SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS
Under Section 12(b) of 12(g) of
The Securities Exchange Act of 1934
COMPANY INTERNATIONAL, INC.
(Name of Small Business Issuer in its charter)
Nevada 22-3113236
------- ----------
(State or Other Jurisdiction (IRS Employer Identification No.)
of Incorporation or Organization)
75-77 North Bridge Street, Somerville, New Jersey 08876
(Address of principal executive offices) (Zip Code)
(908) 429-0030
(Issuer's Telephone Number, Including Area Code)
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
- - --------------- ---------------------------
None None
----- -----
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.001
(Title of Class)
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
A. BUSINESS DEVELOPMENT
1. FORM AND YEAR OF ORGANIZATION
CEVA International, Inc. (the "Company") was founded as a New Jersey
corporation in 1991. In 1998, the Company was reincorporated in the State of
Delaware. On May 10, 1999, the Company merged with Oro Bueno, Inc., a Nevada
corporation. As part of that merger, Oro Bueno, Inc. changed its name to CEVA
International, Inc. and the Delaware corporation was dissolved.
The principal offices of the Company are located at 75-77 North Bridge
Street, Somerville, New Jersey 08876. Whenever we refer to "Company" or use the
terms "we", "us" or "our" in this report, we are referring to CEVA
International, Inc.
B. BUSINESS OF ISSUER
We are engaged in the business of providing technology and services to
public and private clients in Central and Eastern Europe in the alternative
energy and environmental reclamation industries.
PRINCIPAL PRODUCTS AND SERVICES AND THEIR MARKET
Remediation of Hydrocarbon Contamination.
We recover energy content by processing high concentrations of
hydrocarbons contained in petroleum wastes into Alternative Fuel ("AF"). Our AF
business is applicable to the wastes generated by heavy industries such as the
petroleum refining (by-products filter cake, oily filter media, separator waste,
sludges, acid tar, slop and waste oil, tank rail bottoms), steel (coal tar
bottoms), chemical (solvents, chemical tars) mining (coal tars), manufactured
gas and pharmaceutical industries. The processed alternative fuel then can be
used by cement kilns, power plants and other industrial boilers as a cheaper
source of energy.
Heavy industries often contaminate soil and other solid mixtures by hydrocarbons
in ways where they energy content cannot be directly recovered. In these
instances, we employ Low Temperature Thermal Desorption ("LTTD"), a soil
remediation process. Sites where these sorts of contamination can be found are
often neighboring the sites of wastes processed for AF.
The Alternative Fuel Process
Alternative Fuel technology is used to clean up pollutants by converting them
into a reusable fuel form. The alternative fuel ("AF"}, is derived from either
the liquefaction or solidification of residual petroleum and oily wastes and
by-products.
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Technology
The Company's liquefaction process was developed in the United States to
rejuvenate solidified coal tar. Liquefying the solidified tar enables this
material to be utilized as raw materials or as supplementary fuel. The liquefied
material can be re-used in waste fuel recycling programs in cement kilns and
other industrial furnaces. Using the technology of liquefaction helps eliminate
land disposal-related liability and increases useable/saleable tar product
volume, resulting in environmental and economic benefits. The liquid fuel is
referred to as "liquid AF", or alternative fuel.
Solidification processes were developed to prepare AF into a form to replace
coal in large industrial boilers, power plants and cement kilns.
End Use
Both liquefied and solidified waste derived fuels can be utilized in cement
kilns. The use of cement kilns to recycle hazardous industrial wastes has become
an important component of environmentally acceptable handling procedures in the
Western world. The use of hazardous waste derived fuels in cement kilns affords
many specific economic benefits, including the
- reduction in energy cost
- reduction in the need for capital investment in centralized waste
management sites
- preservation of natural resources
Competitive Technologies
AF is principally considered a clean-up technology which is in competition with
other forms of disposal or remediation. The fact that a valuable by-product is
created is important economically because it reduces the net cost of the
clean-up.
The competitive technologies include:
Hazardous waste landfill: There is limited capacity in Central and
Eastern Europe; because of their generally remote locations, landfills require
transportation and handling resulting in costs and expenses in the $200 per
ton for disposal.
Incineration: There are only a limited number of incinerators in
Central and Eastern Europe; because of this limited capacity and the generally
remote location of these incinerators, transportation and handling costs make
incinerator disposition an expensive alternative, costing in the range of
between $500 to $1,000 per ton.
The Alternative Fuel Market
Central and Eastern Europe has vast reserves of coal-chemical and petroleum
tars, and residues generated by the coke, steel, manufactured gas and oil
refining industries. We obtain these tars, convert them to alternative fuel and
sell them as a fuel to select energy users at acceptable levels of environmental
contamination.
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Generation side: Remediation is primarily compliance-driven and covers
industries such as the petroleum refining, steel, coal and chemical industries
that produce hydrocarbon residues that need to be treated.
An analysis of the top 100 Central European companies shows that 44 are
potential customers since they are operating in industries that create the type
of hazardous waste we process.
User side: Use of alternative fuels by cement kilns, powerplants and industrial
boilers as a source of cheaper energy. This business is driven by customary
commercial considerations.
The Need for Remediation
In Hungary and in the Czech Republic, the market is compliance driven, while in
Romania it is commercially driven.
Hungary
The AF, or alternative fuel business depends on the existing stock and on-going
generation of tars and similar materials (e.g. waste oils). To date, we have
identified acid and non-acid tars located at MOL Rt. Hungarian Oil and Gas
Company ("MOL") sites, which represent a potential 10-year supply of AF
materials.
Czech Republic
We have identified acid and non-acid tars located at the Ostramo and Paramo oil
refineries, which, as well, represent a potential 10 year supply of AF materials
Romania
Acid and non-acid tars located at the refineries on or adjacent to the Ploiesti
and Cimpina regions, representing a potential 30 year supply of AF materials and
which two regions represent approximately 80% of the acid and non-acid tars
generated by the Romanian refineries.
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The levels of AF materials are shown in the following table:
<TABLE>
<CAPTION>
----------------------- ----------------------------------------------------------- ------------------------------
Country Potential Supply Potential
Annual Production
(In Tons) (In Tons)
----------------------- ----------------------------------------------------------- ------------------------------
<S> <C> <C> <C>
Hungary MOL (acid tar) 100,000 - 160,000 2,000
MOL (non-acid tar) 100,000 52,000 - 90,000
Total 200,000 - 260,000 54,000 - 92,000
----------------------- ----------------------------------------------------------- ------------------------------
Czech Republic Ostramo 200,000
Paramo 100,000
Total 300,000 50,000
----------------------- ----------------------------------------------------------- ------------------------------
Romania Refineries (acid tar) 600,000 - 850,000 100,000
Refineries (non-acid tar) 600,000 100,000
Total 1,200,000 - 1,450,000
----------------------- ----------------------------------------------------------- ------------------------------
</TABLE>
The Demand for Remediation
Generation Side
In Central and Eastern Europe, acid tar remediation has priority over non-acid
tar and other waste-oil remediation efforts, which are considered of secondary
importance currently. In Hungary and the Czech Republic, legislation will compel
generators to clean up their acid tars within the next 5-10 years. The main
generators of acid tar wastes are refineries - for example, MOL, Ceska
Rafinerska, and Romanian National Oil Company. Identified stocks of acid tar
wastes range from 100-600 thousand tons per country. New acid tar generation
ranges from near zero in Hungary to about 60 thousand tons annually in Romania.
Other tars have been and continue to be generated by the steel and chemical
industries.
User Side
Our AF processing is a cost-efficient tar remediation technology. Cement kilns
are the ideal users for waste-derived fuel, since the possible fuel to AF
replacement rate is very high (50-100%), and cement plants typically have high
levels of fuel consumption, up to 80,000 tons of total fuel annually. The length
of the kiln in cement plants allows for complete hydrocarbon combustion. There
are 5-10 cement producers per country. Most of these have been purchased by
Western European strategic investors.
Industrial boilers can also support some smaller volume AF usage, up to 10,000
tons per client annually.
Power plants are also possible AF users at lower replacement rates. Quality of
AF must be high and ideally power plants require the use of fluidised beds to
burn solid AF.
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Competition
Tar Remediation
There is limited direct competition with our remediation business in the
Countries of Hungary, the Czech Republic and Romania. The AF business is
relatively complex in comparison to burning at incinerators or simply
transporting to landfills. Our AF business requires matching AF materials
sources and supplies with AF end-users; we must also process the AF materials
and then transport them to the user. Our AF business has a two-sided benefit:
mitigating contamination while recovering their energy potential by processing
into alternative fuel. Our competitors who simply burn tars at incinerators,
which generate additional wastes (ash, emissions), are more capital intensive,
and expensive. Landfills are the least desirable of alternatives, since
materials are simply "stored" underground and will always remain as a future
liability and ongoing environmental risk. In addition, fees are charged without
regard to beneficial reuse and they tend to be some distance from the waste
generators, presenting additional transportation costs. In Central and Eastern
Europe, land is a valuable commodity and its use as a landfill site will forever
restrict and limit the development and use of such lands.
Alternative Fuel Usage
Our AF business' largest competitive threats are fuel oil, coal and gas supplies
and their respective prices. Fuel users may be reluctant to switch fuels to an
alternative fuel with which they are not familiar. Alternative fuels must be
significantly discounted (currently 40% in Hungary) in order to induce
switching. At low oil or coal prices, alternative fuel can be less competitive
in commercial markets.
Other alternative sources of fuel used by cement plants and industrial boilers
include tires, plastic and solvents, require processing and collection with
costs in excess of economic benefits created at the user side.
Tipping fees and government subsidies, as in the West, will balance this,
inequity as the region's infrastructure develops.
Barriers to Entry
Our AF business market segment is characterized by high barriers to entry.
As in the case of soil remediation, these include
Credibility: the technical nature and complexity of the business requires
credibility and a track record. As time goes on, our business track record
becomes stronger, making it harder for latecomers to compete.
Permits: By being first in the market, we set the standards for
permitting, cutting off market access for competitors with inferior
technology.
Client Relationship: The business is based on long-term relationships with
clients, and the operations and assets of the service provider become integrated
with those of the client. This increases the cost of switching away from the
incumbent supplier.
6
The Company's Position in the Market
Hungary
We have begun acid tar remediation processing at Nyirbogdany, a Hungarian site
owned by MOL. At this site, we will convert 20,000 tons of acid tar into a
liquid AF fuel. The Company has constructed a processing facility jointly with
MOL at the Nyirbogdany site. We have a contract with MOL to produce AF liquid
fuel.for use at cement, chemical and sugar factories.
We have an option for an additional 40,500 tons of acid tar and propose to
process and produce AF liquid fuel at two other MOL sites: at MOL's Csepel
Island site and at the MOL site located at Szazhalombatta.
Our Hungarian subsidiary, CEVA Hungary, is in discussions with Heidelberger
Cement in Hungary to permit and supply their cement kilns with solid and liquid
AF from MOL and a range of sources.
Romania
We have a contract with S.C. CIMUS S.A., a cement company located in Campulung,
Romania, to process and supply supplemental fuels derived from refinery wastes.
The contract, dated August, 1998, runs for a 20-year period and requires that we
supply its kilns with a minimum 1,800 tons of alternative fuel per month. We
shall be paid fees on a monthly basis based upon the heat value of the
alternative fuel and the cement plant's fuel savings costs as well as certain
fixed fees for technology and equipment.
In September, 1998, we and S. C. Cimus S.A. signed an agreement with the
Petrobrazi S.A. refinery to start processing the wastes from one of its basins.
Total acid and non-acid tar wastes at this refinery are estimated at
approximately 200,000 tons. We completed a technical study and trial, processing
a test amount of the wastes into alternative fuel and are now negotiating a
contract to install additional processing equipment and utilize all of this
refinery's waste as AF for the Romanian-based alternative fuel processing
program.
We entered into an exclusive contract with the VEGA S.A. refinery in 1996 to
remove that refinery's waste materials for use in our alternative fuel
processing. At the time, this refinery was state-owned, and has since been sold
to a private company through Romania's privatization program. Recently, the new
owners have advised us of their intent to start the joint program to start
processing its wastes. In addition, we have proposals with four other refineries
in the region: Petrotel, Steaua, Astra and Arpechim to remove and process their
wastes into AF.
We submitted a preliminary proposal in October, 1999 to supply AF to LaFarge
Romcim, the largest cement producer in Romania.
Czech Republic
We are in preliminary talks with Cementworks Prachovice, a Czech cement plant
and intend to negotiate the installation of our AF equipment at this site. We
are also in discussions with various refineries and power plants in the Czech
Republic with respect to supplying alternative fuels.
7
<PAGE>
SOIL REMEDIATION BUSINESS LINE
The Soil Remediation Process
Central and Eastern Europe has large quantities of contaminated soil, which need
to be cleaned. Contaminated soil is found principally in heavy industries
including oil and gas refineries, railways, energy plants, mining sites, as well
as in and around former Soviet military bases.
The LTTD Technology
We have selected a technology known as "low temperature thermal desorption"
("LTTD") as the method to clean contaminated soil in this marketplace. This
technology is the most cost effective solution for treating moderate to heavily
contaminated soils. The LTTD system was introduced to the United States market
in 1989 and has proved to be a successful, cost-effective method of removing
light and heavy refinery and hydrocarbon wastes from all types of soil.
Contaminant destruction efficiencies in the afterburners of these units are
greater than 99.99%. Decontaminated soil retains its physical properties and
ability to support biological activity.
An LTTD unit of equipment contains several large compartments where at one end,
contaminated soil is fed into the unit on conveyor belts and is treated by heat
processing in various enclosed chambers; once treated, the "clean" soil is
deposited at the other end of the unit. The LTTD equipment heats the soil to
temperatures ranging from 90 to 320 degrees Centigrade (200-600 degrees
Fahrenheit) to vaporize the petroleum, physically separating it from the soil.
The vapor stream is then captured and sent to the afterburner where it is
thermally destroyed.
The LTTD technology itself is not a "rocket science" but only about five known
companies manufacture LTTD equipment. The operation of the LTTD machine requires
experience. Typically, a one or two year learning period is required for
efficiently operating a thermal desorber. Being an experienced operator
translates into lower costs and more efficient operation.
Service Agreement with Green Globe, LLC
We partnered with a United States based LTTD operator, Green Globe, LLC, ("Green
Globe") for soil decontamination projects in Central and Eastern Europe. Green
Globe is owned by David Green a United States citizen whose main operations are
based in Danbury, Connecticut. In the Fall of 1998, we entered into a contract
with Green Globe pursuant to the general terms of which, we agreed to give Green
Globe all soil decontamination projects generated through our business
relationships in Central and Eastern Europe. Green Globe agreed to provide,
transport, install an LTTD equipment unit in the region and train our local
workforce to operate the unit. After provision for costs, profits generated
would be shared equally between Green Globe and us. In order to reduce
importation and tariff charges, Green Globe and our Hungarian subsidiary, CEVA
Hungary kft entered into a lease agreement for the LTTD unit, requiring
quarterly lease payments. In connection with these agreements, Green Globe
transported and installed a large LTTD unit to Budapest, Hungary, in preparation
to begin a soil decontamination project commissioned by a City of Budapest,
municipal district governmental authority known as District XVIII. Our Hungarian
subsidiary was awarded a contract to treat approximately 24,000 cubic meters of
soil and 2,900 cubic meters of heavy oil for the price of approximately
$2,000,000. Green Globe and our Hungarian subsidiary's management team completed
this project in December, 1998. Although the District XVIII municipal government
has paid approximately $1,000,000 of the contract amount, it has failed to pay
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the remaining approximate $1,000,000 balance due us for completion of the
project. After months of meetings with representatives of the District XVIII
government, during which no claims against us for non-performance or other
set-offs were made, we have been forced to commence a legal proceeding against
the District XVIII municipal government to collect payments under the contract.
Since we are not aware of any legitimate claims District XVIII has in connection
with this contract, we expect to obtain a judgment awarding all the monies due
under the contract, plus interest, and possibly damages resulting to our
business because of District XVIII's failure to abide by the agreement.
Applicability and Limitations
The target contaminant groups for an LTTD system are oil and other organic
compounds (hydrocarbons). Such compounds are generated by the petroleum
refining, chemical, railroads, mining industries and governmental organizations,
such as the military, airports, and state-owned dumpsites.
The low temperature desorption processes are best suited for removal of organics
from soil, sand, gravel, or rock fractions. The high-absorption capacity of clay
decreases the partitioning of organics to the vapor phase.
The following factors may limit the applicability and effectiveness of the LTTD
technology and process:
- There are specific feed size and materials handling requirements
that can impact applicability or cost at specific sites.
- high moisture content of the soil decreases capacity of theLTTD
equipment unit.
- highly abrasive feed potentially can damage the LTTD equipment.
- heavy metals in the decontaminated soil may produce a treated
solid residue that requires stabilization and further treatment.
Competitive Technologies
There are other technologies that compete with our LTTD equipment technology for
the treatment of contaminated soil. These competitive technologies include
bioremediation, soil washing, transportation and deposit at landfills and the
burning of contaminated soils at incinerators. However, each of these
competitive technologies has some disadvantages:
- Bioremediation, although not as capital intensive as the
requirements to put an LTTD equipment unit in operation,
is a very time consuming process that does not always
work. In addition, Bioremediation can only be used to
treat lightly contaminated soil and requires a large
operating area and space. Bioremediation costs are in the
approximate range of $35 to $45 a ton.
- "Soil washing" is another widely used technology in
Western Europe. Soil washing is an effective technology to
clean soils contaminated with heavy metals. However, soil
remediation is an expensive process and generally does not
neutralize oil and gas residue or hydrocarbon
contamination.
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- Another soil remediation technique is to simply transport
these soils to a hazardous waste landfill. However, there
are very few licensed and permitted hazardous waste
landfills in Central and Eastern Europe. For example, the
Country of Hungary has only one hazardous waste landfill
and it has an annual capacity of only approximately 5,000
tons. This method to "store" contaminated soil is very
expensive, with prices in the approximate range of $200 a
ton.
- - - Another method to dispose of decontaminated soil is to
burn it in incinerators. Incineration is the most
expensive process to treat contaminated soil. Because of
its high cost, incineration is primarily used to treat the
more hazardous types of wastes. There is a very limited
capacity for incinerator disposal in Central and Eastern
Europe, with costs in the range of $500 to $1,000 a ton
for treatment.
The Soil Remediation Market
Our LTTD technology to clean soils can be used primarily for soils contaminated
directly by the oil, chemicals and residues from the transportation industry.
Sites where these sorts of contamination can be found include chemical
manufacturing plants or disposal areas, contaminated marine sediments, disposal
wells, electroplating/metal finishing shops, fire fighting training areas,
hangars/aircraft maintenance areas, landfills, leaking, collection and system
sanitary lines, leaking storage tanks, oxidation ponds/lagoons and vehicle
maintenance areas.
The market for the cleaning of contaminated soil is driven by legislation, which
either provides direct government funding or compels companies to finance their
own clean-up efforts. Driven by ever stricter environmental clean-up legislation
as the countries of Central and Eastern Europe seek to join the European Common
Market, demand for clean-up services is expected to grow significantly.
We are in frequent discussions with representatives of MOL and expect to begin
soil decontamination projects at their facilities. We expect to either transport
MOL's contaminated soil to the current site where Green Globe's LTTD equipment
unit is now located, or to relocate this LTTD equipment to a MOL site in the
near future.
In Romania, our principal activities there have been to organize a supply of oil
and gas wastes for processing into alternative fuel for utilization in cement
plants and other power generating operations that require large amounts of
energy. As oil and gas residues are removed from the surface of soil storage
basins, a large soil cleaning need will emerge in Romania. Economic Factors and
a lack of legal enforcement laws and regulations, however, suggest that the
Country of Romania is still a few years away from enacting legislation that
would drive soil clean-up projects.
Hungary and Czech Republic
Our investigation of the soil cleaning markets in the Countries of Hungary and
the Czech Republic indicates a sufficient demand to support at least one LTTD
equipment unit in each of these countries.
Romania
In the Country of Romania, it is estimated by government sources that there is
currently over 500 million tons of soil that requires clean-up or remediation.
However, due to lack of funding, at the government level, weak legislative and
enforcement initiatives, effecting the budgeting and clean-up
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programs at the private enterprise level, the current "demand" for soil
remediation is behind that of Hungary. Our current business plan does not
include the installation of an LTTD equipment unit into Romania; however, the
demand and this market is expected to intensify as the economy of Romania
evolves. The December, 1999 formal invitation to enter the process for accession
into the European Common Market will accelerate the demand for environmental
compliance with the Union's standards and our services.
Identified contaminated soil quantities are summarized in the following table:
<TABLE>
<CAPTION>
----------------------- ----------------------------------------------------------- ------------------------------
Countries Estimated Soil Remediation Quantity Estimated
Annual Increases
(In Tons) (In Tons)
----------------------- ----------------------------------------------------------- ------------------------------
<S> <C> <C>
Hungary MOL(1) 1,000,000
MAV(1) 500,000
Other(2) 2,000,000
Total 3,500,000 50,000(5)
----------------------- ----------------------------------------------------------- ------------------------------
Czech Republic Unipetrol(1) 1,200,000
Other(3)
3,800,000 75,000(1)
Total 5,000,000
----------------------- ----------------------------------------------------------- ------------------------------
Romania Oil refineries 480,000,000
Other(4) 20,000,000
Total Unknown
500,000,000
----------------------- ----------------------------------------------------------- ------------------------------
</TABLE>
1. Our estimate
2. In Hungary includes chemical plants, steelindustry, military sites and
state owned dumps
3. In Czech Republic includes railways, steel industry, chemical industry,
automobile industry, mining, military sites
4. In Romania includes railways, mining, steel, and automobile industry 5.
Independent estimate
Economic Barriers to Entry Into the LTTD Soil Remediation Business
The LTTD segment of the soil remediation market is characterized by high
barriers to entry. These barriers include:
Service Provider Credibility: Environmental service clients
often do not feel confident in their understanding of the dimensions of
contamination, remediation, and residual risks, but believe them to be
substantial; therefore, clients will tend to seek service providers in
whom they have confidence for the particular challenge and technology
involved. It takes time and track record to build such credibility.
Market Access, Economies of Scale, and the First Mover
Advantage: For LTTD, the number of potential customers in the medium
term is few, perhaps as few as two major customers each in Hungary and
the Czech Republic, and not more than five per country. The rated
capacity of one LTTD line is up to 300,000 tons per year, which is
estimated to be equal to 80% of the annual demand projected for LTTD's
market segment in Hungary.
