are subject to
removal by the Board, with or without cause.
(3) DUTIES OF OFFICERS
An Officer has all the powers and authority and must perform all the duties
usually incident to, or specified by the Board for, the office held.
(4) REMUNERATION
The Officers are entitled to receive remuneration for their services in the
amount the Board determines.
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SECTION 7.
LIABILITY AND INDEMNIFICATION
(1) LIMITATION OF LIABILITY
Every Director and Officer in exercising the powers and discharging the duties
of office must act honestly and in good faith with a view to the best interests
of the Corporation and must exercise the care, diligence and skill that a
reasonably prudent person would exercise in comparable circumstances. No
Director or Officer is liable for:
(a) the acts, omissions or defaults of any other Director or Officer or an
employee of the Corporation;
(b) any loss, damage or expense incurred by the Corporation through the
insufficiency or deficiency of title to any property acquired for or on
behalf of the Corporation;
(c) the insufficiency or deficiency of any security in or upon which any of
the money of the Corporation is invested;
(d) any loss or damage arising from the bankruptcy, insolvency or tortious
or criminal acts of any person with whom any of the Corporation's money
is, or securities or other property are, deposited;
(e) any loss occasioned by any error of judgment or oversight; or
(f) any other loss, damage or misfortune which occurs in the execution of
the duties of office or in relation to it,
unless occasioned by the willful neglect or default of that Director or Officer.
Nothing in this By-law relieves any Director or Officer of any liability imposed
by the ABCA or otherwise by law.
(2) INDEMNITY
The Corporation shall indemnify a Director or Officer, a former Director or
Officer and a person who acts or acted at the Corporation's request as a
director or officer of a body corporate of which the Corporation is or was a
shareholder or creditor (the "Indemnified Parties") and the heirs and legal
representatives of each of them, against all costs, charges and expenses, which
includes, without limiting the generality of the foregoing, the fees, charges
and disbursements of legal counsel on an as-between-a-solicitor-
and-the-solicitor's-own-client basis and an amount paid to settle an action or
satisfy a judgment, reasonably incurred by an Indemnified Party, or the heirs or
legal representatives of an Indemnified Party, or both, in respect of any action
or proceeding to which any of them is made a party by reason of an Indemnified
Party being or having been a Director or Officer or a director or officer of
that body corporate, if:
(a) the Indemnified Party acted honestly and in good faith with a view to
the best interests of the Corporation; and
<PAGE> 19
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(b) in the case of a criminal or administrative action or proceeding that is
enforced by a monetary penalty, the Indemnified Party had reasonable
grounds for believing that the Indemnified Party's conduct was lawful.
The Corporation shall indemnify an Indemnified Party and the heirs and legal
representatives of an Indemnified Party in any other circumstances that the ABCA
permits or requires. Nothing in this By-law limits the right of a person
entitled to indemnity to claim indemnity apart from the provisions of this
By-law.
(3) INSURANCE
The Corporation may purchase and maintain insurance for the benefit of a person
referred to in subsection (2) against the liabilities and in the amounts the
ABCA permits and the Board approves.
SECTION 8.
SECURITIES
(1) SHARES
Shares of the Corporation may be issued at the times, to the persons and for the
consideration the Board determines. No share may be issued until the
consideration for the share is fully paid in money or in property or past
service that is not less in value than the fair equivalent of the money that the
Corporation would have received if the share had been issued for money.
(2) SECURITIES REGISTER
The Corporation shall maintain at its records office a securities register in
which it records the securities issued by it in registered form, showing with
respect to each class or series of securities:
(a) the names, alphabetically arranged and the latest known address of each
person who is or has been a security holder;
(b) the number of securities held by each security holder; and
(c) the date and particulars of the issue and transfer of each security.
The Corporation shall keep information relating to a security holder that is
entered in the securities register for at least seven years after the security
holder ceases to be a security holder.
(3) SECURITY CERTIFICATES
Security certificates and acknowledgements of a security holder's right to
obtain a security certificate must be in a form the Board approves by
resolution. A security certificate must be signed by at least one Director or
Officer. Any signature may be printed or otherwise mechanically reproduced on a
security certificate. If a security certificate contains a printed or
mechanically reproduced signature of a person, the Corporation may issue the
security
<PAGE> 20
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certificate, notwithstanding that the person has ceased to be a Director or
Officer, and the security certificate is as valid as if the person were a
Director or Officer at the date of issue.
(4) ENTITLEMENT TO A SECURITY CERTIFICATE
A security holder is entitled at the holder's option to a security certificate
or to a nontransferable written acknowledgement of the holder's right to obtain
a security certificate from the Corporation in respect of the securities of the
Corporation held by that holder.
(5) SECURITIES HELD JOINTLY
The Corporation is not required to issue more than one security certificate in
respect of securities held jointly by several persons. Delivery of a certificate
to one of the joint holders is sufficient delivery to all of them. Any one of
the joint holders may give effectual receipts for the certificate issued in
respect of the securities or for any dividend, bonus, return of capital or other
money payable or warrant issuable in respect of the security.
(6) REPLACEMENT OF SECURITY CERTIFICATES
The Board or an Officer or agent designated by the Board may in its or the
Officer's or agent's discretion direct the issue of a new security certificate
in place of a certificate that has been lost, destroyed or wrongfully taken. A
new security certificate may be issued only on payment of a reasonable fee and
on any terms as to indemnity, reimbursement of expenses and evidence of loss of
title as the Board may prescribe.
SECTION 9.
MEETINGS OF SHAREHOLDERS
(1) ANNUAL MEETING OF SHAREHOLDERS
The Board must call an annual meeting of Shareholders to be held not later than
18 months after the date of incorporation and subsequently, not later than 15
months after holding the last preceding annual meeting. An annual meeting is to
be held for the purposes of considering the financial statements and auditor's
report, fixing the number of Directors for the following year, electing
Directors, appointing an auditor and transacting any other business that may
properly be brought before the meeting.
(2) SPECIAL MEETINGS OF SHAREHOLDERS
The Board may at any time call a special meeting of Shareholders.
(3) SPECIAL BUSINESS
All business transacted at a special meeting of Shareholders and all business
transacted at an annual meeting of Shareholders, except consideration of the
financial statements and auditor's report, fixing the number of Directors for
the following year, election of Directors and reappointment of the incumbent
auditor, is deemed to be special business.
<PAGE> 21
(4) PLACE AND TIME OF MEETINGS
Meetings of Shareholders may be held at the place within Alberta and at the time
the Board determines. A meeting of Shareholders may be held outside Alberta if
all the Shareholders entitled to vote at that meeting agree to holding the
meeting outside Alberta. A Shareholder who attends a meeting of Shareholders
held outside Alberta is deemed to have agreed to holding the meeting outside
Alberta, except when the Shareholder attends the meeting for the express purpose
of objecting to the transaction of any business on the grounds that the meeting
is not lawfully held.
(5) NOTICE OF MEETINGS
Notice of the time and place of a meeting of Shareholders must be sent not less
than 21 days and not more than 50 days before the meeting to:
(a) each Shareholder entitled to vote at the meeting;
(b) each Director; and
(c) the auditor of the Corporation.
Notice of a meeting of Shareholders called for the purpose of transacting any
business other than consideration of the financial statements and auditor's
report, fixing the number of Directors for the following year, election of
Directors and reappointment of the incumbent auditor must state the nature of
the business to be transacted in sufficient detail to permit a Shareholder to
form a reasoned judgment on that business and must state the text of any special
resolution to be submitted to the meeting.
(6) NOTICE OF ADJOURNED MEETINGS
With the consent of the Shareholders present at a meeting of Shareholders, the
chairperson may adjourn that meeting to another fixed time and place. If a
meeting of Shareholders is adjourned by one or more adjournments for an
aggregate of less than 30 days, it is not necessary to give notice of the
adjourned meeting, other than by verbal announcement at the time of the
adjournment. If a meeting of Shareholders is adjourned by one or more
adjournments for an aggregate of 30 days or more, notice of the adjourned
meeting must be given as for the original meeting. The adjourned meeting may
proceed with the business to have been transacted at the original meeting, even
though a quorum is not present at the adjourned meeting.
(7) WAIVER OF NOTICE
A Shareholder and any other person entitled to attend a meeting of Shareholders
may waive in any manner notice of a meeting of Shareholders. Attendance of a
Shareholder or other person at a meeting of Shareholders is a waiver of notice
of the meeting, except when the Shareholder or other person attends the meeting
for the express purpose of objecting to the transaction of any business on the
grounds that the meeting is not lawfully called.
<PAGE> 22
-12-
(8) CHAIRPERSON OF MEETINGS
The chairperson of any meeting of Shareholders is the first mentioned of the
following Officers (if appointed) who is present at the meeting: President or
Chairperson of the Board. If neither of the foregoing Officers is present, the
Shareholders present and entitled to vote at the meeting may choose a
chairperson from among those individuals present.
(9) PROCEDURE AT MEETINGS
The chairperson of any meeting of Shareholders shall conduct the proceedings at
the meeting in all respects. The chairperson's decision on any matter or thing
relating to procedure is conclusive and binding upon the Shareholders.
(10) PERSONS ENTITLED TO BE PRESENT
The only persons entitled to be present at a meeting of Shareholders are:
(a) the Shareholders entitled to vote at the meeting;
(b) the Directors;
(c) the auditor of the Corporation; and
(d) any others who, although not entitled to vote, are entitled or required
under any provision of the ABCA, any unanimous shareholder agreement,
the Articles or the Bylaws to be present at the meeting.
Any other person may be admitted only on the invitation of the chairperson of
the meeting or with the consent of the meeting.
(11) QUORUM
A quorum of Shareholders is present at a meeting of Shareholders if the holders
of a majority of the shares entitled to vote at the meeting are present in
person or represented by proxy.
(12) JOINT SHAREHOLDERS
If two or more persons hold shares jointly, one of those holders present at a
meeting of Shareholders may, in the absence of the others, vote the shares. If
two or more of those persons are present in person or by proxy, they must vote
as one on the shares jointly held by them.
(13) DECISION ON QUESTIONS
At every meeting of Shareholders all questions proposed for the consideration of
Shareholders must be decided by the majority of votes, unless otherwise required
by the ABCA or the Articles. In the case of an equality of votes, the
chairperson of the meeting does not, either on a show of hands or verbal poll or
on a ballot, have a casting vote in addition to the vote or votes to which the
chairperson may be entitled as a Shareholder or proxy holder.
<PAGE> 23
-13-
(14) VOTING
Voting at a meeting of Shareholders shall be by a show of hands of those present
in person or represented by proxy or by a verbal poll of those present by
telephone or other communication facilities. If a ballot is required by the
chairperson of the meeting or is demanded by a Shareholder or proxy entitled to
vote at the meeting, either before or on the declaration of the result of a vote
by a show of hands or verbal poll, voting must be by ballot. A demand for a
ballot may be withdrawn at any time before the ballot is taken. If a ballot is
taken on a question, a prior vote on that question by show of hands or verbal
poll has no effect. At every meeting a Shareholder present in person or
represented by proxy or present by telephone or other communication facilities
and entitled to vote has one vote for each share held.
(15) MEETING BY TELEPHONE
Any person described in subsection (10) may participate in a meeting of
Shareholders by means of telephone or other communication facilities that permit
all persons participating in the meeting to hear each other. A Shareholder
participating in a meeting by means of telephone or other communication
facilities is deemed to be present at the meeting.
(16) RESOLUTION IN LIEU OF MEETING
A resolution in writing signed by all the Shareholders entitled to vote on that
resolution at a meeting of Shareholders is as valid as if it had been passed at
a meeting of Shareholders. A resolution in writing takes effect on the date it
is expressed to be effective.
A resolution in writing may be signed in one or more counterparts, all of which
together constitute the same resolution. A counterpart signed by a Shareholder
and transmitted by facsimile or other device capable of transmitting a printed
message is as valid as an originally signed counterpart.
SECTION 10.
NOTICES
(1) METHOD OF NOTICE
A notice or document required to be sent to a Shareholder, Director, Officer or
auditor of the Corporation may be given by personal delivery, prepaid
transmitted or recorded communication or prepaid mail addressed to the recipient
at the recipient's Recorded Address. A notice or document sent by personal
delivery is deemed to be given when it is actually delivered. A notice or
document sent by means of prepaid transmitted or recorded communication is
deemed to be given when dispatched or delivered to the appropriate communication
company or agency or its representative for dispatch. A notice or document sent
by mail is deemed to be given when deposited at a post office or in a public
letter box.
(2) NOTICE TO JOINT SHAREHOLDERS
If two or more persons are registered as joint holders of any share, a notice or
document may be sent or delivered to all of them, but notice given to any one
joint Shareholder is sufficient
<PAGE> 24
-14-
notice to the others
(3) FAILURE TO GIVE NOTICE
The accidental failure to give a notice to a Shareholder, Director, Officer or
auditor of the Corporation, the non-receipt of a notice by the intended
recipient or any error in a notice not affecting its substance does not
invalidate any action taken at the meeting to which the notice relates.
(4) EXECUTION OF NOTICES
Unless otherwise provided, the signature of any person designated by resolution
of the Board to sign a notice or document on behalf of the Corporation may be
written, stamped, typewritten or printed.
MADE by the Directors as evidenced by the signature of the following
Director effective January 5, 1996.
/s/ SARA-LANE SIREX
----------------------------------------
SARA-LANE SIREX
CONFIRMED by the Shareholders as evidenced by the signature of the
following Shareholder effective January 5, 1996.
/s/ SARA-LANE SIREX
----------------------------------------
SARA-LANE SIREX
<PAGE> 25
================================================================================
ALBERTA Corporate Access Number
GOVERNMENT OF ALBERTA 20679460
CERTIFICATE OF STATUS
Form 32
I CERTIFY THAT ACCORDING TO OUR RECORDS
COMPOSITE AUTOMOBILE RESEARCH LTD.
INCORPORATED IN ALBERTA ON 96/01/05
IS AS OF THIS DATE A VALID AND SUBSISTING CORPORATION
GIVEN UNDER MY HAND AND SEAL OF OFFICE IN THE PROVINCE OF ALBERTA.
DATED: 97 JUN 13
[SIG]
--------------------------------------
Registrar of Corporations
[SEAL
REGISTRIES
GOVERNMENT OF ALBERTA]
================================================================================
<PAGE> 1
EXHIBIT 9
IRREVOCABLE STOCK TRUST
20
<PAGE> 2
MARITIME
IRREVOCABLE STOCK TRUST
DATED DECEMBER 1, 1997
Maritime International Ltd ("Maritime") is transferring to Lyle Wardrop, as
Trustee, 726,667 shares of Composite Automobile Research, Ltd. ("CAR") stock,
representing all of the shares Maritime owns of CAR in Trust. The term "Shares"
when used in this Agreement of Trust shall include the shares of common stock of
CAR. Maritime owns no other type of shares, options, or pledge rights of stock
of CAR.
Maritime directs Trustee to hold the Shares in Trust, and to distribute the
Shares and to pay the net income therefrom as follows:
FIRST FOR THREE YEARS FROM THE DATE OF THIS TRUST
a) To pay the net income to Maritime as and when received by
Trustee.
b) Upon the sale by Trustee of any of the Shares, to pay to
Maritime the net proceeds from such sale after setting aside a
reasonable reserve to pay for expenses arising from such sale
and the administration of this Trust.
c) If Trustee receives the written approval from the Board of
Directors of CAR allowing distribution to Maritime all or any
part of the Shares, Trustee shall distribute to Maritime upon
written request up to the entire amount of the Shares so
approved for distribution.
d) To distribute the entire interest in all or any part of the
Shares to such charity or charities as Maritime may from time
to time direct Trustee in writing. The words "charity" or
"charities" shall mean an organization described in section
501(c)(3) of the Internal Revenue Code or any successor
provision thereto which is not a private foundation as defined
in section 509 of the Internal Revenue Code and in which
Maritime has no involvement, control or input regarding its
activities.
SECOND NO RIGHT TO AMEND OR REVOKE
Subject to Paragraph FIRST, c), this Trust is irrevocable. Maritime retains no
power to amend or revoke this Trust, in whole or in part.
THIRD POWER TO DISPOSE
Trustee shall, in Trustee's sole and absolute discretion, possess the exclusive
power to dispose of the Shares, whether by sale or otherwise. Maritime hereby
irrevocably relinquishes any right to participate in any decision relating to
the disposition of the Shares.
<PAGE> 3
FOURTH ADMINISTRATIVE POWERS
Trustee shall have the following powers in addition to those conferred by law
until all Shares are distributed:
a) To retain the Shares in the form in which they were received
without being confined to so-called legal investments and
without regard for the principle of diversification.
b) To sell at public or private sales for cash and/or credit, and
to exchange all or any portion of the Shares and to give
options for such sales or exchanges.
c) To exercise any option arising from the ownership of this
investment; to join in any recapitalization, merger,
reorganization, liquidation, dissolution, consolidation or
voting trust plan effecting this investment; to delegate
powers with respect thereto; to deposit securities under
agreements and pay assessments; to subscribe for stock and
bond privileges; and generally to exercise all rights of
security holders.
d) To hold the Shares unregistered or in the name of a nominee.
e) To compromise claims by or against the trust fund, including
but not limited to tax issues and disputes, without order of
court or consent of any party in interest and without regard
for the effect of such compromise on any interest hereunder.
f) To employ accountants, agents, attorneys, investment counsel,
brokers, bank or trust company to perform services for and at
the expense of the Trust and to carry or register this
investment in the name of the nominee of such agent, broker,
bank or trust company. The expenses and charges for such
services shall be charged against principal. Trustee is
expressly relieved of any liability or responsibility
whatsoever for any act or failure to act by, or for following
the advice of, such accountants, agents, attorneys, investment
counsel, brokers, bank or trust company, so long as Trustee
exercises due care in their selection. The fact that a Trustee
may be a member, shareholder or employee of any accounting,
investment, legal or brokerage firm, agent, or bank or trust
company so employed shall not be deemed a conflict of
interest. Any compensation paid pursuant to this subparagraph
shall not affect in any manner the amount of or the right of
Trustee to receive commissions as a fiduciary.
g) To pledge the property as security for the repayment of any
loan received by Maritime.
<PAGE> 4
h) To enter into agreements concerning the Shares and to extend
the duration thereof.
FIFTH VOTING POWERS AND TRUSTEE AUTHORITY
Trustee agrees to vote the Shares held hereunder, on each matter presented to
Composite Automobile Research, Ltd. shareholders for a vote, as freely as any
individual owner of such interest would have.
SIXTH DISCHARGE BY RECEIPT OF PAYMENT
The receipt of a payment by Maritime, Maritime's duly appointed attorney-in-fact
or Maritime's personal representative shall be a complete discharge to Trustee.
SEVENTH DEFINITIONS
a) The word "Trustee" when used in this Agreement of Trust shall
include all genders and the singular and plural as the context
may require.
b) Paragraph headings in this Agreement of Trust are used for
reference only and shall not affect the meaning, construction
or effect of this Agreement of Trust.
c) The words "Composite Automobile Research, Ltd." when used in
this Agreement of Trust shall include its
successors-in-interest and any entity controlling or
controlled by it.
d) All references in this Agreement of Trust to the Internal
Revenue Code shall mean the Internal Revenue Code of 1986, as
amended or reenacted, and all corresponding provisions of any
subsequent federal tax laws and regulations thereunder.
EIGHTH TRUSTEE
a) If Lyle Wardrop ceases to serve for any reason, Maritime
appoints Ming Chu Ma Trustee in his place. Except as provided
above, the then serving Trustee may appoint in writing any
individual and/or a bank or trust company organized under the
laws of the United States or any state thereof and possessed
of trust powers, to serve as successor Trustee. If there is a
total vacancy in the office of Trustee, Maritime may appoint
in writing any individual and/or corporation described above
to serve as successor Trustee.
b) Except for the appointment of Ming Chu Ma as successor
Trustee, each appointment hereunder of a successor Trustee or
co-Trustee shall require the written consent of Maritime.
<PAGE> 5
c) The individual Trustees of any trust hereunder then serving
may unanimously appoint in writing an individual and/or a bank
or trust company organized under the laws of the United States
or any state thereof and possessed of trust powers to serve
with them as co-Trustee.
d) Any Trustee while serving hereunder may resign without court
approval by written notice delivered to Maritime and Composite
Automobile Research, Ltd. If a Trustee should cease to serve,
whether by death or resignation, such Trustee shall be
relieved of all liability through the delivery of an account
(formal or informal) to Maritime and by the signature of a
release based on said account by Maritime and Composite
Automobile Research, Ltd.
e) No Trustee taking office shall be liable in any way for the
acts or omissions of any Trustee prior to the Trustee's
assuming office and shall have no duty to review the
performance of a Trustee prior to that time.
f) No Trustee shall be required to post security in any
jurisdiction.
NINTH SITUS: APPLICABLE LAW
This Trust has been accepted by the Trustee in the State of California, its
situs shall be in that State, and all questions pertaining to its validity,
construction and administration shall be determined in accordance with the laws
of that State.
Executed of behalf of Maritime International, Ltd.
by
-----------------------------------
Trevor Lloyd, Director
<PAGE> 1
EXHIBIT 10
MATERIAL CONTRACTS
21
<PAGE> 2
EXHIBIT 10a
HONDURAS
22
<PAGE> 3
WORLD TRANSPORT AUTHORITY, INC.
A DIVISION OF COMPOSITE AUTOMOBILE RESEARCH, LTD.
MANUFACTURING & DISTRIBUTION LICENSE
FOR
WORLDSTAR OF HONDURAS, INC.
