SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): October 22, 1998
Coates International, Inc.
Exact name of Registrant as specified in charter)
Delaware 33-94884 22-2925432
(State or other (Commission (IRS employer
jurisdiction of file number) identification
incorporation no.)
Highway 34 & Ridge Road, Wall, New Jersey 07719
(Address of principal executive office) Zip Code
Registration telephone number, including area code: (732) 449-7717
Former name or former address, if changed since last report)
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Item 5. Other Events.
On October 9, 1998, Registrant received an exclusive,
worldwide license to make, use and sell products incorporating
the patents owned by George J. Coates, the founder and
controlling shareholder of Registrant, and his son, Gregory
Coates, which cover the "Coates Spherical Rotary Valve"
system. This new license, which supersedes the previous
license, expands the territorial coverage of the previous
license held by Registrant from those countries, their
territories and possessions, comprising North America, Central
America and South America, to all the countries in the world.
The new license automatically terminates under certain
conditions involving bankruptcy or receivership and in the
event Registrant fails to obtain equity financing in the
minimum amount of $2,000,000 by January 17, 1999. A copy of
the "Exclusive Conditional Worldwide License Agreement", dated
October 9, 1998 is annexed to this Current Report as an
exhibit.
In consideration of the grant of this worldwide license,
Registrant agreed to (a) issue to George J. Coates (i) 500,000
shares of its Series A Preferred Stock (ii) 500,000 shares of
its Common Stock and (iii) 500,000 shares of a new series of
Series A Preferred Stock with supervoting rights entitling its
holder to exercise 1,000 votes per share on all shareholder
matters. In addition, Registrant agreed to pay to George J.
Coates (x) a license payment in the amount of $2,500,000 when,
as and if Registrant has sufficient capital to make such
payment and (y) royalty payments in amounts equal to twenty
(20%) percent of royalties received by Registrant from its
future licensing activities.
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Item 7. Financial Statements and Exhibits.
(c) Exhibits.
(10) Exclusive Conditional Worldwide License
Agreement, dated October 9, 1998, by and
between Coates International, Ltd., George J.
Coates and Gregory Coates.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, the Registrant has duly caused this Current Report to
be signed on its behalf by the undersigned hereunto duly authorized.
October 22, 1998 Coates International, Ltd.
By: s/George J. Coates
George J. Coates, President
and Chief Executive Officer
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EXHIBIT
EXCLUSIVE CONDITIONAL WORLDWIDE LICENSE AGREEMENT
THIS AGREEMENT, dated this 9th day of October, 1998, by and between
GEORGE J. COATES, individually, residing at 1811 Murray Drive, Wall Township,
New Jersey 07719 (hereinafter referred to as "LICENSOR I") and GREGORY COATES,
residing at 1811 Murray Drive Wall Township, New Jersey 07719 (hereinafter
referred to as "LICENSOR II"), and COATES INTERNATIONAL, LTD. having its
principle place of business at Route 34 and Ridgewood Road, Wall Township, New
Jersey 07719, (hereinafter referred to as "LICENSEE").
B A C K G R O U N D:
WHEREAS, LICENSOR I is the patentee and owns and has the right to
license certain PATENT RIGHTS (as hereinafter defined) used in the design and
construction of internal combustion engines employing spherical rotary valves
(the "COATES SPHERICAL ROTARY VALVE SYSTEM"); and
WHEREAS, LICENSOR II has loaned LICENSOR I funds to reimburse
Coates International, Ltd. for patent expenses; and
WHEREAS, LICENSOR I has granted to LICENSOR II and LICENSOR has
accepted an exclusive, revocable license with the right to sublicense; and
WHEREAS, LICENSOR I and LICENSOR II had each granted to LICENSEE, by
License Agreement, dated December 22, 1997, an exclusive revocable license for
all of the countries, their territories and possessions, comprising North
America, Central America and South America to make, use, sell and have made,
LICENSED PRODUCT falling within the scope of the PATENT RIGHTS; and
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WHEREAS, it is the desire of LICENSOR I and LICENSOR II to modify and
expand upon the previously granted license for the consideration set forth
herein and to render the previously granted licenses superseded by this license
and hence null and void.
NOW THEREFORE, in consideration of the premises and covenants and other
good and valuable consideration and the mutual promises of the performance of
the undertakings herein, it is agreed by and between the parties hereto as
follows:
ARTICLE I - DEFINITIONS
1.1 - "CSRV VALVE SYSTEM" shall mean a cylinder head or heads for an
internal combustion engine manufactured in accordance with the PATENT RIGHTS (as
hereinafter defined).
1.2 - "IMPROVEMENTS" shall mean any improvement, change, or
modification to the CSRV VALVE SYSTEM which may be developed, created, or
acquired by either party to this Agreement, but only to the extent that the same
comes within the scope of one or more of the claims of the patent rights (as
hereinafter defined).
1.3 - "PATENT RIGHTS" shall mean the patents as listed in Attachment
1.3.
1.4 - "PROTOTYPES" shall mean LICENSED PRODUCT manufactured for testing
and evaluation purposes only.