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Therefore, an investment in an LTTD line can only be justified
by strong existing or prospective relationships with one or two key
customers. However, given that the investment is made based upon such
relationships, the capacity of the unit will probably preclude another
such unit from being installed in the country, providing a possibly
insurmountable first mover advantage for this market segment. This
follows the US example, in which LTTD lines tend to enjoy a regional
monopoly.
Permits: In order to provide environmental services, specific
technologies, and in order to handle, process, dispose of and transport
wastes and, as with an LTTD equipment unit, generate stack emissions, a
business operator is required to obtain various permits in the Central
and Eastern European countries. Often, these permits require months to
obtain and, in the case of final permits, may require years to obtain.
Obtaining permits requires a local presence and familiarity with the
national and regional written and unwritten rules of the permitting
process. "First movers" have a potential market advantage: since a
first mover is often the first person or business to proceed through a
country's new permitting process, the first mover can set the
permitting standard. If the first mover takes advantage of this
development stage permit processing, it can set "high technological
standards" or the type of technology it intends to employ for
remediation in the target country. We have undergone permitting
processes in Hungary and in the Country of Romania as the "first
mover". Our permits to operate the LTTD equipment unit we, together
with our partner, Green Globe, LLC, installed in Budapest, Hungary was
the first ever issued for LTTD technology in the history of Hungary.
Similarly, we were the first mover in the permit process with respect
to the installation and operation of AF processing and feed equipment
now situated at the CIMUS cement plant in Campulung, Romania. As a
result of these initiatives by us, other competitors desiring to
install an LTTD equipment unit in Hungary, will more than likely have
to meet the technological standards that are contained in our existing
operating permits. These permits as has happened in the United States
environmental markets, tend to become a significant "asset" of the
environmental firm or business.
Experience: Due to the evolution of the general, including soil,
remediation markets in Western Europe, the LTTD technology is not a
widely used in Western Europe. European environmental companies are, by
and large, not familiar with the LTTD technology, and it will take some
time for the LTTD technology to be recognized and utilized in Western
Europe. The same may be said for Central and Eastern Europe: it will
take several successful projects and their results to be distributed
before this technology gains wide approval. The successful LTTD
technology treatment of the Budapest municipal District XVIII project
by us and Green Globe has aided the recognition of our LTTD technology
as a viable remediation technology.
In the United States, LTTD technology is widely recognized and has
established itself as the industry standard for the soil remediation
market segment treatable by this technology. As with the introduction
of any new technology, our presence in the Hungarian soil remediation
market for the past several years facilitate our identifying market
opportunities: Because the utilization of this LTTD technology requires
"staying power" , this time and capital commitment has discouraged
other United States environmental enterprises from attempting to
penetrate, so far, these markets in Central and Eastern Europe.
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Competition
Hungary
Korte Kft. can be considered as our top competitor in the Hungarian market
for refinery services. Korte Kft. has wide scale operations and resources
ranging from site auditing, groundwater cleaning, environmental technology
engineering and sludge dewatering technologies.
The next key competitor is Pyrus the operator of the country's largest landfill.
Pyrus has recently acquired PORR Ktm a biological soil remediation Company.
Currently, no other enterprise in Hungary other than our Company provides AF and
or LTTD technology services.
The following table lists some of our competitors in Hungary:
<TABLE>
<CAPTION>
- - --------------------- -------------------- ------------------ --------------- ------------- -------------------- -----------------
Technology 1997 Revenue No. Of Years Est. Major Clients Contracts (%)
Employees in Hungary Gov't/
Private Sect.
- - --------------------- -------------------- ------------------ --------------- ------------- -------------------- -----------------
Dorog Incineration
(Sarp
Industries)
- - --------------------- -------------------- ------------------ --------------- ------------- -------------------- -----------------
<S> <C> <C> <C> <C>
Pyrus Landfill 3,650 65 1952 Teraszol, Netta, 25/75
Titania, Ikarusz,
Oroshazo Glass
- - --------------------- -------------------- ------------------ --------------- ------------- -------------------- -----------------
Elgoscar Intl Biological 2,392 53 1991 TVK, MAV, 58/42
Treatment Malev, KTLM,
APV Rt.
- - --------------------- -------------------- ------------------ --------------- ------------- -------------------- -----------------
Bekes Dren 1,750 16 1993 MOL 70/30
- - --------------------- -------------------- ------------------ --------------- ------------- -------------------- -----------------
RWE Hungary 1,250 38 1993 Zwack Unicum, 0/100
Emasz, Matav,
McDonalds,
Colgate, KTM
- - --------------------- -------------------- ------------------ --------------- ------------- -------------------- -----------------
BGT Hungaria Biological 600 7 1992 10/90
- - --------------------- -------------------- ------------------ --------------- ------------- -------------------- -----------------
Intonviro Biological 480 6 1991 MOL, GE, Ganz, 20/80
APV Rt,
Hungaro-camion
- - --------------------- -------------------- ------------------ --------------- ------------- -------------------- -----------------
PORR Kim 5 1995 KTM, Va-Elin 60/40
(PYRUS) AG, MAV, BKV,
APV Rt.
- - --------------------- -------------------- ------------------ --------------- ------------- -------------------- -----------------
</TABLE>
Although these and other companies represent competition, they also are
potential partners. We may compete with these companies to become the lead or
general contractor in a clean-up project. However, even if not the lead or
general contractor, we may still serve as a subcontractor, bringing our LTTD
technology to the project.
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<PAGE>
Czech Republic
There is only limited information available about our existing competitors in
the Czech Republic. Some competitors have shown interest in thermal remediation
as the preferred technology to clean and remediate soil. These competitors
include Watco, (a hazardous waste subsidiary of the Belgian utility, Tractabel,
which is owned by Suez-Lyonnaise des Eaux), and Thermo Eurotek (a Dutch
subsidiary of the United States technology group, Thermo Electron). Watco has
installed a small soil thermal treatment unit in Ostrava at the Karolina
industrial site clean-up
There are several foreign competitors in the Czech environmental market. Among
the most aggressive are German companies (Rumpold and RWE Entsorgung) and an
Austrian company (A.S.A.), all of which companies are mainly focusing on the
municipal solid waste markets.
Romania
There is only limited information available about competitors in Romania. Rhone
Poulenc has established an office and begun investigation of the groundwater
contamination in the Ploiesti region. Septos, Ltd., a Polish/French enterprise,
has initiated a preliminary review of using refinery wastes as secondary fuel,
and AVR, a Dutch and partially state-owned incinerator, has offered disposal
services to Romanian refineries.
Our Position in the Soil Remediation Market
Hungary
District XVIII. We completed a soil remediation project in December, 1998
pursuant to a contract with a municipal Department of the City of Budapest known
as District XVIII. We cleaned approximately 24,000 cubic meters of soil at a
price of approximately $45 per ton, with a total contract price of approximately
$1,485,000. Notwithstanding the successful completion of this project, it
appears that District XVIII does not have the funds allocated to pay our
remaining approximately $1,000,000 due on this project and is seeking aid from
the Hungarian central government. In addition, there are offers from land
developers for this property and negotiations are underway to raise
supplementary funds in this matter to pay past cleanup debts and fund continued
remediation of the site. In the meantime, we have commenced legal action against
District XVIII to recoup these payments due.
Czech Republic
South Bohemia: In November, 1998, our Czech subsidiary, CEVATech, signed a
letter of intent with the Centre for Chemical Safety (the "SCHB"), one of the
leading environmental services contractors in the Czech Republic, for
cooperation and subcontracting in two major projects in South Bohemia. In the
tender process for clean-up at the South Bohemian Wood site, CEVATech was one of
the two remaining bidders, and the only one offering the preferred thermal
remediation technology. The results of this tender were announced and the
initial award went to ASA. The project would involve treating 92,000 tons of
material at a price of approximately $50 per ton. The work has not yet begun and
CEVATech is in discussions with ASA to serve as a subcontractor to remediate the
soil with our LTTD equipment technology.
14
<PAGE>
In another project, the South Bohemian Gas Manufacturer is issuing a tender for
soil remediation in January 2000. This project would involve the treatment of
approximately 30,000 tons at various sites.
CUSTOMERS AND OPPORTUNITIES
Our soil remediation business is primarily applicable to hydrocarbon
contamination caused by the petrochemical, chemical, transportation and utility
industries.
Our tar remediation business is applicable to the wastes generated by the
petroleum refining (by-products, filter cake, oily filter media, separator
waste, sludge, acid tar, slop and waste oil, tank bottoms), steel (coal tar
bottoms), chemical (solvents, chemical tars) mining (coal tars), manufactured
gas and pharmaceutical industries. The processed alternative fuel ("AF") can be
used by cement kilns, power plants and other industrial boilers as a cheaper
source of energy.
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<PAGE>
The following table lists our actual and potential customers. A review of the
top 100 companies in Central and Eastern Europe reveals approximately 44 of
which are candidates to be our customers:
<TABLE>
<CAPTION>
- - ------------------- ------------------------------- -------------------------------- -----------------------------------------------
Business Actual Prospective Customers - Potential Customers - Opportunities
Line Customers in Discussion
- - ------------------- ------------------------------- -------------------------------- -----------------------------------------------
<S> <C> <C> <C>
Hungary (1) (2) (3)
- - ------------------- ------------------------------- -------------------------------- -----------------------------------------------
LTTD Budapest Power Rt. MOL Hungarocamion, BKV (transport), Malev
MAV (airline). TVK (chemicals), Ganz, Lehel, GE
Budapest Chemical Works Tungsraum, RABA (mfg). Chemical plants, Gas
stations
- - ------------------- ------------------------------- -------------------------------- -----------------------------------------------
AF MOL Vac Cement DAM (steel works), Dunaferr (steel works),
Labattan, Hejocsaba, Beremend, Belapatfalva,
Sajobabony, Tiszavasvar, Mosonmagyarovar
(cement plants)
- - ------------------- ------------------------------- -------------------------------- -----------------------------------------------
Czech
Republic
- - ------------------- ------------------------------- -------------------------------- -----------------------------------------------
LTTD None Regional gasworks, Unipetrol (Chemopoetroll,
South Bohemia Wood Ceska Rafinerska, Kaucuk, Benzina), Moravske
Company naftove doly (petroleum), Ceske produktovody a
South Bohemia Gasworks ropovdy (pipeline), OKD (mining, Chemapol,
Deza (chemicals, Ceska aerolinie, Skoda Pizen
- - ------------------- ------------------------------- -------------------------------- -----------------------------------------------
AF Ostramo refinery Koramo refinery, Tisova, Hodonin, Porici,
Paramo refinery Ledvice (power plants), Ceskomoravsky Cement,
Prahovice cement Prachovice Cement
Chemopetrol
- - ------------------- ------------------------------- -------------------------------- -----------------------------------------------
Romania
- - ------------------- ------------------------------- -------------------------------- -----------------------------------------------
LTTD None None RENEL (power generator)
Petrotel, Astra, Steaua, Petrobrazi, Vega,
Arpechim,
Rafo-Onesti, Darmanesti (refineries), miolia
Supiacu de Barcau
- - ------------------- ------------------------------- -------------------------------- -----------------------------------------------
AF Petrobrazi refinery Vega refinery Romcim, Romcif, Moldocine, Casial cement
CIMUS Cement plant Astra refinery plants.
Petrotel refinery
Arpechim refinery
Steaua refinery
- - ------------------- ------------------------------- -------------------------------- -----------------------------------------------
</TABLE>
16
<PAGE>
The following is a brief summary of some of the companies in Central and Eastern
Europe who have specific waste management problems whose remediation falls
within our scope of services:
Hungary
MOL: MOL is the largest oil and gas company in Hungary. In 1997, MOL allocated
$45 million for prevention and the elimination of environmental damages incurred
on its sites due primarily to recent Hungarian environmental law
initiatives.required; MOL also spent $20.8 million on satisfying certain
environmental liabilities, $2.7 million on waste disposal and approximately $1.6
million on sewage treatment. In excess of $5.4 million was spent by MOL on
remediation and the prevention of soil and groundwater contamination dispersion.
Over 90,000 tons of hazardous waste were produced by MOL's operations in 1997,
including 56,000 tons of production waste and 14,000 tons of contaminated soil.
TVK: TVK is a major chemical producer. Again, due to increased Hungarian
environmental legal initiatives, TVK spent approximately $10.7 million in 1997
for the prevention and elimination of environmental damages: approximately $8.0
million was spent on developments aimed at decreasing environmental liabilities;
approximately $2.6 million was spent on remediation of existing contamination;
approximately $800,000 was spent on waste water treatment; approximately
$400,000 on hazardous waste treatment, and; in excess of $1 million was spent on
other environmental liabilities.
MAV: MAV is the Hungarian state-owned railway company. The cost of clean-up of
contamination inherited from the past decades at current MAV sites is estimated
to be in excess of $50 million. In 1998, and for the years following, MAV
budgeted approximately$6 million annually on clean-up activities. This budget is
expected to be supplemented by external sources of financing and governmental
grants.
Between 1993 and 1995 MAV prepared an environmental assessment of contamination
at its sites. The major source of contamination derived from mishandling,
wrongful storage and transportation of petrochemicals. Other sources included
lubricants spilling from the diesel rails and machine maintenance areas. The
railways produce approximately 60,000 tons of hazardous waste annually.
Dunaferr: Dunaferr is a large steel manufacturer. The 1998 environmental budget
was approximately $5 million and the same amount of funds are expected to be
allocated for environmental purposes annually over the next years. Dunaferr's
main source of environmental problems include air emissions and the disposal of
hazardous wastes. Hazardous wastes include oily steel by-products, scraps and
waste oil. Dunaferr disposes of over 60,000 tons of waste a year and recycles
approximately 400,000 tons of such materials annually.
Czech Republic
Industrial companies represent the majority of end-users for hazardous waste
management and disposal equipment and services. The most important end-users are
chemical companies, iron works, the paper and pulp industry, and coal power
plants.
According to the Czech Ministry of Environment, total Czech waste generation is
approximately 90 million tons annually, consisting of 39 million tons of
industrial waste, 13 million tons of waste originating from energy generating
processes, 5 million tons of waste generated by mining activities, 6.5 million
tons of agriculture and forestry activity, 2.5 million tons of urban waste, 24
million tons of other waste, including approximately 8.1 million tons of toxic
and noxious waste.
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<PAGE>
CEZ: CEZ is the dominant electric energy producer in the Czech Republic and
produces the most amount of waste in this Country. Each year, it is estimated
that CEZ produces approximately 42 million tons of ash, of which 860,000 tons is
classified as hazardous waste. For years, CEZ has been storing ash ash and there
currently are estimates of millions of tons of ash in landfills that need to be
remediated. At this time, CEZ has not determined how it will handle the disposal
and remediation of these wastes which new environmental laws now require.
Other Large Industrial Companies
Chemical, iron processing and mining companies operate their own landfills which
historically have not complied with environmental regulations.
State Owned Dump Sites
There are a number of dump sites that have been abandoned by former state-owned
companies. These dump sites have not been regulated and were used as the dumping
grounds where industrial wastes were dumped. Currently, the type and extent of
the wastes deposited in and around these dump sites is unknown. The State, or
the government of the Czech Republic, is active and is expected to continue to
be active in the oversight and clean-up initiatives, providing necessary
financial resources and determining the extent and parameters for remediation.
There are two major governmental sources of environmental project financing: the
Czech National Privatization Fund and the State Environmental Fund.
Romania
In Romania, the petrochemical industry represents the main focus for
environmental concerns. The history of the Romanian petroleum sector goes back
more than 140 years. There have been over 23,000 wells drilled for exploration
during its history. Current oil production is estimated to be approximately 6.5
million tons per year produced from approximately 13,500 wells in more than 450
active oil fields.
SNP Petrom SA: Petrom is an integrated company which operates all existing oil
fields, some gas fields, two refineries and an oil product distribution system
including 500 gas stations. It produces approximately 6.5 million tons of oil
and refines approximately 10 million tons per year. Petrom budgeted $150 million
to spend on environmental initiatives in 1998, focusing efforts on reducing
pollution sources and on remediation. In our discussions with senior executives
of SNP Petrom, they identified 11 sites containing an aggregate of more than 1
million tons of tar and soil requiring treatment and remediation.
Other:
In 1998, OAO Lukoil Holding, Russia's second largest oil producer, acquired a
51% stake in Petrotel, another Romanian oil producer, for approximately $300
million, allocating approximately $30 million of such amount for environmental
18
<PAGE>
protection projects. Similarly, following the acquisition of Petromedia, another
Romanian refinery, the acquiring Turkish oil company, Akmaya set aside
approximately $10 million for environmental initiatives.
19
<PAGE>
GOVERNMENT REGULATION AND ENFORCEMENT
REGIONAL OVERVIEW
The Czech Republic, Hungary and Poland have joined the OECD, with Slovakia and
Slovenia expected to follow in the near future. These countries, with the
exception of Slovakia, have also been invited to negotiations to join the
European Common Market, with membership envisaged as early as 2002. Thus, the
harmonization of domestic structures and legislation with those of the European
Union is considered a high priority.
Each of the countries has enacted comprehensive environmental legislation. Their
regulatory systems are currently undergoing changes mainly related to:
- - - harmonizing and integrating domestic environmental legislation with that of
the European Common Market.
- - - improving the environmental regulatory framework by eliminating gaps and
removing inconsistencies.
- - - enacting specific pieces of legislation (e.g. waste management acts).
Domestic environmental legislative initiatives include the approximately 200
pieces of European Common Market legislation which will have to be adopted by
the countries in Central and Eastern Europe seeking membership. According to
1997 estimates, the cost to bring all ten "accession" countries of Central and
Eastern Europe into compliance with the environmental regulations of the
European Common Market is estimated to be in the range of $100 and $130 billion.
Enforcement measures continue to be inconsistent. Enforcement policies mainly
rely on monetary penalties, but also include environmental standards,
restrictions, and permitting systems. Additionally, enforcement policies are
often implemented by local governments without coordination at the national
level, which results in considerable differences in both requirements and levels
of enforcement. Also, with the rapid growth in the number of small and
medium-sized enterprises, compliance monitoring is often difficult.
The main environmental policy instrument applied to industry is the permit
system which includes fee payments for the permitting process and the assessment
of fines for non-compliance. Generally, the collected environmental fees and
fines are earmarked for environmental purposes, and comprise the sources for the
major part of the revenues of state environmental funds and for municipal,
environmental protection budgets.
Generally, all the surveyed countries of Central and Eastern Europe have
established three levels of environmental administration:
- - - national level ministries, (e.g. Ministry of Environment
or other ministries with environmental related duties).
- - - regional level (county, provincial) environmental departments under the
control of regional authorities, inspection bodies, water management
boards, and the like.
20
<PAGE>
- - - municipal level departments created and supervised by local authorities.
Hungary
Regulations
Hungary has one of the most advanced systems of environmental management in
Central and Eastern Europe.
The most significant piece of environmental legislation is the Act No. L111 of
1995 of the General Rules of Environmental Protection. This is a framework
environmental law, containing the fundamental principles and basic legal
institutions related to the environment. The Act formulates the legal basis of
the liability for environmental damages. The Act sets forth the responsibilities
of the government, municipalities, citizens and companies.
Key elements include:
- - - Hungarian law requires companies to remediate contaminated
company-owned land and stored waste. The laws are
considered fairly strong and are stricter than in some
countries of Western Europe.
- - - Laws and regulations are becoming more stringent because
of the Country's movement towards full membership in the
European Common Market. In this regard, the Hungarian
government plans to fully conform its environmental laws,
rules and regulations to those of the European Common
Market by 2002.
- - - In some privatization transactions, environmental clean-up
responsibility was made a part of the primary agreements.
Enforcement
At the top of the Hungarian state environmental hierarchy is the Ministry of
Environment and Regional Policy. This ministry is responsible for the drafting
of environmental legislation and its implementation and administration.
There are 12 regional environmental inspectorates in Hungary with separate
environmental administrative authority at the regional level. These
inspectorates are subordinate to the Chief Environmental Inspectorate, the
authority at the national level, and works under the supervision of the Ministry
of Environment and Regional Policy.
With respect to local environmental issues, especially waste management issues,
municipalities have retained a certain amount of administrative power, defined
by Act No. LXV of 1990 on Municipalities and under the respective environmental
laws:
- - - Local Environmental Inspectorates are responsible for enforcement. They
have the power to mandate and require companies to clean-up
environmental problems under their control and have the power to
conduct inspections.
21
<PAGE>
- - - Any company which fails to comply with environmental requirements is
now subject to fines.
- - - With the increase in environmental regulation
oversight, waste removal "load"charges are expected to
develop during the year 2000.
- - - Charges for products that contain waste are expected to
develop as a regulatory measure to further incentivize
companies to comply with applicable environmental laws and
regulations.
- - - Potential legal measures include the suspension of
operations in the event of environmental non-compliance
with penalties and prison sentences as further available
enforcement measures.
- - - Substantial private as well as public companies are
increasingly responsive to environmental issues because of
their developing high visibility.
Czech Republic
Regulations
The Czech Republic has relatively strong environmental laws, similar to those
found in Hungary. The new waste law, effective, on January 1, 1998, was
structured to harmonize Czech standards with those of the European Common
Market.
Enforcement
Governmental enforcement measures including mandatory clean-ups have begun at
Czech companies.
Romania
Regulations
The environmental laws in Romania remain generally weak . However, hazardous
waste laws in Romania have been rewritten and will be implemented by the end of
1999 to bring it into compliance with Western standards. Romania was formally
invited to begin the process for accession into the European Common Market,
which will further force additional legislation to meet the European standards.
Enforcement
Enforcement of environmental regulations remains sporadic, although we believe
that the more substantial Romanian enterprises are beginning to address
contamination problems on a specific basis due to privatization.
22
<PAGE>
ENVIRONMENTAL EXPENDITURES
A major change is expected (and in Hungary already taking place) in the
financing of environmental projects: the prior funding mechanism for
environmental projects was provided by state and municipal budgets is now
decreasing while businesses are increasing their budgetary contributions to
environmental projects. At present, our ability to secure the necessary
financing for environmental projects is one of our major problems. Countries in
Central and Eastern Europe generally have six sources of funds on which to draw
to support environmental investments. These sources are state and regional
budgets, extra-budgetary funds, investments of commercial enterprises,
commercial credit, foreign investments and foreign assistance programs.
For Central and European countries, environmental spending will have to increase
from present typical levels of 1% to over 2% of their gross domestic production
("GDP") to meet the environmental clean-up requirements.of the European Common
Market.