1
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Paragraph Title Page
- --------- ----- ----
<S> <C> <C>
1. Preamble 5
2. Granting of License 6
3. Licensee's Area of Exclusive Responsibility 6
4. Sales Quotas 6
5. Renewal of License 6
6. Facility Location 7
7. Facility Development 7
8. Molds, Tools & Equipment 8
9. Mold and Equipment Refurbishing 8
10. Training 8
11. Facility Opening 9
12. Operating Assistance 9
13. Product Offering 10
14. Parts, Supplies and Materials 11
15. Advertising and Promotion by Company 11
16. Advertising and Promotion by Licensee 12
17. Bookkeeping and Records 12
18. Sales Reports and Financial Statements 12
19. Specifications, Standards, Procedures and Rules 13
20. Compliance with Laws 13
21. Prices to be Determined by Licensee 13
22. Operating Manual 14
23. Trade Secrets: New Processes, Concepts, Improvements, etc. 14
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
Paragraph Title Page
- --------- ----- ----
<S> <C> <C>
24. Licensee Must Directly Supervise Facility 15
25. Insurance 15
26. Marks 15
27. Initial Fees 16
28. Inventory Purchase / Royalty Fee 17
29. Inspection 17
30. Audit of Sales Reports and Financial Statements 18
31. Termination by Licensee 18
32. Termination by the Company 18
33. Licensee's Obligations Upon Termination of Expiration 19
34. The Company's Option to Purchase Facility 20
35. Licensee's Covenants Not to Compete 21
36. Assignment by the Company 21
37. Assignment by Licensee 21
38. The Company's Approval of Assignment 22
39. Death or Disability of Licensee 22
40. Right of First Refusal of the Company 23
41. Judicial Enforcement, Injunctions and Specific Performance 24
42. Jurisdiction and Venue 24
43. Independent Contractors/Indemnification 24
44. Licensee Corporation/Partnership 25
45. Governing Law 25
46. Binding Effect 25
47. Construction 25
48. Waiver 26
49. Standard of Reasonableness 26
50. Notices 26
</TABLE>
3
<PAGE> 6
<TABLE>
<CAPTION>
Paragraph Title Page
- --------- ----- ----
<S> <C> <C>
51. Effective Date of this Agreement 27
52. Contingency 27
Exhibit A - Product Line 28
Exhibit B - Payment of License Fee 29
Exhibit C - Equipment List 30
Exhibit D - Container Logistics 31
</TABLE>
4
<PAGE> 7
WORLD TRANSPORT AUTHORITY, INC.
STANDARD MANUFACTURING AND DISTRIBUTION LICENSE
THIS AGREEMENT is made and entered into by and between WORLD TRANSPORT
AUTHORITY, INC. A NEVADA CORPORATION, with it's principal office at 635
FRONT STREET, EL CAJON, CA 92020 (the "COMPANY") and WORLDSTAR OF
HONDURAS, INC. whose principal address is APDO. POSTAL 3953, BLVD. JOSE
CECILIO DEL VALLE, ENTRADA RESIDENCIAL LAS VEGAS, TEGUCAIGALPA HONDURAS
C.A. ("LICENSEE").
1. Preamble.
The Company originated and produced certain unique designs, production
processes and molds for use in manufacturing composite and fiberglass
body/chassis parts for a vehicle with three body configurations: an 11 passenger
people mover, a three passenger pickup and a three passenger van. These vehicles
have the trade name WORLDSTAR. The Company developed the design, molding
procedure, trademarks, trade names, and goodwill for the marketing and
manufacturing of the WORLDSTAR, consisting of manufactured plastic parts
produced from molds created from the original design. Licensee has applied to
the Company for a license to manufacture and distribute WORLDSTAR automobiles
utilizing the Company's business format, manufacturing methods, specifications,
standards, operating procedures, operating assistance, advertising services, and
the trademarks. Such application has been approved by the Company in reliance
upon all of the representations made therein, including without limitation the
ownership of License. The Company contemplates the development of additional
vehicles, options, products and processes which shall likewise be offered to
Licensee to manufacture and distribute upon mutually agreeable terms and
conditions. In no way, will the Company introduce these new items into the
Honduras other than thtough WORLDSTAR OF HONDURAS, INC. exclusively. It is also
understood that these new products can only be sold in the Honduras through the
Master License with WORLDSTAR OF HONDURAS, INC. Licensee has read this Agreement
and has been given an opportunity to clarify any provision of the License
Agreement. Licensee hereby acknowledges that he understands and accepts the
terms, conditions and covenants contained in this License Agreement as being
reasonable and necessary to maintain the Company's high standards of quality and
service and the uniformity of those standards in order to protect and preserve
the goodwill of the Marks.
5
<PAGE> 8
2. Granting of License.
Subject to the provisions of this License Agreement, the Company hereby
grants to the Licensee a License to establish a manufacturing facility
('Facility') for the manufacture of the WORLDSTAR product line as described in
Exhibit A and a License to use the trademarks in connection therewith for a term
of two (2) years (the "term of the License") in Honduras. The phrase "term of
the License" used herein shall mean the initial term and the renewal term if the
License is renewed. The License fee is $250,000.00 (Exhibit B). The granting of
the License allows the Licensee to produce annually up to 324 WORLDSTAR cars,
pickups or vans, as an aggregate number. If the Licensee wishes to produce
WORLDSTAR vehicles in excess of the 324 annual aggregate number, another License
must be purchased from the Company. Depending on the training, facility layout,
additional equipment and actual annual production desired, additional Licenses
start at $137,500.00. WORLDSTAR OF HONDURAS, INC. would be granted a 5% overage
allowance in extreme conditions at prorated prices. Example of Extreme
Conditions: Year end, only a few more vehicles are needed to fulfill a large
contract - any additional shipping charges to be paid by WSoH.
3. Licensee's Area of Exclusive Responsibility.
The following geographic territory shall be the Area of Exclusive
Responsibility of the Facility: HONDURAS. During the term of the License,
provided that Licensee is in full compliance with this Agreement, the Company
will not operate or grant a License for the operation of a manufacturing
facility whose area of exclusive responsibility overlaps Licensee's Area of
Exclusive Responsibility.
4. Sales Quotas.
70% of the normal annual product capacity of 324 units is the sales
quota to maintain the License. If the Licensee fails to meet the minimum
requirement of 70% normal capacity of 324 units (227 units) after one full
calendar year (12 consecutive months), the Company reserves the right to sell a
License into the area, after 90-day notification is given to the Licensee of
non-conpliance. Under the terms of the Master License, a minimum of three (3)
additional Licenses must be sold within Honduras within the two (2) year term of
the Master License, otherwise the Master License reverts back to World Transport
Authority, Inc.
5. Renewal of License.
Licensee may, at his option, renew the License for an additional
five-year term, provided that: (a) Licensee is not in default of any provision
of this Agreement or any other agreement between Licensee
6
<PAGE> 9
and the Company or its subsidiaries or affiliates, and has substantially
complied with all the terms and conditions of such agreements during the terms
thereof; (b) Licensee has satisfied all monetary obligations owed by Licensee to
the Company and its subsidiaries and affiliates and has timely met these
obligations throughout the term of this Agreement; (c) Licensee has met the
sales quotas for the Facility prescribed in Paragraph 4; and (d) Licensee is
able to maintain possession of the site of the Facility or to secure and develop
a suitable alternative site approved by the Company. Renewal of the License
shall be effected by the execution by the Company and Licensee of an extension
agreement. Licensee agrees to give the Company not less than six (6) months nor
more than twelve (12) months, prior written notice of an election not to renew
the License. After approval of the extension of the License by the Company,
failure or refusal by Licensee to execute such extension agreements within
thirty (30) days after delivery thereof shall be deemed an election by Licensee
not to renew the License. The price of the 5 year extension of the License
agreement will be one dollar ($1) U.S.
6. Facility Location.
Master Licensee must inform the Company prior to any moves to relocate.
Any such relocation shall be at Licensee's sole expense and the Company shall
have the right to charge Licensee for any costs that the Company may incur, and
a reasonable fee for its services, in connection with any such relocation of the
Facility such as reprogramming computer systems or sending of technicians to aid
in the relocation of equipment at the Licensee's request.
7. Facility Development.
Licensee agrees that promptly after obtaining possession of the site for
the Facility Licensee will: (a) cause to be prepared and submit for approval by
the Company a site plan for the Facility (including requirements for dimensions,
exterior design, materials, interior layout, signs, and decorating) required for
the development of the Facility at the site leased or purchased therefore; (b)
obtain all required zoning changes; all required building, driveway, utility,
health, sanitation, and sign permits and any other required permits; (c)
complete the construction and/or remodeling, and sign installation and
decorating of the Facility in full and strict compliance with plans and
specifications therefore approved by the Company. The Company will as a
provision of the License help the Licensee design the WORLDSTAR manufacturing
facility floor plan for the most efficient use of the space.
7
<PAGE> 10
8. Molds, Tools, and Equipment.
The Company shall provide Licensee with molds, tools and all equipment
specific to the manufacture of the WORLDSTAR automobile. Molds are proprietary
to the Company and must be returned to the Company in case of default,
non-compliance or time limitations (two/five year term). A complete listing of
these molds, tools and equipment can be found in Exhibit C. Licensee will not
duplicate WORLDSTAR molds or tooling, not will the Licensee sell, give or trade
said WORLDSTAR molds or tooling to any third party not related to the original
agreement.
9. Mold & Equipment Refurbishing.
The molds, tools and equipment have been designed and or specified to be
capable of producing their products at maximum quantity as allowed by the
Licensee over the term of the License. If the molds, tools or equipment
deteriorates the Licensee agrees to refurbish such molds, tools and equipment
and/or introduce into production such changes as are required by the Company to
maintain minimum product standards and specifications within a reasonable time
after receipt of notice thereof, not to exceed three (3) months.
10. Training.
Prior to the opening of the Facility, the Licensee shall enroll up to
two persons (selected by the Licensee) in a training program for instruction in
all phases of the operation of a World Transport Authority manufacturing
facility. These programs shall be furnished at such times and places as the
Company designates. The Licensee's designated personnel shall complete the
training program to the satisfaction of the Company, so that then they will be
able to train their employees at their local facility. Licensee shall be
responsible for the travel and compensation of himself and his employees
incurred during the training program. The Company shall provide living
accommodations (room and board) as well as transportation to the training
facility and back to the living accommodation. The Licensee's personnel shall be
trained in all aspects of the W.T.A. business, including but not limited to, the
following: Sales, Marketing, Computer Operation, WORLDSTAR Manufacturing;
welding, fabrication, molding, assembly, upholstery and testing.
Licensee shall implement a training program for employees of the
Facility in accordance with training standards and the procedures manual
provided by the Company upon start of the facility and as necessary thereafter.
Licensee shall purchase from the Company and utilize such training aids which
the Licensee may require from time to time (e.g., films, videotapes or printed
materials). Licensee agrees not
8
<PAGE> 11
to employ any person who is required by the Company to complete a training
program but who fails or refuses to do so.
11. Facility Opening.
Licensee shall complete development of the Facility and shall have the
Facility ready to open and commence the conduct of its business within a
reasonable time after Licensee obtains possession of such site and possession of
the Company supplied molds, tooling, equipment and production materials or from
the date of this Agreement if Licensee has possession of such site on the date
hereof. If Licensee has not, within nine (9) months from the date of this
Agreement, completed all required training and opened the Facility, then this
Agreement and the License granted hereby may, at the sole option of the Company,
be terminated upon the giving of written notice to Licensee by the Company.
12. Operating Assistance.
a). The Company shall furnish to Licensee reasonable operating
assistance in connection with the operation of the Facility as the Company and
WORLDSTAR OF HONDURAS determines to be necessary. The Company will provide two
technicians for approximately two (2) weeks to provide operating assistance upon
initial start-up. The Company shall be responsible for the travel and
compensation of its technicians incurred during the initial two-week operating
assistance program. Licensee shall provide living accommodations (room and
board) as well as transportation to the Facility and back to the living
accommodation. The Company technicians shall provide operating assistance in
accordance with the training standards and procedures prescribed by the Company.
Operating assistance will include advice and guidance with respect to: (i)
manufacturing processes and techniques; (ii) vehicle quality control testing,
(iii) hiring and training employees; (iv) formulating and implementing
advertising and promotional programs; and (v) the establishment and maintenance
of administrative, bookkeeping, accounting, inventory control and general
operating procedures.
b). In order to promote the desire of the Company that the automobiles
manufactured by Licensee be of the highest quality, the Company will provide
continuing operating assistance as it sees fit. In order to promote quality, the
Company shall advise Licensee from time to time of improvements or changes to
the operating procedures. The Company may also advise Licensee from time to time
of concerns or problems with Licensee's product quality or the Facility
discovered by the Company in the normal course of business or during inspections
made by the Company. The Company shall make no separate charge to Licensee for
such continuing operating assistance, provided that the Company feels that the
Licensee is making reasonable steps to address the concerns expressed by the
Company.
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c). If the Licensee, after written notice and in the sole opinion of the
Company, continues to produce automobiles which are of unacceptable levels of
quality, or continues to operate the Facility in an unsafe manner, or fails to
substantially comply with the provisions of this Agreement, the Company may
require that the Licensee make necessary changes. The Company may at it's
discretion incur costs and make reasonable charges for such costs for corrective
operating assistance made necessary, in the sole judgment of the Company, as a
result of Licensee's failure to comply with any provision of this Agreement or
any specification, standard or operating procedure prescribed by the Company or
corrective operating assistance provided to Licensee in excess of that which is
normally provided by the Company.
13. Product Offering.
Licensee agrees that he will offer for sale and sell at the Facility
only World Transport Authority products and services. Options, not supplied by
WTA such as radios, customizing parts, etc. of acceptable high quality will be
an exception. Licensee further agrees not to offer for sale or sell at the
Facility any other product or services or use such premises for any purpose
other than the manufacture and sale of World Transport Authority products.
Notwithstanding the foregoing, Licensee may repair "non-competitive products"
which are compatible with the Facility and technologies of the Licensee provided
such products do not impair Licensee's ability to meet production demands and/or
minimum quotas as herein provided. The Licensee may also at his sole discression
provide options, modifications, additions, upgrades and repair parts to the
WORLDSTAR that in the Licensee's opinion helps with the sales and profitability
of the product. Notwithstanding the foregoing, should Licensee fail to generate
at least 70% of the sales quotas as described in Paragraph 4 for a period of six
consecutive months, and the Licensee has exercised all reasonable due diligence
to generate such sales, Licensee shall be permitted to introduce into production
at the Facility non-World Transport Authority products approved by the Company
upon such terms and for such periods as are commercially reasonable under the
market conditions then existing and to which both Licensee and Company agree in
writing.
14. Parts, Supplies and Materials.
All parts, supplies and materials used in the production of the
WORLDSTAR shall be purchased from the Company and at no time be sourced
elsewhere. The Company has the right to upgrade, change and modify due to
technological changes at it's sole discretion any and all parts, supplies and
materials. The Company is responsible to supply the Licensee tooling for any
changes made at no cost to the Licensee. The parts, supplies and materials shall
be drop shipped directly to WORLDSTAR OF HONDURAS from the manufacturer as the
Company deems mutually advisable to minimize shipping
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costs and utilize Just-In-Time (JIT) production methods. As may be mutually
acceptable to the Company and WSoH parts, supplies and materials may be shipped
to WSoH in 40' shipping containers, or if the port facility in the area is not
capable of handling 40' containers, 20' containers will be used. The Company
shall have the right from time to time without notice to examine the Facility of
the Licensee and any related warehousing facility and to test or inspect the
parts, materials or supplies to determine whether they were procured from the
Company. In the event such inspections disclose non-compliance, the Company
shall have the right to charge reasonable fees for the inspection of the
materials. The Company, at its sole discretion, shall fine the Licensee a fine
of 25 times the value of the products not purchased from the Company. If the
Company finds that the Licensee continues this practice, the License will be
terminated and all molds, tools and equipment purchased with said License must
be returned to the Company at the Licensees expense.
15. Advertising and Promotion by the Company.
The Company shall from time to time formulate, develop, produce and
conduct advertising and promotional programs in such form and media as it
determines to be most effective. The Company shall have the right, at its sole
discretion, to determine the composition of all geographic territories and
market areas for the development and implementation of such advertising and
promotion programs. All costs of the formulation and development of any such
advertising and promotion will be paid for by the Company. The Company shall
design advertising materials for the promotion of the products and the Marks.
Any production and distribution costs shall be borne directly by Licensee for
such materials ordered by the Licensee such as brochures, mailers, posters,
etc. International advertising shall be the sole responsibility of the Company
and no international advertising shall be placed by Licensee. Licensee
acknowledges and understands that this advertising is intended to maximize
general public recognition and patronage of the Marks in the manner determined
to be most effective by the Company and that the Company undertakes no
obligation in developing, implementing or administering such programs.
16. Advertising and Promotion by Licensee.
All advertising and promotion by Licensee shall be completely factual
and shall conform to the highest standards of ethical advertising and the
policies prescribed by the Company, including policies contained in the
Company's corporate identity manuals as revised by the Company. Advertising
guidelines and actual ad formats can be found in the supplied computer program
which has been provided by the Company within the materials noted in Exhibit C.
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<PAGE> 14
17. Bookkeeping and Records.
Licensee shall use the established bookkeeping and record keeping
systems provided by the Company in the computer business program for the
retention of sales, purchase orders, invoices, payroll, accounts payable, sales
tax, tax returns, cash receipts and disbursements journals and general ledgers.
Said records shall be made available to the Company at any time upon reasonable
notice and during regular business hours.
18. Sales Reports and Financial Statements.
Licensee shall submit to the Company: (a) within ten (10) days of the
end of each quarter a report of the sales of products and services sold at the
Facility, and such other information and supporting records as the Company
requires. (b) within sixty (60) days of the end of each fiscal year of the
Facility, unaudited annual statements of profit and loss and financial condition
of the Facility. The Company may require Licensee to obtain at the Company's
expense and submit to the Company within sixty (60) days an audited statement of
profit and loss and financial condition of the Facility for any fiscal year if
the Company believes that Licensee has submitted sales reports, unaudited profit
and loss statements or tax returns containing material inaccuracies. Should such
audit disclose greater than 10% under-reporting of unit sales, the cost of such
audit shall be assumed by Licensee. If the Licensee continues to under-report
sales for three consecutive quarters, the Company may fine the Licensee up to
25% of the unreported sales.
19. Specifications, Standards, Procedures and Rules.
Licensee agrees to fully comply with all specifications, standards and
operating procedures and rules prescribed for the Facility, including without
limitation, specifications, standards and operating procedures and rules
relating to: (a) the safety, maintenance, cleanliness, sanitation, function and
appearance of the Facility and its equipment, fixtures, furniture, decor and
signs; (b) qualifications, dress, grooming, general appearance and demeanor of
Licensee and all employees of Licensee and the Facility; (c) quality,
appearance, performance and uniformity, and manner of preparation and sale of
all World Transport Authority products sold by Licensee and of all supplies and
materials used in the preparation and sale thereof; (d) methods and procedures
relating to receiving, preparing and delivering customer orders; (e) hours
during which the Facility will be open for business; (f) advertising and
promotion; (g) use of standard forms; (h) use of exterior and interior signs,
posters, displays and similar items; (i) the handling of customer complaints;
(i) compliance with the Company's Identity Programs, as same may
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<PAGE> 15
exist; and (k) the posting of signs identifying Licensee as the owner of the
Facility in accordance with the Company's requirements.
20. Compliance with Laws.
Licensee shall secure and maintain in force all required licenses,
permits and certificates and shall operate the Facility in full compliance with
all applicable laws, ordinances and regulations, including without limitation
all government regulations relating to occupational hazards and health, consumer
protection, unfair and deceptive practices, trade regulation, and other rules as
stated by the government of the Licensee country.
21. Prices to be Determined by Licensee.
The Company may from time to time offer guidance to Licensee relative to
retail and wholesale prices for the products and services of the Facility that
in the Company's judgment constitute good business practice. Licensee shall have
the sole right to determine the prices to be charged by the Facility and no such
guidance shall be deemed or construed to impose upon Licensee any obligation to
charge any fixed, minimum or maximum prices for any product or service offered
for sale by the Facility.
22. Operating Manual.
The Company will supply to Licensee during the term of the License
Agreement one or more copies of an operating manual containing mandatory and
suggested specifications, standards, production and operating procedures and
rules prescribed by the company and information relative to other obligations of
Licensee hereunder and the operation of the Facility (the "Operating Manual").
This manual will be provided both in written and in a computer format both in
English. The entire contents of the Operating Manual will remain confidential
and the intellectual property of the Company. The Company shall have the right
to add to and otherwise modify the Operating Manual, if deemed necessary by the
Company to improve the standards of service or product quality or the efficient
operation of the Facility, to protect or maintain the goodwill associated with
the Marks or to meet competition, provided that no such addition or modification
shall alter Licensee's fundamental status and rights under this Agreement. The
provisions of the Operating Manual as modified and mandatory specifications
standards and operating procedures and rules prescribed by the Company and
communicated to Licensee in writing, shall constitute provisions of this
Agreement as if fully set forth herein. All references herein to this Agreement
shall include the provisions of the Operating Manual and all such mandatory
specifications,
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<PAGE> 16
standards and operating procedures and rules. The modified provisions to the
manual shall be transmitted to be incorporated in both the written and computer
versions.
23. Trade Secrets; New Processes, Concepts.
Licensee acknowledges that his entire knowledge regarding the production
of the WORLDSTAR automobile, including without limitation the contents of the
Operating Manual and the specifications, standards and operating procedures of
the Facility, is derived from information disclosed to Licensee by the Company
and that such Operating Manual and such other information is confidential and a
trade secret of the Company. Licensee agrees that he will maintain the absolute
confidentiality of the Operating Manual and all such other information during
and after the term of the License, disclosing same to the other employees of the
Facility only to the extent necessary for the operation of the Facility in
accordance with this Agreement, and that he will not use the Operating Manual
and such other information in any other business or in any manner not
specifically authorized or approved in writing by the Company. Licensee agrees
that if they shall develop any new concept, process or improvement in the
operation or promotion of the Facility or product (other than those not uniquely
applicable to the World Transport Authority product itself), Licensee shall
promptly notify the Company and shall provide the Company with all necessary
information with respect thereto without compensation therefore. Licensee
acknowledges that such concept, process or improvement shall become the property
of the Company and that the Company may itself utilize or disclose to other
Licensees such information. The Company at its sole discretion shall decide if
the new concept, process or improvement is such that an acknowledgment of the
new idea is meritorious of a royalty or fee.