1.5 - "TERRITORY" shall mean all of the countries, their territories
and possessions, either currently existing or hereinafter formed, in the world.
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ARTICLE II - LICENSES GRANTED
2.1 - LICENSES GRANTED TO LICENSEE
(1) LICENSOR I and LICENSOR II (hereinafter referred to
jointly as "LICENSOR") hereby grants to LICENSEE an exclusive license in the
TERRITORY, to make, use, sell, and have made, product falling within the scope
of the PATENT RIGHTS, and to prevent others from making, using, selling or
having made product falling within the scope of the PATENT RIGHTS;
(2) LICENSOR hereby grants to LICENSEE the exclusive right to
manufacture and sell PROTOTYPES falling within the scope of the PATENT RIGHTS
anywhere in the world.
2.2 - IMPROVEMENTS
If LICENSORS have heretofore brought about or shall hereafter during
the term of this Agreement bring about any IMPROVEMENTS to the PATENT RIGHTS
LICENSORS shall promptly disclose such IMPROVEMENTS TO LICENSEE. Any such
IMPROVEMENTS shall become subject to this Agreement.
2.3 - PATENT MARKINGS
LICENSEE shall mark on an exposed surface of all products made through
use of the PATENT RIGHTS hereunder, appropriate patent markings identifying
LICENSOR I as the owner of the pertinent PATENT RIGHTS. The content, formal
language used in such markings shall be in accordance with the laws and
practices of the countries where such products bearing such markings are made,
sold, or used and shall be approved by LICENSOR I.
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2.4 ACKNOWLEDGMENT OF LICENSE
On all CSRV VALVE SYSTEMS, LICENSEE and Sublicensee shall
acknowledge that the same are manufactured under license from
LICENSOR I. Unless otherwise agreed to by the parties, the
following notice shall be used by LICENSEE and sublicensees on an
exposed surface of all products: "Manufactured under License from
George J. Coates". Sublicensees shall use the notice:
"Manufactured under License from Coates International, Ltd. and
George J. Coates." Such notices shall be used in all descriptive
materials, instruction and service manuals relating to the CSRV
VALVE SYSTEM.
ARTICLE III - PAYMENTS
3.1 - In consideration for the grant of this license, the LICENSEE
shall grant to LICENSORS, shares of stock in LICENSEE. The shares shall be
granted as follows: 500,000 Series A Preferred shares to LICENSOR I; 500,000
Common Shares to LICENSOR I; the LICENSEE shall cause the creation of a new
series of Series A Preferred shares with voting rights for all shareholder
matters equal to 1,000 votes per share and to issue 500,000 of the to-be-created
new series A Preferred shares to LICENSOR I.
3.2 - In further consideration of the granting of this License,
LICENSEE shall (a) pay all costs associated with the PATENT RIGHTS identified
herein in the TERRITORY; (b) pay to LICENSOR I a license payment fee in the
amount of $2,500,000, payable when, as and if the LICENSEE has sufficient
capital to make such payment, and; (c) pay to LICENSOR I a royalty payment in
the amount of twenty (20%) percent of any and all royalties received by
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the LICENSEE pursuant to any and all license, royalty or other agreement with
any third party in the TERRITORY derived from the manufacture, assembly or sale
of any part, accessory, component or engine incorporating any aspect of the
PATENT RIGHTS, the CSRV VALVE SYSTEM or IMPROVEMENTS.
ARTICLE IV - REPRESENTATIONS, OBLIGATIONS, WARRANTIES AND
DISCLAIMERS
4.1 - LICENSOR I represents and warrants that LICENSOR I is the
rightful owner of the PATENT RIGHTS and has the exclusive right to license all
of the PATENT RIGHTS and that all such PATENT RIGHTS pertaining to the CSRV
VALVE SYSTEM under LICENSOR'S control and possession in the TERRITORY are set
forth in Attachment 1.4. Further, LICENSOR I and LICENSOR II have the power and
authority to execute, deliver and perform its obligations under this Agreement,
nor the performance of its obligations hereunder will constitute a breach of the
terms or provisions of any contract or agreement to which LICENSOR is a party.
4.2 - LICENSEE will use its best efforts to execute all such tasks as
may be necessary to bring about the speedy manufacture, sale or use of products
manufactured with the use of the PATENT RIGHTS consistent with good business
practice; and ensure that all steps within its power are undertaken with all
reasonable speed to ensure that such products made by LICENSEE comply with
relevant government regulations and to ensure that all steps within its power
are undertaken with all reasonable speed to ensure that sublicenses are
negotiated and executed with respect to the PATENT RIGHTS.
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ARTICLE V - DURATION AND TERMINATION
5.1 - Subject to the provisions of Section 5.1 hereof, all rights and
obligations under this Agreement shall expire upon the last to expire patents of
the PATENT RIGHTS.