The following table summarizes annual environmental expenditures by country in
the region (1995):
<TABLE>
<CAPTION>
======================================== ------------------------------------- =====================================
Country Expenditure (USD m) Share of GDP
======================================== ------------------------------------- =====================================
<S> <C> <C>
Czech Republic 1,185 2.6%
======================================== ------------------------------------- =====================================
Hungary 385 1.1%
======================================== ------------------------------------- =====================================
Poland 1,308 1.1%
======================================== ------------------------------------- =====================================
Slovakia 232 1.0%
======================================== ===================================== =====================================
Slovenia 150 0.8%
======================================== ===================================== =====================================
</TABLE>
State Environmental Funds
All surveyed countries have established national environmental protection funds
to provide non-budgetary revenue earmarked for environmental projects. The
rationale behind the establishment of the funds was to ensure a steady flow of
the significant amounts of money needed for environmental protection. The
dominant share of these funds' revenues come from outside national budgets, so
that the protection of the environment does not directly compete for limited
resources with other social programs.
The resources of state funds can account for a significant proportion of a
country's environmental spending. State environmental funds' main activities are
to provide financial support for investments, usually through loans offered with
preferential conditions. Other forms of support are also used, and include
grants, subsidies to bank credits, equity involvement and others. The form of
financing available from these funds depend on the project type, the investor,
and the financing institution.
23
<PAGE>
LONG TERM STRATEGY
Our business is likely to develop along a path from being a provider of specific
technologies to being a broad-based environmental services company within the
hazardous waste sector.
We have identified two major environmental problems in Central and Eastern
Europe and have selected two proven technologies which we have imported from the
United States which we believe can efficiently and competitively provide a
solution to environmental problems. The two principal problems are soil
contamination by hydrocarbons and the generation of hydrocarbon waste products
from the oil refinery and other businesses. Our solutions are low temperature
thermal desorption ("LTTD") and the processing and manufacturing of alternative
fuels from these waste products ("AF").
Our management which is responsible for implementing these technologies in
Central and Eastern Europe have an aggregate of five decades of experience with
these technologies in the United States.
Our business goals over the coming three to five years is to develop a number of
valuable assets through the successful implementation of these technologies:
- - - Develop a strong reputation and track record of successful, competitive and
efficient service to blue chip companies.
- - - Establish long term commercial relationships with blue chip companies in
the key, environmentally sensitive sectors.
- - - Develop familiarity with the authorities and key decision makers across the
region.
- - - Acquire a detailed understanding of permitting procedures across the region
- - - Gain access to subsidized financing from PHARE, World Bank, and other
sources
- - - Develop a vast network of contacts across the very fragmented environmental
services sector in the region
- - - Gain a detailed knowledge of the environmental problems and policies of
those companies.
- - - Gain a detailed knowledge of the competitive environment within other
slices of the environmental services sector.
- - - Develop experience at managing complex, multi-technology clean-up projects
- - - Develop experience at managing projects across a range of countries in the
region
24
<PAGE>
We are an environmental services and not a technology Company. This means that
we provide and execute solutions for companies and governmental bodies with
environmental problems. Our current focus on using our LTTD technology and AF
processing technologies does not preclude the us from using other technologies
at times when it may be appropriate. It is expected that through the current two
service lines, we can rapidly establish an important reputation from which we
can leverage our entre into other services and solutions. Once our LTTD and AF
business lines mature, we expect opportunities to expand as discussed below.
Geographical Expansion
The markets in the different countries of Central and Eastern Europe are at
different stages of maturity and are developing at different rates. As the
characteristics of the Czech or Hungarian markets begin to mature, the Balkans,
Slovakia or Romania are expected to develop and the wealth of experience we have
gained in the Hungarian and Czech markets can be reapplied in this next
generation of projects. Next, over the horizon, we expect that the countries of
Bulgaria and the Ukraine to develop environmental markets for our services.
We have learned that the differences in language, legislation and logistical
barriers limit the potential for regional synergies and our business plan does
not anticipate implementation of such synergies or strategy. We expect that our
experience and know-how can be successfully transferred and that our in-country
business partners monitoring their respective markets will permit us to enter
new countries at the right time to take advantage of these opportunities as they
arise.
Following the Oil and Gas Trail
Our AF business focuses initially on the large oil and gas companies whose large
production facilities and deep pockets present a logical market entry point. Our
business will, over time, we believe, begin to penetrate further down the
petrochemical industry ladder. We anticipate serving the chemical industry,
pharmaceutical manufacturers, paint shops, repair shops and gas stations.
We are likely to become a service provider for the waste oil and solvent
collection businesses which are developing in Hungary. As it occurred in the
United States, our AF processing capacity will be a key collection repository
for waste solvents. The waste fuels will be blended and sold to the cement
industry. By having a large capacity, a nationwide watershed, and a reliable
service, we are likely to become a preferred supplier of AF to cement kilns and
other users, providing us with long term supply contracts. The generation of
waste solvents is an on-going business cycle and can be expected to endure as
long as the petrochemical industry continues its dominant role in industrial
processes.
From Technology Provider to Solutions Provider
Our track record and experience will accelerate over the next few years, as well
as the wealth of other strategic intangible assets discussed above. These
intangibles will enable us to move from being a provider of specific
technologies to a provider of environmental solutions.
Aware of how fragmented the environmental services industry is in Central and
Eastern Europe, with numerous small, undercapitalized, technology providers, a
strategy of selective acquisitions represent an attractive business opportunity
for us. Such acquisitions can probably be made at very competitive prices, and
25
<PAGE>
then incorporated into our group. We will provide a conduit for applications of
the acquired technologies in other markets, utilizing the local presence of the
businesses acquired as a conduit to the local markets. Other less capital
intensive ways of accessing technology can come through simply subcontracting,
technology partnerships or joint ventures. As a result, we can access a
portfolio of solutions and can act as the main contractor in remediation and
clean-up projects, pollution prevention engineering, infra-structural projects,
and the like. Ultimately, we intend to position ourselves as project management
providers.
Employees
As of the date hereof, we employed 20 full-time employees and 7 part-time
employees. We hire independent contractors on an "as needed" basis only. We have
no collective bargaining agreements with our employees. We believe that our
employee relationships are satisfactory. We expect to hire additional employees
based on our future growth rate.
Key Personnel
Our success depends to a material and significant extent on the services of
Herbert G. Case, Jr., our President and Chief Executive Officer as well as our
ability to attract and retain additional key personnel with the skills necessary
to manage our existing business and strategic plans. The loss of Mr. Case or
other key personnel could have a material adverse effect on our business,
results of operations, liquidity and financial position. We do not have an
employment agreement with Mr. Case. If we cannot retain Mr. Case or hire and
retain qualified personnel, our business, results of operations, financial
condition and prospects could be adversely affected.
PROPOSED CORPORATE STRUCTURE
Our Company is currently composed of CEVA International, Inc., a Nevada
corporation with its principal offices located in New Jersey, a Czech subsidiary
and a Hungarian subsidiary. We are currently forming a Romanian subsidiary. Our
Hungarian subsidiary is 50% owned by Hungarian partners although CEVA
International, Inc. is the managing shareholder. Our Czech subsidiary is owned
40% by our Czech partners and we have control and management authority. Our
Romanian subsidiary, currently being formed, will also have foreign-based
ownership.
The proposed ownership structure, accepted in principle by all shareholders of
our Hungarian and Czech subsidiaries, calls for all these minority,
foreign-based minority owners to exchange their shares in these subsidiaries for
shares in CEVA International, Inc., resulting in our ownership of 100% of our
Hungarian and Czech subsidiaries.
26
<PAGE>
Our Company's organization structure is based around a combination of
in-country, locally recruited managers with their expertise tied to their
respective business functions. Several of the persons identified in the
following chart, Messrs. Dennis Konnick, Tom Nail and Joerg Klaube, all United
States citizens who have been rendering part-time, consulting services to us,
have not yet been hired by our Company as full-time employees and are only
projected to fill the positions listed by their names.as shown in the diagram
below:
Board of Directors
------------------
Chief Executive
EXECUTIVE COMMITTEE Officer
------------------
Operations Regulatory & Finance Business
Director Technical Director Development
DENNIS KONNICK TOM NAIL JOERG KLAUBE MIHAI MARACINEAN
--------------- ---------- ------------ ----------------
Country Project Managers Compliance Officer Chief Accountant
Director Hungary Hungary Hungary (HUNGRY)
Hungary JOZSEF LASZLO JANOS SOOS ZSOLT BENESOZKY
JANOS SOOS
- - -----------------------------------------------------------------------------
Country Project Managers Compliance Officer Chief Accountant
Director Romania Romania Romania (ROMANIA)
Romania MARIOS BICA MIHAI MARACINEANU ZSOLT BENESOCKY
MIHAI
MARACINEANU
- - ------------------------------------------------------------------------------
(CZECH REPUBLIC}
Country Project Managers Compliance Officer Chief Accountant
Director Czech Republic Czech Republic Czech Republic
Czech Republic PETER RAAB JIRI ROTT IRENA SOPOVOVA
JIRI ROTT A. CETKOVSKY
Although we seek to fill certain positions and that certain personnel will
occupy more than one position, the main features of this structure incorporate
the following business priorities:
- - - Country Directors oversee local office operations, manage local
cultural/political issues
- - - Project Managers oversee their in-country projects throughout the region
Our Company, CEVA International, Inc., was founded by Herbert G. Case, Jr., age
56, our current President and Chief Executive Officer. He has been responsible
for strategy, business development, negotiating with financial institutions and
the overall management of our Company. With more than 30 years of experience in
environmental companies, Mr. Case has a wide network of relationships in the
world of environmental businiess. In the United States, Mr. Case was one of the
principal parties who assisted in the establishment of the alternative derived
fuel market as replacement fuel for cement kilns during the 1970's and 1980's.
27
<PAGE>
The Company's Hungarian subsidiary, CEVA Hungary, is managed by Mr. Janos
Soos. Mr. Soos, 60 years of age, has a degree in economics and more than thirty
years of experience in managing commercial enterprises in Hungary. He has been a
chief executive officer of a Hungarian enterprise in a related business for four
years. Mr. Soos coordinates all in-country activities and works closely with
clients and government agencies. Mr. Soos is assisted in Hungary by Mr.Jozsef
Laszlo, our Project Manager in Hungary. Mr. Laszlo, 46 years of age, is a
mechanical engineer with a background in industrial processes and holds degrees
in economics and mechanical engineering.
The Company's Czech subsidiary, CEVATech, is managed by Mr. Jiri Rott. Mr. Rott,
50 years of age, holds a Master of Science degree from the Faculty of Chemistry
of Silicates Technology, Czechoslovak Academy of Sciences. He has over 25 years
experience in Research and Development, particularly in cement production
technology and environmental protection management. The Czech affiliate is
focusing on providing consulting services and targeting to sell alternative fuel
technology and product to the cement industry.
The Company's Romanian subsidiary, in organization, will be managed by Mr.
Mihai Maracineanu. Mr. Maracineanu, 46 years of age, has 23 years of experience
in international trade in the energy sector and holds a Masters of Science
degree in Economics.
Our LTTD technology partner, Green Globe, LLC, is owned and managed by Mr.
David Green. Mr. Green, 49 years of age, provides the LTTD technology and full
service support to our Central and Eastern European soil remediation projects.
Mr. Green has over 25 years of experience in the environmental sector and
operations of LTTD technology equipment.
Year 2000
We have conducted a review of how our business could be affected by the Year
2000 "Y2K" problem. The Y2K problem is the result of computer programs being
written using two digits rather than four to define the applicable year. Any
programs that have time-sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000. This could result in a major computer
system failure or miscalculations.
The Y2K problem can affect any modern technology used by a business in the
course of its daily operations. Any machine that uses installed computer
technology is susceptible to this problem, including, for example, telephone
systems, postage meters, scales as well as computers. The impact of the Y2K
problem on a business enterprise is determined to a large extent by such
company's dependence on these technologies to perform their daily operations.
We use computers at our corporate headquarters here in New Jersey, our offices
in Budapest, Hungary, Bucharest, Romania and in Prague, the Czech Republic. We
use computers to communicate with management via the internet and to keep our
business and financial records. Since our business generally does not require
voluminous record keeping nor daily billing or banking transactions, nor do we
have a computer network system that integrates software among our business
locations, we believe that any Y2K problem will not have any material adverse
effect on our results of operations, financial condition or business prospects.
We expect that if a Y2K problem does arise in one of our computer applications
that it can be remedied within a several day period without having any material
negative effect on our operations. In such a case, we have access to local
computer consultants who have the expertise to solve all anticipated computer
problems.
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Economic Conditions
Our business in Central and Eastern Europe is sensitive to the local financial
condition of the economies in which we work, government environmental regulation
as well as the condition of worldwide financial markets. We have extensively
discussed these topics above. A downturn in economic conditions in one or more
of our Central and Eastern European markets, a governmental failure to develop
and enforce environmental regulations as well as unforeseen governmental
legislation could have a material adverse effect on our results of operations,
financial condition, business and prospects. Although we attempt to stay
informed of economic and market conditions, government environmental
initiatives, changing permit requirements, any continuing failure on our part to
identify potentially adverse developments and to respond to such trends would
have a material adverse effect on our results of operations, financial
condition, business and prospects.
Stock Price
Our Common Shares have no public market . Several of our shareholders who have
held their stock in our Company for the required periods may, in compliance with
all the applicable regulations, may sell their shares pursuant to Rule 144;
other shareholders who purchased our stock in a Rule 504 private offering
possess non-restricted stock and may sell those shares in certain jurisdictions
where such trades comply with local blue sky laws. When and if our stock is sold
by any shareholder, its selling price may be extremely volatile. We do not
expect any significant trading of our stock and if there are any trades, we
expect the market price of our shares to be subject to significant fluctuations
in response to new business, operating results and other factors, and those
fluctuations may continue in the future. In addition, most stock markets in
recent years have experienced significant price and volume fluctuations that
often are unrelated or disproportionate to the operating performance of
particular companies. These fluctuations, as well as a shortfall in sales or
earnings compared to public market analyst's expectations, changes in analyst's
recommendations or projections, and general economic and market conditions, may
adversely effect the market price of our common stock.
Risks Related to the Business
Describe below some of the risks and uncertainties facing our Company. There may
be additional risks that we are not currently aware of or that we presently
consider immaterial. All of these risks could adversely affect our business,
results of operations, liquidity and financial position.
Accumulated Deficit; Operating Losses: At December 31, 1998, we had an
accumulated deficit of $2,454,140 representing a consolidated net loss for the
period from its inception through December 31, 1998. The consolidated loss was
caused primarily by the costs involved in establishing our market position in
Central and Eastern Europe (the "CEE"). Our cash flow since inception has been
principally the result of equity and debt financing and limited revenues
generated from our operating activities in the Central and Eastern Europe (the
"CEE"). Our ability to achieve profitability is dependent upon our ability to
realize revenues from our contracts with both public and private entities
advertising that exceed costs.
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Competition. In seeking to market US technologies and environmental
services in Central and Eastern Europe (the "CEE"), we face difficult and stiff
competition from a number of US and foreign companies that are much better
capitalized than we are. Competition in Hungary, the Czech Republic and Romania,
our principal markets, is well documented. Although management believes that our
market position in the CEE as well as our strategic offering of US technologies
to perform environmental services is extremely valuable to these markets and
will give us a competitive advantage, no assurances can be given that such will
be the case.
Government Regulation. Our operations are and will be, subject to and
substantially affected by the foreign laws of the Countries in the CEE, their
respective regulations, orders and permits which govern environmental
protection, health and safety,zoning and other matters. These laws, regulations,
orders and permits may impose restrictions on operations that could adversely
affect our results of operations and financial condition, such as limitations on
the expansion of disposal facilities, limitations on or restrictions upon the
treatment of waste or certain categories of waste or mandates regarding the
disposal of and/or utilization of solid or hazardous waste. In particular, we
are, and will be, subject to extensive and evolving environmental and land use
laws and regulations, which have become increasingly stringent. These laws and
regulations affect our businesses and will affect our businesses in a variety of
ways. In order to develop and operate a low temperature thermal desorption soil
cleaning equipment, a waste derived fuel facility landfill or other waste
management facility, it is necessary to obtain and maintain in effect various
facility permits and other governmental approvals, including those related to
zoning, environmental protection and land use. These permit approvals are
difficult, time consuming and costly to obtain and may be subject to community
opposition by government officials or citizens, regulatory delays, subsequent
modifications and other uncertainties. There can be no assurance that we will be
successful in obtaining and maintaining in effect permits and approvals required
for the successful operation and growth of our business, including permits and
approvals required for the development of additional soil cleaning and/or waste
derived fuel operations. The siting, design, operation and closure/shutdown of
soil cleaning sites, waste derived fuel facilities and their respective
equipment are also subject to extensive regulations. These regulations could
require us to undertake investigatory or remedial activities, to curtail
operations or to close soil cleaning facility or other treatment facility
temporarily or permanently. Furthermore, future changes in these regulations may
require us to modify, supplement or replace equipment or facilities at costs
which could be substantial. It is not possible to predict what impact, if any,
new regulation laws, court decision or local and national laws may have in the
future on our facilities.
Potential Liabilities Arising out of Environmental Laws and
Regulations. Although we believe that we generally benefit from increased
environmental regulations adopted from time to time by the countries in the CEE
and from enforcement of those regulations, increased regulation and enforcement
also create significant risks for us. The assessment, analysis, remediation,
transportation, handling and management of hazardous substances necessarily
involve significant risks, including the possibility of damages or personal
injuries caused by the escape of hazardous materials into the environment, and
the possibility of fines, penalties or other regulatory action. These risks
include potentially large civil and criminal liabilities to customers and to
third parties for damages arising from performing services for customers. All
facets of our business are conducted in the context of a rapidly developing and
changing statutory and regulatory framework. In certain business sectors, such
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as in Romania, environmental regulations and laws are only beginning to be
developed. In such instances, the market for our businesses is not driven by
environmental regulations and laws which are in their nascent stage of
development but by the need to reduce traditional fuel costs in the power
sector; accordingly, our existing relationship with cement plants and its
business plan to expand its waste derived fuel operations to other power plants
in these regions provides the economic foundation for our businesses operating
in early regulation-stage countries. Although we are confident that our
relationships with both private and state-owned entities will increasingly
develop and provide expansion for our business activities, there can be no
assurances that such will be the case.
Potential Liabilities Involving Customers and Third Parties. In
performing services for our customers, we potentially could be liable for breach
of contract, personal injury, property damage (including environmental
impairment), and negligence, including claims for lack of timely performance or
for failure to deliver the service promised (including improper or negligent
performance or design, failure to meet specifications, and breaches of express
or implied warranties). The damages available to a client, should it prevail in
its claims, are potentially large and could include consequential damages.
Industrial waste management companies, in connection with work performed for
customers, also potentially face liabilities to third parties from various
claims including claims for property damage or personal injury stemming from a
release of hazardous substances or otherwise. Claims for damage to third parties
could arise in a number of ways, including: through a sudden and accidental
release or discharge of contaminants or pollutants during transportation of
wastes or the performance of services; through the inability, despite reasonable
care, of a remedial plan to contain or correct an ongoing seepage or release of
pollutants; through the inadvertent exacerbation of an existing contamination
problem; or through reliance on reports prepared by such waste management
companies. Personal injury claims could arise contemporaneously with performance
of the work or long after completion of projects as a result of alleged exposure
to toxic or hazardous substances.
Risks Inherent in Foreign Investment. Risks inherent in foreign
operations include loss of revenue, property and equipment from expropriation,
governmental royalties and fees and involuntary renegotiation of contracts with
or licenses from foreign governments. We are is also exposed to the risk of
changes in foreign and domestic laws, regulations and policies that govern
operations of overseas-based companies. In the event we achieve and maintain
profitable operations in Hungary and in the other Central and Eastern European
countries, if we retain earnings it will be subject to substantial taxes on all
profits earned, and if we pay dividends, we will be subject to further
substantial taxes.
Inflation and Local Currency Devaluation. We believe that any United
States investors in our stock seek a return on investment based upon the dollar
value of our foreign operating results. Although most of our current contracts
are payable in United States dollars, a few contracts as well as future
contracts for our services and technology are and may be payable in the local
foreign currency, such as Hungarian forints. Significant inflation in Hungary,
the Czech Republic or Romania, or significant future devaluation of the
currencies of these nations would decrease the dollar value of our investments.
The Hungarian economy has been characterized by high rates of inflation and
devaluation of the Hungarian Forint against the U.S. Dollar and certain European
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currencies. In 1993, 1994, 1995, 1996 and 1997 the annual reported inflation
rate in Hungary (measured by the national consumer price index) was
approximately 23%, 19%, 30%, 23% and 18%, respectively. The Hungarian Forint was
devalued against the U.S. Dollar in 1993, 1994, 1995, 1996 and 1997 by 14.2%,
15.9%, 26.7%, 18.0% and 23.6%, respectively. In March 1995, an immediate 9%
devaluation of the Hungarian Forint was announced together with a new policy of
daily or "crawling peg" devaluation. This involved daily devaluations amounting
to approximately 1.9% monthly in the second quarter of 1995, 1.3% monthly during
the second half of 1995, 1.2% monthly during 1996, 1.1% through July 1997 and
1.0% beginning in August 1997. The monthly rate is presently 0.9% and is
expected to be further decreased, subject to Hungary's economic condition. The
exchange rate for the Hungarian Forint, as set by the National Bank of Hungary,
declined from 100.70 Forints per U.S. Dollar at December 31, 1993 to 211 Forints
per U.S. Dollar at May 15, 1998. On April 16, 1997, the government of the Czech
Republic announced a package of measures designed to finish vital microeconomic
tasks, such as completing the privatization of the energy distribution companies
and state-owned banks, restructuring firms to maintain competitiveness, and
strengthening the regulatory framework. Following pressure on the currency
resulting in a 15% depreciation, the government announced a further austerity
package on May 28th. The depreciation, along with increases in controlled rents
and utilities at midyear and the floods, is expected to push 1997 inflation
above 10%. This compares to earlier forecasts of up to 8.8% for 1997. Inflation
in 1996 reached 8.8%.