24. Licensee Must Directly Supervise Facility.
The Facility shall be under the direct, on-premises supervision of
Licensee (or person approved by the Company). Licensee (or person approved by
the Company if Licensee is a corporation or partnership) shall devote his entire
time (excluding reasonable vacation periods) which shall be no less than forty
(40) hours per week to the management of the Facility.
25. Insurance.
Licensee shall at all times during the term of the License maintain in
force at his sole expense comprehensive general liability insurance (including,
but not limited to coverage for personal injury, product and contractual
liability), motor vehicle liability, fire, and workmen's compensation insurance
if necessary in the country where the Licensee is located. All comprehensive
general liability and motor
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<PAGE> 17
vehicles liability insurance policies shall name the Company as additional
insured, provided that any increase in insurance premiums attributable to the
naming of Company as an additional insured shall be assumed by Company. Said
policies shall provide that the Company shall receive thirty (30) days prior
written notice of termination, expiration, cancellation, modification or
reduction in coverage of any such policy. Licensee shall submit to the Company
annually a copy of the certificate of insurance or evidence of the renewal or
extension of each such insurance policy.
26. The Marks.
Licensee acknowledges that the Company is the owner of all Marks
licensed to Licensee by this Agreement and all usage thereof by Licensee and any
goodwill established thereby shall be for the exclusive benefit of the Company.
Licensee agrees to use each such Mark in full compliance with rules prescribed
from time to time by the Company. Licensee may not use any Mark in connection
with the sale of any unauthorized product or service or in any other manner not
explicitly authorized in writing by the Company. Licensee shall immediately
notify the Company of any infringement of or challenge to the Company's use of
any Mark or claim by any person of any rights in any Mark, and Licensee shall
not communicate with any person other than the Company and its counsel in
connection with any such infringement challenge or claim. The Company shall have
sole discretion to take such action as it deems appropriate and the right to
exclusively control any litigation of the Patent or Mark or other proceeding
arising out of any such infringement, challenge or claim or otherwise relating
to any Mark and Licensee agrees to execute any and all instruments and
documents, render such assistance and do such acts and things as may, in the
opinion of the Company's counsel, be necessary or advisable to protect and
maintain the interests of the Company in any such litigation, Patent or
Trademark or other proceeding or to otherwise protect and maintain the interest
of the Company in the Marks. The Company agrees to indemnify Licensee against
and to reimburse Licensee for all damages for which he is held liable in any
proceeding arising out of the use of any Mark in compliance with this Agreement
and for all costs reasonably incurred by Licensee in the defense of any such
claim brought against him or in any such proceeding in which he is named as a
party. If it becomes advisable at any time in the sole discretion of the Company
for Licensee to modify or discontinue use of any Mark and/or use one or more
additional or substitute trademarks Licensee agrees to do so and the sole
obligation of the Company in any such event shall be to reimburse Licensee for
his tangible costs of complying with this obligation.
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<PAGE> 18
27. Initial Fees.
Licensee agrees to pay to the Company a license application fee in the
amount of two hundred sixty thousand dollars ($250,000.00 U.S.), payable as
provided in Exhibit B attached hereto. Licensee shall have the right to inspect,
at the point of debarcation, all molds, equipment, tooling and supplies, as
indicated in Exhibit C of this License application, prior to shipment and prior
to installment payment. In the event the Company fails to produce the required
equipment, tooling and supplies within 30 days of the time agreed upon by the
Company, unless not within the Company's control, Licensee shall be entitled to
the refund of fees paid to date. If a tool, piece of equipment or supply is
unavoidably unavailable the Company has the right to substitute a tool, piece of
equipment or supply of equal or better quality. Licensee shall assume all
shipping expenses to Licensee's Facility from the Port of San Diego, California
U.S.A. Licensee intends to release from escrow each installment immediately
upon satisfaction of the Company completing each phase of the License Payment
Schedule.
It should be understood, that at the time this contract is signed, the
Licensee is unaware of exactly what it takes to construct the aforementioned
vehicles and operate a modern efficient business. The Licensee is purchasing in
good faith, all goods and knowledge of the Company expecting the Company will
supply everything needed to produce a high tech, quality vehicle and business.
28. Inventory Purchase.
The Company shall purchase in quantity all the materials neededs by the
Licensee for the manufacture of the WORLDSTAR vehicle. These materials shall be
shipped directly to WSoH or collected and packaged ready for shipment in 40'
containers, or 20' as outlined in paragraph 14. The Company shall add together
all materials needs from each Licensee and negotiate extraordinary discounts in
pricing from our suppliers. From time to time the Company may change suppliers
seeking better pricing, quality or availability. The Company shall organize the
containerization of the materials and shipment to the Licensee. The Company will
charge the Licensee for the cost of materials, assembly, handling and
containerization plus a royalty fee of $275.00 per vehicle. If the Company
receives a better price from its suppliers this cost savings belongs to the
Licensee. The Licensee shall cause a Letter of Credit to be lodged with the
Company's bank for the container of materials with such terms and conditions
that allow the Company to use the Letter of Credit as collateral for the
Company's Letter of Credit to their suppliers. With the Company using the
Licensees credit and the combination of all Licensees collective buying power
the Company is able to pass on great savings to the Licensee for the parts,
supplies and materials. In addition, the Company is not required to use it's
resources to finance the purchase of the parts, supplies and materials.
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29. Inspection.
To determine whether the Licensee is complying with this Agreement the
Company shall have the right at any time during business hours, and without
prior notice to Licensee, to inspect the Facility and the business bookkeeping
records and other supporting records and documents of the Facility and Licensee.
Such inspections shall not unreasonably disrupt the ongoing operations of the
Facility or interfere with the duties of Licensee or its employees. Such
inspections shall be made at the Company's expense, provided, however, that if
the Company is required to make any inspections in connection with Licensee's
repeated or continuing failure to comply with this Agreement following prior
notice and reasonable opportunity to cure (not to exceed 30 days) deficiencies
particularized by the Company. The Company shall have the right to charge
Licensee for the costs of making all further inspections in connection with such
failure to comply which reveal continuing deficiencies, including without
limitation travel expenses, room and board and compensation of the Company's
employees.
30. Audit of Sales and Financial Statements.
The Company shall have the right to audit or cause to be audited the
sales reports, and financial statements which Licensee is required to submit by
Paragraph 18 of this Agreement. In the event any such audit shall disclose
unequal purchases of parts from the Company compared to the sales of the
Licensee, for any period or periods, Licensee shall pay to the Company, within
fifteen (15) days after receipt of the audit report, a fee of 10% of the value
of vehicles sold where the materials were not purchased from the Company.
Further, in the event such understatement for any period or periods shall be ten
percent (10%) or more of the gross sales of the Facility for such period or
periods, Licensee shall reimburse the Company for the cost of such audit,
including without limitation the charges of any independent certified public
accountant and the travel expenses, room and board and compensation of employees
of the Company. The 10% fee plus expenses is in addition to the fines outlined
in Paragraph 14 as applicable.
31. Termination by Licensee.
If Licensee is in compliance with this Agreement and the Company
breaches this Agreement and fails to cure such breach within ninety (90) days
after written notice thereof is delivered to the Company, Licensee may terminate
this Agreement and the License effective ten (10) days after delivery to the
Company of notice thereof. The Licensee at that time is to be returned his
License fee prorated over a 5 year period less $135,000. The balance is payable
within 10 days to the Licensee after the Company
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<PAGE> 20
receives all tools, equipment and supplies associated with the License fee as
described in Exhibit C and added to from time to time as memorialized in Company
shipping documents. A termination of this Agreement and the License by Licensee
without complying with the foregoing requirement or for any reason other than
the Company's breach of this Agreement and failure to cure such breach within
thirty (30) days after receipt of written notice thereof shall be deemed a
termination by Licensee without cause and not in accordance with the provisions
of this Agreement.
32. Termination by the Company.
The Company may terminate this Agreement and the License effective five
(5) days after delivery of notice of termination to Licensee, if: (a) Licensee
or the Facility makes an assignment for the benefit of creditors or an admission
of an inability to pay its obligations as they become due; (b) Licensee fails to
continuously and actively operate the Facility; (c) Licensee suffers
cancellation of or fails to renew or extend the lease or sublease for or
otherwise fails to maintain possession of the premises occupied by the Facility
and fails to secure suitable alternative premises approved by the Company; (d)
Licensee fails to achieve the sales quotas specified in Paragraph 4 in two (2)
consecutive years or any four (4) years of the term of the License; (e) License
consistently fails to submit when due, sales reports or financial statements;
(f) Licensee or any of its owners are convicted of a felony or other crime which
substantially impairs the goodwill associated with the Marks; (g) Licensee
repeatedly fails to substantially comply with this Agreement, whether or not
such failures to comply are corrected after notice thereof is delivered to
Licensee; (h) Licensee or any of its owners have made any material
misrepresentation on his application for the License; or (i) the Licensee or any
person who owns a controlling interest in this Agreement or in the License fails
to dispose of such interest in the manner required by Paragraph 40 hereof. The
Company shall have the further right to terminate this Agreement and the
License, effective upon delivery of notice of termination to Licensee, if
Licensee fails to comply with any provision of this Agreement or any
specification, standard or operating procedure or rule prescribed by the Company
and does not correct such failure within thirty (30) days if such failure
relates to the use of any Mark or the quality of the product or the appearance
of the Facility; fifteen (15) days if such failure is to pay any money payable
by Licensee pursuant to any provision of this Agreement or any other agreement
between the Company or its affiliates or subsidiaries and Licensee; otherwise
thirty (30) days, after written notice of such failure to comply (which shall
describe the action that Licensee must take to correct same) is delivered to
Licensee. It is understood that the Philippine Islands is a 3rd World Country,
and it's 1st Class businesses are not quite up to a standard of a 1st Class
compny is the 1st World. WSPI will make every effort to reach 1st World
standards within reason.
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33. Licensee's Obligations Upon Termination or Expiration.
Upon termination or expiration of the License, Licensee agrees to pay
the Company within fifteen (15) days after the effective date of termination or
expiration any other charges as have or will thereafter become due hereunder and
are then unpaid. Licensee further agrees that upon termination or expiration of
the License, Licensee will immediately return to the Company all copies of the
Operating Manual and all other propriety manuals and written procedures which
have been loaned to Licensee by the Company. All proprietary tooling utilized in
the production of any World Transport Authority product shall be returned to the
Company by the Licensee, or, in the alternative, offered to the Company in the
Licensees location for destruction upon terms and conditions mutually agreeable
to the parties. The WORLDSTAR molds, which are proprietary to W.T.A. and with
the signing of this agreement the Licensee acknowledges this proprietary right,
shall be returned to the Company at the Company's expense. Any inventory or
parts uniquely related to World Transport Authority products shall be valued by
an independent appraisal and offered for sale to the Company which may but shall
not be required to, purchase same at the appraised value and upon terms and
conditions mutually agreeable to the parties. Licensee further agrees that upon
termination or expiration of the License, he will take such action as may be
required to cancel all assumed name or equivalent registrations relating to the
use of any Mark and to notify the telephone company within fifteen (15) days and
all listing agencies of the termination or expiration of Licensee's right to use
all telephone numbers and all classified and other directory listings and to
authorize same to transfer to the Company or its Licensee all telephone numbers
and directory listings of the Facility. Licensee acknowledges that as between
the Company and Licensee, the Company has the sole rights to and interest in all
telephone numbers and directory listings associated with any Mark and authorizes
the Company to direct the telephone company and all listing agencies to transfer
same to the Company or its Licensee, should Licensee fail or refuse to do so,
and the telephone company and all listing agencies may accept such direction of
this Agreement as conclusive of the exclusive rights of the Company in such
telephone numbers and directory listings and its authority to direct their
transfer. If Licensee retains possession of the premises occupied by the
Facility, Licensee agrees that upon termination or expiration of the License, he
will at his expense make such reasonable modifications in the exterior and
interior decor thereof as the Company deems required to minimize its
identification as a World Transport Authority Facility. Licensee agrees that
after the termination or expiration of the License he will not directly or
indirectly in any manner identify the premises which were occupied by the
Facility or any other business as a World Transport Authority Facility, a former
World Transport
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Authority Facility, or as a Licensee of or otherwise associated with the Company
or use in any manner or for any purpose any Mark or other indicia of World
Transport Authority.
34. Company's Option to Purchase Facility.
Upon the termination or expiration of the License except termination by
Licensee for cause pursuant to Paragraph 31 hereof, the Company shall have the
option, but not the obligation, exercisable for thirty (30) days, to purchase
all of the assets of the Facility, including the equipment, inventory, leasehold
interests and improvements and favorable rights and covenants of the Facility
upon terms mutually acceptable to the parties.
35. Licensee's Covenants Not To Compete.
Licensee agrees that he will not during the term of the License have any
interest as an owner (except of publicly traded securities), director, officer,
employee, consultant, representative or agent, or in any other capacity, in any
other "specialty car" manufacturing, design or sales company (except another
World Transport Authority Facility operated under license agreements heretofore
or hereafter entered into between Licensee and the Company). If the License is
terminated by the Company in accordance with this Agreement including by
exercise of the Company's option to purchase pursuant to Paragraph 34 or
pursuant to the right of first refusal contained in Paragraph 40 below, by
Licensee without cause or not in accordance with this Agreement or by mutual
agreement, or if the License expires and Licensee rejects the Company's offer to
renew the License, Licensee agrees that for a period of ten (10) years
commencing on the effective date of termination or expiration of the Licensee,
he will not engage as an owner (except of publicly traded securities), partner,
director, officer, employee, consultant, representative, or agent, or in any
other capacity, in any business or entity which produces in any form a
"specialty car". In the event this agreement is terminated by Licensee for
cause, Licensee shall be permitted to continue production of the WORLDSTAR for
the unexpired remaining term of this license, subject only to the purchase of
all materials to build the WORLDSTAR from the Company. In such event, no quotas
shall apply. In no event shall Licensee's right to produce the WORLDSTAR extend
beyond the original 10 year term hereof absent further agreement. Licensee must
be notified in writing 60 days prior to the end of the 10 year term of License,
so as to have ample time to renew said License.
36. Assignment by the Company.
This Agreement is fully assignable by the Company and shall inure to the
benefit of any assignee or other legal successor to the interests of the Company
herein.
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37. Assignment by Licensee.
This Agreement and the License are personal to Licensee and neither this
Agreement nor the License may be voluntarily, involuntarily, directly or
indirectly assigned or otherwise transferred without the prior written approval
of the Company, and any such assignment or transfer without such approval shall
constitute a breach hereof. This Agreement does not give Licensee the right to
grant a sub-license or similar right.
38. Company's Approval of Assignment.
If Licensee is in full compliance with this Agreement, permission to
assign or transfer shall not be unreasonably withheld by the Company: (a) in the
case of proposed assignments or transfers to a partnership or corporation which
is actively managed by Licensee and in which Licensee owns and controls not less
than fifty-one percent (51%) of the general partnership interest or the equity
and voting power of all issued and outstanding capital stock; provided that the
provisions of Paragraph 44 shall be fully complied with, and (b) subject to the
Company's right of first refusal pursuant to Paragraph 40 hereof, in the case of
proposed assignees or transferees who: (i) are willing to execute and be bound
by all provisions of this Standard Manufacturing and Distribution License and
all other agreements and legal instruments and documents then in effect between
the parties hereto, provided that the Company shall not charge such assignee an
initial license application processing fee; and (ii) who are willing to and do
complete the Company's standard training program for which such assignee shall
pay the Company its standard training fee and a transfer fee in the sum of
twenty-five thousand dollars ($25,000.00) to recover its cost of training and
other costs incurred in approving and effecting the assignment. In connection
with any assignment permitted under this Paragraph 38, Licensee shall provide
the Company with all documents to be executed by Licensee and the proposed
assignee or transferee at least thirty (30) business days prior to execution.
39. Death or Disability Of Licensee.
Upon the death or permanent disability of any person who owns a
controlling interest in this Agreement or in Licensee, the executor,
administrator or representative of such person (the "representative') shall have
twelve (12) months in which to transfer the interest of the deceased or
permanently disabled person to a third party approved by the Company. All
transfers of the interest of the
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deceased or permanently disabled person, including, without limitation,
transfers by devise or inheritance, shall be in writing and subject to the
approval of the Company.
40. Right of First Refusal of the Company.
If Licensee or its owners propose to sell the Facility (or its assets)
or part or all of the ownership of Licensee and Licensee or its owners obtains a
bona fide, executed written offer to purchase same, Licensee shall deliver a
copy of the bona fide offer to the Company along with all documents to be
executed by Licensee and the proposed assignee or transferee, and the Company
shall, for a period of thirty (30) days from the date of delivery of such offer
to the Company have the right, exercisable by written notice to Licensee or its
owners, to purchase the Facility (its assets) and License as set forward in the
documents provided by the Licensee for the price and on the terms and conditions
contained in such offer, provided that the Company may substitute equivalent
cash for any form of payment proposed in such offer. If the Company does not
exercise this right of first refusal, the original offer may be accepted by
Licensee or its owners, subject to the prior written approval of the Company as
provided in Paragraphs 37 and 38, provided that if such offer is not so accepted
within five (5) months of the date thereof, the Company shall again have the
right of first refusal herein described. This paragraph does not apply to
transfers described in subsection (a) of Paragraph 39.
41. Judicial Enforcement, Injunctions and Specific Performance.
The Company may enforce by judicial process its right to terminate this
Agreement as provided in Paragraph 32 hereof and any rights it may have under
other agreements the Company may have with Licensee. Company shall be entitled
to temporary and permanent injunctions and orders of specific performance
enforcing any of the provisions of Paragraphs 23, 26, 32, 33, 35, 37, 39 and 40
of this Agreement upon proper application being first made. If the Company
secures any such injunction or order of specific performance, Licensee agrees to
pay to the Company an amount equal to the aggregate of its costs of obtaining
any such relief, including without limitation reasonable attorney's fees, costs
of investigation and proof of facts, court costs other litigation expenses and
travel and living expenses, and any damages incurred by the Company as a result
of the breach of any such provision. Should Licensee
22
<PAGE> 25
prevail in such judicial proceedings, it too shall be entitled to recover its
costs of opposing such application. For the purpose of insuring the Company's
ability to protect the Marks against infringement by outsiders, the Company and
Licensee each agree to the establishment of a "litigation trust fund" to be
utilized to defer the costs of any litigation required to protect the interests
of the Company and Licensee. Such "litigation trust fund" shall be established
at a mutually agreeable banking institution in an interest bearing account. Any
Licensee (including the Company 'to the extent that it produces cars) shall be
obligated to deposit into the "litigation trust fund' each quarter the sum of
$25 per completed car sold and at the time of reporting sales, see paragraph 18.
Annually, the value of the litigation trust fund shall be assessed, and the
magnitude of the per car contribution adjusted to meet the pending and potential
litigation needs of the Company and Licensee. All litigation shall be commenced
in the name of Company for the benefit of any Licensee and all parties shall
cooperate with the others in the prosecution of such litigation. Only such
litigation as the parties mutually agree to for the mutual benefit of the
Company and all Licensees shall be funded through the "litigation trust fund."
42. Jurisdiction and Venue.
Licensee agrees that the Company may institute any action against
Licensee arising out of or relating to this Agreement in the Honduran Court of
general jurisdiction. Licensee irrevocably submits to the jurisdiction of said
court and waives any objection he may have to either the jurisdiction or venue
of such court.
43. Independent Contractors Indemnification.
The Company and Licensee are independent contractors. The Company shall
not be obligated by any agreements, representations or warranties made by
Licensee nor shall the Company be obligated for any damages to any person or
property directly or indirectly arising out of the operation of the Facility or
the product produced or serviced, whether caused by Licensee's negligent or
willful action or failure to act.
44. Licensee Corporation/Partnership.
If Licensee is a corporation or a partnership or if this Agreement and
the License are assigned to a corporation or partnership, such corporation or
partnership shall conduct no business other than the Facility and other World
Transport Authority Facilities under License Agreement with the Company, except
those activities specifically authorized per Paragraph 14 hereof. Licensee, or
if Licensee is a corporation or partnership, the person designated hereinafter
as the controlling shareholder or partner
23
<PAGE> 26
shall own and control not less than fifty-one percent (51%) of the partnership
interest or the equity and voting power of all issued and outstanding capital
stock of the corporation. All shareholders, partners or investors in such
corporation or partnership shall execute this Agreement and be bound jointly and
severally by all provisions hereof and shall thereby also represent and warrant
their percentage ownership interest and that they are all of the persons
required to sign this Agreement pursuant to this paragraph. The articles of
partnership, partnership agreement, articles of incorporation, bylaws and other
organizational documents of such partnership or corporation shall recite that
the issuance and transfer of any interest therein is subject to the restrictions
of Paragraphs 33, 35, 37 and 39 hereof and all issued and outstanding stock
certificates of such corporation shall bear a legend referring to the
restrictions contained in this Agreement.
45. Governing Law
Except to the extent governed by the United States Trademark Act of 1946
(Lanham Act; 15 U.S.C. S1051 et secr.) or the United States Arbitration Act,
this Agreement shall be governed by the laws of the State of California.
46. Binding Effect.
This Agreement is binding upon the parties hereto and their respective
heirs, assigns and successors in interest.
47. Construction.
The preamble recitals and exhibits hereto are a part of this Agreement,
which constitutes the entire agreement of the parties, and there are no other
oral or written understandings or agreements between the Company and Licensee
relating to the subject matter of this Agreement. The headings of the several
paragraphs hereof are for convenience only and do not define, limit or construe
the contents of such paragraphs. The term 'Licensee' as used herein is
applicable to one or more persons, a corporation or a partnership, as the case
may be, and the singular usage includes the plural and the masculine and neuter
usages include the other and the feminine. The Company and Licensee agree that
if any provision of this Agreement is capable of two constructions one of which
would render the provision illegal or otherwise voidable or unenforceable and
the other of which would render the provision valid and enforceable, such
provision shall have the meaning which renders it valid and enforceable. The
language of all provisions of this Agreement shall be construed simply according
to its fair meaning and not strictly against the Company or Licensee. It is the
desire and intent of the Company and Licensee that the provisions of this
24
<PAGE> 27
Agreement be enforced to the fullest extent permissible under the laws and
public policies applied in each jurisdiction in which enforcement is sought.