5.2 - This Agreement shall terminate effective immediately
upon:
(a) The filing by LICENSEE of an involuntary petition in
bankruptcy, the entry of a decree or order by a court or agency or
supervisory authority having jurisdiction in the premises for the
appointment of a conservator, receiver, trustee in bankruptcy or
liquidator for LICENSEE in any insolvency, readjustment of debt,
marshaling of assets and liabilities, bankruptcy or similar
proceedings, or the winding up or liquidation of its affairs, and the
continuance of any such petition, decree or order undismissed or
unstayed and in effect for a period of sixty (60) consecutive days; or
(b) The voluntary or involuntary consent of LICENSEE to the
appointment of a conservator, receiver, trustee in bankruptcy or
liquidator in any insolvency, readjustment of debt, marshaling of
assets and liabilities, bankruptcy or similar proceedings of or
relating to LICENSEE, or relating to substantially all of its property,
or if LICENSEE shall admit in writing its inability to pay its debts
generally as they become due, file a petition to pay its debts
generally as they become due, file a petition to take advantage of any
applicable insolvency, reorganization or bankruptcy statute,
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make an assignment for the benefit of its creditors or
voluntarily suspend payment of its obligations; or
(c) the failure of LICENSEE to successfully consummate the
private placement of the minimum 400,000 of its Common Shares being offered
pursuant to LICENSEE'S Confidential Private Offering Memorandum, dated October,
1998, pursuant to the terms and provisions set forth therein.
ARTICLE VI - LIMITATION OF ASSIGNMENT BY LICENSEE
6.1 - This License is non-assignable and the rights, duties and
privileges of LICENSEE hereunder shall not be sold, transferred, hypothecated,
or assigned by LICENSEE, either in whole or in part without the consent of
LICENSORS.
ARTICLE VII - GOVERNING LAW
7.1 - This Agreement shall be governed by and construed and enforced in
accordance with the Laws of the State of New Jersey and each party hereby
submits to the jurisdiction of any state or federal court in the State of New
Jersey in the event of any claims arising under this Agreement.
ARTICLE VIII - ENTIRE AGREEMENT
8.1 - This Agreement sets forth the entire Agreement and understanding
by and between LICENSOR and LICENSEE as to the subject matter hereof and has
priority over all documents, verbal consents and understandings made before the
execution of this Agreement and none of the terms of this Agreement shall be
amended or modified except in a written document signed by LICENSORS and
LICENSEE hereto.
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8.2 - Should any portion of this Agreement be declared null and void by
operation of law, or otherwise, the remainder of this Agreement shall remain in
full force and effect.
8.3 - This Agreement is understood by the parties hereto to
specifically supersede both the February 17, 1997 License from LICENSOR I to
LICENSEE and any subsequent amendments thereto as well as the Agreement from
LICENSOR II to LICENSEE dated February 22, 1997 as well as the License
Agreement, dated December 22, 1997, executed and delivered by and between
LICENSOR I, LICENSOR II and LICENSEE and any subsequent amendments thereto.
ARTICLE IX - NOTICES
9.1 - Any notice, consent or approval required under this Agreement
shall be in English and in writing, and shall be delivered to the following
addresses (a) personally by hand, (b) by Certified Air Mail, postage prepaid,
with return receipt requested, or (c) by telefax, confirmed by such Certified
Air Mail:
If to the LICENSORS:
Mr. George J. Coates
c/o COATES INTERNATIONAL, LTD.
Route 34 & Ridgewood Road
Wall Township, NJ 07719-9738
Telephone: (732) 449-7717
Telefax: (732) 449-7736
Mr. Gregory Coates
c/o COATES INTERNATIONAL, LTD.
Route 34 & Ridgewood Road
Wall Township, NJ 07719-9738
Telephone: (732) 449-7717
Telefax: (732) 449-7736
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If to LICENSEE:
COATES INTERNATIONAL, LTD.
Route 34 & Ridgewood Road
Wall Township, NJ 07719-9738
All notices shall be deemed effective upon the date delivered by hand
or sent. If either party desires to change the address to which notice is sent
to such party, it shall so notify the other party in writing in accordance with
the foregoing.
ARTICLE X - MISCELLANEOUS
10.1 - Headings and References - Headings in this Agreement are
included herein for ease of reference only and have no legal effect. Reference
herein to Sections or Attachments are to Sections and Attachments to this
Agreement, unless expressly stated otherwise.
10.2 - Reference on Disclosure of Terms and Provisions (a)This
Agreement shall be distributed solely to:
(i) those personnel of LICENSORS and LICENSEE who shall have a need to know of
its contents; (ii) those persons whose knowledge of its contents will facilitate
performance of the obligations of the parties under this agreement; (iii) those
persons, if any, whose knowledge of its contents is essential in order to permit
LICENSEE or LICENSORS to place, maintain or secure benefits as required by law,
regulation or judicial order.
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IN WITNESS WHEREOF, the parties have cause this Agreement to be
executed as of the date first above written by their authorized representatives.
ATTEST:
s/George J. Coates
GEORGE J. COATES - INDIVIDUALLY
s/Gregory Coates
GREGORY COATES - INDIVIDUALLY
COATES INTERNATIONAL, LTD.
BY: s/George J. Coates
GEORGE J. COATES
PRESIDENT AND CHIEF
EXECUTIVE OFFICER
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