Foreign Currency and Exchange Risks and Regulation. We are subject to
significant foreign exchange risk. There are currently no meaningful ways to
hedge currency risk in any Eastern European country. Therefore, our ability to
limit our exposure to currency fluctuations is significantly restricted. The
Hungarian forint (HUF) became convertible for essentially all business
transactions within Hungary on January 1, 1996 and complies with IMF Article
VIII and OECD convertibility requirements. The HUF is generally not traded
outside the country. The HUF exchange rate is set by a basket which is composed
of the deutsche mark (70%) and the dollar (30%). The Hungarian Investment Act
guarantees foreigners the right to repatriate "in the currency of the
investment" any dividends, after-tax profits, royalties, fees, or other income
deriving from the operation or sale of the investment. The Act also grants
foreign employees of a foreign investment the right to transfer all of their
after-tax salaries. There are no onerous foreign exchange requirements, and
there are no known instances of delay in repatriations. Foreign investors are
allowed to keep cash contributions made in a convertible currency in a foreign
exchange account. Companies may use these funds to import duty-free goods
considered as part of the investment. Alternatively, it may import goods using
foreign exchange bought in HUF. Companies are allowed to maintain foreign
currency accounts at Hungarian banks where they keep their export receipts.
Companies must receive permission from the National Bank before taking out a
hard currency loan. In the fall of 1995, the Czech Parliament approved a Foreign
Exchange Act which resulted in expanded convertibility of the Czech crown. In
May of 1997, the CNB board canceled the fluctuation band for the Czech crown's
exchange rate (which had been set at +/-7.5 percent in February 1996). The board
also decided to abandon the previously used currency basket (65 percent German
Mark (DEM), 35 percent USD) and peg the crown to the DEM. As of July 1997, the
exchange rate was roughly 31 crowns to the U.S. dollar and 17 to 19.50 per 1
DEM.
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Political and Economic Environment. Central and Eastern Europe is
generally considered by international investors to be an emerging market. There
can be no assurance that political, economic, social and other developments in
these emerging markets will not have an adverse effect on the market value and
potential future liquidity of our Common Stock. In general, investing in the
securities of issuers with substantial operations in markets such as Central and
Eastern Europe involves a higher degree of risk than investing in the securities
of issuers with substantial operations in the United States and other similar
jurisdictions. Our Company is organized under the laws of the State of Nevada.
Although holders of record of our Common Stock will be able to effect service of
process in the United States upon us and may be able to effect service of
process upon our directors, due to the fact that we are primarily a holding
company which holds between 50% and 60% of all the outstanding equity securities
of our Central and European based subsidiaries, substantially all of the assets
of our Company are located outside the United States. As a result, it may not be
possible for stockholders to enforce against our assets judgments of United
States courts predicated upon the civil liability provisions of United States
laws. In addition, awards of punitive damages in actions brought in the United
States or elsewhere may not be enforceable in any country of Central and Eastern
Europe.
Agreements with Green Globe, LLC. In December, 1997, we entered into
certain agreements with Green Globe, LLC, a Connecticut based environmental
company controlled by David Green. Pursuant to the terms of this agreement,
Green Globe, LLC ("Green Globe") agreed to provide all of the equipment and
services, including training, mobilization, conversion to in-country technical
standards and specifications with respect to all "low temperature thermal
desorption" soil remediation projects generated through our Company's business
network in Central and Eastern Europe (the "CEE"). In return for this
commitment, we agreed to share profits, after deduction of costs and expenses,
equally with Green Globe. In order to facilitate entry into Hungary of the
capital equipment comprising the low temperature thermal desorption unit
("LTTD"), our Hungarian subsidiary, CEVA Hungary, entered into an equipment
lease arrangement with Green Globe with the proviso that our original agreement
would control and govern our relationship. Under the lease agreement, CEVA
Hungary committed to make lease payments to Green Globe to amortize the cost of
the LTTD Unit and to cover certain mobilization costs. The first project we
obtained in Hungary for the LTTD equipment unit was the remediation of soil in
municipal District XVIII in the City of Budapest requiring the remediation of
approximately 32,000 tons of soil. The LTTD soil remediation work on the project
for District XVIII was completed in December, 1998, but full payment has not yet
been received. Accordingly, the equipment rental payments of CEVA Hungary and
any profit-sharing payments due from us to Green Globe have not been made. We
have commenced legal process against the municipal District XVIII in the
Hungarian courts to recover the approximately $1,000,000 due us pursuant to this
contract. Because of this delay in receipt of payments, our Hungarian
subsidiary, CEVA Hungary, has failed to make the required lease payments to
Green Globe. There can be no assurances that our relationship with Green Globe
to provide soil remediation with its Budapest-based LTTD equipment unit will
continue. In the event Green Globe terminates its contracts with us and our
Hungarian subsidiary and/or removes the LTTD equipment unit from Budapest,
Hungary, such actions will have a material adverse effect on our results of
operations, financial condition, business and prospects.
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Additional Financing. We will require additional financing although we
have no current arrangements to obtain any additional financing. No assurance
can be given that such additional financing will be available on terms that are
satisfactory to us, if they are available at all.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION.
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data set forth below with respect to (i) the
consolidated statements of income for the fiscal years ended December 31, 1998
and 1997, and (ii) the consolidated balance sheets at December 31, 1998 and 1997
are derived from the consolidated financial statements for CEVA International,
Inc., a Delaware corporation which merged with and into the Company as of May
10, 1999, which have been examined by Rosenberg Rich Baker Berman & Company,
independent certified public accountants, all of which financial statements are
included elsewhere herein, are qualified by reference to such financial
statements, and should be read in conjunction with such financial statements and
the notes thereto.
The selected consolidated financial data set forth below with respect to (i) the
period ended September 30, 1999, and (ii) the period ended September 30, 1998
are derived from unaudited consolidated financial statements for the Company and
for CEVA International, Inc. ("CEVA Delaware"), a Delaware corporation,
respectively. The results of operation for the nine months ended September 30,
1999, should not be regarded as indicative of the results of operations for the
year ending December 31, 1999. All amounts are in $-thousands except for any
share data. The historical number of shares outstanding has been adjusted to
take into account a 3.692488:1 stock split for CEVA-Delaware's common stock
effected in May 1999.
On May 10, 1999, the Company, then known as ORO Bueno Inc., after divesting
itself of all operations, all assets except for a cash depository in the amount
of approximately $500,000, and substantially all liabilities, extended an offer
to all holders of the common stock of CEVA Delaware to exchange their shares
into newly to be issued common stock of the Company, and CEVA Delaware merged
into the Company. The operations of the newly combined entity are comprised
solely of the operations of CEVA Delaware. Therefore, the discussion ensuing
below pertains to the operations of CEVA Delaware for the prior fiscal periods
until the date of the merger, and to the operations of the Company thereafter.
Year Ended Nine Months Ended
December 31, September 30,
(Unaudited)
Consolidated Income Statement Data: 1998 1997 1999 1998
Revenues ................$ 1,950 $ 1,003 $ 1,459 $ 1,428
Cost of goods sold................. 1,436 496 954 1,233
Gross profit.............. 514 507 505 194
Operating income (loss). (564) (269) (339) (570)
Net income (loss).......... (408) (292) (725) (624)
Earnings (loss) per share$ (0.05) $ (0.04) $ (0.08) $ (0.08)
Shares used in computing per
share data 7,385,000 7,385,000 8,662,000 7,385,000
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At December 31, At September 30,
Consolidated Balance Sheet Data: 1998 1997 1999
Working Capital............... $ (896) $ 85 $ (983)
Total assets................ 5,196 847 4,344
Total current liabilities... 2,419 440 2,472
Shareholders'equity (impairment)$ (900) $ (546) $ (30)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
CEVA International, Inc. specializes in the application of waste-to-energy
alternative fuel and environmental remediation technologies. Its primary target
market and current operations focus on Central and Eastern Europe, specifically
Hungary, Czech Republic, and Romania. These countries not only have rapidly
growing energy needs but at the same time are burdened with a legacy of
significant problems in the areas of environmental pollution, coupled with a
scarcity of technical and managerial know-how in trying to address these
problems. However, the region is only now starting to develop and implement a
regulatory, socio-economic and jurisdictional infrastructure on par with Western
standards that can effectively deal with the legacy of decades of communist
rule. This may on occasion create obstacles in the day-to-day management of a
company which are not normally encountered in the developed world. During the
last several years, we have succeeded in establishing a presence and creating a
wide ranging network of business contacts and working relationships which
facilitates this task and which management expects will bear fruit in the years
to come. Despite this progress, however, and although basing its projects and
operations on traditional and proven technologies, timing and success of
individual projects often depend on factors beyond our control and the resulting
uncertainties make reliable projections difficult. Our Company is pioneering new
frontiers and must therefore be considered a company in transition.
Results of Operations for Nine Months Ended September 30, 1999 compared to Nine
Months Ended September 30, 1998.
For the nine months ended September 30, 1999, we had gross revenues of
$1,459,179 ($1,427,584 during the same period a year ago), substantially all of
which was generated by our Hungarian subsidiary, CEVA Hungary. A major portion
of the Hungary revenues is attributable to the City of Budapest District XVIII
soil remediation project involving Low Temperature Thermal Desorption
technology. A portion of the 1999 revenues of approximately $200,000 was
delivered by the CIMUS Alternative Fuel project in Romania, significant because
it represents our most promising revenue generating activity in that country.
Gross profits amounted to $505,389 for a 35% gross margin ($194,444 and 14%
respectively in 1998). Margins fluctuate significantly from project to project
depending upon local factors and individually negotiated terms, and any given
reporting period's overall results are affected by the mix and timing of such
projects. This volatility represents a major risk factor in predicting our
future performance and will relatively diminish only upon our achieving revenue
goals during the next two years when a larger number of projects are in progress
and in combination contribute to a more level gross margin profile. After
deducting operating expenses of $844,881 which were not materially higher than
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those incurred during the same period a year ago, we realized an operating loss
of $339,492 (compared to an operating loss of $569,667 in 1998). Non-operating
expenses totaled $345,692 after applying a credit of $88,915 for minority
interests in the loss of consolidated subsidiaries and constitute primarily
interest expenses and charges in connection with capital leases. The nine months
period concluded with a net loss of $724,849 or $0.08 per share, compared to a
loss of $624,171 or $0.08 per share for the nine months period in 1998.
Results of Operations for the Year Ended December 31, 1998 compared to the Year
Ended December 31, 1997
The fiscal year's results, in comparison to the prior year, were primarily
determined by a combination of significantly higher revenues that increased by
94% from $1,003,388 to $1,950,256 and a decrease in the overall gross profit
margin. As mentioned above, margins fluctuate significantly from project to
project depending upon local factors and individually negotiated terms. As a
result, total gross profits increased only slightly, from $507,473 to $514,069.
Revenues in 1998 were supplied almost exclusively by our Hungarian subsidiary.
Operations in Romania and Czech Republic, currently the two other main target
markets, were still in their infancy and are not expected to generate
significant income before the year 2000.
Operating expenses increased sharply, from $776,465 in 1997 to $1,078,742 in
1998. The increases were primarily in the areas of personnel and travel
expenses, reflecting the expanded operations and build-up of infrastructure. In
view of relatively unchanged gross profits the higher expenses in 1998
contributed to a larger net loss of $658,309 for the year ($291,817 in 1997). A
reclassification in 1998 of $250,000 in notes payable into a capital lease
agreement resulted in an extraordinary credit in the same amount, decreasing the
overall net loss to $408,309 or $0.06 per share, compared to $0.04 per share in
the preceding year.
Revenues during 1998 were primarily supplied by only two projects, i.e. the
Nyirbogdany liquid alternative fuel processing facility operated by the Company
at a refinery owned by the Hungarian gas and oil company MOL, and the City of
Budapest District XVIII soil remediation project for which the Company shipped
from the U.S. and installed in Hungary a Low Temperature Thermal Desorption
equipment. During the year, we invested considerable time and effort in the
further development and exploratory negotiations in its Hungarian and Romanian
markets, and the procurement of necessary permits issued by the respective local
and state government entities. As a result of these efforts, two further
projects have advanced to a stage where significant revenues are expected for
1999 and beyond. These are the production of a proprietary, solid, waste-derived
fuel to be used in a Duna-Drava Cement operated in Vac, Hungary, and the first
project in Romania which will produce liquid alternative fuel from hazardous
waste to be used in cement kilns, in this particular case in cooperation with
S.C. CIMUS S.A., a privately-owned cement manufacturer. The resulting broadening
of the revenue base is expected to materially improve our business outlook,
predictability of future performance, and cash flows.
Liquidity and Capital Resources
The Company's liquidity remains strained because the level of operations and
revenues is still not adequate to finance operations and the required
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infrastructure. In addition, the projects pursued by the Company necessitate
significant investments in capital equipment that we largely financed through
capital lease agreements. At September 30, 1999, the working capital deficit
amounted to $983,111 as compared with a deficit of $896,403 at December 31,
1998. Cash flow from operations during the nine months in 1999 totaled negative
$941,514 which was largely offset by a cash inflow of $945,310 from financing
activities, primarily through the issuance of common stock.
Management's plans with regard to the satisfaction of future cash needs until
cash flows from operations are sufficient to finance further growth center
around the infusion of additional equity capital by a combination of private
placements and, possibly, a secondary public offering.
ITEM 3. DESCRIPTION OF PROPERTY.
Our corporate headquarters offices are located at 75-77 North Bridge Street,
Somerville, New Jersey 08876. Currently, we do not pay any rent to utilize these
facilities which have been provided free of charge by one of our directors.
However, we expect to commence paying some rent and facilities charges during
the year 2000.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding beneficial
ownership of our Common Stock, as of the date hereof, by (i) each stockholder
known by the Company to be the beneficial owner of more than five percent of the
outstanding Common Stock, (ii) each director of the Company, (iii) each officer
of the Company and (iv) all directors and executive officers as a group.
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Percentage
Name Number of Shares (1) Beneficially Owned
- - ------------- ---------------- -------------------
Herbert G. Case, Jr. 7,015,809 71.42%
President, Chief Executive
Officer and Director
Budapest, Hungary
Joseph J. Tomasek 184,612 1.88%
Vice President/General
Counsel and Director
Verona, New Jersey
Robert Van Pelt 184,612 1.88%
Secretary and Director
New Hope, Pennsylvania
Robert M. Long 639,994 6.52%
Rhinebeck, New York
All Officers and Directors 7,385,033 75.18%
as a Group (3 persons)
- - ----------------------------------------
(1) Except as otherwise indicated, we believe that the beneficial
owners of Common Stock listed above, based on information
furnished by such owners, have sole investment and voting
power with respect to such shares, subject to community
property laws where applicable. Beneficial ownership is
determined in accordance with the rules of the Securities and
Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of Common
Stock subject to options or warrants currently exercisable, or
exercisable within 60 days, are deemed outstanding for
purposes of computing the percentage of the person or group
holding such options or warrants, but are not deemed
outstanding for purposes of computing the percentage of any
other person or group.
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ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
Our directors and officers are as follows:
Name
Herbert G. Case, Jr. 56 President, Chief Executive Officer, Director
Robert Van Pelt 51 Secretary, Director
Joseph J. Tomasek 52 Vice President, Director
Herbert G. Case, Jr., President, Chief Executive Officer and Director. Mr.
Case founded the Company in 1991. Prior to his founding the Company, Mr. Case
developed several United States based environmental services and alternative
fuel processing companies over a 20 year span. In 1992, Mr. Case sold these
companies to a consortium that included Waste Management USA and the Swiss
cement conglomerate, Holderbank.
Robert Van Pelt, Secretary and Director. Mr. Van Pelt has been an officer
and director of the Company since 1997. Mr. Van Pelt is the owner and founder of
Bedminster Financial Group, Ltd. of New Hope, Pennsylvania, an investment
banking and brokerage firm that is a member of the National Association of
Securities Dealers, Inc. Mr. Van Pelt holds a degree in Business Administration
from Columbia University.
Joseph J. Tomasek, Vice President and Director. Mr. Tomasek has been an
officer and director of the Company since 1997. Mr. Tomasek is engaged in the
private practice of corporate finance and securities law and has managed his own
firm since 1992. Mr. Tomasek holds a Bachelor of Arts Degree and Juris Doctor
Degree from Seton Hall University as well as a graduate degree in European
Studies from the European Studies Institute in Strasbourg, France.
ITEM 6. EXECUTIVE COMPENSATION.
None of the officers or directors of the Company have an
employment agreement with the Company. As well, no officer or
director has received any salary during the prior two fiscal
years or for the current fiscal year except, however, the
Company has paid expenses for Mr. Herbert G. Case, Jr. in the
approximate amount of $12,000 during such fiscal years.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Joseph J. Tomasek, an officer and director, who serves as
general counsel for the Company was paid $63,708.69 in legal
fees and expenses during calendar year 1999 by the Company.
ITEM 8. LEGAL PROCEEDINGS.
The Company is not involved in any legal proceedings except it
has commenced a civil action against the Municipal District
XVIII government of Budapest, Hungary to recover approximately
$1,000,000 of contract payments, plus interest, and for other
consequential damages.
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ITEM 9. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Although we have a trading symbol, "OROB", there is no public
trading market for our Common Shares.
Currently we have two (2) warrants outstanding to purchase
25,000 shares of our Common Stock, at a warrant exercise price
of $1.00 per share, exercisable during a three year period. As
well, we have two Convertible Promissory Notes outstanding
whose holders may convert an aggregate $25,000 of principal
debt into a maximum of 50,000 shares of our Common Stock.
These notes do not provide for the payment of any interest and
are automatically convertible into the Common Shares as
aforesaid on their respective six month anniversary dates. We
have agreed to register the Common Shares underlying the above
identified warrants by filing a registration statement under
the Securities Act of 1933, as amended, on or before March 1,
2000.
There are currently 62 holders of our Common Stock. Some of
these shareholders may have beneficially owned their shares
for a period in excess of one year and, accordingly, may under
certain circumstances sell their Company Common Shares
pursuant to Rule 144.
We have never paid dividends on our outstanding securities and
do not expect to do so in the foreseeable future.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES.
On April 6, 1999, ORO Bueno, Inc., the predecessor to our
Company, completed the placement of 550,000 shares of our
Common Stock to several accredited investors in New York
pursuant to a private placement offering conducted in
accordance with Rule 504 of Regulation D for the subscription
price of $1.00 per share and received $550,000 in gross
proceeds from this offering.
In connection with the merger of CEVA International, Inc., a
Delaware corporation, with and into ORO Bueno, Inc., a Nevada
corporation, which occurred on May 10, 1999, CEVA
International, Inc. shareholders exchanged their Common Shares
in said corporation for Common Shares of ORO Bueno, Inc. in a
transaction based upon the private offering exemption provided
by Section 4(2) of the Securities Act of 1933, as amended.
Pursuant to two private placement investments by two
accredited investors, in November, 1999, we delivered two (2)
convertible promissory notes in the aggregate principal amount
of $25,000, automatically convertible into Common Shares of
our Company at the conversion rate of $.50 per share on the
six month anniversary dates of these notes; in addition, each
of the accredited investors received a warrant to purchase an
aggregate 25,000 shares of our Common Stock at the exercise
price of $1.00 per share, exercisable at any time over a three
year period commencing upon the warrant issue date. These
Convertible Promissory Notes and Common Stock Purchase
Warrants were placed with the accredited investors pursuant to
the private placement exemption afforded to the Company by
Section 4(2) of the Securities Act of 1933, as amended.
ITEM 11. DESCRIPTON OF SECURITIES.
CEVA International, Inc. (the "Company") is currently authorized by its
Articles of Incorporation to issue an aggregate 100,000,000 shares of Common
Stock $.001 Par Value ("Common Stock").
Common Stock
The holders of shares of our Common Stock are entitled to one vote per
share held on all matters submitted to a vote of shareholders of the Company. In
addition, such holders are entitled to receive ratably such dividends, if any,
as may be declared from time to time by the Board of Directors out of funds
legally available therefor. In the event of the dissolution or liquidation of
the Company, the holders of Common Stock are entitled to share ratably in all
assets remaining after payment of all liabilities of the Company as well as all
required prior payments with respect to any outstanding shares of Common Stock.
41
<PAGE>
The holders of Common Stock do not have any subscription, redemption or
conversion rights, nor do they have any preemptive or other rights to acquire or
subscribe for additional unissued or treasury shares.
Redeemable Non-Preferred Stock ("Preferred Stock")
Herbert G. Case, Jr. has converted his outstanding loans to CEVA
International, Inc. in the approximate amount of $1,000,000 into 20 shares
of Preferred Stock. The Preferred Stock has the following rights, privileges
and designations:
(1) each share of Redeemable Non-Dividend Preferred
Stock shall have a Liquidation Value, or Stated Value
of $50,000;
(2) the Redeemable Non-Dividend Preferred Stock shall
have liquidation rights superior to the Common Stock of the Company and shall be
superior to all other series or issuances of the stock of the Company;
(3) the Company shall be obligated to redeem all or
part of the Redeemable Non-Dividend Preferred Stock outstanding in the event the
Company has earned after-tax profits during any previous fiscal year in an
amount equal to or greater than One Million ($1,000,000.00) Dollars, determined
in accordance with generally accepted accounting principles, consistently
applied (the "After Tax Profit"), calculated as follows: the Company shall
redeem for cash that number of shares of Redeemable Non-Dividend Preferred Stock
whose aggregate Stated Value is equal to twenty-five (25%) percent of the After
Tax Profit; for example, in the event the Company earns $1,200,000 in After Tax
Profit during a prior fiscal year, the Company will be obligated to redeem 6
shares of the Redeemable Non-Dividend Preferred Stock outstanding ($1,200,000 X
25% = $300,000, divided by $50,000, the Stated Value, = 6 shares of Redeemable
Non-Dividend Preferred Stock);
(4) the Redeemable Non-Dividend Preferred Stock shall
not be entitled to receive any preference or fixed
rate of dividend and shall only be entitled to participate in any cash or stock
dividend after the holders of the shares of Common Stock of the Company have
received such dividend;
(5) the Redeemable Non-Dividend Preferred Stock shall
be entitled to be paid out of the assets of the Company upon liquidation prior
to any distribution or payment to the holders of the shares of the Commo
Stock of the Company;
(6) the holders of the Redeemable Non-Dividend
Preferred Stock shall have no right to vote at or
participate in any meeting of the stockholders of the Company and shall have
voting rights only in certain enumerated and extraordinary events.
42
<PAGE>
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Nevada Revised Statutes and the Company's Articles of
Incorporation and Bylaws authorize indemnification of a
director, officer, employee or agent of the Company against
expenses incurred by him or her in connection with any action,
suit, or proceeding to which such person is named a party by
reason of having acted or served in such capacity, except for
liabilities arising from such person's own misconduct or
negligence in performance of duty. In addition, even a
director, officer, employee or agent of the Company who was
found liable for misconduct or negligence in the performance
of duty may obtain such indemnification if, in view of all the
circumstances in the case, a court of competent jurisdiction
determines such person is fairly and reasonably entitled to
indemnification. Insofar as indemnification for liabilities
arising under the Act may be permitted to directors, officers,
or persons controlling the Company pursuant to the foregoing
provisions, the Company has been informed that in the opinion
of the Commission, such indemnification is against public
policy as expressed in the Act and is therefore unenforceable.