Accordingly, if any provision of this Agreement is adjudicated to be invalid or
unenforceable, such adjudication is to apply only with respect to the operation
of such provision in the particular jurisdiction in which such adjudication is
made. All provisions of this Agreement are severable and this Agreement shall be
interpreted and enforced as if all completely invalid or unenforceable
provisions were not contained herein and partially valid and enforceable
provisions shall be enforced to the extent valid and enforceable. If any
applicable law or rule requires a greater prior notice of the termination of or
election not to renew this Agreement, or the taking of some other action
hereunder, than is required hereunder, the prior notice or other requirements
required by such law or rule shall be substituted for the requirements hereof.
48. Waiver.
The Company and Licensee may by written instrument unilaterally waive
any obligation of or restriction upon the other under this Agreement. No
acceptance by the Company of any payment by Licensee and no failure, refusal or
neglect of the Company or Licensee to exercise any right under this Agreement or
to insist upon full compliance by the other with its obligations hereunder or
with any specification, standard or operating procedure or rule shall constitute
a waiver of any provision of this Agreement.
49. Standard of Reasonableness.
With respect to all determinations to be made by the Company pursuant to
this Agreement except those to be made in its sole discretion, the Company
agrees to exercise reasonable judgment.
50. Notices.
All written notices permitted or required to be delivered by the
provisions of this Agreement or of the Operating Manual shall be deemed so
delivered by hand or three (3) days after placed in the United States Mail by
Registered or Certified Mail, Return Receipt Requested, postage prepaid and
addressed to the party to be notified at its most current principal business
address of which the notifying party has been notified.
25
<PAGE> 28
51. Effective Date of this Agreement.
This Agreement shall take effect upon the date of its acceptance and
execution by the Company. LICENSEE REPRESENTS THAT HE HAS READ THIS AGREEMENT IN
ITS ENTIRETY AND THAT HE HAS BEEN GIVEN THE OPPORTUNITY TO CLARIFY ANY
PROVISIONS AND INFORMATION THAT HE DID NOT UNDERSTAND AND TO CONSULT WITH AN
ATTORNEY OR OTHER PROFESSIONAL ADVISOR. LICENSEE FURTHER REPRESENTS TEAT HE
UNDERSTANDS THE TERMS, CONDITIONS AND OBLIGATIONS OF THIS AGREEMENT AND THE
LICENSE AND AGREES TO BE BOUND THEREBY.
World Transport Authority, Inc.. WorldStar of Honduras, Inc.
By: ___________________________ By: _______________________________
Dean Amaru, President Fuad Hasbun
Dated:_________________________ Dated: _____________________________
26
<PAGE> 29
Exhibit A
PRODUCT LINE
8-PASSENGER TAXI
[PICTURE]
VAN
[PICTURE]
TRUCK
[PICTURE]
27
<PAGE> 30
EXHIBIT B
PAYMENT OF LICENSE FEE
<TABLE>
<CAPTION>
AMOUNT
EVENT PAYABLE
----- -------
<S> <C> <C> <C>
1. Upon execution of Agreement $ 50,000.00
(receipt acknowledged)
Less Deposit received 2/26/97 - $ 10,000.00
2. Bank drafts to $ 200,000.00
be released as follows:
a. 30 days after execution of this
agreement $ 95,000.00
b. Upon delivery of container of tools,
equipment and supplies to the
shipping company $ 85,000.00
c. Upon two W.T.A. technicians arriving
in Licensees country and setting up
facility $ 17,500.00
d. Upon completion of training at Licensees
facility. $ 17,500.00
</TABLE>
28
<PAGE> 31
EXHIBIT C
WORLD CAR BUSINESS EQUIPMENT LIST
OFFICE EQUIPMENT
o IBM compatible Computer & Monitor
o Laser Printer
o Computer Desk & Chair
COMPOSITE AUTOMOBILE BUSINESS COMPUTER PROGRAM
o Letterhead Design
o Advertising Program
o Marketing Program
o General Accounting Software o G/L, A/R, A/P, P/O
o Building Layout
WORLD VEHICLE VHS TRAINING AID
o TV & VCR
o Tapes & Manuscript
o Manuals
WORLD VEHICLE FIBERGLASS TOOLING o 7 PASSENGER CONFIGURATION
o Outer body mold
o Inner body mold
o Driver seat mold
o Hood mold
o Rear fender opening moldsoleft and right
o Inner fender moldsoleft and right
WORLD VEHICLE FIBERGLASS TOOLING o TRUCK CONFIGURATION
o Inner bed mold
o Inner tailgate mold
29
<PAGE> 32
o Outer tailgate mold
WORLD VEHICLE FIBERGLASS TOOLING - VAN CONFIGURATION
o Van box mold
o Inner door mold
o Outer door mold
WORLD VEHICLE CUTTING PATTERNS
PRODUCTION EQUIPMENT
o Steel paint/grinding booth with heater
o Compressor
o MIG Welder with welding table, curtains and fixtures
o Tubing Bender
o Plasma Cutter
o Drill Press
o Band Saw & Cold Cut Saw
o Disc Sander & Bench Grinder
o Eight 2-Door Metal Cabinets
o Sewing Machine & Table
o Tire Changer
o Tool chest with hand, air and electric tools required for vehicle
production
o Fiberglass tools
o Facility Air & Vacuum Lines
o Battery Charger and Engine Stand
PRODUCTION MATERIAL - 3 CARS
o Motors & Transaxles and other mechanical parts
o Wheels & Tires
o Fuel tanks
o Electrical components
o Windshields
o Steel tubing
30
<PAGE> 33
o Resin & Fiberglass Material
TRAINING
o Production of one vehicle to be completed with licensee during training at
our facilities
o Technical advice for production setup & Training and production of 3
vehicles at licensed facility by two WTA technicians
EXHIBIT D
WORLDSTAR CONTAINER LOGISTICS
Material Qty
-------- ---
1. Polyester Resin (55 gal. drums) 22
2. Fiberglass Mat (2 oz. x 48") 60 Rolls
3. Core Material (4' x 8' x 1/2") 80 Sheets
4. Windshields 40
5. Wheels 200
6. Tires 200
7. Engines (Long Block 1.6L) 40
8. Transmissions 40
9. Wiring 5,000 Feet
10. Steering Columns 40
11. Drive Shafts 80
12. Gel Coat (5 gal. pails) 24
13. Suspensions 40 Sets
14. Brakes 40 Sets
31
<PAGE> 34
15. Steel Tube (Engine Cage) 20' Lengths 100
16. Sheet Metal (Gas Tank) (4' x 8' x .050) 20 Sheets
17. Mufflers 40
32
<PAGE> 1
EXHIBIT 10b
MEXICO
23
<PAGE> 2
WORLD TRANSPORT AUTHORITY, INC.
A DIVISION OF COMPOSITE AUTOMOBILE RESEARCH, LTD.
MANUFACTURING
&
DISTRIBUTION LICENSE
GRANA BAJA
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Paragraph Title Page
- --------- ----- ----
<S> <C> <C>
1. Preamble 1
2. Granting of License 1
3. Licensee's Area of Exclusive Responsibility 2
4. Sales Quotas 2
5. Renewal of License 2
6. Facility Location 3
7. Facility Development 3
8. Molds, Tools & Equipment 4
9. Mold and Equipment Refurbishing 4
10. Training 4
11. Facility Opening 5
12. Operating Assistance 5
13. Product Offering 6
14. Parts, Supplies and Materials 6
15. Advertising and Promotion by Company 7
16. Advertising and Promotion by Licensee 7
17. Bookkeeping and Records 8
18. Sales Reports and Financial Statements 8
19. Specifications, Standards, Procedures and Rules 8
20. Compliance with Laws 9
21. Prices to be Determined by Licensee 9
22. Operating Manual 9
23. Trade Secrets: New Processes, Concepts, Improvements, etc. 10
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
Paragraph Title Page
- --------- ----- ----
<S> <C> <C>
24. Licensee Must Directly Supervise Facility 10
25. Insurance 10
26. Marks 11
27. Initial Fees 12
28. Inventory Purchase / Royalty Fee 12
29. Inspection 13
30. Audit of Sales Reports and Financial Statements 13
31. Termination by Licensee 13
32. Termination by the Company 14
33. Licensee's Obligations Upon Termination of Expiration 14
34. The Company's Option to Purchase Facility 16
35. Licensee's Covenants Not to Compete 16
36. Assignment by the Company 16
37. Assignment by Licensee 16
38. The Company's Approval of Assignment 17
39. Death or Disability of Licensee 17
40. Right of First Refusal of the Company 18
41. Judicial Enforcement, Injunctions and Specific Performance 18
42. Jurisdiction and Venue 19
43. Independent Contractors/Indemnification 19
44. Licensee Corporation/Partnership 19
45. Governing Law 20
46. Binding Effect 20
47. Construction 20
48. Waiver 21
49. Standard of Reasonableness 21
50. Notices 21
</TABLE>
iii
<PAGE> 5
<TABLE>
<CAPTION>
Paragraph Title Page
- --------- ----- ----
<S> <C> <C>
51. Effective Date of this Agreement 22
Exhibit A - Product Line 23
Exhibit B - Payment of License Fee 24
Exhibit C - Equipment List 25
Exhibit D - Container Logistics 27
</TABLE>
iv
<PAGE> 6
WORLD TRANSPORT AUTHORITY, INC.
STANDARD MANUFACTURING AND DISTRIBUTION LICENSE
THIS AGREEMENT is made and entered into by and between World Transport
Authority, Inc. A Nevada Corporation, with it's principal office at 635
Front Street, El Cajon, CA 92020 (the "Company") and Grana Baja, S.A.de
C.V. Mexico whose principal address is P.O. Box 92168-0072, San Diego,
CA 92168-0072 USA ("Licensee").
1. Preamble.
The Company originated and produced certain unique designs, production
processes and molds for use in manufacturing composite and fiberglass
body/chassis parts for a vehicle with three body configurations: an 8 passenger
people mover, a three passenger pickup and a three passenger van. These vehicles
have the trade name WORLDSTAR. The Company developed the design, molding
procedure, trademarks, trade names, and goodwill for the marketing and
manufacturing of the WORLDSTAR, consisting of manufactured plastic parts
produced from molds created from the original design. Licensee has applied to
the Company for a license to manufacture and distribute WORLDSTAR automobiles
utilizing the Company's business format, manufacturing methods, specifications,
standards, operating procedures, operating assistance, advertising services, and
the trademarks. Such application has been approved by the Company in reliance
upon all of the representations made therein, including without limitation the
ownership of License. The Company contemplates the development of additional
vehicles, options, products and processes which shall likewise be offered to
Licensee to manufacture and distribute upon mutually agreeable terms and
conditions. Licensee has read this Agreement and has been given an opportunity
to clarify any provision of the License Agreement. Licensee hereby acknowledges
that he understands and accepts the terms, conditions and covenants contained in
this License Agreement as being reasonable and necessary to maintain the
Company's high standards of quality and service and the uniformity of those
standards in order to protect and preserve the goodwill of the Marks.
2. Granting of License.
Subject to the provisions of this License Agreement, the Company hereby
grants to the Licensee a License to establish a manufacturing facility
('Facility') for the manufacture of the WORLDSTAR product line as described in
Exhibit A and a License to use the trademarks in connection therewith for a term
of ten (10) years (the "term of the License") at the following location:
_______________________________
1
<PAGE> 7
___________________________________________________________________________. The
phrase "term of the License" used herein shall mean the initial term and the
renewal term if the License is renewed. The License fee is $260,000.00 (Exhibit
B). The granting of the License allows the Licensee to produce annually up to
324 WORLDSTAR cars, pickups or vans, as an aggregate number. If the Licensee
wishes to produce WORLDSTAR vehicles in excess of the 324 annual aggregate
number, another License must be purchased from the Company. Depending on the
training, facility layout, additional equipment and actual annual production
desired additional Licenses start at $137,500.00.
3. Licensee's Area of Exclusive Responsibility.
The following geographic territory shall be the Area of Exclusive
Responsibility of the Facility: Tijuana, Mexico B.C.. During the term of the
License, provided that Licensee is in full compliance with this Agreement, the
Company will not operate or grant a License for the operation of a manufacturing
facility whose area of exclusive responsibility overlaps Licensee's Area of
Exclusive Responsibility.
4. Sales Quotas.
50% of the normal annual product capacity of 324 units is the sales
quota to maintain the License. If the Licensee fails to meet the minimum
requirement of 50% normal capacity of 324 units (162 units) after one full
calendar year (12 consecutive months), the Company reserves the right to sell a
License into the area, after 90-day notification is given to the Licensee of
non-conpliance.
5. Renewal of License.
Licensee may, at his option, renew the License for an additional
ten-year term, provided that: (a) Licensee is not in default of any provision of
this Agreement or any other agreement between Licensee and the Company or its
subsidiaries or affiliates, and has substantially complied with all the terms
and conditions of such agreements during the terms thereof; (b) Licensee has
satisfied all monetary obligations owed by Licensee to the Company and its
subsidiaries and affiliates and has timely met these obligations throughout the
term of this Agreement; (c) Licensee has met the sales quotas for the Facility
prescribed in Paragraph 4; and (d) Licensee is able to maintain possession of
the site of the Facility or to secure and develop a suitable alternative site
approved by the Company. Renewal of the License shall be effected by the
execution by the Company and Licensee of an extension agreement. Licensee agrees
to give the Company not less than six (6) months nor more than twelve (12)
months, prior written notice of an election not to renew the License. After
approval of the extension of the License by the Company, failure or refusal by
Licensee to execute such extension agreements within thirty (30) days after
delivery
2
<PAGE> 8
thereof shall be deemed an election by Licensee not to renew the License. The
price of the 10 year extension of the License agreement will be one dollar ($1)
U.S.
6. Facility Location.
Licensee may operate the Facility only at the location specified in
Paragraph 2 of this Agreement and may not relocate the Facility except with the
Company's prior written consent as herein provided. If the lease for the site of
the Facility expires or terminates without fault of Licensee, or if the site is
destroyed, condemned or otherwise rendered unusable, or if in the judgment of
the Company there is a change in character of the location of the Facility
sufficiently detrimental to its business potential to warrant its relocation or
a new location is of significant business advantage, the Company shall not
withhold permission for relocation of the Facility to a location and site
mutually acceptable. Any such relocation shall be at Licensee's sole expense and
the Company shall have the right to charge Licensee for any costs that the
Company may incur, and a reasonable fee for its services, in connection with any
such relocation of the Facility such as reprogramming computer systems or
sending of technicians to aid in the relocation of equipment at the Licensee's
request.
7. Facility Development.
Licensee agrees that promptly after obtaining possession of the site for
the Facility Licensee will: (a) cause to be prepared and submit for approval by
the Company a site plan for the Facility (including requirements for dimensions,
exterior design, materials, interior layout, signs, and decorating) required for
the development of the Facility at the site leased or purchased therefore; (b)
obtain all required zoning changes; all required building, driveway, utility,
health, sanitation, and sign permits and any other required permits; (c)
complete the construction and/or remodeling, and sign installation and
decorating of the Facility in full and strict compliance with plans and
specifications therefore approved by the Company. The Company will as a
provision of the License help the Licensee design the WORLDSTAR manufacturing
facility floor plan for the most efficient use of the space.
3
<PAGE> 9
8. Molds, Tools, and Equipment.
The Company shall provide Licensee with molds, tools and all equipment
specific to the manufacture of the WORLDSTAR automobile. Molds are proprietary
to the Company and must be returned to the Company in case of default,
non-compliance or time limitations (ten/twenty year term). A complete listing of
these molds, tools and equipment can be found in Exhibit C. Licensee will not
duplicate WORLDSTAR molds or tooling, not will the Licensee sell, give or trade
said WORLDSTAR molds or tooling to any third party not related to the original
agreement.
9. Mold & Equipment Refurbishing.
The molds, tools and equipment have been designed and or specified to be
capable of producing their products at maximum quantity as allowed by the
Licensee over the term of the License. If the molds, tools or equipment
deteriorates the Licensee agrees to refurbish such molds, tools and equipment
and/or introduce into production such changes as are required by the Company to
maintain minimum product standards and specifications within a reasonable time
after receipt of notice thereof, not to exceed three (3) months.
10. Training.
Prior to the opening of the Facility, the Licensee shall enroll up to
two persons (selected by the Licensee) in a training program for instruction in
all phases of the operation of a World Transport Authority manufacturing
facility. These programs shall be furnished at such times and places as the
Company designates. The Licensee's designated personnel shall complete the
training program to the satisfaction of the Company, so that then they will be
able to train their employees at their local facility. Licensee shall be
responsible for the travel and compensation of himself and his employees
incurred during the training program. The Company shall provide living
accommodations (room and board) as well as transportation to the training
facility and back to the living accommodation. The Licensee's personnel shall be
trained in all aspects of the W.T.A. business, including but not limited to, the
following: Sales, Marketing, Computer Operation, WORLDSTAR Manufacturing;
welding, fabrication, molding, assembly, upholstery and testing.
Licensee shall implement a training program for employees of the
Facility in accordance with training standards and the procedures manual
provided by the Company upon start of the facility and as necessary thereafter.
Licensee shall purchase from the Company and utilize such training aids which
the Licensee may require from time to time (e.g., films, videotapes or printed
materials). Licensee agrees not
4
<PAGE> 10
to employ any person who is required by the Company to complete a training
program but who fails or refuses to do so.
11. Facility Opening.
Licensee shall complete development of the Facility and shall have the
Facility ready to open and commence the conduct of its business within a
reasonable time after Licensee obtains possession of such site and possession of
the Company supplied molds, tooling, equipment and production materials or from
the date of this Agreement if Licensee has possession of such site on the date
hereof. If Licensee has not, within nine (9) months from the date of this
Agreement, completed all required training and opened the Facility, then this
Agreement and the License granted hereby may, at the sole option of the Company,
be terminated upon the giving of written notice to Licensee by the Company.
12. Operating Assistance.
a). The Company shall furnish to Licensee reasonable operating
assistance in connection with the operation of the Facility as the Company
determines to be necessary. The Company will provide two technicians for
approximately two (2) weeks to provide operating assistance upon initial
start-up. The Company shall be responsible for the travel and compensation of
its technicians incurred during the initial two-week operating assistance
program. Licensee shall provide living accommodations (room and board) as well
as transportation to the Facility and back to the living accommodation. The
Company technicians shall provide operating assistance in accordance with the
training standards and procedures prescribed by the Company. Operating
assistance will include advice and guidance with respect to: (i) manufacturing
processes and techniques; (ii) vehicle quality control testing, (iii) hiring and
training employees; (iv) formulating and implementing advertising and
promotional programs; and (v) the establishment and maintenance of
administrative, bookkeeping, accounting, inventory control and general operating
procedures.
b). In order to promote the desire of the Company that the automobiles
manufactured by Licensee be of the highest quality, the Company will provide
continuing operating assistance as it sees fit. In order to promote quality, the
Company shall advise Licensee from time to time of improvements or changes to
the operating procedures. The Company may also advise Licensee from time to time
of concerns or problems with Licensee's product quality or the Facility
discovered by the Company in the normal course of business or during inspections
made by the Company. The Company shall make no separate charge to Licensee for
such continuing operating assistance, provided that the Company feels that the
Licensee is making reasonable steps to address the concerns expressed by the
Company.
5
<PAGE> 11
c). If the Licensee, after written notice and in the sole opinion of the
Company, continues to produce automobiles which are of unacceptable levels of
quality, or continues to operate the Facility in an unsafe manner, or fails to
substantially comply with the provisions of this Agreement, the Company may
require that the Licensee make necessary changes. The Company may at it's
discretion incur costs and make reasonable charges for such costs for corrective
operating assistance made necessary, in the sole judgment of the Company, as a
result of Licensee's failure to comply with any provision of this Agreement or
any specification, standard or operating procedure prescribed by the Company or
corrective operating assistance provided to Licensee in excess of that which is
normally provided by the Company.
13. Product Offering.
Licensee agrees that he will offer for sale and sell at the Facility
only World Transport Authority products and services. Licensee further agrees
not to offer for sale or sell at the Facility any other product or services or
use such premises for any purpose other than the manufacture and sale of World
Transport Authority products. Notwithstanding the foregoing, Licensee may repair
"non-competitive products" which are compatible with the Facility and
technologies of the Licensee provided such products do not impair Licensee's
ability to meet production demands and/or minimum quotas as herein provided. The
Licensee may also at his sole discression provide options, modifications,
additions, upgrades and repair parts to the WORLDSTAR that in the Licensee's
opinion helps with the sales and profitability of the product. Notwithstanding
the foregoing, should Licensee fail to generate at least 75% of the sales quotas
as described in Paragraph 4 for a period of six consecutive months, and the
Licensee has exercised all reasonable due diligence to generate such sales,
Licensee shall be permitted to introduce into production at the Facility
non-World Transport Authority products approved by the Company upon such terms
and for such periods as are commercially reasonable under the market conditions
then existing and to which both Licensee and Company agree in writing.
14. Parts, Supplies and Materials.
All parts, supplies and materials used in the production of the
WORLDSTAR shall be purchased from the Company and at no time be sourced
elsewhere. The Company has the right to upgrade, change and modify due to
technological changes at it's sole discretion any and all parts, supplies and
materials. The Company is responsible to supply the Licensee tooling for any
changes made at no cost to the Licensee. The parts, supplies and materials shall
be available only in a complete 40' container, or if the port facility in the
Licensees area is not capable of handling 40' containers, two 20' containers
will be used. Each 40' container shall have enough materials to build 40 cars.
The Company shall warrantee that
6
<PAGE> 12
each container shall include all materials per Exhibit D. If for any reason the
Company is unable to ship the order complete, the Company at its sole expense
shall ship the items backordered. If the Company ships orders incomplete for
more than three consecutive orders, the Company shall lose it's $275.00 per
vehicle royalty fee, until such a time as the orders are shipped complete. The
Company shall have the right from time to time without notice to examine the
Facility of the Licensee and any related warehousing facility and to test or
inspect the parts, materials or supplies to determine whether they were procured
from the Company. In the event such inspections disclose non-compliance, the
Company shall have the right to charge reasonable fees for the inspection of the
materials. The Company, at its sole discretion, shall fine the Licensee a fine
of 25 times the value of the products not purchased from the Company. If the
Company finds that the Licensee continues this practice, the License will be
terminated and all molds, tools and equipment purchased with said License must
be returned to the Company at the Licensees expense.