ITEM 13. FINANCIAL STATEMENTS.
The following financial statements are included herein:
Audited Financial Statements for the Fiscal Years Ended
December 31, 1998 and December 31, 1997.
Unaudited Financial Statements for the Nine Months Ended
September 30, 1999 and September 30, 1998.
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
None
43
<PAGE>
ITEM 15. EXHIBITS.
Exhibit No. Document Description
2.1 Agreement and Plan of Merger, dated March 29, 1999
2.2 Articles of Merger, dated April 23, 1999
2.3 Certificate of Merger, dated April 26, 1999
3.1 Articles of Incorporation of Oro Bueno, Inc., dated
January 30, 1994
3.2 Certificate of Amendment of Articles of Incorporation of Oro
Bueno, Inc., dated July 10, 1997
3.3 Amended and Restated Articles of Incorporation of Oro Bueno,
Inc., dated April 24, 1999.
3.4 Bylaws of CEVA International, Inc., a Nevada corporation 10.1 Loan
and Master LTTD Services Agreement with Green Globe LLC,
dated December 6, 1997
10.2 Lease Agreement between Green Globe LLC and CEVA Hungary,
dated June 5, 1998
10.3 Joint Venture and Shareholder Agreement with CEVA and CEVA
Hungary, et al, dated October 16, 1995
10.4 Service Agreement by and between the Research and
Development Directorate, Hungarian Oil & Gas Rt. and CEVA,
dated September 24, 1996
10.5 Service Agreement by and between the Hungarian Oil and and
Gas Company and CEVA, dated 1997
10.6 Guarantee Agreement by and between CEVA and CEVA Ltd,
dated June 5, 1998
44
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, as
amended, the Registrant caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized.
CEVA International, Inc.
Date: December 23, 1999 By:s/s Herbert G. Case, Jr.
Herbert G. Case, Jr.
Its: President and Chief Executive Officer
Acting Chief Financial Officer
Signature Title Date
- - ---------------- ------ -------
s/s Herbert G. Case, Jr. President,
Herbert G. Case, Jr. Chief Executive Officer December 23, 1999
Acting Chief Financial Officer
Director
s/s Joseph J. Tomasek Vice President and
Joseph J. Tomasek Director December 23, 1999
s/s Robert Van Pelt__ Treaasurer and December 23, 1999
Robert Van Pelt Director
45
ceva10-sb
<PAGE>
Ceva International, Inc. and Subsidiary
Consolidated Balance Sheets
September 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
Assets
Current Assets
<S> <C>
Cash $ 53,894
Accounts receivable 1,398,798
Inventory 28,038
Prepaid expenses 7,904
----------------
Total Current Assets 1,488,634
Due from related party 5,499
Loan receivable from stockholder 23,986
Property and equipment (net of accumulated depreciation) 2,618,930
Deferred charges (net of accumulated amortization) 200,000
Intangible assets (net of accumulated amortization) 1,548
Deferred income taxes 5,000
----------------
Total Assets 4,343,597
================
Liabilities and Stockholders' Impairment
Current Liabilities
Accounts payable and accrued expenses 864,967
Current maturities of long-term debt 200,000
Current maturities of capital leases 1,312,334
Deferred credit 94,444
----------------
Total Current Liabilities 2,471,745
Capital leases, net of current maturities 2,039,618
----------------
Total Liabilities 4,511,363
----------------
Minority interest in subsidiary (138,128)
----------------
Stockholders' Equity
Preferred stock, $.001 par value 25,000,000 shares authorized:
Series A - redeemable, non-dividend, $50,000 stated value per share, 100 shares
authorized, 17 shares issued and outstanding ($850,000 redeemable preference in either
cash or convertible to common shares) 850,000
Common stock, $.001 par value; 100,000,000 common shares authorized; 9,823,165
(post-split) and 1,000,000 (post-split) common shares issued and outstanding,
respectively 9,823
Additional paid-in capital 2,220,517
(Deficit) (3,178,989)
Accumulated other comprehensive income - Foreign currency translation adjustment 69,011
----------------
Total Stockholders' Equity (Impairment) (29,638)
----------------
Total Liabilities and Stockholders' Equity $ 4,343,597
================
</TABLE>
See notes to the consolidated financial statements.
<PAGE>
Ceva International, Inc. and Subsidiary
Consolidated Statements of Operations and Deficit
<TABLE>
<CAPTION>
Nine Months Ended
September 30, 1999
-----------------------------------
1999 1998
--------------- ---------------
(Unaudited) (Unaudited)
$ $
<S> <C> <C>
Revenue 1,459,179 1,427,584
Direct Costs 953,790 1,233,140
--------------- ---------------
Gross Profit 505,389 194,444
Operating Expenses 844,881 764,111
--------------- ---------------
(Loss) from operations (339,492) (569,667)
--------------- ---------------
Other income (expense)
Proceeds from sale of assets 6,563 20,682
Interest expense (530,502) (178,486)
Interest and other income 89,332 11,933
Minority interest of consolidated subsidiary 88,915 99,369
--------------- ---------------
Total Other Expense (345,692) (46,502)
--------------- ---------------
(Loss) before provision for income taxes (685,184) (616,169)
Provision for income taxes 39,665 8,002
--------------- ---------------
Net (Loss) (724,849) (624,171)
--------------- ---------------
(Deficit), beginning of year (2,454,140) (2,045,831)
--------------- ---------------
(Deficit), end of year $ (3,178,989) $ (2,670,002)
=============== ===============
Loss per common share $ (0.10) $ (0.31)
=============== ===============
6,953,173 2,000,000
Weighted average of common shares outstanding
=============== ===============
</TABLE>
See notes to the consolidated financial statements.
<PAGE>
Ceva International, Inc. and Subsidiary
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Nine Months Ended
September 30, 1999
---------------------------------
1999 1998
--------------- ---------------
(Unaudited) (Unaudited)
Cash Flows From Operating Activities
<S> <C> <C>
Net (loss) $ (724,849) $ (624,171)
Adjustments to reconcile net (loss) to net cash provided (used) by operating
activities
Depreciation and amortization 607,455 214,495
Minority interest (income) of consolidated subsidiaries (88,915) (58,868)
Gain on assets sold 6,563 -
Decreases (increases) in assets
Accounts receivable (227,453) (654,284)
Escrow funds receivable - 198,000
Inventory 51,369 (59,555)
Prepaid expenses 1,142 (5,661)
Increases (decreases) in liabilities
Accounts payable and accrued expenses (577,170) 760,610
Deferred credit 10,344 84,110
--------------- ---------------
Net cash provided (used) by operating activities (941,514) (145,324)
--------------- ---------------
Cash flows from investing activities
Purchase of machinery and equipment (37,040) (100,000)
--------------- ---------------
Net cash (used) by investing activities (37,040) (100,000)
--------------- ---------------
Cash flows from financing activities
Proceeds from issuance of common stock 969,296 -
Proceeds from borrowings - 408,508
Cash payments for acquisitions - (190,654)
Loans made to officer (23,986) -
--------------- ---------------
Net cash provided by financing activities 945,310 217,854
--------------- ---------------
Foreign currency translation adjustment 14,517 54,494
--------------- ---------------
Net increase (decrease) in cash (18,727) 27,024
Cash at beginning of period 72,621 27,442
--------------- ---------------
Cash at end of period $ 53,894 $ 54,466
=============== ===============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for income taxes $ 22,985 $ 8,202
=============== ===============
Cash paid for interest $ 209,741 $ 123,291
=============== ===============
</TABLE>
See notes to the consolidated financial statements.
<PAGE>
Ceva International, Inc. and Subsidiary
Consolidated Financial Statements
December 31, 1998 and 1997
<PAGE>
Ceva International, Inc. and Subsidiary
Index to the Consolidated Financial Statements
December 31, 1998 and 1997
Page
Independent Auditors' Report........................................ 1
Consolidated Financial Statements
Consolidated Balance Sheets.................................... 2
Consolidated Statements of Operations and Deficit.............. 3
Consolidated Statements of Comprehensive Loss.................. 4
Consolidated Statements of Cash Flows.......................... 5
Notes to the Consolidated Financial Statements................. 6-10
Independent Auditors' Report on Additional Information.............. 11
Consolidating Balance Sheet - December 31, 1998 ............... 12
Consolidating Statement of Operations and Deficit - Year Ended
December 31, 1998 13
Consolidating Balance Sheet - December 31, 1997................ 14
Consolidating Statement of Operations and Deficit - Year Ended
December 31, 1997 ............................................. 15
<PAGE>
Independent Auditors' Report
To the Board of Directors and Stockholders of
Ceva International, Inc. and Subsidiary
We have audited the accompanying consolidated balance sheets of Ceva
International, Inc. as of December 31, 1998 and 1997 and the related
consolidated statements of operations and deficit, comprehensive loss 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 the 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 audits 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 consolidated financial position of Ceva
International, Inc. and Subsidiary as of December 31, 1998 and 1997 and the
results of their operations and cash flows for the years then ended in
conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in the Notes to
the Consolidated Financial Statements, the Company has incurred operating losses
for a number of years and has a stockholders' impairment. These conditions raise
substantial doubt about its ability to continue as a going concern. Management's
plans regarding those matters are also described in the Notes to the
Consolidated Financial Statements. The consolidated financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
[GRAPHIC OMITTED]
Bridgewater, New Jersey
July 28, 1999
1
<PAGE>
Ceva International, Inc. and Subsidiary
Consolidated Balance Sheets
<TABLE>
December 31,
--------------------------------------
1998 1997
---------------- -----------------
Assets
Current Assets
<S> <C> <C>
Cash $ 72,621 $ 27,442
Accounts receivable (net of allowance for doubtful accounts of $0 and
$109,061, respectively) 1,171,345 298,967
Escrow funds receivable - 198,000
Inventory 79,407 -
Prepaid expenses 9,046 1,498
Prepaid acquisition costs 190,654 -
---------------- -----------------
Total Current Assets 1,523,073 525,907
Due from related party 5,499 101,818
Property and equipment (net of accumulated depreciation) 3,421,864 209,359
Intangible assets (net of accumulated amortization) 2,894 5,195
Deferred charges (net of accumulated amortization) 237,500 -
Deferred income taxes 5,000 5,000
---------------- -----------------
Total Assets 5,195,830 847,279
================ =================
Liabilities and Stockholders' Impairment
Current Liabilities
Accounts payable and accrued expenses 1,442,137 427,990
Current maturities of long-term debt 200,000 11,733
Current maturities of capital leases 693,239 -
Deferred credit 84,100 -
---------------- -----------------
Total Current Liabilities 2,419,476 439,723
Long-term debt, net of current maturities - 238,267
Capital leases, net of current maturities 2,630,625 -
Loans payable to stockholder 1,094,588 685,843
---------------- -----------------
Total Liabilities 6,144,689 1,363,833
---------------- -----------------
Minority interest in subsidiary (49,213) 29,277
Stockholders' Equity
Common stock, $.01 par value; 20,000,000 common shares
authorized; 2,000,000 common shares issued and outstanding 20,000 20,000
Additional paid-in capital 1,480,000 1,480,000
(Deficit) (2,454,140) (2,045,831)
Accumulated other comprehensive income - foreign currency
translation adjustment 54,494 -
---------------- -----------------
Total Stockholders' Equity (Impairment) (899,646) (545,831)
---------------- -----------------
$ 5,195,830 $ 847,279
Total Liabilities and Stockholders' Equity
================ =================
</TABLE>
See notes to the consolidated financial statements.
2
<PAGE>
Ceva International, Inc. and Subsidiary
Consolidated Statements of Operations and Deficit
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
Revenue $ 1,950,256 $ 1,003,388
Direct Costs 1,436,187 495,915
--------------- ---------------
Gross Profit 514,069 507,473
--------------- ---------------
Operating Expenses
Wages 391,345 12,095
Travel 179,372 65,577
Bad debts 151,401 185,906
Depreciation and amortization 80,007 11,167
Auto expenses 37,824 35,760
Telephone 39,926 30,332
International expenses 37,399 114,044
Other expenditures 32,829 7,395
Professional services 30,300 143,757
Miscellaneous 18,839 110,095
Employee benefits 24,267 12,072
Office expenses 16,530 9,118
Officer's compensation 11,900 11,900
Rent 7,580 6,241
Entertainment 7,537 8,676
Other taxes 7,282 7,315
Insurance 4,009 3,593
Advertising 395 1,422
--------------- ---------------
Total operating expenses 1,078,742 776,465
--------------- ---------------
(Loss) from operations (564,673) (268,992)
--------------- ---------------
Other income (expense)
Interest expense (179,988) (39,515)
Interest and other income 18,531 -
Minority interest in loss of consolidated subsidiary 78,490 16,890
--------------- ---------------
Total other income (expense) (82,967) (22,625)
--------------- ---------------
(Loss) before provision for income taxes (647,640) (291,617)
Provision for income taxes (10,669) (200)
--------------- ---------------
(Loss) before extraordinary item (658,309) (291,817)
Extraordinary item, cancelation of indebtedness, net of income tax
effect of $0 250,000 -
--------------- ---------------
Net (loss) (408,309) (291,817)
(Deficit), beginning of year (2,045,831) (1,754,014)
--------------- ---------------
(Deficit), end of year $ (2,454,140) $ (2,045,831)
=============== ===============
(Loss) per share $ (0.20) $ (0.15)
=============== ===============
Weighted average of common shares outstanding (restated for 1997) 2,000,000 2,000,000
=============== ===============
</TABLE>
See notes to the consolidated financial statements.
3
<PAGE>
Ceva International, Inc. and Subsidiary
Consolidated Statements of Comprehensive Loss
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------
1998 1997
---------------- ----------------
<S> <C> <C>
Net (loss) $ (408,309) $ (291,817)
---------------- ----------------
Other comprehensive income
Foreign currency translation adjustment (net of $0 tax effect) 54,494 -
---------------- ----------------
Other comprehensive income 54,494 -
---------------- ----------------
Comprehensive loss $ (353,815) (291,817)
================ ================
</TABLE>
See notes to the consolidated financial statements.
4
<PAGE>
Ceva International, Inc. and Subsidiary
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Year Ended December 31
---------------------------------
1998 1997
--------------- ---------------
Cash Flows From Operating Activities
<S> <C> <C>
Net (loss) $ (408,309) $ (291,817)
Adjustments to reconcile net (loss) to net cash provided (used) by operating
activities
Depreciation and amortization 285,993 11,167
Minority interest in loss of consolidated subsidiaries (78,490) (16,890)
Decreases (increases) in assets
Accounts receivable (872,378) 179,211
Escrow funds receivable 198,000 (198,000)
Inventory (79,407) -
Prepaid expenses (7,548) 7,817
Due from related party 96,319 9,420
Increases (decreases) in liabilities
Accounts payable and accrued expenses 1,014,147 (203,758)
Deferred credit 84,100 -
--------------- ---------------
Net cash provided (used) by operating activities 232,427 (502,850)
--------------- ---------------
Cash flows from investing activities
Cash paid for machinery and equipment (100,000) (209,580)
Purchase of intangible assets - (5,195)
--------------- ---------------
Net cash (used) by investing activities (100,000) (209,580)
--------------- ---------------
Cash flows from financing activities
Proceeds from stockholders' investment - 546,170
Repayment of stockholders' loans - (81,941)
Proceeds from borrowings 408,745 250,000
Repayment of capital lease obligations (359,833) -
Cash payments for acquisition costs (190,654) -
--------------- ---------------
Net cash provided (used) by financing activities (141,742) 714,229
--------------- ---------------
Effect of exchange rate changes on cash 54,494 -
--------------- ---------------
Net increase (decrease) in cash 45,179 (23,918)
Cash at January 1 27,442 51,360
--------------- ---------------
Cash at December 31 $ 72,621 $ 27,442
=============== ===============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for income taxes $ 200 $ 200
Cash paid for interest $ 164,388 $ 41,013
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES
In 1997, the Company's bank credit line of $265,400 was exchanged for
a stockholder's personal bank loan which is included in loans payable to
stockholders.
Capitalized lease obligations incurred for purchase of equipment in 1998:
Equipment under capital lease $ 3,044,561
Deferred charge incurred 250,000
---------------
3,294,561
Obligations under capital lease incurred 3,294,561
---------------
$ -
===============
</TABLE>
See notes to the consolidated financial statements.
5
<PAGE>
Ceva International, Inc. and Subsidiary
Notes to the Consolidated Financial Statements
SUMMARY OF SIGNIFICANT ACCOUNTING POLICES
Nature of Organization
Ceva International, Inc., a New Jersey corporation, was organized in 1991
to develop an Eastern European market presence in the waste technology
management business. In that connection, the Company organized Ceva
Hungary, a Hungarian corporation, which is 50% owned by Ceva International,
Inc. with the remaining 50% thereof owned by Hungarian stockholders active
in its business development. The Company's intentions are to create
alternative fuel sources from industrial waste for use in the cement and
other industries.
The Company's financial statements have been prepared in conformity with
principles of accounting applicable to a going concern.
The Company has incurred large operating losses which have resulted in a
stockholders impairment. Additional funds are needed to finance the
equipment required for signed and proposed contracts to increase the level
of business to cover the Company's operating expenses and create profits.
Management has retained an investment banking firm which has assisted in
merging the Company with a public "shell" Company and has raised $750,000
in private placements for working capital operating purposes. Additional
capital raising efforts are also currently being held (see "SUBSEQUENT
EVENTS"). In addition, the stockholder's loan has been recapitalized to
stockholders' equity. Moreover, the Company has instituted controls to
avoid future large bad debt losses.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
the company and its 50% owned subsidiary. Intercompany transactions and
balances have been eliminated in consolidation.
Inventory
Inventories are valued at the lower of cost (determined on a first-in
first-out basis) or market.
Depreciation and Amortization
The cost of property and equipment is depreciated for financial reporting
purposes on a straight-line basis over the useful lives of the assets which
is 3 to 7 years. Repairs and maintenance which do not extend the useful
lives of the related assets are expensed as incurred. Deferred charges in
connection with LTTD contracts are being amortized over 10 years.
Income Taxes
The Company is taxed as a "C" Corporation for federal and state purposes
and deferred taxes are recognized for operating losses that are anticipated
to offset future federal and state income taxes.
The basic corporation income tax rate applicable to Ceva Hungary is 18%
(1998:18%). In addition, a supplementary tax of up to 35% (1997:35%) is
payable on dividends from post-1994 profits. The actual rate of
supplementary tax depends on the residence of the recipient shareholder and
the terms of the applicable tax treaty between Hungary and the relevant
foreign country. A rate of up to 35% (1997:27%) applies to Hungarian
shareholders.
Revenue Recognition
Revenue is recognized in accordance with contracts as services are
rendered.
Use of Estimates
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 the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Reclassification
Certain amounts in 1997 have been reclassified to conform to the current
year (1998) presentation.
6
<PAGE>
Ceva International, Inc.
Notes to the Consolidated Financial Statements
CONCENTRATION OF BUSINESS AND CREDIT RISK
At times throughout the year the Company may maintain certain bank accounts
in excess of the FDIC and Hungarian limits.
The Company has contracts with a small number of customers; the loss of one
of the major ones would have a near-term severe impact on the Company.
EQUIPMENT
Equipment at cost, less accumulated depreciation consists of the following:
December 31,
--------------------------------------
1998 1997
----------------- ----------------
Equipment under capital lease $ 3,044,561 $ 187,285
Field and office equipment 676,756 54,888
----------------- ----------------
Subtotal 3,721,317 242,173
Less accumulated depreciation 299,453 32,814
----------------- ----------------
Total $ 3,421,864 $ 209,359
================= ================
DUE FROM RELATED PARTY
Due from related party represents advances to a corporation controlled by
the same interests as the Company which are without a fixed maturity date
and bear no interest.
LOAN PAYABLE-STOCKHOLDER
A stockholder has advanced working capital to the Company. The advances of
$1,094,588 and $967,549 at December 31, 1998 and 1997, respectively, are
unsecured, with interest at 9.5% per annum effective January 1, 1998, and
with no definitive repayment terms. The loan was reclassified into
stockholders' equity pursuant to the subsequent merger of the Company into
the public "shell" Company. (see "SUBSEQUENT EVENTS")
LONG-TERM DEBT
Long-term debt is comprised of the following:
<TABLE>
<CAPTION>
December 31,
---------------------------------
Notes Payable 1998 1997
--------------- ---------------
Note payable to individual with interest at 12%, payable monthly at $5,741
per month beginning June 1, 1998. This note is personally guaranteed by a
stockholder. This note was reclassified into a capital lease agreement in
<S> <C> <C> <C>
1998. $ - $ 250,000
Unsecured
Note payable interest only at 12% per annum due in full on December 31,
1999. Interest rate shall increase to 24% per annum should balance not be
settled by December 31, 1999. The note is guaranteed by the principal
stockholder. 200,000 -
Less current maturities 200,000 11,733
--------------- ---------------
Long-term debt, net of current maturities $ - $ 238,267
=============== ===============
</TABLE>
7
<PAGE>
Ceva International, Inc.
Notes to the Consolidated Financial Statements
CAPITAL LEASES
The Company leases certain equipment under capital leases expiring in
various years through 2003. The assets and liabilities under capital leases
are recorded at the lower of the present value of the minimum lease
payments or the fair value of the asset at the inception of the lease. The
assets are amortized over the lower of their related lease terms or their
estimated productive lives. Amortization of assets under capital leases is
included in depreciation expense in 1998 and 1997.
Properties under capital leases are as follows:
December 31,
----------------------------------
1998 1997
--------------- ---------------
Equipment under capital lease $ 3,044,561 $ -
Less accumulated amortization 216,989 -
--------------- ---------------
Total $ 2,827,572 $ -
=============== ===============
The following is a schedule of minimum lease payments due under capital
leases as of December 31, 1998.
Year Ending December 31,
1999 $ 1,158,661
2000 1,110,652
2001 1,062,643
2002 612,180
2003 464,608
-------------
Total net minimum capital lease payments 4,408,744
Less amounts representing interest 1,084,880
-------------
Present value of net minimum capital lease payments 3,323,864
Less current maturities of capital lease obligations 693,239
-------------
Obligations under capital leases, excluding current maturities $ 2,630,625
==============
Interest rates on capitalized leases are 10% and are imputed based on the
lower of the Company's incremental borrowing rate at the inception of each
lease or the lessor's implicit rate of return.
INCOME TAXES
Deferred taxes are recognized for temporary differences between the basis
of assets and liabilities for financial statement and state income tax
purposes. The differences relate primarily to federal and state net
operating losses. A valuation allowance was included because the state net
operating loss carry forwards may expire unused. The valuation allowance on
the tax benefit of net operating loss carry forwards increased $71,270 and
$23,903 in the years ended December 31, 1998 and December 31, 1997.
The major components of the Company's current and long-term deferred tax
assets are as follows:
December 31,
---------------------------------------
1998 1997
----------------- -----------------
Tax benefit of net operating
loss carry forwards $ 250,000 $ 178,730
Less: valuation allowance 245,000 173,730
----------------- -----------------
Net tax benefit of net operating
loss carry forwards 5,000 5,000
Current portion - -
----------------- -----------------
Long-term deferred tax asset $ 5,000 $ 5,000
================= =================
8
<PAGE>
Ceva International, Inc.
Notes to the Consolidated Financial Statements
INCOME TAXES, Continued
Income tax expense is comprised of the following:
December 31,
-----------------------------------
---------------
1998 1997
--------------- ---------------
Current Provision $ 10,669 $ 200
Deferred Benefit - -
--------------- ---------------
Total $ 10,669 $ 200
=============== ===============
At December 31, 1998, the Company had $326,049 of federal net operating
loss carryforwards available for income tax purposes which expire on
December 31, 2018.
At December 31, 1998, the Company had State net operating losses carry
forwards available for income tax purposes as follows:
Expiration December 31,
1999 $ 453,821
2000 402,733
2001 269,597
2002 221,646
2003 282,349
2004 274,727
2005 326,049
---------------
Total $ 2,230,922
===============
CONTINGENCIES
A suit was instituted against the Company by a vendor which the Company is
vigorously defending. The amount of the suit was accrued in a prior year and
is recorded as an accounts payable in these consolidated financial
statements.
PROFIT SHARING ARRANGEMENT/DEFERRED CHARGE
The Company has entered into an agreement to share profits with a vendor on
its Low Temperature Thermal Desorption (LTTD) contracts. The vendor also has
the exclusive right to provide equipment and services that might be required
under any LTTD contracts. This contract, implemented in 1997, has a term of
ten years or may be terminated by mutual consent of the parties. In 1998, an
advance by the vendor was included as part of the lease obligation and was
recorded as a deferred charge of $250,000 which will amortize over the
repayment terms of the lease. Amortization expense totaled $12,500 and $0
during the years ended December 31, 1998 and 1997, respectively.
9
<PAGE>
Ceva International, Inc.
Notes to the Consolidated Financial Statements
EARNINGS PER SHARE
In accordance with Financial Accounting Standards Board No. 128 "Earnings
Per Share". Basic earnings per share amounts are computed based on the
weighted average number of shares actually outstanding, after restating the
number of shares outstanding in 1997 to be equal to 1998 outstanding shares.
The number of shares used in the computations were 2,000,000 in 1998 and
1997.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Estimated fair values of the Company's financial instruments (all of which
are held for nontrading purposes) are as follows:
<TABLE>
<CAPTION>
December 31,
----------------------------------------------------------------
1998 1997
-------------------------------- -----------------------------
Carrying Carrying
Amount Fair Value Amount Fair Value
--------------- -------------- ------------- -------------
Cash and short-term
<S> <C> <C> <C> <C>
investments $ 72,621 $ 72,621 $ 27,442 $ 27,442
Accounts receivable 1,171,345 1,171,345 298,967 298,967
Accounts payable and
accrued expenses 1,442,137 1,442,137 427,990 472,990
Long-term debt 2,630,625 2,630,625 238,267 238,627
Loan payable to
stockholder 1,094,588 1,094,588 685,843 685,843
</TABLE>
The carrying amount approximates fair value for cash and short-term
instruments. For accounts receivable fair values are estimates based on
relevant market conditions. The fair value of accounts payable and accrued
expenses, long-term debt and loan payable to stockholder is based on
current rates at which the Company could borrow funds with similar
remaining maturities.
SUBSEQUENT EVENTS
On May 10, 1999, Ceva International, Inc. (the "Company" or "Ceva") merged
with a Nevada corporation whereby each issued and outstanding share of the
Company's common and preferred stock was exchanged for one similar share of
the Nevada corporation. Stock splits for both companies took place prior to
the exchange. The surviving Nevada corporation changed its name upon
completion of the merger to Ceva International, Inc. The shareholders of
Ceva retained an approximate 79% controlling interest in the new Company.
The transaction is considered a recapitalization of Ceva for accounting
purposes and all financial information regarding operations will be that of
Ceva. In anticipation of the merger, the Nevada corporation engaged in a
private placement in early 1999, pursuant to the exemption from the
registration requirements of the Securities Act of 1933, as amended (the
"1933 Act") provided by Rule 504 of Regulation D promulgated under the 1933
Act, raising gross proceeds of $550,000. Fees incurred in 1998 and
associated with the merger regarding legal, underwriting, promotion,
accounting and auditing as well as other various expenses have been
capitalized as prepaid acquisition costs on the balance sheet. These costs
will be offset in 1999 against Additional Paid-in Capital.
10
<PAGE>
Independent Auditors' Report on Additional Information
To the Board of Directors and Stockholders of
Ceva International, Inc. and Subsidiary
Our report on our audits of the consolidated balance sheets of Ceva
International, Inc. and Subsidiary as of December 31, 1998 and 1997 and
consolidated statements of operations and deficit, comprehensive loss and cash
flows for the years then ended, appears on page 1. Our audits were made for the
purpose of forming an opinion on the above referenced consolidated financial
statements taken as a whole. The additional information on the following pages
is presented for purposes of additional analysis and is not a required part of
the basic financial statements. Such information has been subjected to the
auditing procedures applied in the audits of the above referenced consolidated
financial statements and, in our opinion, is fairly stated in all material
respects.
[GRAPHIC OMITTED]
Bridgewater, New Jersey
July 28, 1999
11
<PAGE>
Ceva International, Inc. and Subsidiary
Consolidating Balance Sheet
<TABLE>
<CAPTION>
December 31, 1998
---------------------------------------------------------------------------
Ceva DR (CR) Consolidated
International Ceva Hungary Elimination Totals
--------------- --------------- --------------- ----------------
Assets
Current Assets
<S> <C> <C> <C> <C>
Cash 11,379 $ 61,242 $ - $ 72,621
Accounts receivable (net of allowance for
doubtful accounts of $0) 207,923 963,422 - 1,171,345
Inventory - 79,407 - 79,407
Due from Ceva International Inc. - 166,839 (166,839) -
Prepaid expenses - 9,046 - 9,046
Prepaid acquisition costs 190,654 - - 190,654
------------- --------------- --------------- ----------------
Total Current Assets 409,956 1,279,956 (166,839) 1,523,073
Due from related party 5,499 - - 5,499
Property and equipment (net of accumulated
depreciation) 298,850 3,123,014 - 3,421,864
Investment in Ceva Hungary 53,833 - (53,833) -
Deferred charges (net of accumulated amortization) 237,500 - - 237,500
Intangible assets (net of accumulated amortization) - 2,894 - 2,894
Deferred income taxes 5,000 - - 5,000
--------------- --------------- --------------- ----------------
Total Assets 1,010,638 4,405,864 (220,672) 5,195,830
=============== =============== =============== ================
Liabilities and Stockholders' Equity
Current Liabilities
Due to Ceva Hungary 166,839 - 166,839 -
Accounts payable and accrued expenses 417,115 1,025,022 - 1,442,137
Current maturities of long-term debt 200,000 - - 200,000
Current maturities of capital leases - 693,239 - 693,239
Deferred credit - 84,100 - 84,100
--------------- --------------- --------------- ---------------
Total Current Liabilities 783,954 1,802,361 166,839 2,419,476
Capital leases, net of current maturities - 2,630,625 - 2,630,625
Loans payable to stockholder 1,094,588 - - 1,094,588
--------------- --------------- --------------- ----------------
Total Liabilities 1,878,542 4,432,986 166,839 6,144,689
--------------- --------------- --------------- ----------------
Minority interest in subsidiary - - 49,213 (49,213)
--------------- --------------- --------------- ----------------
Stockholder's Equity
Common stock, $.01 par value; 20,000,000
common shares 20,000 100,000 100,000 20,000
authorized; 2,000,000 common shares
issued and outstanding
Additional paid-in capital 1,480,000 - - 1,480,000
(Deficit) (2,367,904) (181,616) (95,380) (2,454,140)
Accumulated other comprehensive income
- Foreign currency translation adjustment - 54,494 - 54,494
--------------- --------------- --------------- ----------------
Total Stockholders' Equity (Impairment) (867,904) (27,122) 4,620 (899,646)
--------------- --------------- --------------- ----------------
Total Liabilities and Stockholders' Equity $ 1,010,638 $ 4,405,864 $ 220,672 $ 5,195,830
=============== =============== =============== ================
</TABLE>
12
<PAGE>
Ceva International, Inc. and Subsidiary
Consolidating Statement of Operations and Deficit
Year Ended December 31, 1998
<TABLE>
<CAPTION>
Ceva Ceva DR (CR) Consolidated
International Hungary Elimination Totals
--------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
Revenue $ 140,433 $ 1,809,823 $ - $ 1,950,256
Direct Costs - 1,436,187 - 1,436,187
--------------- --------------- --------------- ----------------
Gross Profit 140,433 373,636 - 514,069
--------------- --------------- --------------- ----------------
Operating Expense
Wages 95,192 296,153 - 391,345
Travel 179,372 - - 179,372
Bad debts 151,401 - - 151,401
Depreciation and amortization 69,004 11,003 - 80,007
Auto expenses 37,824 - - 37,824
Telephone 39,926 - - 39,926
International expenses 37,399 - - 37,399
Other expenditures 4,944 27,885 - 32,829
Professional services 30,300 - - 30,300
Miscellaneous - 18,839 - 18,839
Employee benefits 24,267 - - 24,267
Office expenses 16,530 - - 16,530
Officer's compensation 11,900 - - 11,900
Rent - 7,580 - 7,580
Entertainment 7,537 - - 7,537
Other taxes 7,282 - - 7,282
Insurance 4,009 - - 4,009
Advertising 395 - - 395
Management services - 100,000 (100,000) -
--------------- --------------- --------------- ----------------
Total operating expense 717,282 461,460 (100,000) 1,078,742
--------------- --------------- --------------- ----------------
(Loss) from operations (576,849) (87,824) (100,000) (564,673)
--------------- --------------- --------------- ----------------
Other income (expense)
Interest expense (116,261) (63,727) - (179,988)
Management fee income 100,000 - 100,000 -
Interest and other income 13,292 5,239 - 18,531
Minority interest in loss of
consolidated subsidiary - - 78,490 78,490
--------------- --------------- --------------- ----------------
Total other income (expense) (2,969) (58,488) 178,490 (82,967)
--------------- --------------- --------------- ----------------
Income (loss) before provision for income taxes (579,818) (146,312) 78,490 (647,640)
Provision for income taxes - (10,669) - (10,669)
--------------- --------------- --------------- ----------------
Income (loss) before extraordinary item (579,818) (156,981) 78,490 (658,309)
Extraordinary item, cancelation of
indebtedness, net of income tax effect of $0 250,000 - - 250,000
--------------- --------------- --------------- ----------------
Net income (loss) (329,818) (156,981) 78,490 (408,309)
Retained earnings (deficit), beginning of year (2,038,087) (24,634) 16,890 (2,045,831)
--------------- --------------- --------------- ----------------
Retained earnings (deficit), end of year $ (2,367,905)$ (181,615) $ 95,380 $ (2,454,140)
=============== =============== =============== ================
</TABLE>
13
<PAGE>
Ceva International, Inc. and Subsidiary
Consolidating Balance Sheet
December 31, 1997
<TABLE>
<CAPTION>
Ceva DR (CR) Consolidated
International Ceva Hungary Elimination Totals
--------------- --------------- --------------- ----------------
Assets
Current Assets
<S> <C> <C> <C> <C>
Cash (10,261) $ 37,703 $ - $ 27,442
Accounts receivable (net of allowance
for doubtful accounts of $109,061) 173,021 125,946 - 298,967
Escrow funds receivable 198,000 - - 198,000
Due from Ceva Hungary 63,705 - (63,705) -
Deposit 52,000 - (52,000) -
Prepaid expenses - 1,498 - 1,498
--------------- --------------- --------------- ----------------
Total Current Assets 476,465 165,147 (115,705) 525,907
Due from related party 101,818 - - 101,818
Property and equipment (net of accumulated depreciation) 5,354 204,005 - 209,359
Investment in Ceva Hungary 53,833 - (53,833) -
Intangible assets (net of accumulated amortization) - 5,195 - 5,195
Deferred income taxes 5,000 - - 5,000
-------- --------------- --------------- ----------------
Total Assets 642,470 374,347 (169,538) 847,279
======== =============== =============== ================
Liabilities and Stockholders' Equity
Current Liabilities
Due to Ceva International, Inc. - 63,705 63,705 -
Accounts payable and accrued expenses 276,656 151,334 - 427,990
Current maturities of long-term debt 11,733 - - 11,733
-------- --------------- --------------- ----------------
Total Current Liabilities 288,389 215,039 63,705 439,723
Due to Ceva International, Inc. - 52,000 52,000 -
Long term debt, net of current maturities 238,267 - - 238,267
Loans payable to stockholder 653,901 31,942 - 685,843
-------------- --------------- --------------- ---------------
Total Liabilities 1,180,557 298,981 115,705 1,363,833
-------------- --------------- --------------- ----------------
Minority interest in subsidiary - - (29,277) 29,277
-------------- --------------- --------------- ----------------
Stockholders' Equity
Common stock, $.01 par value; 20,000,000 common shares authorized;
2,000,000 common shares issued and
outstanding 20,000 100,000 100,000 20,000
Additional paid-in capital 1,480,000 - - 1,480,000
(Deficit) (2,038,087) (24,634) (16,890) (2,045,831)
--------------- --------------- --------------- ----------------
Total Stockholders' Equity (Impairment) (538,087) 75,366 83,110 (545,831)
--------------- --------------- --------------- ----------------
Total Liabilities and Stockholders' Equity $ 642,470 $ 374,347 $ 169,538 $ 847,279
=============== =============== =============== ================
</TABLE>
14
<PAGE>
Ceva International, Inc. and Subsidiary
Consolidating Statement of Operations and Deficit
Year Ended December 31, 1997
<TABLE>
<CAPTION>
Ceva Ceva DR (CR) Consolidated
International Hungary Elimination Totals
-------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
Revenue 386,968 $ 616,420 $ - $ 1,003,388
Direct Costs 35,000 460,915 - 495,915
-------------- --------------- --------------- ----------------
Gross Profit 351,968 155,505 - 507,473
-------------- --------------- --------------- ----------------
Operating Expense
Bad debts 185,906 - - 185,906
International expenses 114,044 - - 114,044
Professional services 94,174 49,583 - 143,757
Travel 65,577 - - 65,577
Auto expenses 35,760 - - 35,760
Telephone 30,332 - - 30,332
Employee benefits 12,072 - - 12,072
Officer's compensation 11,900 - - 11,900
Office expenses 9,118 - - 9,118
Entertainment 8,676 - - 8,676
Rent 6,241 - - 6,241
Miscellaneous 5,378 104,717 - 110,095
Insurance 3,593 - - 3,593
Depreciation 2,812 8,355 - 11,167
Advertising 1,422 - - 1,422
Wages - 12,095 - 12,095
Other expenditures - 7,395 - 7,395
Other taxes - 7,315 - 7,315
-------------- --------------- --------------- ----------------
Total operating expense 587,005 189,460 - 776,465
-------------- --------------- --------------- ----------------
(Loss) from operations (235,037) (33,955) - (268,992)
-------------- --------------- --------------- ----------------
Other income (expense)
Interest expense net of other income (39,690) 175 - (39,515)
Minority interest in loss of
consolidated subsidiary - - 16,890 16,890
-------------- --------------- --------------- ----------------
Total other income (expense) (39,690) 175 16,890 (22,625)
-------------- --------------- --------------- ----------------
Income (loss) before provision for income taxes (274,727) (33,780) 16,890 (291,617)
Provision for income taxes (200) - - (200)
--------------- --------------- --------------- ----------------
Net income (loss) (274,927) (33,780) 16,890 (291,817)
Retained earnings (deficit), beginning of year (1,763,160) 9,146 - (1,754,014)
--------------- --------------- --------------- ----------------
Retained earnings (deficit), end of year $ (2,038,087)$ (24,634) $ 16,890 $ (2,045,831)
=============== =============== =============== ================
</TABLE>
15
<PAGE>
Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of March 29,
1999, by and between CEVA International, Inc., a Delaware corporation
(hereinafter sometimes called "CEVA"), and Oro Bueno, Inc., a Nevada corporation
(hereinafter sometimes called "ORO"), (CEVA and ORO being hereinafter sometimes
called the Constituent Corporations).
B A C K G R O U N D :
WHEREAS, CEVA is a corporation organized and existing under the laws of
the State of Delaware, having been incorporated by the filing of its Articles of
Incorporation on November 21, 1997 with the Secretary of State of the State of
Delaware, and is authorized to do business in the State of New Jersey; and
WHEREAS, ORO is a corporation organized and existing under the laws of
the State of Nevada, its Certificate of Incorporation having been filed by the
Department of State of the State of Nevada, its Certificate of Incorporation
having been filed on March 3, 1994;
WHEREAS, the authorized capital stock of CEVA consists of (1)
10,000,000 Preferred Shares, $.05 per share par value, none of which are issued
and outstanding, and (2) 10,000,000 shares of Common Stock, $.01 par value per
share, of which 2,101,564 shares are issued and outstanding (the "CEVA Common
Stock"); and
WHEREAS, the authorized capital stock of ORO consists of 100,000,000
shares of Common Stock, $.001 par value per share, of which 803,427 shares shall
be issued and outstanding (the "ORO Common Stock"); and
WHEREAS, the holders of shares of CEVA Common Stock, are entitled to
vote on this Agreement and Plan of Merger, and the holders of shares of ORO
Common Stock are entitled to vote on this Agreement and Plan of Merger; and
WHEREAS, the Constituent Corporations deem it advisable and generally
to the welfare and advantage of each, and of all of the several and respective
holders of their shares, to merge the Constituent Corporations under and
pursuant to Chapter 92A of the Nevada Revised Statutes and Section 252 of the
Delaware General Corporation Law, (hereinafter referred to as the "Nevada Merger
Law" and the "Delaware Merger Law", respectively) and;
WHEREAS, it is the intention of ORO to issue and place a maximum of
650,000 of its Common Shares pursuant to exemptions from the registration
requirements of the Securities Act of 1933, as amended and those of the State of
New York (the "Placement Shares") to be finalized prior to the merger; and
<PAGE>
WHEREAS, each of the Constituent Corporations shall undertake to take
certain corporate actions as conditions to effectuating the merger which shall
include a forward stock split of each of the Constituent's outstanding series or
classes of stock (the "Stock Split Shares"), certain liability stand-still
agreements, all as more fully described in this Agreement below; and
WHEREAS, it is the intention of the Constitutent Corporations that as a
result of the merger of the Constituten Corporations, and after giving effect to
the issuance of the Placement Shares and the Stock Split Shares, that the
shareholders of CEVA shall own approximately 77.6%, or approximately 7,760,000
of the issued and outstanding Common Shares; the present shareholders of ORO,
approximately 15.9%, or 1,590,000 Common Shares, and; the balance of the
approximate 6.5% represented by the 650,000 Placement Shares on a fully diluted
basis.
NOW, THEREFORE, in consideration of the mutual agreements, provisions,
and covenants herein contained, the parties hereby agree in accordance with the
Nevada Merger Law and the Delaware Merger law that CEVA and ORO shall be, and
they hereby are, at the effective date of this Agreement and Plan of Merger,
merged into a single corporation existing under the laws of the State of Nevada,
to wit, ORO, one of the Constituent Corporations, which shall be the surviving
corporation (such corporation in its capacity as such surviving corporation
being hereinafter called the Surviving Corporation), and the parties hereto
hereby adopt and agree to the following agreements, terms, and conditions
relating to said merger and the manner of carrying the same into effect.
I. NAME, ARTICLES OF INCORPORATION, BYLAWS, DIRECTORS, AND
OFFICERS
1.1. Name of Surviving Corporation. The corporation which shall survive
the merger shall be ORO, and pursuant to certain amendments to its Articles of
Incorporation prior to the Effective Date (as defined in Section 3.2 hereof)
shall change its name to "CEVA International, Inc." as contemplated in Section
1.2 below.
1.2. Articles of Incorporation. The Articles of Incorporation, as
amended, of ORO, in effect on the date hereof, shall be further amended so that
upon the Filing Date, as defined herein, the Articles of Incorporation shall
provide (a) for the changing of the corporate name of ORO to "CEVA
International, Inc.", (b) for the substitution of the requirement of a
super-majority to a simple majority of the holders of its Common Stock necessary
to take appropriate shareholder action, and (c) for the authorization of a
series of "Redeemable Non-Dividend Preferred Shares" containing the rights,
privileges and designations or attributes similar to those described in Section
7.2(f)(1) through (6) and said Articles of Incorporation as so amended shall
from and after the Effective Date be and continue to be the Articles of
2
<PAGE>
Incorporation of the Surviving Corporation until changed or amended as provided
by law.
1.3. Bylaws. The Bylaws of ORO in effect on the Effective Date shall
from and after the Effective Date be and continue to be the Bylaws of the
Surviving Corporation until changed as therein provided.
1.4. Directors. The directors of CEVA on the Effective Date shall be
the directors of the Surviving Corporation until their successors are elected in
accordance with the Bylaws of the Surviving Corporation and shall have duly
qualified.
1.5. Officers. The officers of CEVA on the Effective Date shall be the
officers of the Surviving Corporation holding the office in the Surviving
Corporation which they hold in CEVA until their successors are elected or
appointed in accordance with the Bylaws of the Surviving Corporation and shall
have duly qualified.
1.6. Vacancies. If, on the Effective Date, a vacancy shall exist in the
Board of Directors or in any of the offices of the Surviving Corporation by
reason of death or inability to act, or for any other reason, such vacancy may
be filled in the manner provided in the Bylaws of the Surviving Corporation.
II. STATUS OF CONVERSION OF SHARES
2.1. Authorized Capitalization of Surviving Corporation. The
---------------------------------------------------
total number of shares of all classes of stock which the Surviving Corporation
shall have authority to issue shall be (A) 100,000,000 shares of Common Stock,
with its par value adjusted from the current $.001 par value per share to
reflect the issuance of the Stock Split Shares described below, and, pursuant to
the contemplated amendment to ORO's Article III of its Articles of Incorporation
as more fully detailed below, (B) 10,000,000 shares of Preferred Stock, $.001
par value per share.