15. Advertising and Promotion by the Company.
The Company shall from time to time formulate, develop, produce and
conduct advertising and promotional programs in such form and media as it
determines to be most effective. The Company shall have the right, at its sole
discretion, to determine the composition of all geographic territories and
market areas for the development and implementation of such advertising and
promotion programs. All costs of the formulation and development of any such
advertising and promotion will be paid for by the Company. The Company shall
design advertising materials for the promotion of the products and the Marks.
Any production and distribution costs shall be borne directly by Licensee for
such materials ordered by the Licensee such as brochures, mailers, posters,
etc.. International advertising shall be the sole responsibility of the Company
and no international advertising shall be placed by Licensee. Licensee
acknowledges and understands that this advertising is intended to maximize
general public recognition and patronage of the Marks in the manner determined
to be most effective by the Company and that the Company undertakes no
obligation in developing, implementing or administering such programs.
16. Advertising and Promotion by Licensee.
All advertising and promotion by Licensee shall be completely factual
and shall conform to the highest standards of ethical advertising and the
policies prescribed by the Company, including policies contained in the
Company's corporate identity manuals as revised by the Company. Advertising
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guidelines and actual ad formats can be found in the supplied computer program
which has been provided by the Company within the materials noted in Exhibit C.
17. Bookkeeping and Records.
Licensee shall use the established bookkeeping and record keeping
systems provided by the Company in the computer business program for the
retention of sales, purchase orders, invoices, payroll, accounts payable, sales
tax, tax returns, cash receipts and disbursements journals and general ledgers.
Said records shall be made available to the Company at any time upon reasonable
notice and during regular business hours.
18. Sales Reports and Financial Statements.
Licensee shall submit to the Company: (a) within ten (10) days of the
end of each quarter a report of the sales of products and services sold at the
Facility, and such other information and supporting records as the Company
requires. (b) within sixty (60) days of the end of each fiscal year of the
Facility, unaudited annual statements of profit and loss and financial condition
of the Facility. The Company may require Licensee to obtain at the Company's
expense and submit to the Company within sixty (60) days an audited statement of
profit and loss and financial condition of the Facility for any fiscal year if
the Company believes that Licensee has submitted sales reports, unaudited profit
and loss statements or tax returns containing material inaccuracies. Should such
audit disclose greater than 10% under-reporting of unit sales, the cost of such
audit shall be assumed by Licensee. If the Licensee continues to under-report
sales for three consecutive quarters, the Company may fine the Licensee up to
25% of the unreported sales.
19. Specifications, Standards, Procedures and Rules.
Licensee agrees to fully comply with all specifications, standards and
operating procedures and rules prescribed for the Facility, including without
limitation, specifications, standards and operating procedures and rules
relating to: (a) the safety, maintenance, cleanliness, sanitation, function and
appearance of the Facility and its equipment, fixtures, furniture, decor and
signs; (b) qualifications, dress, grooming, general appearance and demeanor of
Licensee and all employees of Licensee and the Facility; (c) quality,
appearance, performance and uniformity, and manner of preparation and sale of
all World Transport Authority products sold by Licensee and of all supplies and
materials used in the preparation and sale thereof; (d) methods and procedures
relating to receiving, preparing and delivering customer orders; (e) hours
during which the Facility will be open for business; (f) advertising and
promotion; (g)
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<PAGE> 14
use of standard forms; (h) use of exterior and interior signs, posters, displays
and similar items; (i) the handling of customer complaints; (i) compliance with
the Company's Identity Programs, as same may exist; and (k) the posting of signs
identifying Licensee as the owner of the Facility in accordance with the
Company's requirements.
20. Compliance with Laws.
Licensee shall secure and maintain in force all required licenses,
permits and certificates and shall operate the Facility in full compliance with
all applicable laws, ordinances and regulations, including without limitation
all government regulations relating to occupational hazards and health, consumer
protection, unfair and deceptive practices, trade regulation, and other rules as
stated by the government of the Licensee country.
21. Prices to be Determined by Licensee.
The Company may from time to time offer guidance to Licensee relative to
retail and wholesale prices for the products and services of the Facility that
in the Company's judgment constitute good business practice. Licensee shall have
the sole right to determine the prices to be charged by the Facility and no such
guidance shall be deemed or construed to impose upon Licensee any obligation to
charge any fixed, minimum or maximum prices for any product or service offered
for sale by the Facility.
22. Operating Manual.
The Company will supply to Licensee during the term of the License
Agreement one or more copies of an operating manual containing mandatory and
suggested specifications, standards, production and operating procedures and
rules prescribed by the company and information relative to other obligations of
Licensee hereunder and the operation of the Facility (the "Operating Manual").
This manual will be provided both in written and in a computer format both in
English. The entire contents of the Operating Manual will remain confidential
and the intellectual property of the Company. The Company shall have the right
to add to and otherwise modify the Operating Manual, if deemed necessary by the
Company to improve the standards of service or product quality or the efficient
operation of the Facility, to protect or maintain the goodwill associated with
the Marks or to meet competition, provided that no such addition or modification
shall alter Licensee's fundamental status and rights under this Agreement. The
provisions of the Operating Manual as modified and mandatory specifications
standards and operating procedures and rules prescribed by the Company and
communicated to Licensee in writing, shall constitute provisions of this
Agreement as if fully set forth herein. All references herein to this
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<PAGE> 15
Agreement shall include the provisions of the Operating Manual and all such
mandatory specifications, standards and operating procedures and rules. The
modified provisions to the manual shall be transmitted to be incorporated in
both the written and computer versions.
23. Trade Secrets; New Processes, Concepts.
Licensee acknowledges that his entire knowledge regarding the production
of the WORLDSTAR automobile, including without limitation the contents of the
Operating Manual and the specifications, standards and operating procedures of
the Facility, is derived from information disclosed to Licensee by the Company
and that such Operating Manual and such other information is confidential and a
trade secret of the Company. Licensee agrees that he will maintain the absolute
confidentiality of the Operating Manual and all such other information during
and after the term of the License, disclosing same to the other employees of the
Facility only to the extent necessary for the operation of the Facility in
accordance with this Agreement, and that he will not use the Operating Manual
and such other information in any other business or in any manner not
specifically authorized or approved in writing by the Company.
Licensee agrees that if they shall develop any new concept, process or
improvement in the operation or promotion of the Facility or product (other than
those not uniquely applicable to the World Transport Authority product itself),
Licensee shall promptly notify the Company and shall provide the Company with
all necessary information with respect thereto without compensation therefore.
Licensee acknowledges that such concept, process or improvement shall become the
property of the Company and that the Company may itself utilize or disclose to
other Licensees such information. The Company at its sole discretion shall
decide if the new concept, process or improvement is such that an acknowledgment
of the new idea is meritorious of a royalty or fee.
24. Licensee Must Directly Supervise Facility.
The Facility shall be under the direct, on-premises supervision of
Licensee (or person approved by the Company). Licensee (or person approved by
the Company if Licensee is a corporation or partnership) shall devote his entire
time (excluding reasonable vacation periods) which shall be no less than forty
(40) hours per week to the management of the Facility.
25. Insurance.
Licensee shall at all times during the term of the License maintain in
force at his sole expense comprehensive general liability insurance (including,
but not limited to coverage for personal injury,
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<PAGE> 16
product and contractual liability), motor vehicle liability, fire, and workmen's
compensation insurance if necessary in the country where the Licensee is
located. All comprehensive general liability and motor vehicles liability
insurance policies shall name the Company as additional insured, provided that
any increase in insurance premiums attributable to the naming of Company as an
additional insured shall be assumed by Company. Said policies shall provide that
the Company shall receive thirty (30) days prior written notice of termination,
expiration, cancellation, modification or reduction in coverage of any such
policy. Licensee shall submit to the Company annually a copy of the certificate
of insurance or evidence of the renewal or extension of each such insurance
policy.
26. The Marks.
Licensee acknowledges that the Company is the owner of all Marks
licensed to Licensee by this Agreement and all usage thereof by Licensee and any
goodwill established thereby shall be for the exclusive benefit of the Company.
Licensee agrees to use each such Mark in full compliance with rules prescribed
from time to time by the Company. Licensee may not use any Mark in connection
with the sale of any unauthorized product or service or in any other manner not
explicitly authorized in writing by the Company. Licensee shall immediately
notify the Company of any infringement of or challenge to the Company's use of
any Mark or claim by any person of any rights in any Mark, and Licensee shall
not communicate with any person other than the Company and its counsel in
connection with any such infringement challenge or claim. The Company shall have
sole discretion to take such action as it deems appropriate and the right to
exclusively control any litigation of the Patent or Mark or other proceeding
arising out of any such infringement, challenge or claim or otherwise relating
to any Mark and Licensee agrees to execute any and all instruments and
documents, render such assistance and do such acts and things as may, in the
opinion of the Company's counsel, be necessary or advisable to protect and
maintain the interests of the Company in any such litigation, Patent or
Trademark or other proceeding or to otherwise protect and maintain the interest
of the Company in the Marks. The Company agrees to indemnify Licensee against
and to reimburse Licensee for all damages for which he is held liable in any
proceeding arising out of the use of any Mark in compliance with this Agreement
and for all costs reasonably incurred by Licensee in the defense of any such
claim brought against him or in any such proceeding in which he is named as a
party. If it becomes advisable at any time in the sole discretion of the Company
for Licensee to modify or discontinue use of any Mark and/or use one or more
additional or substitute trademarks Licensee agrees to do so and the sole
obligation of the Company in any such event shall be to reimburse Licensee for
his tangible costs of complying with this obligation.
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<PAGE> 17
27. Initial Fees.
Licensee agrees to pay to the Company a license application fee in the
amount of two hundred sixty thousand dollars ($260,000.00 U.S.), payable as
provided in Exhibit B attached hereto. Licensee shall have the right to inspect,
at the point of debarcation, all molds, equipment, tooling and supplies, as
indicated in Exhibit C of this License application, prior to shipment and prior
to installment payment. In the event the Company fails to produce the required
equipment, tooling and supplies within 30 days of the time agreed upon by the
Company, unless not within the Company's control, Licensee shall be entitled to
the refund of fees paid to date. If a tool, piece of equipment or supply is
unavoidably unavailable the Company has the right to substitute a tool, piece of
equipment or supply of equal or better quality. Licensee shall assume all
shipping expenses to Licensee's Facility from the Port of San Diego, California
U.S.A.. In the event Licensee fails to pay any installment of the license
application fee when due, Licensee shall forfeit all sums previously paid and
this agreement shall terminate.
28. Inventory Purchase.
The Company shall purchase in quantity all the materials neededs by the
Licensee for the manufacture of the WORLDSTAR vehicle. These materials shall be
collected and packaged ready for shipment in 40' containers, or two 20' as
outlined in paragraph 14. The Company shall add together all materials needs
from each Licensee and negotiate extraordinary discounts in pricing from our
suppliers. From time to time the Company may change suppliers seeking better
pricing, quality or availability. The Company shall organize the
containerization of the materials and shipment to the Licensee. The Company will
charge the Licensee for the cost of materials, assembly , handling and
containerization plus a royalty fee of $275.00 per vehicle. If the Company
receives a better price from its suppliers this cost savings belongs to the
Licensee. The Licensee shall cause a Letter of Credit to be lodged with the
Company's bank for the container of materials with such terms and conditions
that allow the Company to use the Letter of Credit as collateral for the
Company's Letter of Credit to their suppliers. With the Company using the
Licensees credit and the combination of all Licensees collective buying power
the Company is able to pass on great savings to the Licensee for the parts,
supplies and materials. In addition, the Company is not required to use it's
resources to finance the purchase of the parts, supplies and materials.
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29. Inspection.
To determine whether the Licensee is complying with this Agreement the
Company shall have the right at any time during business hours, and without
prior notice to Licensee, to inspect the Facility and the business bookkeeping
records and other supporting records and documents of the Facility and Licensee.
Such inspections shall not unreasonably disrupt the ongoing operations of the
Facility or interfere with the duties of Licensee or its employees. Such
inspections shall be made at the Company's expense, provided, however, that if
the Company is required to make any inspections in connection with Licensee's
repeated or continuing failure to comply with this Agreement following prior
notice and reasonable opportunity to cure (not to exceed 30 days) deficiencies
particularized by the Company. The Company shall have the right to charge
Licensee for the costs of making all further inspections in connection with such
failure to comply which reveal continuing deficiencies, including without
limitation travel expenses, room and board and compensation of the Company's
employees.
30. Audit of Sales and Financial Statements.
The Company shall have the right to audit or cause to be audited the
sales reports, and financial statements which Licensee is required to submit by
Paragraph 18 of this Agreement. In the event any such audit shall disclose
unequal purchases of parts from the Company compared to the sales of the
Licensee, for any period or periods, Licensee shall pay to the Company, within
fifteen (15) days after receipt of the audit report, a fee of 10% of the value
of vehicles sold where the materials were not purchased from the Company.
Further, in the event such understatement for any period or periods shall be ten
percent (10%) or more of the gross sales of the Facility for such period or
periods, Licensee shall reimburse the Company for the cost of such audit,
including without limitation the charges of any independent certified public
accountant and the travel expenses, room and board and compensation of employees
of the Company. The 10% fee plus expenses is in addition to the fines outlined
in Paragraph 14 as applicable.
31. Termination by Licensee.
If Licensee is in compliance with this Agreement and the Company
breaches this Agreement and fails to cure such breach within ninety (90) days
after written notice thereof is delivered to the Company, Licensee may terminate
this Agreement and the License effective ten (10) days after delivery to the
Company of notice thereof. The Licensee at that time is to be returned his
License fee prorated over a 10
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year period less $135,000. The balance is payable within 10 days to the Licensee
after the Company receives all tools, equipment and supplies associated with the
License fee as described in Exhibit C and added to from time to time as
memorialized in Company shipping documents. A termination of this Agreement and
the License by Licensee without complying with the foregoing requirement or for
any reason other than the Company's breach of this Agreement and failure to cure
such breach within thirty (30) days after receipt of written notice thereof
shall be deemed a termination by Licensee without cause and not in accordance
with the provisions of this Agreement.
32. Termination by the Company.
The Company may terminate this Agreement and the License effective five
(5) days after delivery of notice of termination to Licensee, if: (a) Licensee
or the Facility makes an assignment for the benefit of creditors or an admission
of an inability to pay its obligations as they become due; (b) Licensee fails to
continuously and actively operate the Facility; (c) Licensee suffers
cancellation of or fails to renew or extend the lease or sublease for or
otherwise fails to maintain possession of the premises occupied by the Facility
and fails to secure suitable alternative premises approved by the Company; (d)
Licensee fails to achieve the sales quotas specified in Paragraph 4 in two (2)
consecutive years or any four (4) years of the term of the License; (e) License
consistently fails to submit when due, sales reports or financial statements;
(f) Licensee or any of its owners are convicted of a felony or other crime which
substantially impairs the goodwill associated with the Marks; (g) Licensee
repeatedly fails to substantially comply with this Agreement, whether or not
such failures to comply are corrected after notice thereof is delivered to
Licensee; (h) Licensee or any of its owners have made any material
misrepresentation on his application for the License; or (i) the Licensee or any
person who owns a controlling interest in this Agreement or in the License fails
to dispose of such interest in the manner required by Paragraph 40 hereof. The
Company shall have the further right to terminate this Agreement and the
License, effective upon delivery of notice of termination to Licensee, if
Licensee fails to comply with any provision of this Agreement or any
specification, standard or operating procedure or rule prescribed by the Company
and does not correct such failure within thirty (30) days if such failure
relates to the use of any Mark or the quality of the product or the appearance
of the Facility; fifteen (15) days if such failure is to pay any money payable
by Licensee pursuant to any provision of this Agreement or any other agreement
between the Company or its affiliates or subsidiaries and Licensee; otherwise
thirty (30) days, after written notice of such failure to comply (which shall
describe the action that Licensee must take to correct same) is delivered to
Licensee.
33. Licensee's Obligations Upon Termination or Expiration.
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<PAGE> 20
Upon termination or expiration of the License, Licensee agrees to pay
the Company within fifteen (15) days after the effective date of termination or
expiration any other charges as have or will thereafter become due hereunder and
are then unpaid. Licensee further agrees that upon termination or expiration of
the License, Licensee will immediately return to the Company all copies of the
Operating Manual and all other propriety manuals and written procedures which
have been loaned to Licensee by the Company. All proprietary tooling utilized in
the production of any World Transport Authority product shall be returned to the
Company by the Licensee, or, in the alternative, offered to the Company in the
Licensees location for destruction upon terms and conditions mutually agreeable
to the parties. The Licensee at the Company's request must place a bond in the
amount of shipping cost to the Company for the expiration of this license. The
WORLDSTAR molds, which are proprietary to W.T.A. and with the signing of this
agreement the Licensee acknowledges this proprietary right, shall be returned to
the Company at the Company's expense. Any inventory or parts uniquely related to
World Transport Authority products shall be valued by an independent appraisal
and offered for sale to the Company which may but shall not be required to,
purchase same at the appraised value and upon terms and conditions mutually
agreeable to the parties. Licensee further agrees that upon termination or
expiration of the License, he will take such action as may be required to cancel
all assumed name or equivalent registrations relating to the use of any Mark and
to notify the telephone company within fifteen (15) days and all listing
agencies of the termination or expiration of Licensee's right to use all
telephone numbers and all classified and other directory listings and to
authorize same to transfer to the Company or its Licensee all telephone numbers
and directory listings of the Facility. Licensee acknowledges that as between
the Company and Licensee, the Company has the sole rights to and interest in all
telephone numbers and directory listings associated with any Mark and authorizes
the Company to direct the telephone company and all listing agencies to transfer
same to the Company or its Licensee, should Licensee fail or refuse to do so,
and the telephone company and all listing agencies may accept such direction of
this Agreement as conclusive of the exclusive rights of the Company in such
telephone numbers and directory listings and its authority to direct their
transfer. If Licensee retains possession of the premises occupied by the
Facility, Licensee agrees that upon termination or expiration of the License, he
will at his expense make such reasonable modifications in the exterior and
interior decor thereof as the Company deems required to minimize its
identification as a World Transport Authority Facility. Licensee agrees that
after the termination or expiration of the License he will not directly or
indirectly in any manner identify the premises which were occupied by the
Facility or any other business as a World Transport Authority Facility, a former
World Transport Authority Facility, or as a Licensee of or otherwise associated
with the Company or use in any manner or for any purpose any Mark or other
indicia of World Transport Authority.
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34. Company's Option to Purchase Facility.
Upon the termination or expiration of the License except termination by
Licensee for cause pursuant to Paragraph 31 hereof, the Company shall have the
option, but not the obligation, exercisable for thirty (30) days, to purchase
all of the assets of the Facility, including the equipment, inventory, leasehold
interests and improvements and favorable rights and covenants of the Facility
upon terms mutually acceptable to the parties.
35. Licensee's Covenants Not To Compete.
Licensee agrees that he will not during the term of the License have any
interest as an owner (except of publicly traded securities), director, officer,
employee, consultant, representative or agent, or in any other capacity, in any
other "specialty car" manufacturing, design or sales company (except another
World Transport Authority Facility operated under license agreements heretofore
or hereafter entered into between Licensee and the Company). If the License is
terminated by the Company in accordance with this Agreement including by
exercise of the Company's option to purchase pursuant to Paragraph 34 or
pursuant to the right of first refusal contained in Paragraph 40 below, by
Licensee without cause or not in accordance with this Agreement or by mutual
agreement, or if the License expires and Licensee rejects the Company's offer to
renew the License, Licensee agrees that for a period of ten (10) years
commencing on the effective date of termination or expiration of the Licensee,
he will not engage as an owner (except of publicly traded securities), partner,
director, officer, employee, consultant, representative, or agent, or in any
other capacity, in any business or entity which produces in any form a
"specialty car". In the event this agreement is terminated by Licensee for
cause, Licensee shall be permitted to continue production of the WORLDSTAR for
the unexpired remaining term of this license, subject only to the purchase of
all materials to build the WORLDSTAR from the Company. In such event, no quotas
shall apply. In no event shall Licensee's right to produce the WORLDSTAR extend
beyond the original 10 year term hereof absent further agreement.
36. Assignment by the Company.
This Agreement is fully assignable by the Company and shall inure to the
benefit of any assignee or other legal successor to the interests of the Company
herein.
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37. Assignment by Licensee.
This Agreement and the License are personal to Licensee and neither this
Agreement nor the License may be voluntarily, involuntarily, directly or
indirectly assigned or otherwise transferred without the prior written approval
of the Company, and any such assignment or transfer without such approval shall
constitute a breach hereof. This Agreement does not give Licensee the right to
grant a sub-license or similar right.
38. Company's Approval of Assignment.
If Licensee is in full compliance with this Agreement, permission to
assign or transfer shall not be unreasonably withheld by the Company: (a) in the
case of proposed assignments or transfers to a partnership or corporation which
is actively managed by Licensee and in which Licensee owns and controls not less
than fifty-one percent (51%) of the general partnership interest or the equity
and voting power of all issued and outstanding capital stock; provided that the
provisions of Paragraph 44 shall be fully complied with, and (b) subject to the
Company's right of first refusal pursuant to Paragraph 40 hereof, in the case of
proposed assignees or transferees who: (i) are willing to execute and be bound
by all provisions of this Standard Manufacturing and Distribution License and
all other agreements and legal instruments and documents then in effect between
the parties hereto, provided that the Company shall not charge such assignee an
initial license application processing fee; and (ii) who are willing to and do
complete the Company's standard training program for which such assignee shall
pay the Company its standard training fee and a transfer fee in the sum of
twenty-five thousand dollars ($25,000.00) to recover its cost of training and
other costs incurred in approving and effecting the assignment. In connection
with any assignment permitted under this Paragraph 38, Licensee shall provide
the Company with all documents to be executed by Licensee and the proposed
assignee or transferee at least thirty (30) business days prior to execution.