2.2. Forward Stock Split. As soon as practicable following the
execution and delivery of this Agreement, the Constitutent Corporations shall
undertake the following corporate actions which shall be deemed a "condition of
closing" as set forth in Article VII below:
(a) ORO shall take all corporate action necessary to declare
and adopt a forward stock split of its issued and outstanding ORO Common Stock,
to wit, the 803,427 shares of ORO Common Stock to be outstanding at the Filing
Date, so that each share of ORO Common Stock outstanding shall be reclassified
and changed into approximately 1.9790223 fully paid and non-assessable shares of
ORO Common Stock, with the par value per share adjusted, reflecting such
increase, so that the then outstanding 803,427 shares of ORO Common Stock shall
be increased to approximately
3
<PAGE>
1,590,000 shares of ORO Common Stock.
(b) CEVA shall take all corporate action necessary to declare
and adopt a forward stock split of its issued and outstanding CEVA Common Stock,
to wit, the 2,101,564 shares of CEVA Common Stock currently outstanding, so that
each share of CEVA Common Stock outstanding on the date of this Agreement shall
be reclassified and changed into approximately 3.692488 fully paid and
non-assessable shares of CEVA Common Stock, with the par value per share
adjusted, reflecting such increase, so that the currently outstanding 2,101,564
shares of CEVA Common Stock shall be increased to approximately 7,760,000 shares
of CEVA Common Stock.
(c) No fractional shares of Common Stock subject to the
forward stock splits described in subparagraphs (a) and (b) above shall be
issued to represent any fractional share interests in shares of Common Stock of
either of the Constituent Corporations; any fractional shares of Common Stock of
the Constituent Corporations shall be rounded to the nearest whole number for
purposes of the forward stock splits described above.
2.3. Manner of Converting Shares. The manner of converting shares of
capital stock of each of the Constituent Corporations into shares of capital
stock of the Surviving Corporation shall be as follows:
(a) CEVA Common Stock. Each issued and outstanding share of
CEVA Common Stock shall be exchanged for one (1) share of the Common Stock of
ORO, so that following the Effective Date of the Merger, the holders of the
currently issued and outstanding CEVA Common Stock, after giving effect to the
forward stock split described in Section 2.2 (a) above, shall own of record
approximately 7,760,000 shares of the Common Stock of ORO, representing no less
than approximately 77.6% of the issued and outstanding ORO Common Stock
following the merger.
(b) CEVA Preferred Stock. Each of the shares of CEVA's
"Redeemable Non-Dividend Preferred Shares" owned of record at the time shall be
exchanged for one (1) share of the similarly designated preferred shares of ORO.
(c) Surrender and Exchange of CEVA Common Stock and Preferred
Stock. After the Effective Date, each holder of an outstanding certificate or
certificates representing shares of CEVA Common Stock and Preferred Stock shall
surrender such certificate or certificates to the Exchange Agent designated by
the Surviving Corporation and shall receive in exchange therefor certificates
representing the number of whole shares of Common Stock and Preferred Stock of
the Surviving Corporation into which the shares of CEVA Common Stock and
Preferred Stock represented by the certificate or certificates so surrendered
shall have been converted and changed. Until so surrendered and exchanged, the
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outstanding certificates representing shares of CEVA Common Stock and Preferred
Stock shall be deemed for all purposes, other than the payment of dividends or
other distributions, if any, to shareholders, to represent the number of whole
shares of Common Stock and Preferred Stock of the Surviving Corporation into
which the shares of CEVA Common Stock and Preferred Stock represented thereby
shall have been converted, and no dividend or other distributions, if any,
payable to holders of record of shares of Common Stock and Preferred Stock of
the Surviving Corporation as of any date subsequent to the Effective Date shall
be paid to the holders of such outstanding certificates representing shares of
ORO Common Stock and Preferred Stock; provided, however, that upon surrender and
exchange of such outstanding certificates representing shares of CEVA Common
Stock and Preferred Stock there shall be paid to the record holders of the
certificates issued in exchange therefor, the amount, without interest thereon,
of dividends and other distributions, if any, which theretofore have become
payable with respect to the number of whole shares of Common Stock and Preferred
Stock of the Surviving Corporation represented thereby.
III. SHAREHOLDER APPROVALS; EFFECTIVE DATE; FILING DATE
3.1. Shareholder Approvals. (a) Separate meetings of the shareholders
of CEVA and ORO, respectively, shall be called to be held in accordance with the
corporation law of the State of Nevada and the Delaware General Corporation Law
on or before April 15, 1999 (or such date as may be approved by the Board of
Directors of both CEVA and ORO), after the requisite written notice periods
therefor to the shareholders of the respective corporations, or where permitted
by applicable state law, unanimous majority written consents may be obtained(i)
in the case of CEVA, to consider and vote upon adoption of this Agreement and
Plan of Merger, and to ratify the action of the CEVA Board of Directors
declaring the required forward stock split, and (ii) in the case of ORO, to
consider and vote upon adoption of this Agreement and Plan of Merger, the
amendments to the Articles of Incorporation of ORO, changing its name on the
Effective Date to "CEVA International, Inc.", changing the super-majority to a
simple majority for voting purposes and authorizing the issuance of shares of
"Redeemable Non- Dividend Preferred Stock" containing all of the rights,
privileges and designations described in Section 7.2(f)(1) through (6) hereof
and to ratify the action of the ORO Board of Directors declaring the required
forward stock split.
(b) If this Agreement and Plan of Merger is approved and
adopted at such meetings or pursuant to written consents, upon submission
thereof as aforesaid, in accordance with the Nevada Merger Law and the Delaware
Merger law, by the holders of at least a majority of the outstanding shares of
CEVA Common Stock and by the holders of the super-majority of the outstanding
shares of ORO Common Stock, and if the merger is not thereafter abandoned as
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permitted by the provisions hereof, this Agreement and Plan of Merger and
certificates duly acknowledged of its adoption shall be submitted for filing in
accordance with the Nevada Merger Law and a Certificate of Merger signed and
verified on behalf of ORO and CEVA shall be delivered to the Department of State
of the State of Delaware in accordance with the Delaware Merger Law.
3.2. Effective Date. This Agreement and Plan of Merger shall
become effective on the date when this Agreement and Plan of Merger duly
certified and acknowledged has been filed in the appropriate offices of the
States of Nevada and Delaware. The date of such effectiveness is referred to
herein as the "Effective Date".
3.3. Filing Date. Counsel for each of the Constituent
Corporations shall agree upon the date on which this Agreement and Plan of
Merger shall be submitted for filing in the States of Nevada and Delaware. The
date of such submission for filing and delivery is hereinafter referred to as
the "Filing Date".
IV. CERTAIN EFFECTS OF MERGER
When the merger becomes effective, the separate existence of CEVA shall
cease. CEVA shall be merged into ORO, and the Surviving Corporation, without
further action, shall succeed to and shall possess and enjoy all the rights,
privileges, immunities, powers, purposes, and franchises, both of a public and a
private nature; and all property, real, personal, and mixed, and all debts due
to CEVA on whatever account, including stock subscriptions, causes of action,
and every other asset of CEVA, shall be vested in the Surviving Corporation as
effectually as they were vested in CEVA; and all property, rights, privileges,
powers, and franchises, and all and every other interest, shall be thereafter as
effectually the property of the Surviving Corporation as they were of CEVA; and
the title to any real estate and to any other property, whether by deed or
otherwise, under the laws of the State of Delaware or of any other jurisdiction,
vested in CEVA, shall not revert or be in any way impaired by reason of the
merger or the statutes providing therefor; provided, however, that all rights of
creditors and all liens upon the property of CEVA shall be preserved unimpaired,
and all debts, liabilities, obligations, and duties of CEVA shall thenceforth
attach to the Surviving Corporation, and may be enforced against it to the same
extent as if they had been incurred or contracted by it. No liability or
obligation due or to become due, claim or demand existing against either
Constituent Corporation, or any shareholder, officer, or director thereof, shall
be impaired by the merger. No action or proceeding, whether civil or criminal,
pending on the Effective Date by or against either Constituent Corporation, or
any shareholder, officer, or director thereof, shall abate or be discontinued by
the merger, but may be enforced, prosecuted, settled, or compromised as if the
merger had not occurred, or the Surviving Corporation may be
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substituted in such action or special proceeding in place of CEVA. At any time,
or from time to time, after the Effective Date, the last acting officers of
CEVA, or the corresponding officers of the Surviving Corporation, may, in the
name of CEVA, execute and deliver all such proper deeds, assignments, and other
instruments and take or cause to be taken all such further or other action as
the Surviving Corporation may deem necessary or desirable in order to vest,
perfect, or confirm in the Surviving Corporation title to and possession of all
of CEVA's property, rights, privileges, immunities, powers, purposes, and
franchises, and otherwise to carry out the purposes of this Agreement and Plan
of Merger.
V. COVENANTS
5.1. Covenants of Merging Corporation. CEVA agrees that,
prior to the Effective Date:
(a) CEVA will operate its business, and will cause the
business of each of its subsidiaries to be operated, in the usual, regular, and
ordinary manner and, to the extent consistent with such operation, will use its
best efforts to (i) preserve its present business organization and that of each
of its subsidiaries intact, (ii) keep available the services of the present
officers and employees of CEVA and each of its subsidiaries, and (iii) preserve
the present relationships of CEVA and each of its subsidiaries with persons
having business dealings with any of them.
(b) CEVA will, and will cause each of its subsidiaries to,
maintain all of its and their respective properties in customary repair, order,
and condition, reasonable wear and use and damage by fire or unavoidable
casualty excepted, and will maintain, and will cause each of its subsidiaries to
maintain, insurance upon all of its and their properties and with respect to the
conduct of its and their businesses in such amounts and such kinds comparable to
that in effect on the date of this Agreement and Plan of Merger.
(c) CEVA will maintain its books, accounts, and records, and
will cause the books, records, and accounts of each of its subsidiaries to be
maintained, in the usual, regular, and ordinary manner, on a basis consistent
with prior years; CEVA and each of its subsidiaries will duly comply with all
laws applicable to each of them and to the conduct of their respective
businesses.
(d) Except as to the authorization of the CEVA Redeemable
Non-Dividend Preferred Stock, the authorization and issuance of the shares of
Redeemable Non-Dividend Preferred Stock, (the "Preferred Stock", no amendment
will be made to the Articles or Certificate of Incorporation or Bylaws of CEVA
or any of its subsidiaries, and neither CEVA nor any of its subsidiaries will
merge or consolidate with, or sell all or substantially all of its assets to,
any other corporation or change the character of its
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business.
(e) Except as to the required forward stock split, the
authorization and issuance of the shares of Redeemable Non-Dividend Preferred
Stock (the "Preferred Stock"), no change will be made in the number of shares of
CEVA Common Stock and Preferred Stock issued and outstanding, nor will any
change be made in the number of shares of capital stock of any of its
subsidiaries issued and outstanding or in the ownership by CEVA or any of its
subsidiaries of shares of the issued and outstanding capital stock of any
subsidiary of CEVA except as disclosed in writing by CEVA to ORO; no option,
warrant, or any other right to purchase or to convert any obligation into shares
of CEVA Common Stock will be granted or made by CEVA and no option, warrant, or
any other right to purchase or to convert any obligation into shares of capital
stock of any subsidiary of CEVA will be granted or made by CEVA or any of its
subsidiaries.
(f) No dividend or other distribution or payment will be
declared, paid, or made by CEVA in respect of the CEVA Common Stock after the
date hereof and prior to the Effective Date; no purchase, redemption, or other
acquisition will be made by CEVA of any of its outstanding shares of Common
Stock; and no sale or other disposition shall be made of any indebtedness of any
of the subsidiaries of CEVA otherwise than to CEVA, except in the ordinary
course of business or pursuant to contractual obligations existing on the date
of this Agreement, and of which CEVA has been informed.
(g) Neither CEVA nor any of its subsidiaries will encumber or
mortgage any of its nor their property or assets or enter into any transaction
or make or enter into any contract or commitment which by reason of its size or
otherwise is not in the ordinary course of business, and neither CEVA nor any of
the subsidiaries will, other than in the ordinary course of its business,incur
any obligation (contingent or otherwise), or transfer or convey or acquire any
material assets or property, or enter into any arrangement, agreement, or
undertaking (including, without limitation, employment agreements with
executives not terminable on 90 days' or less notice without cost or liability,
or pay or promise to pay any bonus or special compensation to employees other
than in accordance with prior practices.
(h) No change shall be made in the banking and safe deposit
arrangements existing on the date hereof of CEVA and its subsidiaries without
the prior written consent of ORO; and no powers of attorney shall be granted,
except in the ordinary course of business.
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5.2. Covenants of Surviving Corporation. ORO agrees that,
prior to the Effective Date:
(a) ORO will operate its business, and will cause the business
of each of its subsidiaries to be operated, only in the usual, regular, and
ordinary manner and, to the extent consistent with such operation, will use its
best efforts to (i) preserve its present business organization and that of each
of its subsidiaries intact, (ii) keep available the services of the present
officers and employees of ORO and each of its subsidiaries, and (iii) preserve
the present relationships of ORO and each of its subsidiaries with persons
having business dealings with any of them.
(b) ORO will, and will cause each of its subsidiaries to,
maintain all of its and their respective properties in customary repair, order,
and condition, reasonable wear and use and damage by fire or unavoidable
casualty excepted, and will maintain, and will cause each of its subsidiaries to
maintain, insurance upon all of its and their properties and with respect to the
conduct of its and their businesses in such amounts and of such kinds comparable
to that in effect on the date of this Agreement and Plan of Merger.
(c) ORO will maintain its books, accounts, and records, and
will cause the books, records, and accounts of each of its subsidiaries to be
maintained, in the usual, regular, and ordinary manner, on a basis consistent
with prior years; ORO and each of its subsidiaries will duly comply with all
laws applicable to each of them and to the conduct of their respective
businesses.
(d) Except as to the authorization of a class of "Redeemable
Non-Dividend Preferred Shares", no amendment will be made in the Articles or
Certificate of Incorporation or Bylaws of ORO or any of its subsidiaries, except
as contemplated by this Agreement or to authorize an increase in the number of
directors of ORO, and neither ORO nor any of its subsidiaries will merge or
consolidate with, or sell all or substantially all of its assets to, any other
corporation, or change the character of its business.
(e) Except as to the required forward stock split, and the
authorization and issuance of the shares of "Redeemable Non- Dividend Preferred
Stock" (the "Preferred Stock"), no change will be made in the number of shares
of the ORO Common Stock issued and outstanding nor will any change be made in
the number of shares of capital stock of any of its subsidiaries issued and
outstanding or in the ownership by ORO or any of its subsidiaries of shares of
the issued and outstanding capital stock of any subsidiary of ORO; no option,
warrant, or any other right to purchase or to convert any obligation into shares
of ORO Common Stock will be granted or made by ORO (except pursuant to the ORO
Stock Option Plan or in exchange for case, property, or services and no option,
warrant, or any
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other right to purchase or convert any obligation into shares of capital stock
of any subsidiary or ORO will be granted or made by ORO or any of its
subsidiaries.
(f) No dividend or other distribution will be declared, paid,
or made by ORO in respect of shares of the ORO Common Stock and no sale or other
disposition shall be made of any indebtedness of any of the subsidiaries of ORO
otherwise than to ORO.
(g) Neither ORO nor any of its subsidiaries will encumber or
mortgage any of its or their property or assets, or enter into any transaction
or enter into any contract or commitment which by reason of its size or
otherwise is not in the ordinary course of business, unless the same shall be
disclosed by ORO to CEVA in writing, and neither ORO nor any of its subsidiaries
will, other than in the ordinary course of business, incur any obligation
(contingent or otherwise) or transfer or convey or acquire any material assets
or property, or enter into any arrangement, agreement, or undertaking
(including, without limitation, employment agreements not terminable on 90 days'
or less notice without cost or liability), or pay or promise to pay any bonus or
special compensation to employees other than in accordance with prior practices.
VI. REPRESENTATIONS AND WARRANTIES
6.1. Representations and Warranties of CEVA. CEVA represents and
warrants to ORO as follows:
(a) Due Incorporation, Good Standing, Qualification. CEVA is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware with all requisite corporate power and authority
to own, operate, and lease its properties and to carry on its business as now
being conducted, and is duly qualified and in good standing in every
jurisdiction in which the property owned, leased, or operated by it or the
nature of the business conducted by it makes such qualification necessary. The
copies of the Certificate of Incorporation and all amendments thereto of CEVA
and the Bylaws of CEVA as amended to date which have been delivered to ORO are
complete and correct.
(b) Authorized Capitalization. The authorized capital stock of
CEVA consists of 10,000,000 shares of Common Stock, of which as of the date of
this Agreement 2,101,564 shares are issued and outstanding, and; 10,000,000
Preferred Shares, of which as of the date of this Agreement no shares are issued
and outstanding. All of such shares have been validly issued and are fully paid
and nonassessable with no personal liability attaching to the ownership thereof,
except for any liability that may be imposed by applicable state constitution or
statute upon shareholders for wages or similar claims, and insofar as known to
CEVA there are no agreements or understandings among the shareholders of CEVA
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with respect to the voting of shares of its Common Stock on any matter, except
as previously disclosed to ORO.
(c) Options, Warrants, Rights, etc. CEVA does not have
outstanding any option, warrant, or other right to purchase or convert any
obligation into any shares of its Common Stock, and as of the date of this
Agreement has not agreed to issue or sell any shares of its Common Stock as of
the date of this Agreement.
(d) Financial Statements. The Audited Consolidated Balance
Sheet of CEVA and its subsidiaries as of December 31, 1997, and the related
Consolidated Statement of Income and Retained earnings of CEVA and its
subsidiaries for the fiscal year then ended, including in each case the related
schedules and notes, all certified by Rosenberg Rich Baker Berman & Company,
independent certified public accounts, and the unaudited Consolidated Balance
Sheet of CEVA and its subsidiaries as of December 31, 1998 have been delivered
to ORO, have been prepared in accordance with generally accepted accounting
principles applied on a basis consistent with that of prior years or periods,
are correct and complete, and fairly present the financial position and results
of operations of CEVA and its subsidiaries as of said dates and for the periods
indicated. Said Consolidated Balance Sheets make full and adequate provision for
all obligations and liabilities (fixed and contingent) of CEVA and its
subsidiaries as of December 31, 1997 and December 31, 1998, respectively.
(e) No Material Adverse Change. Since the date hereof there
has not been (i) any material adverse change in the financial condition,
business, properties, or assets of CEVA and its subsidiaries; (ii) any material
loss or damage to any of the properties or assets of CEVA and its subsidiaries
(whether or not covered by insurance) which materially affects or impairs the
ability of CEVA and its subsidiaries to conduct their businesses or any labor
trouble or any other event or condition of any character which has materially
and adversely affected CEVAl's business or the business of any of its
subsidiaries; (iii) any mortgage or pledge of any of the properties or assets of
CEVA or any of its subsidiaries, or any indebtedness incurred by CEVA or any of
its subsidiaries maturing more than one year from the date the indebtedness was
incurred; (iv) any purchase, redemption, or other acquisition by CEVA of any
shares of its Common Stock; or (v) any issuance, sale, or other disposition of
any shares of CEVA Common Stock or of any shares of capital stock of any
subsidiary of CEVA or of any evidence of indebtedness or securities of CEVA or
any of CEVA's subsidiaries, except in the ordinary course of business.
(f) Title to Properties. CEVA and its subsidiaries have good
and marketable title to all of their respective properties, including all
property reflected in the unaudited Consolidated Balance Sheet as of December
31, 1998, except property disposed of subsequent to December 31, 1998 in the
ordinary course of business,
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free and clear of any mortgage, lien, pledge, charge, claim, or encumbrance,
except (i) as shown on said unaudited Consolidated Balance Sheet as of December
31, 1998 or the notes thereto; (ii) the lien of taxes not yet due or payable or
being contested in good faith by appropriate proceedings; (iii) such
imperfections of title and encumbrances, if any, as do not materially detract
from the value, or interfere with the present use, of the properties of CEVA and
its subsidiaries subject thereto or affected thereby, or otherwise materially
impair business operations. All material leases pursuant to which CEVA and any
of its subsidiaries lease any substantial amount of real or personal property
are valid and effective in accordance with their respective terms, and there is
not, under any of such leases, any existing default or event of default or event
which with notice or lapse of time or both would constitute a default. Certain
nonmaterial leases, however, require landlord's consent to the transfers
contemplated hereby and no assurance can be given that such consents will be
obtained.
(g) No Defaults. CEVA has made available to ORO, for its
examination, copies of all material contracts, agreements, leases, licenses, and
understandings of a kind which would be required to be filed (or incorporated by
reference) by CEVA as Exhibits if CEVA were on the Effective Date filing a
Registration Statement on Form S-1 under the Securities Act of 1933, as amended,
and CEVA is not in default under the terms of any such contract, agreement,
lease, license, or understanding, except as previously disclosed to ORO.
(h) Litigation. Except for actions seeking $50,000 or less in
damages, and except as disclosed to ORO by CEVA in writing, there are no
actions, suits, or proceedings pending or to the knowledge of CEVA, threatened
against or affecting CEVA or any of its subsidiaries, at law or in equity, or
before or by any federal, state, municipal, or other governmental department,
commission, board, bureau, agency, or instrumentality, that can reasonably be
expected to result in any materially adverse change in the business, properties,
operations, prospects, or assets or in the condition, financial or otherwise, of
CEVA and its subsidiaries.
(i) Tax Returns. Except as disclosed by CEVA to ORO in
writing, CEVA and its subsidiaries have filed all tax returns and reports
required to be filed, including, but without limitation, returns of federal and
local income taxes, and have paid in full or made adequate provision for the
payment of all taxes, interest, penalties, assessments, or deficiencies shown to
be due and claimed to be due on such tax returns and reports. The federal income
tax returns of CEVA and its subsidiaries for all taxable years through and
including the fiscal year ended December 31, 1997, have been examined by the
federal tax authorities and, except as disclosed in the notes to the
Consolidated Balance Sheet as of December 31, 1997, no proposed (but unassessed)
additional taxes, interest, and penalties have been asserted with respect to the
years examined or
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with respect to those not yet examined. Neither CEVA nor any of its subsidiaries
is a party to any action or proceeding by any governmental authority for
assessment or collection of taxes, nor has any claim for assessment or
collection of taxes been asserted against CEVA or any of its subsidiaries, other
than actions or proceedings or claims for assessment or collection of taxes
which are being contested in good faith by appropriate proceedings.