39. Death or Disability Of Licensee.
(a) Upon the death or permanent disability of any person who owns a
controlling interest in this Agreement or in Licensee, the executor,
administrator or representative of such person (the "representative") shall have
twelve (12) months in which to transfer the interest of the deceased or
permanently disabled person to a third party approved by the Company. All
transfers of the
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<PAGE> 23
interest of the deceased or permanently disabled person, including, without
limitation, transfers by devise or inheritance, shall be in writing and subject
to the approval of the Company.
40. Right of First Refusal of the Company.
If Licensee or its owners propose to sell the Facility (or its assets)
or part or all of the ownership of Licensee and Licensee or its owners obtains a
bona fide, executed written offer to purchase same, Licensee shall deliver a
copy of the bona fide offer to the Company along with all documents to be
executed by Licensee and the proposed assignee or transferee, and the Company
shall, for a period of thirty (30) days from the date of delivery of such offer
to the Company have the right, exercisable by written notice to Licensee or its
owners, to purchase the Facility (its assets) and License as set forward in the
documents provided by the Licensee for the price and on the terms and conditions
contained in such offer, provided that the Company may substitute equivalent
cash for any form of payment proposed in such offer. If the Company does not
exercise this right of first refusal, the original offer may be accepted by
Licensee or its owners, subject to the prior written approval of the Company as
provided in Paragraphs 37 and 38, provided that if such offer is not so accepted
within five (5) months of the date thereof, the Company shall again have the
right of first refusal herein described. This paragraph does not apply to
transfers described in subsection (a) of Paragraph 39.
41. Judicial Enforcement, Injunctions and Specific Performance.
The Company may enforce by judicial process its right to terminate this
Agreement as provided in Paragraph 32 hereof and any rights it may have under
other agreements the Company may have with Licensee. Company shall be entitled
to temporary and permanent injunctions and orders of specific performance
enforcing any of the provisions of Paragraphs 23, 26, 32, 33, 35, 37, 39 and 40
of this Agreement upon proper application being first made. If the Company
secures any such injunction or order of specific performance, Licensee agrees to
pay to the Company an amount equal to the aggregate of its costs of obtaining
any such relief, including without limitation reasonable attorney's fees, costs
of
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<PAGE> 24
investigation and proof of facts, court costs other litigation expenses and
travel and living expenses, and any damages incurred by the Company as a result
of the breach of any such provision. Should Licensee prevail in such judicial
proceedings, it too shall be entitled to recover its costs of opposing such
application. For the purpose of insuring the Company's ability to protect the
Marks against infringement by outsiders, the Company and Licensee each agree to
the establishment of a "litigation trust fund" to be utilized to defer the costs
of any litigation required to protect the interests of the Company and Licensee.
Such "litigation trust fund" shall be established at a mutually agreeable
banking institution in an interest bearing account. Any Licensee (including the
Company to the extent that it produces cars) shall be obligated to deposit into
the "litigation trust fund" each quarter the sum of $25 per completed car sold
and at the time of reporting sales, see paragraph 18. Annually, the value of the
litigation trust fund shall be assessed, and the magnitude of the per car
contribution adjusted to meet the pending and potential litigation needs of the
Company and Licensee. All litigation shall be commenced in the name of Company
for the benefit of any Licensee and all parties shall cooperate with the others
in the prosecution of such litigation. Only such litigation as the parties
mutually agree to for the mutual benefit of the Company and all Licensees shall
be funded through the "litigation trust fund."
42. Jurisdiction and Venue.
Licensee agrees that the Company may institute any action against
Licensee arising out of or relating to this Agreement in the United States
Federal Court of general jurisdiction in the State of California and Licensee
irrevocably submits to the jurisdiction of said court and waives any objection
he may have to either the jurisdiction or venue of such court.
43. Independent Contractors Indemnification.
The Company and Licensee are independent contractors. The Company shall
not be obligated by any agreements, representations or warranties made by
Licensee nor shall the Company be obligated for any damages to any person or
property directly or indirectly arising out of the operation of the Facility or
the product produced or serviced, whether caused by Licensee's negligent or
willful action or failure to act. Licensee agrees to indemnify the Company
against and to reimburse the Company for all such obligations and damages for
which it is held liable and for all costs incurred by it in the defense of any
such claim brought against it or in any action in which it is named as a party,
including without limitation reasonable attorney's fees, costs of investigation
and proof of facts, court costs, other litigation expenses and travel and living
expenses. The Company shall have the right to defend any such claim.
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44. Licensee Corporation/Partnership.
If Licensee is a corporation or a partnership or if this Agreement and
the License are assigned to a corporation or partnership, such corporation or
partnership shall conduct no business other than the Facility and other World
Transport Authority Facilities under License Agreement with the Company, except
those activities specifically authorized per Paragraph 14 hereof. Licensee, or
if Licensee is a corporation or partnership, the person designated hereinafter
as the controlling shareholder or partner shall own and control not less than
fifty-one percent (51%) of the partnership interest or the equity and voting
power of all issued and outstanding capital stock of the corporation. All
shareholders, partners or investors in such corporation or partnership shall
execute this Agreement and be bound jointly and severally by all provisions
hereof and shall thereby also represent and warrant their percentage ownership
interest and that they are all of the persons required to sign this Agreement
pursuant to this paragraph. The articles of partnership, partnership agreement,
articles of incorporation, bylaws and other organizational documents of such
partnership or corporation shall recite that the issuance and transfer of any
interest therein is subject to the restrictions of Paragraphs 33, 35, 37 and 39
hereof and all issued and outstanding stock certificates of such corporation
shall bear a legend referring to the restrictions contained in this Agreement.
45. Governing Law.
Except to the extent governed by the United States Trademark Act of 1946
(Lanham Act; 15 U.S.C. S1051 et secr.) or the United States Arbitration Act,
this Agreement shall be governed by the laws of the State of California.
46. Binding Effect.
This Agreement is binding upon the parties hereto and their respective
heirs, assigns and successors in interest.
47. Construction.
The preamble recitals and exhibits hereto are a part of this Agreement,
which constitutes the entire agreement of the parties, and there are no other
oral or written understandings or agreements between the Company and Licensee
relating to the subject matter of this Agreement. The headings of the several
paragraphs hereof are for convenience only and do not define, limit or construe
the contents of such paragraphs. The term 'Licensee' as used herein is
applicable to one or more persons, a corporation or a partnership, as the case
may be, and the singular usage includes the plural and the masculine and neuter
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<PAGE> 26
usages include the other and the feminine. The Company and Licensee agree that
if any provision of this Agreement is capable of two constructions one of which
would render the provision illegal or otherwise voidable or unenforceable and
the other of which would render the provision valid and enforceable, such
provision shall have the meaning which renders it valid and enforceable. The
language of all provisions of this Agreement shall be construed simply according
to its fair meaning and not strictly against the Company or Licensee. It is the
desire and intent of the Company and Licensee that the provisions of this
Agreement be enforced to the fullest extent permissible under the laws and
public policies applied in each jurisdiction in which enforcement is sought.
Accordingly, if any provision of this Agreement is adjudicated to be invalid or
unenforceable, such adjudication is to apply only with respect to the operation
of such provision in the particular jurisdiction in which such adjudication is
made. All provisions of this Agreement are severable and this Agreement shall be
interpreted and enforced as if all completely invalid or unenforceable
provisions were not contained herein and partially valid and enforceable
provisions shall be enforced to the extent valid and enforceable. If any
applicable law or rule requires a greater prior notice of the termination of or
election not to renew this Agreement, or the taking of some other action
hereunder, than is required hereunder, the prior notice or other requirements
required by such law or rule shall be substituted for the requirements hereof.
48. Waiver.
The Company and Licensee may by written instrument unilaterally waive
any obligation of or restriction upon the other under this Agreement. No
acceptance by the Company of any payment by Licensee and no failure, refusal or
neglect of the Company or Licensee to exercise any right under this Agreement or
to insist upon full compliance by the other with its obligations hereunder or
with any specification, standard or operating procedure or rule shall constitute
a waiver of any provision of this Agreement.
49. Standard of Reasonableness.
With respect to all determinations to be made by the Company pursuant to
this Agreement except those to be made in its sole discretion, the Company
agrees to exercise reasonable judgment.
50. Notices.
All written notices permitted or required to be delivered by the
provisions of this Agreement or of the Operating Manual shall be deemed so
delivered by hand or three (3) days after placed in the United States Mail by
Registered or Certified Mail, Return Receipt Requested, postage prepaid and
addressed to
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<PAGE> 27
the party to be notified at its most current principal business address of which
the notifying party has been notified.
51. Effective Date of this Agreement.
This Agreement shall take effect upon the date of its acceptance and
execution by the Company. LICENSEE REPRESENTS THAT HE HAS READ THIS AGREEMENT IN
ITS ENTIRETY AND THAT HE HAS BEEN GIVEN THE OPPORTUNITY TO CLARIFY ANY
PROVISIONS AND INFORMATION THAT HE DID NOT UNDERSTAND AND TO CONSULT WITH AN
ATTORNEY OR OTHER PROFESSIONAL ADVISOR. LICENSEE FURTHER REPRESENTS TEAT HE
UNDERSTANDS THE TERMS, CONDITIONS AND OBLIGATIONS OF THIS AGREEMENT AND THE
LICENSE AND AGREES TO BE BOUND THEREBY.
LICENSEE
World Transport Authority, Inc.. Grana Baja, S.A. de C.V.
By: ___________________________ By: ___________________________________
Dean Amaru, President Francis Zubrowski, Director General
Dated:_________________________ Dated: _________________________________
COVENANTS OF SHAREHOLDERS/PARTNERS/INVESTORS
The undersigned individuals represent and warrant that they are all of
the shareholders, partners or investors of Licensee or otherwise have a direct
or indirect beneficial interest in the success of Licensee. Accordingly, to
induce the Company to enter into this Agreement and grant the License to
Licensee, each of the undersigned individuals hereby jointly and severally agree
to be bound by all of the provisions of this Agreement.
By: ___________________________ By: ___________________________________
Shareholder Shareholder
22
<PAGE> 28
EXHIBIT A
PRODUCT LINE
8-PASSENGER TAXI
[PICTURE]
VAN
[PICTURE]
TRUCK
[PICTURE]
23
<PAGE> 29
EXHIBIT B
PAYMENT OF LICENSE FEE
<TABLE>
<CAPTION>
AMOUNT
EVENT PAYABLE
----- -------
<S> <C> <C>
1. Upon execution of Agreement $ 5,000.00
(receipt acknowledged)
2. Due 60 days after execution $ 25,000.00
3. Due 90 days after execution $ 30,000.00
4. Irrevocable Letter of Credit lodged
with the bank of the Company upon $ 200,000.00
shipment of factory.
</TABLE>
EXHIBIT C
24
<PAGE> 30
WORLD CAR BUSINESS EQUIPMENT LIST
OFFICE EQUIPMENT
o IBM compatible Computer & Monitor
o Laser Printer
o Computer Desk & Chair
COMPOSITE AUTOMOBILE BUSINESS COMPUTER PROGRAM
o Letterhead Design
o Advertising Program
o Marketing Program
o General Accounting Software - G/L, A/R, A/P, P/O
o Building Layout
WORLD VEHICLE VHS TRAINING AID
o TV & VCR
o Tapes & Manuscript
o Manuals
WORLD VEHICLE FIBERGLASS TOOLING - 7 PASSENGER CONFIGURATION
o Outer body mold
o Inner body mold
o Driver seat mold
o Hood mold
o Rear fender opening molds-left and right
o Inner fender molds-left and right
WORLD VEHICLE FIBERGLASS TOOLING - TRUCK CONFIGURATION
o Inner bed mold
o Inner tailgate mold
o Outer tailgate mold
25
<PAGE> 31
WORLD VEHICLE FIBERGLASS TOOLING - VAN CONFIGURATION
o Van box mold
o Inner door mold
o Outer door mold
WORLD VEHICLE CUTTING PATTERNS
PRODUCTION EQUIPMENT
o Steel paint/grinding booth with heater
o Compressor
o MIG Welder with welding table, curtains and fixtures
o Tubing Bender
o Plasma Cutter
o Drill Press
o Band Saw & Cold Cut
o Saw Disc Sander & Bench Grinder
o Eight 2-Door Metal Cabinets
o Sewing Machine & Table
o Tire Changer
o Tool chest with hand, air and electric tools required for vehicle
production
o Fiberglass tools
o Facility Air & Vacuum Lines
o Battery Charger and Engine Stand
PRODUCTION MATERIAL - 3 CARS
o Motors & Transaxles and other mechanical parts
o Wheels & Tires
o Fuel tanks
o Electrical components
o Windshields
o Steel tubing
o Resin & Fiberglass Material
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<PAGE> 32
TRAINING
o Production of one vehicle to be completed with licensee during training at
our facilities
o Technical advice for production setup
o Training and production of 3 vehicles at licensed facility by two
WTA technicians
EXHIBIT D
WORLDSTAR CONTAINER LOGISTICS
Material Qty
-------- ---
1. Polyester Resin (55 gal. drums) 22
2. Fiberglass Mat (2 oz. x 48") 60 Rolls
3. Core Material (4' x 8' x 1/2") 80 Sheets
4. Windshields 40
5. Wheels 200
6. Tires 200
7. Engines (Long Block 1.6L) 40
8. Transmissions 40
9. Wiring 5,000 Feet
10. Steering Columns 40
11. Drive Shafts 80
12. Gel Coat (5 gal. pails) 24
13. Suspensions 40 Sets
14. Brakes 40 Sets
15. Steel Tube (Engine Cage) 20' Lengths 100
16. Sheet Metal (Gas Tank) (4' x 8' x .050) 20 Sheets
27
<PAGE> 33
17. Mufflers 40
18. Batteries 40
28
<PAGE> 1
EXHIBIT 10c
PHILIPPINES
24
<PAGE> 2
WORLD TRANSPORT AUTHORITY, INC.
A DIVISION OF COMPOSITE AUTOMOBILE RESEARCH, LTD.
MANUFACTURING & DISTRIBUTION LICENSE
FOR
WORLDSTAR PHILIPPINE ISLANDS, INC.
1
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Paragraph Title Page
- --------- ----- ----
<S> <C> <C>
1. Preamble 1
2. Granting of License 2
3. Licensee's Area of Exclusive Responsibility 2
4. Sales Quotas 2
5. Renewal of License 2
6. Facility Location 3
7. Facility Development 3
8. Molds, Tools & Equipment 4
9. Mold and Equipment Refurbishing 4
10. Training 4
11. Facility Opening 5
12. Operating Assistance 5
13. Product Offering 6
14. Parts, Supplies and Materials 7
15. Advertising and Promotion by Company 7
16. Advertising and Promotion by Licensee 8
17. Bookkeeping and Records 8
18. Sales Reports and Financial Statements 8
19. Specifications, Standards, Procedures and Rules 9
20. Compliance with Laws 9
21. Prices to be Determined by Licensee 9
22. Operating Manual 10
23. Trade Secrets: New Processes, Concepts, Improvements, etc. 10
</TABLE>
2
<PAGE> 4
<TABLE>
<CAPTION>
Paragraph Title Page
- --------- ----- ----
<S> <C> <C>
24. Licensee Must Directly Supervise Facility 11
25. Insurance 11
26. Marks 11
27. Initial Fees 12
28. Inventory Purchase / Royalty Fee 13
29. Inspection 13
30. Audit of Sales Reports and Financial Statements 14
31. Termination by Licensee 14
32. Termination by the Company 14
33. Licensee's Obligations Upon Termination of Expiration 15
34. The Company's Option to Purchase Facility 16
35. Licensee's Covenants Not to Compete 17
36. Assignment by the Company 17
37. Assignment by Licensee 17
38. The Company's Approval of Assignment 18
39. Death or Disability of Licensee 18
40. Right of First Refusal of the Company 19
41. Judicial Enforcement, Injunctions and Specific Performance 19
42. Jurisdiction and Venue 20
43. Independent Contractors/Indemnification 20
44. Licensee Corporation/Partnership 20
45. Governing Law 21
46. Binding Effect 21
47. Construction 21
48. Waiver 22
49. Standard of Reasonableness 22
50. Notices 22
</TABLE>
3
<PAGE> 5
<TABLE>
<CAPTION>
Paragraph Title Page
- --------- ----- ----
<S> <C> <C>
51. Effective Date of this Agreement 23
Exhibit A - Product Line 23
Exhibit B - Payment of License Fee 24
Exhibit C - Equipment List 25
Exhibit D - Container Logistics 27
Exhibit D - Container Logistics 27
</TABLE>
4
<PAGE> 6
WORLD TRANSPORT AUTHORITY, INC.
STANDARD MANUFACTURING AND DISTRIBUTION LICENSE
THIS AGREEMENT is made and entered into by and between WORLD TRANSPORT
AUTHORITY, INC. A NEVADA CORPORATION, with it's principal office at 635
FRONT STREET, EL CAJON, CA 92020 (the "COMPANY") and WORLDSTAR
PHILIPPINE ISLANDS, INC. whose principal address is 2ND FLOOR, ROOM 206,
C & S SHOPPING COMPLEX, JUAN LUNA STREET TARLAC PHILIPPINES
("LICENSEE").
1. Preamble.
The Company originated and produced certain unique designs, production
processes and molds for use in manufacturing composite and fiberglass
body/chassis parts for a vehicle with three body configurations: an 11 passenger
people mover, a three passenger pickup and a three passenger van. These vehicles
have the trade name WORLDSTAR. The Company developed the design, molding
procedure, trademarks, trade names, and goodwill for the marketing and
manufacturing of the WORLDSTAR, consisting of manufactured plastic parts
produced from molds created from the original design. Licensee has applied to
the Company for a license to manufacture and distribute WORLDSTAR automobiles
utilizing the Company's business format, manufacturing methods, specifications,
standards, operating procedures, operating assistance, advertising services, and
the trademarks. Such application has been approved by the Company in reliance
upon all of the representations made therein, including without limitation the
ownership of License. The Company contemplates the development of additional
vehicles, options, products and processes which shall likewise be offered to
Licensee to manufacture and distribute upon mutually agreeable terms and
conditions. In no way, will the Company introduce these ne3 items into the
Philippine Islands other than thtough WORLDSTAR PHILIPPINE ISLANDS, INC.
exclusively. It is also understood that these new products can only be sold in
the Philippiones through the Master License with WORLDSTAR PHILIPPINE ISLANDS
INC. Licensee has read this Agreement and has been given an opportunity to
clarify any provision of the License Agreement. Licensee hereby acknowledges
that he understands and accepts the terms, conditions and covenants contained in
this License Agreement as being reasonable and necessary to maintain the
Company's high standards of quality and service and the uniformity of those
standards in order to protect and preserve the goodwill of the Marks.
5
<PAGE> 7
2. Granting of License.
Subject to the provisions of this License Agreement, the Company hereby
grants to the Licensee a License to establish a manufacturing facility
('Facility') for the manufacture of the WORLDSTAR product line as described in
Exhibit A and a License to use the trademarks in connection therewith for a term
of ten (10) years (the "term of the License") in the Philippine Islands. The
phrase "term of the License" used herein shall mean the initial term and the
renewal term if the License is renewed. The License fee is $260,000.00 (Exhibit
B). The granting of the License allows the Licensee to produce annually up to
324 WORLDSTAR cars, pickups or vans, as an aggregate number. If the Licensee
wishes to produce WORLDSTAR vehicles in excess of the 324 annual aggregate
number, another License must be purchased from the Company. Depending on the
training, facility layout, additional equipment and actual annual production
desired, additional Licenses start at $137,500.00. WORLDSTAR PHILIPPINE ISLANDS,
INC. would be granted a 5% overage allowance in extreme conditions at prorated
prices. Example of Extreme Conditions: Year end, only a few more vehicles are
needed to fulfill a large contract - any additional shipping charges to be paid
by WSPI.
3. Licensee's Area of Exclusive Responsibility.
The following geographic territory shall be the Area of Exclusive
Responsibility of the Facility: THE PHILIPPINE ISLANDS (as a whole). During the
term of the License, provided that Licensee is in full compliance with this
Agreement, the Company will not operate or grant a License for the operation of
a manufacturing facility whose area of exclusive responsibility overlaps
Licensee's Area of Exclusive Responsibility.
4. Sales Quotas.
30% of the normal annual product capacity of 324 units is the sales
quota to maintain the License. If the Licensee fails to meet the minimum
requirement of 30% normal capacity of 324 units (98 units) after one full
calendar year (12 consecutive months), the Company reserves the right to sell a
License into the area, after 90-day notification is given to the Licensee of
non-conpliance.
5. Renewal of License.
Licensee may, at his option, renew the License for an additional
ten-year term, provided that: (a) Licensee is not in default of any provision of
this Agreement or any other agreement between Licensee and the Company or its
subsidiaries or affiliates, and has substantially complied with all the terms
and conditions of such agreements during the terms thereof; (b) Licensee has
satisfied all monetary
6
<PAGE> 8
obligations owed by Licensee to the Company and its subsidiaries and affiliates
and has timely met these obligations throughout the term of this Agreement; (c)
Licensee has met the sales quotas for the Facility prescribed in Paragraph 4;
and (d) Licensee is able to maintain possession of the site of the Facility or
to secure and develop a suitable alternative site approved by the Company.
Renewal of the License shall be effected by the execution by the Company and
Licensee of an extension agreement. Licensee agrees to give the Company not less
than six (6) months nor more than twelve (12) months, prior written notice of an
election not to renew the License. After approval of the extension of the
License by the Company, failure or refusal by Licensee to execute such extension
agreements within thirty (30) days after delivery thereof shall be deemed an
election by Licensee not to renew the License. The price of the 10 year
extension of the License agreement will be one dollar ($1) U.S.
6. Facility Location.
Master Licensee must inform the Company prior to any moves to relocate.
Any such relocation shall be at Licensee's sole expense and the Company shall
have the right to charge Licensee for any costs that the Company may incur, and
a reasonable fee for its services, in connection with any such relocation of the
Facility such as reprogramming computer systems or sending of technicians to aid
in the relocation of equipment at the Licensee's request.
7. Facility Development.
Licensee agrees that promptly after obtaining possession of the site for
the Facility Licensee will: (a) cause to be prepared and submit for approval by
the Company a site plan for the Facility (including requirements for dimensions,
exterior design, materials, interior layout, signs, and decorating) required for
the development of the Facility at the site leased or purchased therefore; (b)
obtain all required zoning changes; all required building, driveway, utility,
health, sanitation, and sign permits and any other required permits; (c)
complete the construction and/or remodeling, and sign installation and
decorating of the Facility in full and strict compliance with plans and
specifications therefore approved by the Company. The Company will as a
provision of the License help the Licensee design the WORLDSTAR manufacturing
facility floor plan for the most efficient use of the space.
8. Molds, Tools, and Equipment.
The Company shall provide Licensee with molds, tools and all equipment
specific to the manufacture of the WORLDSTAR automobile. Molds are proprietary
to the Company and must be returned to the Company in case of default,
non-compliance or time limitations (ten/twenty year term). A
7
<PAGE> 9
complete listing of these molds, tools and equipment can be found in Exhibit C.
Licensee will not duplicate WORLDSTAR molds or tooling, not will the Licensee
sell, give or trade said WORLDSTAR molds or tooling to any third party not
related to the original agreement.
9. Mold & Equipment Refurbishing.
The molds, tools and equipment have been designed and or specified to be
capable of producing their products at maximum quantity as allowed by the
Licensee over the term of the License. If the molds, tools or equipment
deteriorates the Licensee agrees to refurbish such molds, tools and equipment
and/or introduce into production such changes as are required by the Company to
maintain minimum product standards and specifications within a reasonable time
after receipt of notice thereof, not to exceed three (3) months.
10. Training.
Prior to the opening of the Facility, the Licensee shall enroll up to
two persons (selected by the Licensee) in a training program for instruction in
all phases of the operation of a World Transport Authority manufacturing
facility. These programs shall be furnished at such times and places as the
Company designates. The Licensee's designated personnel shall complete the
training program to the satisfaction of the Company, so that then they will be
able to train their employees at their local facility. Licensee shall be
responsible for the travel and compensation of himself and his employees
incurred during the training program. The Company shall provide living
accommodations (room and board) as well as transportation to the training
facility and back to the living accommodation. The Licensee's personnel shall be
trained in all aspects of the W.T.A. business, including but not limited to, the
following: Sales, Marketing, Computer Operation, WORLDSTAR Manufacturing;
welding, fabrication, molding, assembly, upholstery and testing.
Licensee shall implement a training program for employees of the
Facility in accordance with training standards and the procedures manual
provided by the Company upon start of the facility and as necessary thereafter.
Licensee shall purchase from the Company and utilize such training aids which
the Licensee may require from time to time (e.g., films, videotapes or printed
materials). Licensee agrees not to employ any person who is required by the
Company to complete a training program but who fails or refuses to do so.
11. Facility Opening.
8
<PAGE> 10
Licensee shall complete development of the Facility and shall have the
Facility ready to open and commence the conduct of its business within a
reasonable time after Licensee obtains possession of such site and possession of
the Company supplied molds, tooling, equipment and production materials or from
the date of this Agreement if Licensee has possession of such site on the date
hereof. If Licensee has not, within nine (9) months from the date of this
Agreement, completed all required training and opened the Facility, then this
Agreement and the License granted hereby may, at the sole option of the Company,
be terminated upon the giving of written notice to Licensee by the Company.
12. Operating Assistance.
a). The Company shall furnish to Licensee reasonable operating
assistance in connection with the operation of the Facility as the Company and
WORLDSTAR PI determines to be necessary. The Company will provide two
technicians for approximately two (2) weeks to provide operating assistance upon
initial start-up. The Company shall be responsible for the travel and
compensation of its technicians incurred during the initial two-week operating
assistance program. Licensee shall provide living accommodations (room and
board) as well as transportation to the Facility and back to the living
accommodation. The Company technicians shall provide operating assistance in
accordance with the training standards and procedures prescribed by the Company.
Operating assistance will include advice and guidance with respect to: (i)
manufacturing processes and techniques; (ii) vehicle quality control testing,
(iii) hiring and training employees; (iv) formulating and implementing
advertising and promotional programs; and (v) the establishment and maintenance
of administrative, bookkeeping, accounting, inventory control and general
operating procedures.
b). In order to promote the desire of the Company that the automobiles
manufactured by Licensee be of the highest quality, the Company will provide
continuing operating assistance as it sees fit. In order to promote quality, the
Company shall advise Licensee from time to time of improvements or changes to
the operating procedures. The Company may also advise Licensee from time to time
of concerns or problems with Licensee's product quality or the Facility
discovered by the Company in the normal course of business or during inspections
made by the Company. The Company shall make no separate charge to Licensee for
such continuing operating assistance, provided that the Company feels that the
Licensee is making reasonable steps to address the concerns expressed by the
Company.
c). If the Licensee, after written notice and in the sole opinion of the
Company, continues to produce automobiles which are of unacceptable levels of
quality, or continues to operate the Facility in an unsafe manner, or fails to
substantially comply with the provisions of this Agreement, the Company may
require that the Licensee make necessary changes. The Company may at it's
discretion incur costs and
9
<PAGE> 11
make reasonable charges for such costs for corrective operating assistance made
necessary, in the sole judgment of the Company, as a result of Licensee's
failure to comply with any provision of this Agreement or any specification,
standard or operating procedure prescribed by the Company or corrective
operating assistance provided to Licensee in excess of that which is normally
provided by the Company.
13. Product Offering.
Licensee agrees that he will offer for sale and sell at the Facility
only World Transport Authority products and services. Options, not supplied by
WTA such as radios, customizing parts, etc. of acceptable high quality will be
an exception. Licensee further agrees not to offer for sale or sell at the
Facility any other product or services or use such premises for any purpose
other than the manufacture and sale of World Transport Authority products.
Notwithstanding the foregoing, Licensee may repair "non-competitive products"
which are compatible with the Facility and technologies of the Licensee provided
such products do not impair Licensee's ability to meet production demands and/or
minimum quotas as herein provided. The Licensee may also at his sole discression
provide options, modifications, additions, upgrades and repair parts to the
WORLDSTAR that in the Licensee's opinion helps with the sales and profitability
of the product. Notwithstanding the foregoing, should Licensee fail to generate
at least 75% of the sales quotas as described in Paragraph 4 for a period of six
consecutive months, and the Licensee has exercised all reasonable due diligence
to generate such sales, Licensee shall be permitted to introduce into production
at the Facility non-World Transport Authority products approved by the Company
upon such terms and for such periods as are commercially reasonable under the
market conditions then existing and to which both Licensee and Company agree in
writing.
14. Parts, Supplies and Materials.
All parts, supplies and materials used in the production of the
WORLDSTAR shall be purchased from the Company and at no time be sourced
elsewhere. The Company has the right to upgrade, change and modify due to
technological changes at it's sole discretion any and all parts, supplies and
materials. The Company is responsible to supply the Licensee tooling for any
changes made at no cost to the Licensee. The parts, supplies and materials shall
be drop shipped directly to WORLDSTAR PI from the manufacturer as the Company
deems mutually advisable to minimize shipping costs to WSPI and utilize
Just-In-Time (JIT) production methods. As may be mutually acceptable to the
Company and
10
<PAGE> 12
WSPI parts, supplies and materials may be shipped to WSPI in 40' shipping
containers, or if the port facility in the area is not capable of handling 40'
containers, 20' containers will be used. The Company shall have the right from
time to time without notice to examine the Facility of the Licensee and any
related warehousing facility and to test or inspect the parts, materials or
supplies to determine whether they were procured from the Company. In the event
such inspections disclose non-compliance, the Company shall have the right to
charge reasonable fees for the inspection of the materials. The Company, at its
sole discretion, shall fine the Licensee a fine of 25 times the value of the
products not purchased from the Company. If the Company finds that the Licensee
continues this practice, the License will be terminated and all molds, tools and
equipment purchased with said License must be returned to the Company at the
Licensees expense.
15. Advertising and Promotion by the Company.
The Company shall from time to time formulate, develop, produce and
conduct advertising and promotional programs in such form and media as it
determines to be most effective. The Company shall have the right, at its sole
discretion, to determine the composition of all geographic territories and
market areas for the development and implementation of such advertising and
promotion programs. All costs of the formulation and development of any such
advertising and promotion will be paid for by the Company. The Company shall
design advertising materials for the promotion of the products and the Marks.
Any production and distribution costs shall be borne directly by Licensee for
such materials ordered by the Licensee such as brochures, mailers, posters,
etc.. International advertising shall be the sole responsibility of the Company
and no international advertising shall be placed by Licensee. Licensee
acknowledges and understands that this advertising is intended to maximize
general public recognition and patronage of the Marks in the manner determined
to be most effective by the Company and that the Company undertakes no
obligation in developing, implementing or administering such programs.
16. Advertising and Promotion by Licensee.
All advertising and promotion by Licensee shall be completely factual
and shall conform to the highest standards of ethical advertising and the
policies prescribed by the Company, including policies contained in the
Company's corporate identity manuals as revised by the Company. Advertising
guidelines and actual ad formats can be found in the supplied computer program
which has been provided by the Company within the materials noted in Exhibit C.
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<PAGE> 13
17. Bookkeeping and Records.
Licensee shall use the established bookkeeping and record keeping
systems provided by the Company in the computer business program for the
retention of sales, purchase orders, invoices, payroll, accounts payable, sales
tax, tax returns, cash receipts and disbursements journals and general ledgers.
Said records shall be made available to the Company at any time upon reasonable
notice and during regular business hours.
18. Sales Reports and Financial Statements.
Licensee shall submit to the Company: (a) within ten (10) days of the
end of each quarter a report of the sales of products and services sold at the
Facility, and such other information and supporting records as the Company
requires. (b) within sixty (60) days of the end of each fiscal year of the
Facility, unaudited annual statements of profit and loss and financial condition
of the Facility. The Company may require Licensee to obtain at the Company's
expense and submit to the Company within sixty (60) days an audited statement of
profit and loss and financial condition of the Facility for any fiscal year if
the Company believes that Licensee has submitted sales reports, unaudited profit
and loss statements or tax returns containing material inaccuracies. Should such
audit disclose greater than 10% under-reporting of unit sales, the cost of such
audit shall be assumed by Licensee. If the Licensee continues to under-report
sales for three consecutive quarters, the Company may fine the Licensee up to
25% of the unreported sales.
19. Specifications, Standards, Procedures and Rules.
Licensee agrees to fully comply with all specifications, standards and
operating procedures and rules prescribed for the Facility, including without
limitation, specifications, standards and operating procedures and rules
relating to: (a) the safety, maintenance, cleanliness, sanitation, function and
appearance of the Facility and its equipment, fixtures, furniture, decor and
signs; (b) qualifications, dress, grooming, general appearance and demeanor of
Licensee and all employees of Licensee and the Facility; (c) quality,
appearance, performance and uniformity, and manner of preparation and sale of
all World Transport Authority products sold by Licensee and of all supplies and
materials used in the preparation and sale thereof; (d) methods and procedures
relating to receiving, preparing and delivering customer orders; (e) hours
during which the Facility will be open for business; (f) advertising and
promotion; (g) use of standard forms; (h) use of exterior and interior signs,
posters, displays and similar items; (i) the
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<PAGE> 14
handling of customer complaints; (i) compliance with the Company's Identity
Programs, as same may exist; and (k) the posting of signs identifying Licensee
as the owner of the Facility in accordance with the Company's requirements.
20. Compliance with Laws.
Licensee shall secure and maintain in force all required licenses,
permits and certificates and shall operate the Facility in full compliance with
all applicable laws, ordinances and regulations, including without limitation
all government regulations relating to occupational hazards and health, consumer
protection, unfair and deceptive practices, trade regulation, and other rules as
stated by the government of the Licensee country.
21. Prices to be Determined by Licensee.
The Company may from time to time offer guidance to Licensee relative to
retail and wholesale prices for the products and services of the Facility that
in the Company's judgment constitute good business practice. Licensee shall have
the sole right to determine the prices to be charged by the Facility and no such
guidance shall be deemed or construed to impose upon Licensee any obligation to
charge any fixed, minimum or maximum prices for any product or service offered
for sale by the Facility.
22. Operating Manual.
The Company will supply to Licensee during the term of the License
Agreement one or more copies of an operating manual containing mandatory and
suggested specifications, standards, production and operating procedures and
rules prescribed by the company and information relative to other obligations of
Licensee hereunder and the operation of the Facility (the "Operating Manual").
This manual will be provided both in written and in a computer format both in
English. The entire contents of the Operating Manual will remain confidential
and the intellectual property of the Company. The Company shall have the right
to add to and otherwise modify the Operating Manual, if deemed necessary by the
Company to improve the standards of service or product quality or the efficient
operation of the Facility, to protect or maintain the goodwill associated with
the Marks or to meet competition, provided that no such addition or modification
shall alter Licensee's fundamental status and rights under this Agreement. The
provisions of the Operating Manual as modified and mandatory specifications
standards and operating procedures and rules prescribed by the Company and
communicated to Licensee in writing,
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<PAGE> 15
shall constitute provisions of this Agreement as if fully set forth herein. All
references herein to this Agreement shall include the provisions of the
Operating Manual and all such mandatory specifications, standards and operating
procedures and rules. The modified provisions to the manual shall be transmitted
to be incorporated in both the written and computer versions.
23. Trade Secrets; New Processes, Concepts.
Licensee acknowledges that his entire knowledge regarding the production
of the WORLDSTAR automobile, including without limitation the contents of the
Operating Manual and the specifications, standards and operating procedures of
the Facility, is derived from information disclosed to Licensee by the Company
and that such Operating Manual and such other information is confidential and a
trade secret of the Company. Licensee agrees that he will maintain the absolute
confidentiality of the Operating Manual and all such other information during
and after the term of the License, disclosing same to the other employees of the
Facility only to the extent necessary for the operation of the Facility in
accordance with this Agreement, and that he will not use the Operating Manual
and such other information in any other business or in any manner not
specifically authorized or approved in writing by the Company. Licensee agrees
that if they shall develop any new concept, process or improvement in the
operation or promotion of the Facility or product (other than those not uniquely
applicable to the World Transport Authority product itself), Licensee shall
promptly notify the Company and shall provide the Company with all necessary
information with respect thereto without compensation therefore. Licensee
acknowledges that such concept, process or improvement shall become the property
of the Company and that the Company may itself utilize or disclose to other
Licensees such information. The Company at its sole discretion shall decide if
the new concept, process or improvement is such that an acknowledgment of the
new idea is meritorious of a royalty or fee.
24. Licensee Must Directly Supervise Facility.
The Facility shall be under the direct, on-premises supervision of
Licensee (or person approved by the Company). Licensee (or person approved by
the Company if Licensee is a corporation or partnership) shall devote his entire
time (excluding reasonable vacation periods) which shall be no less than forty
(40) hours per week to the management of the Facility.
25. Insurance.
Licensee shall at all times during the term of the License maintain in
force at his sole expense comprehensive general liability insurance (including,
but not limited to coverage for personal injury,
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<PAGE> 16
product and contractual liability), motor vehicle liability, fire, and workmen's
compensation insurance if necessary in the country where the Licensee is
located. All comprehensive general liability and motor vehicles liability
insurance policies shall name the Company as additional insured, provided that
any increase in insurance premiums attributable to the naming of Company as an
additional insured shall be assumed by Company. Said policies shall provide that
the Company shall receive thirty (30) days prior written notice of termination,
expiration, cancellation, modification or reduction in coverage of any such
policy. Licensee shall submit to the Company annually a copy of the certificate
of insurance or evidence of the renewal or extension of each such insurance
policy.
26. The Marks.
Licensee acknowledges that the Company is the owner of all Marks
licensed to Licensee by this Agreement and all usage thereof by Licensee and any
goodwill established thereby shall be for the exclusive benefit of the Company.
Licensee agrees to use each such Mark in full compliance with rules prescribed
from time to time by the Company. Licensee may not use any Mark in connection
with the sale of any unauthorized product or service or in any other manner not
explicitly authorized in writing by the Company. Licensee shall immediately
notify the Company of any infringement of or challenge to the Company's use of
any Mark or claim by any person of any rights in any Mark, and Licensee shall
not communicate with any person other than the Company and its counsel in
connection with any such infringement challenge or claim. The Company shall have
sole discretion to take such action as it deems appropriate and the right to
exclusively control any litigation of the Patent or Mark or other proceeding
arising out of any such infringement, challenge or claim or otherwise relating
to any Mark and Licensee agrees to execute any and all instruments and
documents, render such assistance and do such acts and things as may, in the
opinion of the Company's counsel, be necessary or advisable to protect and
maintain the interests of the Company in any such litigation, Patent or
Trademark or other proceeding or to otherwise protect and maintain the interest
of the Company in the Marks. The Company agrees to indemnify Licensee against
and to reimburse Licensee for all damages for which he is held liable in any
proceeding arising out of the use of any Mark in compliance with this Agreement
and for all costs reasonably incurred by Licensee in the defense of any such
claim brought against him or in any such proceeding in which he is named as a
party. If it becomes advisable at any time in the sole discretion of the Company
for Licensee to modify or discontinue use of any Mark and/or use one or more
additional or substitute trademarks Licensee agrees to do so and the sole
obligation of the Company in any such event shall be to reimburse Licensee for
his tangible costs of complying with this obligation.
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<PAGE> 17
27. Initial Fees.
Licensee agrees to pay to the Company a license application fee in the
amount of two hundred sixty thousand dollars ($260,000.00 U.S.), payable as
provided in Exhibit B attached hereto. Licensee shall have the right to inspect,
at the point of debarcation, all molds, equipment, tooling and supplies, as
indicated in Exhibit C of this License application, prior to shipment and prior
to installment payment. In the event the Company fails to produce the required
equipment, tooling and supplies within 30 days of the time agreed upon by the
Company, unless not within the Company's control, Licensee shall be entitled to
the refund of fees paid to date. If a tool, piece of equipment or supply is
unavoidably unavailable the Company has the right to substitute a tool, piece of
equipment or supply of equal or better quality. Licensee shall assume all
shipping expenses to Licensee's Facility from the Port of San Diego, California
U.S.A.. Licensee intends to release from escrow each installment immediately
upon satisfaction of the Company completing each phase of the License Payment
Schedule.
It should be understood, that at the time this contract is signed, the
Licensee is unaware of exactly what it takes to construct the aforementioned
vehicles and operate a modern efficient business. The Licensee is purchasing in
good faith, all goods and knowledge of the Company expecting the Company will
supply everything needed to produce a high tech, quality vehicle and business.
28. Inventory Purchase.
The Company shall purchase in quantity all the materials neededs by the
Licensee for the manufacture of the WORLDSTAR vehicle. These materials shall be
shipped directly to WSPI or collected and packaged ready for shipment in 40'
containers, or 20' as outlined in paragraph 14. The Company shall add together
all materials needs from each Licensee and negotiate extraordinary discounts in
pricing from our suppliers. From time to time the Company may change suppliers
seeking better pricing, quality or availability. The Company shall organize the
containerization of the materials and shipment to the Licensee. The Company will
charge the Licensee for the cost of materials, assembly , handling and
containerization plus a royalty fee of $275.00 per vehicle. If the Company
receives a better price from its suppliers this cost savings belongs to the
Licensee. The Licensee shall cause a Letter of Credit to be lodged with the
Company's bank for the container of materials with such terms and conditions
that allow the Company to use the Letter of Credit as collateral for the
Company's Letter of Credit to their suppliers. With the Company using the
Licensees credit and the combination of all Licensees collective buying power
the Company is able to pass on great savings to the Licensee for the parts,
supplies and materials. In addition, the Company is not required to use it's
resources to finance the purchase of the parts, supplies and materials.
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<PAGE> 18
29. Inspection.
To determine whether the Licensee is complying with this Agreement the
Company shall have the right at any time during business hours, and without
prior notice to Licensee, to inspect the Facility and the business bookkeeping
records and other supporting records and documents of the Facility and Licensee.
Such inspections shall not unreasonably disrupt the ongoing operations of the
Facility or interfere with the duties of Licensee or its employees. Such
inspections shall be made at the Company's expense, provided, however, that if
the Company is required to make any inspections in connection with Licensee's
repeated or continuing failure to comply with this Agreement following prior
notice and reasonable opportunity to cure (not to exceed 30 days) deficiencies
particularized by the Company. The Company shall have the right to charge
Licensee for the costs of making all further inspections in connection with such
failure to comply which reveal continuing deficiencies, including without
limitation travel expenses, room and board and compensation of the Company's
employees.
30. Audit of Sales and Financial Statements.
The Company shall have the right to audit or cause to be audited the
sales reports, and financial statements which Licensee is required to submit by
Paragraph 18 of this Agreement. In the event any such audit shall disclose
unequal purchases of parts from the Company compared to the sales of the
Licensee, for any period or periods, Licensee shall pay to the Company, within
fifteen (15) days after receipt of the audit report, a fee of 10% of the value
of vehicles sold where the materials were not purchased from the Company.
Further, in the event such understatement for any period or periods shall be ten
percent (10%) or more of the gross sales of the Facility for such period or
periods, Licensee shall reimburse the Company for the cost of such audit,
including without limitation the charges of any independent certified public
accountant and the travel expenses, room and board and compensation of employees
of the Company. The 10% fee plus expenses is in addition to the fines outlined
in Paragraph 14 as applicable.
31. Termination by Licensee.
If Licensee is in compliance with this Agreement and the Company
breaches this Agreement and fails to cure such breach within ninety (90) days
after written notice thereof is delivered to the Company, Licensee may terminate
this Agreement and the License effective ten (10) days after delivery to the
Company of notice thereof. The Licensee at that time is to be returned his
License fee prorated over a 10 year period less $135,000. The balance is payable
within 10 days to the Licensee after the Company
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<PAGE> 19
receives all tools, equipment and supplies associated with the License fee as
described in Exhibit C and added to from time to time as memorialized in Company
shipping documents. A termination of this Agreement and the License by Licensee
without complying with the foregoing requirement or for any reason other than
the Company's breach of this Agreement and failure to cure such breach within
thirty (30) days after receipt of written notice thereof shall be deemed a
termination by Licensee without cause and not in accordance with the provisions
of this Agreement.
32. Termination by the Company.
The Company may terminate this Agreement and the License effective five
(5) days after delivery of notice of termination to Licensee, if: (a) Licensee
or the Facility makes an assignment for the benefit of creditors or an admission
of an inability to pay its obligations as they become due; (b) Licensee fails to
continuously and actively operate the Facility; (c) Licensee suffers
cancellation of or fails to renew or extend the lease or sublease for or
otherwise fails to maintain possession of the premises occupied by the Facility
and fails to secure suitable alternative premises approved by the Company; (d)
Licensee fails to achieve the sales quotas specified in Paragraph 4 in two (2)
consecutive years or any four (4) years of the term of the License; (e) License
consistently fails to submit when due, sales reports or financial statements;
(f) Licensee or any of its owners are convicted of a felony or other crime which
substantially impairs the goodwill associated with the Marks; (g) Licensee
repeatedly fails to substantially comply with this Agreement, whether or not
such failures to comply are corrected after notice thereof is delivered to
Licensee; (h) Licensee or any of its owners have made any material
misrepresentation on his application for the License; or (i) the Licensee or any
person who owns a controlling interest in this Agreement or in the License fails
to dispose of such interest in the manner required by Paragraph 40 hereof. The
Company shall have the further right to terminate this Agreement and the
License, effective upon delivery of notice of termination to Licensee, if
Licensee fails to comply with any provision of this Agreement or any
specification, standard or operating procedure or rule prescribed by the Company
and does not correct such failure within thirty (30) days if such failure
relates to the use of any Mark or the quality of the product or the appearance
of the Facility; fifteen (15) days if such failure is to pay any money payable
by Licensee pursuant to any provision of this Agreement or any other agreement
between the Company or its affiliates or subsidiaries and Licensee; otherwise
thirty (30) days, after written notice of such failure to comply (which shall
describe the action that Licensee must take to correct same) is delivered to
Licensee. It is understood that the Philippine Islands is a 3rd World Country,
and it's 1st Class businesses are not quite up to a standard of a 1st Class
compny is the 1st World. WSPI will make every effort to reach 1st World
standards within reason.
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<PAGE> 20
33. Licensee's Obligations Upon Termination or Expiration
Upon termination or expiration of the License, Licensee agrees to pay
the Company within fifteen (15) days after the effective date of termination or
expiration any other charges as have or will thereafter become due hereunder and
are then unpaid. Licensee further agrees that upon termination or expiration of
the License, Licensee will immediately return to the Company all copies of the
Operating Manual and all other propriety manuals and written procedures which
have been loaned to Licensee by the Company. All proprietary tooling utilized in
the production of any World Transport Authority product shall be returned to the
Company by the Licensee, or, in the alternative, offered to the Company in the
Licensees location for destruction upon terms and conditions mutually agreeable
to the parties. The WORLDSTAR molds, which are proprietary to W.T.A. and with
the signing of this agreement the Licensee acknowledges this proprietary right,
shall be returned to the Company at the Company's expense. Any inventory or
parts uniquely related to World Transport Authority products shall be valued by
an independent appraisal and offered for sale to the Company which may but shall
not be required to, purchase same at the appraised value and upon terms and
conditions mutually agreeable to the parties. Licensee further agrees that upon
termination or expiration of the License, he will take such action as may be
required to cancel all assumed name or equivalent registrations relating to the
use of any Mark and to notify the telephone company within fifteen (15) days and
all listing agencies of the termination or expiration of Licensee's right to use
all telephone numbers and all classified and other directory listings and to
authorize same to transfer to the Company or its Licensee all telephone numbers
and directory listings of the Facility. Licensee acknowledges that as between
the Company and Licensee, the Company has the sole rights to and interest in all
telephone numbers and directory listings associated with any Mark and authorizes
the Company to direct the telephone company and all listing agencies to transfer
same to the Company or its Licensee, should Licensee fail or refuse to do so,
and the telephone company and all listing agencies may accept such direction of
this Agreement as conclusive of the exclusive rights of the Company in such
telephone numbers and directory listings and its authority to direct their
transfer. If Licensee retains possession of the premises occupied by the
Facility, Licensee agrees that upon termination or expiration of the License, he
will at his expense make such reasonable modifications in the exterior and
interior decor thereof as the Company deems required to minimize its
identification as a World Transport Authority Facility. Licensee agrees that
after the termination or expiration of the License he will not directly or
indirectly in any manner identify the premises which were occupied by the
Facility or any other business as a World Transport Authority Facility, a former
World Transport
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Authority Facility, or as a Licensee of or otherwise associated with the Company
or use in any manner or for any purpose any Mark or other indicia of World
Transport Authority.
34. Company's Option to Purchase Facility.
Upon the termination or expiration of the License except termination by
Licensee for cause pursuant to Paragraph 31 hereof, the Company shall have the
option, but not the obligation, exercisable for thirty (30) days, to purchase
all of the assets of the Facility, including the equipment, inventory, leasehold
interests and improvements and favorable rights and covenants of the Facility
upon terms mutually acceptable to the parties.
35. Licensee's Covenants Not To Compete
Licensee agrees that he will not during the term of the License have any
interest as an owner (except of publicly traded securities), director, officer,
employee, consultant, representative or agent, or in any other capacity, in any
other "specialty car" manufacturing, design or sales company (except another
World Transport Authority Facility operated under license agreements heretofore
or hereafter entered into between Licensee and the Company). If the License is
terminated by the Company in accordance with this Agreement including by
exercise of the Company's option to purchase pursuant to Paragraph 34 or
pursuant to the right of first refusal contained in Paragraph 40 below, by
Licensee without cause or not in accordance with this Agreement or by mutual
agreement, or if the License expires and Licensee rejects the Company's offer to
renew the License, Licensee agrees that for a period of ten (10) years
commencing on the effective date of termination or expiration of the Licensee,
he will not engage as an owner (except of publicly traded securities), partner,
director, officer, employee, consultant, representative, or agent, or in any
other capacity, in any business or entity which produces in any form a
"specialty car". In the event this agreement is terminated by Licensee for
cause, Licensee shall be permitted to continue production of the WORLDSTAR for
the unexpired remaining term of this license, subject only to the purchase of
all materials to build the WORLDSTAR from the Company. In such event, no quotas
shall apply. In no event shall Licensee's right to produce the WORLDSTAR extend
beyond the original 10 year term hereof absent further agreement. Licensee must
be notified in writing 60 days prior to the end of the 10 year term of License,
so as to have ample time to renew said License.
36. Assignment by the Company.
This Agreement is fully assignable by the Company and shall inure to the
benefit of any assignee or other legal successor to the interests of the Company
herein.
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37. Assignment by Licensee.
This Agreement and the License are personal to Licensee and neither this
Agreement nor the License may be voluntarily, involuntarily, directly or
indirectly assigned or otherwise transferred without the prior written approval
of the Company, and any such assignment or transfer without such approval shall
constitute a breach hereof. This Agreement does not give Licensee the right to
grant a sub-license or similar right.
38. Company's Approval of Assignment.
If Licensee is in full compliance with this Agreement, permission to
assign or transfer shall not be unreasonably withheld by the Company: (a) in the
case of proposed assignments or transfers to a partnership or corporation which
is actively managed by Licensee and in which Licensee owns and controls not less
than fifty-one percent (51%) of the general partnership interest or the equity
and voting power of all issued and outstanding capital stock; provided that the
provisions of Paragraph 44 shall be fully complied with, and (b) subject to the
Company's right of first refusal pursuant to Paragraph 40 hereof, in the case of
proposed assignees or transferees who: (i) are willing to execute and be bound
by all provisions of this Standard Manufacturing and Distribution License and
all other agreements and legal instruments and documents then in effect between
the parties hereto, provided that the Company shall not charge such assignee an
initial license application processing fee; and (ii) who are willing to and do
complete the Company's standard training program for which such assignee shall
pay the Company its standard training fee and a transfer fee in the sum of
twenty-five thousand dollars ($25,000.00) to recover its cost of training and
other costs incurred in approving and effecting the assignment. In connection
with any assignment permitted under this Paragraph 38, Licensee shall provide
the Company with all documents to be executed by Licensee and the proposed
assignee or transferee at least thirty (30) business days prior to execution.
39. Death or Disability Of Licensee.
Upon the death or permanent disability of any person who owns a
controlling interest in this Agreement or in Licensee, the executor,
administrator or representative of such person (the "representative") shall have
twelve (12) months in which to transfer the interest of the deceased or
permanently disabled person to a third party approved by the Company. All
transfers of the interest of the
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deceased or permanently disabled person, including, without limitation,
transfers by devise or inheritance, shall be in writing and subject to the
approval of the Company.
40. Right of First Refusal of the Company.
If Licensee or its owners propose to sell the Facility (or its assets)
or part or all of the ownership of Licensee and Licensee or its owners obtains a
bona fide, executed written offer to purchase same, Licensee shall deliver a
copy of the bona fide offer to the Company along with all documents to be
executed by Licensee and the proposed assignee or transferee, and the Company
shall, for a period of thirty (30) days from the date of delivery of such offer
to the Company have the right, exercisable by written notice to Licensee or its
owners, to purchase the Facility (its assets) and License as set forward in the
documents provided by the Licensee for the price and on the terms and conditions
contained in such offer, provided that the Company may substitute equivalent
cash for any form of payment proposed in such offer. If the Company does not
exercise this right of first refusal, the original offer may be accepted by
Licensee or its owners, subject to the prior written approval of the Company as
provided in Paragraphs 37 and 38, provided that if such offer is not so accepted
within five (5) months of the date thereof, the Company shall again have the
right of first refusal herein described. This paragraph does not apply to
transfers described in subsection (a) of Paragraph 39.
41. Judicial Enforcement, Injunctions and Specific Performance.
The Company may enforce by judicial process its right to terminate this
Agreement as provided in Paragraph 32 hereof and any rights it may have under
other agreements the Company may have with Licensee. Company shall be entitled
to temporary and permanent injunctions and orders of specific performance
enforcing any of the provisions of Paragraphs 23, 26, 32, 33, 35, 37, 39 and 40
of this Agreement upon proper application being first made. If the Company
secures any such injunction or order of specific performance, Licensee agrees to
pay to the Company an amount equal to the aggregate of its costs of obtaining
any such relief, including without limitation reasonable attorney's fees, costs
of investigation and proof of facts, court costs other litigation expenses and
travel and living expenses, and any damages incurred by the Company as a result
of the breach of any such provision. Should Licensee
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<PAGE> 24
prevail in such judicial proceedings, it too shall be entitled to recover its
costs of opposing such application. For the purpose of insuring the Company's
ability to protect the Marks against infringement by outsiders, the Company and
Licensee each agree to the establishment of a "litigation trust fund" to be
utilized to defer the costs of any litigation required to protect the interests
of the Company and Licensee. Such "litigation trust fund" shall be established
at a mutually agreeable banking institution in an interest bearing account. Any
Licensee (including the Company to the extent that it produces cars) shall be
obligated to deposit into the "litigation trust fund" each quarter the sum of
$25 per completed car sold and at the time of reporting sales, see paragraph 18.
Annually, the value of the litigation trust fund shall be assessed, and the
magnitude of the per car contribution adjusted to meet the pending and potential
litigation needs of the Company and Licensee. All litigation shall be commenced
in the name of Company for the benefit of any Licensee and all parties shall
cooperate with the others in the prosecution of such litigation. Only such
litigation as the parties mutually agree to for the mutual benefit of the
Company and all Licensees shall be funded through the "litigation trust fund."
42. Jurisdiction and Venue.
Licensee agrees that the Company may institute any action against
Licensee arising out of or relating to this Agreement in the Philippine Island
Court of general jurisdiction. Licensee irrevocably submits to the jurisdiction
of said court and waives any objection he may have to either the jurisdiction or
venue of such court.
43. Independent Contractors Indemnification.
The Company and Licensee are independent contractors. The Company shall
not be obligated by any agreements, representations or warranties made by
Licensee nor shall the Company be obligated for any damages to any person or
property directly or indirectly arising out of the operation of the Facility or
the product produced or serviced, whether caused by Licensee's negligent or
willful action or failure to act.
44. Licensee Corporation/Partnership.
If Licensee is a corporation or a partnership or if this Agreement and
the License are assigned to a corporation or partnership, such corporation or
partnership shall conduct no business other than the Facility and other World
Transport Authority Facilities under License Agreement with the Company, except
those activities specifically authorized per Paragraph 14 hereof. Licensee, or
if Licensee is a corporation or partnership, the person designated hereinafter
as the controlling shareholder or partner
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shall own and control not less than fifty-one percent (51%) of the partnership
interest or the equity and voting power of all issued and outstanding capital
stock of the corporation. All shareholders, partners or investors in such
corporation or partnership shall execute this Agreement and be bound jointly and
severally by all provisions hereof and shall thereby also represent and warrant
their percentage ownership interest and that they are all of the persons
required to sign this Agreement pursuant to this paragraph. The articles of
partnership, partnership agreement, articles of incorporation, bylaws and other
organizational documents of such partnership or corporation shall recite that
the issuance and transfer of any interest therein is subject to the restrictions
of Paragraphs 33, 35, 37 and 39 hereof and all issued and outstanding stock
certificates of such corporation shall bear a legend referring to the
restrictions contained in this Agreement.
45. Governing Law.
Except to the extent governed by the United States Trademark Act of 1946
(Lanham Act; 15 U.S.C. S1051 et secr.) or the United States Arbitration Act,
this Agreement shall be governed by the laws of the State of California.
46. Binding Effect.
This Agreement is binding upon the parties hereto and their respective
heirs, assigns and successors in interest.
47. Construction.
The preamble recitals and exhibits hereto are a part of this Agreement,
which constitutes the entire agreement of the parties, and there are no other
oral or written understandings or agreements between the Company and Licensee
relating to the subject matter of this Agreement. The headings of the several
paragraphs hereof are for convenience only and do not define, limit or construe
the contents of such paragraphs. The term 'Licensee' as used herein is
applicable to one or more persons, a corporation or a partnership, as the case
may be, and the singular usage includes the plural and the masculine and neuter
usages include the other and the feminine. The Company and Licensee agree that
if any provision of this Agreement is capable of two constructions one of which
would render the provision illegal or otherwise voidable or unenforceable and
the other of which would render the provision valid and enforceable, such
provision shall have the meaning which renders it valid and enforceable. The
language of all provisions of this
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<PAGE> 26
Agreement shall be construed simply according to its fair meaning and not
strictly against the Company or Licensee. It is the desire and intent of the
Company and Licensee that the provisions of this Agreement be enforced to the
fullest extent permissible under the laws and public policies applied in each
jurisdiction in which enforcement is sought. Accordingly, if any provision of
this Agreement is adjudicated to be invalid or unenforceable, such adjudication
is to apply only with respect to the operation of such provision in the
particular jurisdiction in which such adjudication is made. All provisions of
this Agreement are severable and this Agreement shall be interpreted and
enforced as if all completely invalid or unenforceable provisions were not
contained herein and partially valid and enforceable provisions shall be
enforced to the extent valid and enforceable. If any applicable law or rule
requires a greater prior notice of the termination of or election not to renew
this Agreement, or the taking of some other action hereunder, than is required
hereunder, the prior notice or other requirements required by such law or rule
shall be substituted for the requirements hereof.
48. Waiver.
The Company and Licensee may by written instrument unilaterally waive
any obligation of or restriction upon the other under this Agreement. No
acceptance by the Company of any payment by Licensee and no failure, refusal or
neglect of the Company or Licensee to exercise any right under this Agreement or
to insist upon full compliance by the other with its obligations hereunder or
with any specification, standard or operating procedure or rule shall constitute
a waiver of any provision of this Agreement.
49. Standard of Reasonableness.
With respect to all determinations to be made by the Company pursuant to
this Agreement except those to be made in its sole discretion, the Company
agrees to exercise reasonable judgment.
50. Notices.
All written notices permitted or required to be delivered by the
provisions of this Agreement or of the Operating Manual shall be deemed so
delivered by hand or three (3) days after placed in the United States Mail by
Registered or Certified Mail, Return Receipt Requested, postage prepaid and
addressed to the party to be notified at its most current principal business
address of which the notifying party has been notified.
51. Effective Date of this Agreement.
This Agreement shall take effect upon the date of its acceptance and
execution by the Company. LICENSEE REPRESENTS THAT HE HAS READ THIS AGREEMENT IN
ITS ENTIRETY AND THAT HE
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HAS BEEN GIVEN THE OPPORTUNITY TO CLARIFY ANY PROVISIONS AND INFORMATION THAT HE
DID NOT UNDERSTAND AND TO CONSULT WITH AN ATTORNEY OR OTHER PROFESSIONAL
ADVISOR. LICENSEE FURTHER REPRESENTS TEAT HE UNDERSTANDS THE TERMS, CONDITIONS
AND OBLIGATIONS OF THIS AGREEMENT AND THE LICENSE AND AGREES TO BE BOUND
THEREBY.
52. Contingency
It is understood that WORLDSTAR PHILIPPINE ISLANDS, INC. is working with
the Philippine Government (specifically the Board of Investments) under the
Department of Trade and Industry, to procure reasonable tariffs and conditions
acceptable to WSPI. If not accepted by WSPI, all deposit money are to be
immediately refunded in full.
Upon receipt of $35,000.00 USD from WSPI, it is estimated it will
require between 60 and 120 days to finalize dealings with the Philippine
goverment. This time should be considered a grace period. The $35,000.00 USD is
a show of good faith by WSPI and is to be held (not deposited) until WSPI
informs Company tariffs and conditions with Philippine Government are final and
accepted by WORLDSTAR PHILLIPINE ISLANDS, INC.
World Transport Authority, Inc.. WorldStar Philippine Islands, Inc.
By: _____________________________ By: ________________________________
Dean Amaru, President Necito Ng Chua
By: _____________________________ By: ________________________________
Douglas Norman John E. Banning
Dated:___________________________ Dated: _____________________________
EXHIBIT A
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PRODUCT LINE
II-PASSENGER TAXI
[PICTURE]
VAN
[PICTURE]
TRUCK
[PICTURE]
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EXHIBIT B
PAYMENT OF LICENSE FEE
<TABLE>
<CAPTION>
AMOUNT
EVENT PAYABLE
----- -------
<S> <C> <C>
1. Upon execution of Agreement $ 35,000.00
(receipt acknowledged)
2. Irrevocable Letter of Credit lodged
with the bank of the Company to $ 225,000.00
be released as follows:
a. Upon date training begins for Licensee's
designated people $ 35,000.00
b. Upon delivery of container of tools,
equipment and supplies to the
shipping company $ 95,000.00
c. Upon two W.T.A. technicians arriving
in Licensees country and setting up
facility $ 95,000.00
</TABLE>
EXHIBIT C
WORLD CAR BUSINESS EQUIPMENT LIST
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OFFICE EQUIPMENT
o IBM compatible Computer & Monitor
o Laser Printer
o Computer Desk & Chair
COMPOSITE AUTOMOBILE BUSINESS COMPUTER PROGRAM
o Letterhead Design
o Advertising Program
o Marketing Program
o General Accounting Software - G/L, A/R, A/P, P/O
o Building Layout
WORLD VEHICLE VHS TRAINING AID
o TV & VCR
o Tapes & Manuscript
o Manuals
WORLD VEHICLE FIBERGLASS TOOLING - 7 PASSENGER CONFIGURATION
o Outer body mold
o Inner body mold
o Driver seat mold
o Hood mold
o Rear fender opening molds-left and right
o Inner fender molds-left and right
WORLD VEHICLE FIBERGLASS TOOLING - TRUCK CONFIGURATION
o Inner bed mold
o Inner tailgate mold
o Outer tailgate mold
Note: Licensee assumes these are (Exhibits C & D) all the necessary supplies and
materials to begin business, noting however that these lists were prepared by
the Company.
WORLD VEHICLE FIBERGLASS TOOLING - VAN CONFIGURATION
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o Van box mold
o Inner door mold
o Outer door mold
WORLD VEHICLE CUTTING PATTERNS
PRODUCTION EQUIPMENT
o Steel paint/grinding booth with heater
o Compressor
o MIG Welder with welding table, curtains and fixtures
o Tubing Bender
o Plasma Cutter
o Drill Press
o Band Saw & Cold Cut Saw
o Disc Sander & Bench Grinder
o Eight 2-Door Metal Cabinets
o Sewing Machine & Table
o Tire Changer
o Tool chest with hand, air and electric tools required for vehicle
production
o Fiberglass tools
o Facility Air & Vacuum Lines
o Battery Charger and Engine Stand
PRODUCTION MATERIAL - 3 CARS
o Motors & Transaxles and other mechanical parts
o Wheels & Tires
o Fuel tanks
o Electrical components
o Windshields
o Steel tubing
o Resin & Fiberglass Material
TRAINING
o Production of one vehicle to be completed with licensee during training at
our facilities
o Technical advice for production setup & Training and production of
3 vehicles at licensed facility by two WTA technicians
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EXHIBIT D
WORLDSTAR CONTAINER LOGISTICS
Material Qty
-------- ---
1. Polyester Resin (55 gal. drums) 22
2. Fiberglass Mat (2 oz. x 48") 60 Rolls
3. Core Material (4' x 8' x 1/2") 80 Sheets
4. Windshields 40
5. Wheels 200
6. Tires 200
7. Engines (Long Block 1.6L) 40
8. Transmissions 40
9. Wiring 5,000 Feet
10. Steering Columns 40
11. Drive Shafts 80
12. Gel Coat (5 gal. pails) 24
13. Suspensions 40 Sets
14. Brakes 40 Sets
15. Steel Tube (Engine Cage) 20' Lengths 100
16. Sheet Metal (Gas Tank) (4' x 8' x .050) 20 Sheets
17. Mufflers 40
18. Batteries 40
31