(j) No Violations. Consummation of the merger will not violate or
result in a breach of or constitute a default under any provision of any
charter, bylaw, indenture, mortgage, lien, lease, agreement, contract,
instrument, order, judgment, decree, ordinance, regulation or any other
restriction of any kind or character to which any property of CEVA or any of its
subsidiaries is subject or by which CEVA or any of its subsidiaries is bound or
materially affected.
6.2 Representations and Warrangies of ORO. ORO represents and warrants
to CEVA as follows:
(a) Due Incorporation, Good Standing, Qualification. ORO is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Nevada with all requisite corporate power and authority to
own, operate, and lease its properties and to carry on its business as now being
conducted, and is duly qualified and in good standing in every jurisdiction in
which the property owned, leased, or operated by it or the nature of the
business conducted by it makes such qualification necessary. The copies of the
Certificate of Incorporation and all amendments thereto of ORO and the Bylaws of
ORO as amended to date which have been delivered to CEVA are complete and
correct.
(b) Authorized Capitalization. The authorized capital stock of
ORO consists of 100,000,000 shares of Common Stock, of which as of the date of
this Agreement 505,300 shares are issued and outstanding and, prior to the
Filing Date, 803,427 of such shares shall be outstanding. All of such shares
have been or shall be validly issued, fully paid and nonassessable with no
personal liability attaching to the ownership thereof, except for any liability
that may be imposed by applicable state constitution or statute upon
shareholders for wages or similar claims, and insofar as known to ORO there are
no agreements or understandings among the shareholders of ORO with respect to
the voting of shares of its Common Stock on any matter.
(c) Options, Warrants, Rights, etc. ORO does not have
outstanding any option, warrant, or other right to purchase or convert any
obligation into any shares of its Common Stock, and as of the date of this
Agreement has not agreed to issue or sell any shares of its Common Stock as of
the date of this Agreement.
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(d) Financial Statements. The Audited Consolidated Balance
Sheet of ORO and its subsidiaries as of May 31, 1998, and the related
Consolidated Statement of Income and Retained earnings of ORO and its
subsidiaries for the periods then ended, including in each case the related
schedules and notes, all certified by Andersen Andersen & Strong, L.C. have been
delivered to CEVA, have been prepared in accordance with generally accepted
accounting principles applied on a basis consistent with that of prior years or
periods, are correct and complete, and fairly present the financial position and
results of operations of ORO and its subsidiaries as of said dates and for the
periods indicated. Said Consolidated Balance Sheets make full and adequate
provision for all obligations and liabilities (fixed and contingent) of ORO and
its subsidiaries as of May 31, 1998.
(e) No Material Adverse Change. Since the date hereof there
has not been (i) any material adverse change in the financial condition,
business, properties, or assets of ORO and its subsidiaries; (ii) any material
loss or damage to any of the properties or assets of ORO and its subsidiaries
(whether or not covered by insurance) which materially affects or impairs the
ability of ORO and its subsidiaries to conduct their businesses or any labor
trouble or any other event or condition of any character which has materially
and adversely affected ORO's business or the business of any of its
subsidiaries; (iii) any mortgage or pledge of any of the properties or assets of
ORO or any of its subsidiaries, or any indebtedness incurred by ORO or any of
its subsidiaries maturing more than one year from the date the indebtedness was
incurred; (iv) any purchase, redemption, or other acquisition by ORO of any
shares of its Common Stock; or (v) any issuance, sale, or other disposition of
any shares of ORO Common Stock or of any shares of capital stock of any
subsidiary of ORO or of any evidence of indebtedness or securities of ORO or any
of ORO's subsidiaries, except in the ordinary course of business.
(f) Title to Properties. ORO and its subsidiaries have good
and marketable title to all of their respective properties, including all
property reflected in the audited Consolidated Balance Sheet as of May 31, 1998,
except property disposed of subsequent to May 31, 1998 in the ordinary course of
business, free and clear of any mortgage, lien, pledge, charge, claim, or
encumbrance, except (i) as shown on said audited Consolidated Balance Sheet as
of May 31, 1998 or the notes thereto; (ii) the lien of taxes not yet due or
payable or being contested in good faith by appropriate proceedings; (iii) such
imperfections of title and encumbrances, if any, as do not materially detract
from the value, or interfere with the present use, of the properties of ORO and
its subsidiaries subject thereto or affected thereby, or otherwise materially
impair business operations. All material leases pursuant to which ORO and any of
its subsidiaries lease any substantial amount of real or personal property are
valid and effective in accordance with their respective terms, and there is
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not, under any of such leases, any existing default or event of default or event
which with notice or lapse of time or both would constitute a default. Certain
nonmaterial leases, however, require landlord' s consent to the transfers
contemplated hereby and no assurance can be given that such consents will be
obtained.
(g) No Defaults. ORO has made available to CEVA, for its
examination, copies of all material contracts, agreements, leases, licenses, and
understandings of a kind which would be required to be filed (or incorporated by
reference) by ORO as Exhibits if ORO were on the Effective Date filing a
Registration Statement on Form S-1 under the Securities Act of 1933, as amended,
and ORO is not in default under the terms of any such contract, agreement,
lease, license, or understanding, except as previously disclosed to CEVA.
(h) Litigation. Except for actions seeking $50,000 or less in
damages, and except as disclosed to CEVA by ORO in writing, there are no
actions, suits, or proceedings pending or to the knowledge of ORO, threatened
against or affecting ORO or any of its subsidiaries, at law or in equity, or
before or by any federal, state, municipal, or other governmental department,
commission, board, bureau, agency, or instrumentality, that can reasonably be
expected to result in any materially adverse change in the business, properties,
operations, prospects, or assets or in the condition, financial or otherwise, of
ORO and its subsidiaries.
(i) Tax Returns. Except as disclosed by ORO to CEVA in
writing, ORO and its subsidiaries have filed all tax returns and reports
required to be filed, including, but without limitation, returns of federal and
local income taxes, and have paid in full or made adequate provision for the
payment of all taxes, interest, penalties, assessments, or deficiencies shown to
be due and claimed to be due on such tax returns and reports. The federal income
tax returns of ORO and its subsidiaries for all taxable years through and
including the fiscal year ended December 31, 1997, have been examined by the
federal tax authorities and, except as disclosed in the notes to the
Consolidated Balance Sheet as of May 31, 1998, no proposed (but unassessed)
additional taxes, interest, and penalties have been asserted with respect to the
years examined or with respect to those not yet examined. Neither ORO nor any of
its subsidiaries is a party to any action or proceeding by any governmental
authority for assessment or collection of taxes, nor has any claim for
assessment or collection of taxes been asserted against ORO or any of its
subsidiaries, other than actions or proceedings or claims for assessment or
collection of taxes which are being contested in good faith by appropriate
proceedings.
(j) No Violations. Consummation of the merger will not violate or
result in a breach of or constitute a default under any provision of any
charter, bylaw, indenture, mortgage, lien, lease, agreement, contract,
instrument, order, judgment, decree,
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ordinance, regulation or any other restriction of any kind or character to which
any property of ORO or any of its subsidiaries is subject or by which ORO or any
of its subsidiaries is bound or materially affected.
VII. ABANDONMENT AND TERMINATION
7.1. CEVA's Right to Abandon. CEVA shall have the right to abandon the
merger in the event that any of the following shall not be true or shall not
have occurred, as the case may be, as of the Filing Date.
(a) Accuracy of Representations and Warranties. The
representations and warranties of ORO herein contained shall be true on and as
of the Filing Date with the same force and effect as though made on and as of
the Filing Date, except as affected by transactions contemplated hereby and
except to the extent that any such representations and warranties are made as of
a specified date.
(b) Performance of Agreements. ORO shall have performed all
obligations and agreements and complied with all covenants contained in this
Agreement to be performed and complied with by it prior to the Filing Date.
(c) Accuracy of Information in Information Statement. None of
the information which shall have been furnished by or on behalf of ORO or its
management for inclusion in the information soliciting material sent to the
shareholders of CEVA in connection with the meeting of such shareholders to be
held in accordance with Section 3.1 of this Agreement, shall be false or
misleading in any material respect or shall fail to state any fact necessary to
make the statements therein not false or misleading in any material respect.
(d) Shareholder Approvals. The holders of the super-majority
of the outstanding shares of ORO Common Stock and the holders of at least a
majority of the outstanding shares of CEVA Common Stock, shall have voted in
favor of the adoption of this Agreement and Plan of Merger and the merger
contemplated hereby, and the amendments to the Articles of Incorporation of ORO,
as specified herein shall have been approved by the super-majority of the
outstanding shares of ORO and by the holders of at least a majority of the
outstanding shares of CEVA.
(e) Completion of Share Placement. CEVA shall have received
confirmation and evidentiary proof that ORO has a minimum of $500,000 in cash in
its bank account or that of an escrow agent, derived from its placement of a
minimum of 500,000 shares of ORO Common Stock.
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<PAGE>
(f) NASD Qualification. CEVA shall have received assurances
supported by sufficient documentation that ORO has been issued by the National
Association of Securities Dealers, Inc. ("NASD") a trading symbol, that a fully
licensed NASD firm has filed a Form 15c211, as required at the time filed, and
that such fully-licensed NASD firm received approval of its Form 15c211.
7.2. ORO's Right to Abandon. ORO shall have the right to abandon the
merger in the event that any of the following shall not be true or shall not
have occurred, as the case may be, as of the Filing Date.
(a) Accuracy of Representations and Warranties. The
representations and warranties of ORO herein contained shall be true on and as
of the Filing Date with the same force and effect as though made on and as of
the Filing Date, except as affected by transactions contemplated hereby and
except to the extent that any such representations and warranties are made as of
a specified date.
(b) Performance of Agreements. ORO shall have performed all
obligations and agreements and complied with all covenants contained in this
Agreement to be performed and complied with by it prior to the Filing Date.
(c) Accuracy of Information in Information Statement. None of
the information which shall have been furnished by or on behalf of CEVA or its
management for inclusion in the information soliciting material sent to the
shareholders of ORO in connection with the meeting of such shareholders to be
held in accordance with Section 3.1 of this Agreement, shall be false or
misleading in any material respect or shall fail to state any fact necessary to
make the statements therein not false or misleading in any material respect.
(d) Shareholder Approvals. The holders of the super-majority
of the outstanding shares of ORO Common Stock and the holders of at least a
majority of the outstanding shares of CEVA Common Stock, shall have voted in
favor of the adoption of this Agreement and Plan of Merger as well as all of the
amendments to the Articles of Incorporation of ORO, as specified herein.
(e) Gainsboro (U.S.A.) Inc. Loan. ORO shall have received
written assurances from Gainsboro (U.S.A.) Inc., a creditor of CEVA which is
owed $200,000 in principal debt, that such creditor shall stand still with
respect to any repayment of the outstanding principal balance until December 31,
1999.
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(f) Conversion of Insider Debt. The stockholder loans to CEVA
made by Herbert G. Case, Jr., the President and majority shareholder of CEVA, in
the aggregate of approximately $1,000,000, shall be converted into shares of
CEVA "Redeemable Non-Dividend Preferred Stock" which shall have the following
rights, privileges and designations:
(1) each share of Redeemable Non-Dividend Preferred
Stock shall have a Liquidation Value, or Stated Value of $50,000;
(2) the Redeemable Non-Dividend Preferred Stock
shall have liquidation rights superior to the Common Stock of the Corporation
and shall be superior to all other series or issuances of the stock of the
Corporation;
(3) the Corporation shall be obligated to redeem all
or part of the Redeemable Non-Dividend Preferred Stock outstanding in the event
the Corporation has earned after-tax profits during any previous fiscal year in
an amount equal to or greater than One Million ($1,000,000.00) Dollars,
determined in accordance with generally accepted accounting principles,
consistently applied (the "After Tax Profit"), calculated as follows: the
Corporation shall redeem for cash that number of shares of Redeemable
Non-Dividend Preferred Stock whose aggregate Stated Value is equal to
twenty-five (25%) percent of the After Tax Profit; for example, in the event the
Corporation earns $1,200,000 in After Tax Profit during a prior fiscal year, the
Corporation will be obligated to redeem 6 shares of the Redeemable Non-Dividend
Preferred Stock outstanding ($1,200,000 X 25% = $300,000, divided by $50,000,
the Stated Value, = 6 shares of Redeemable Non-Dividend Preferred Stock);
(4) the Redeemable Non-Dividend Preferred Stock
shall not be entitled to receive any preference or fixed rate of dividend and
shall only be entitled to participate in any cash or stock dividend after the
holders of the shares of Common Stock of the Corporation have received such
dividend;
(5) the Redeemable Non-Dividend Preferred Stock
shall be entitled to be paid out of the assets of the Corporation upon
liquidation prior to any distribution or payment to the holders of the shares of
the Common Stock of the Corporation;
(6) the holders of the Redeemable Non-Dividend
Preferred Stock shall have no right to vote at or participate in any meeting of
the stockholders of the Corporation and shall have voting rights only in certain
enumerated and extraordinary events.
VIII. ADDITIONAL TERMS OF ABANDONMENT
In addition to the provisions of Article VII hereof, the merger may be
abandoned or terminated on or before the Filing Date:
18
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(a) by mutual agreement of the boards of Directors of
CEVA and ORO; or
(b) at the option of either Constituent Corporation if, in the
judgment of the Board of Directors of such Constituent Corporation, the
potential liability of the Surviving Corporation which might result from demands
by shareholders of either or both of the Constituent Corporation who have
perfected their rights to receive payment of the value of their shares renders
the merger undesirable or not in the best interests of the shareholders of the
Surviving Corporation.
In the event the merger is abandoned or terminated by either CEVA or
ORO as in this Article VIII or in Article VII provided, this Agreement shall
forthwith become wholly void and of no effect, except as to Article IX hereof,
and there shall be no liability to each other on the part of either CEVA or ORO
or their respective directors, officers, or shareholders.
IX. EXPENSES
The Surviving Corporation shall pay all expenses of carrying this
Agreement and Plan of Merger into effect and of accomplishing the merger,
including amounts, if any, to which shareholders of ORO who may dissent may be
entitled by reason of the merger; provided, however, that in the event such
merger shall not become effective for any reason, each of the parties hereto
shall pay the fees and expenses of its respective counsel and accountants.
X. GENERAL
10.1. Brokerage. CEVA and ORO each represents to the other that it has
not incurred and will not incur any liability for brokerage fees or agents'
commissions in connection with this Agreement and the merger contemplated
hereby, except as shall be earned by Robert M. Long previously disclosed to the
parties.
10.2. Certification of Shareholder Votes and Dissenters. Prior to the
Filing Date, (a) ORO shall deliver to CEVA a certificate of its Secretary
setting forth (i) the number of shares of its Common Stock outstanding and
entitled to vote on the adoption of this Agreement and Plan of Merger, the
number of shares of its Common Stock voted in favor of adoption of this
Agreement and Plan of Merger, and the number of shares of its Common Stock voted
against adoption of this Agreement and Plan of Merger, and (ii) the names of all
of its shareholders not voting in favor of this Agreement and Plan of Merger who
have filed with ORO written notice of election to dissent in accordance with the
Nevada Merger Law to this Agreement and Plan of Merger, and the number of shares
of ORO Common Stock owned of record by each such shareholder; and (b) CEVA shall
deliver to ORO a certificate of its Secretary, setting forth (i) the number of
shares of its Common Stock to vote
19
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on the adoption of this Agreement and Plan of Merger, and the number of shares
of its Common Stock voted against adoption of this Agreement, and (ii) the names
of all of its shareholders voting against the merger who, as of the date of such
certificate, have objected in writing to the merger and demanded payment of the
fair cash value of their shares in accordance with the Delaware Merger Law, and
the number of shares of CEVA Common Stock owned of record by each such
shareholders.
10.3. Cooperation. From time to time prior to the Effective Date each
Constituent Corporation will permit the other to make, and will cooperate and
assist such other corporation in making, such investigations as may be
appropriate to enable such corporation to determine compliance with the terms of
this Agreement and Plan of Merger.
10.4. Definition of Subsidiary. As used in this Agreement and Plan of
Merger, the term "subsidiary" shall mean any corporation more than 50 percent of
the capital stock of which having ordinary voting power for the election of
directors shall be owned, directly or indirectly, by a parent corporation or by
one or more of its subsidiaries or by such parent corporation and one or more
subsidiaries.
10.5. Execution in Counterparts. For the convenience of the parties and
to facilitate filing, this Agreement and Plan of Merger may be executed in one
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same document.
10.6. Notices. All notices which are required or may be given pursuant
to the terms of this Agreement and Plan of Merger shall be in writing and shall
be sufficient in all respects if given in writing and delivered personally or by
registered or certified mail, postage prepaid, as follows:
If to ORO, to: Robert M. Long, President
Oro Bueno, Inc.
RD 2, Box 401
Rhinebeck, New York 12572
If to CEVA, to: Herbert G. Case, Jr., President
c/o Joseph J. Tomasek, Esq.
77 North Bridge Street
Somerville, New Jersey 08876
10.7. Waivers. Any failure of either of the Constituent Corporations to
comply with any of its obligations, agreements, or conditions as set forth
herein may be expressly waived in writing by the other Constituent Corporation.
20
<PAGE>
10.8. Amendments, Supplements, etc. At any time before or after
approval and adoption by the respective shareholders of the Constituent
Corporations, this Agreement and Plan of Merger may be amended in matters of
form, or supplemented by additional agreements, articles, or certificates, as
may be determined in the judgment of the Boards of Directors (or Executive
Committees) of the Constituent Corporations to be necessary, desirable, or
expedient to clarify the intention of the parties hereto or to effect or
facilitate the filing, recording, or official approval of this Agreement and
Plan of Merger and the consummation hereof and the merger provided for herein,
in accordance with the purpose and intent of this Agreement and Plan of Merger.
IN WITNESS WHEREOF, each of the Constituent Corporations has caused
this Agreement and Plan of Merger to be executed in its corporate name by its
president or one of its Vice-Presidents thereunto duly authorized under its
corporate seal attested by its Secretary or an Assistant Secretary, and all or a
majority of the directors of each of the Constituent Corporations have signed
this Agreement and Plan of Merger all as of the date first above written.
(Corporate Seal) CEVA INTERNATIONAL, INC.
Attest:
By: /s/Herbert G. Case, Jr.
/s/Joseph J. Tomasek Herbert G. Case, Jr.
Joseph J. Tomasek President
Secretary
ORO BUENO, INC.
By: /s/Robert M. Long
Robert M. Long
President
mergplan.cev
21
<PAGE>
STATE OF NEW YORK:
COUNTY OF Dutchess SS.:
On this 29 day of March, 1999, personally appeared before me, a notary
public in and for the County and State aforesaid, Robert M. Long, President, of
Oro Bueno, Inc., a corporation of the State of Nevada, and one of the
corporations described in and which executed the foregoing Agreement and Plan of
Merger, known to me to be such, and he, being by me duly sworn, acknowledge said
Agreement and Plan of Merger to be the act, deed, and agreement of said Oro
Bueno, Inc.
IN WITNESS WHEREOF, I have hereunto set my hand and notarial seal the
day and year aforesaid.
/s/Jeanette A. Romano
Jeanette A. Romano
Notary Public
(Notarial Seal)
mergplan.cev
22
<PAGE>
Exhibit 2.2
ARTICLES OF MERGER
OF
CEVA INTERNATIONAL, INC.
AND
ORO BUENO, INC.
The undersigned, being first duly sworn, does hereby state as follows:
1. These Articles of Merger are being filed with the Delaware Secretary of
State and Nevada Secretary of State pursuant to Section 252 of the
Delaware General Corporation law and Section 92A.200 of the Nevada
General Corporation Law to reflect the merger of CEVA INTERNATIONAL,
INC., a Delaware corporation ("CEVA"),into ORO BUENO, INC., a Nevada
corporation ("ORO BUENO"), as the surviving corporation.
2. A copy of the Agreement and Plan of Merger dated as of March 29, 1999
(the "Plan") is attached hereto as Exhibit "A."
3. The Plan was approved by the shareholders of ORO BUENO and CEVA on
April 5, 1999 and April 19, 1999, respectively. The class, number of
shares outstanding at the record date for determining shareholders
entitled to vote on the Plan, and the number of votes cast for and
against the Plan are as follows:
Number of Shares Number of Number of Number of
Corporation Class Outstanding Votes Votes Votes
Entitled Cast For Cast Against
To Be Cast or Non-Voting
- - ---------- ------ --------- ----------- ---------- -----------
CEVA Common 7,760,000 7,760,000 7,760,000 0
ORO BUENO Common 505,300 505,300 496,600 8,700
4. The number of votes cast for the Plan by the shareholders of CEVA and
the number of votes cast for the Plan by ORO BUENO were sufficient for
approval of the Plan.
5. The principal office of ORO BUENO, the surviving corporation, is 77
North Bridge Street, Somerville, New Jersey 08876.
6. The merger is to be effective as of the latter date of filing of these
Articles of Merger with the Secretary of State, State of Nevada, and
the Certificate of Merger with the Secretary of State, State of
Delaware.
1
<PAGE>
Dated this 23rd day of April, 1999
CEVA INTERNATIONAL, INC. ORO BUENO, INC.
A Delaware corporation A Nevada corporation
By:/s/ Herbert G. Case, Jr. By:/s/ Robert M. Long
Herbert G. Case, Jr., President Robert M. Long, President
By:/s/ Joseph J. Tomasek By:/s/ Robert M. Long
Joseph J. Tomasek, Secretary Robert M. Long, Secretary
Mr. Herbert G. Case, Jr., the President of CEVA International, Inc.
shall obtain the notarial acts necessary to acknowledge his signature on these
Articles of Merger, and attach such certificates hereto, by an officer of the
foreign service of the United States, a consular agent, or any other person
authorized by regulation of the United States Department of State to perform
notarial acts in the place in which the act is performed, Uniform Recognition of
Acknowledgments Acts.
County of Somerset )
)
State of New Jersey )ss.
I certify that on April 22, 1999, Joseph J. Tomasek personally came
before me and this person acknowledged under oath, to my satisfaction, that:
(a) this person signed, sealed and delivered the attached document as
Secretary of CEVA International, Inc., a corporation named in this document;
(b) the proper corporate seal was affixed; and
(c) this document was signed and made by the corporation as its
voluntary act and deed by virtue of authority from its Board of Directors.
/s/ Anita B. Hogan
Notary Public
COUNTY OF )
)
STATE OF NEW YORK )
Before me a notary public in and for the aforesaid County, personally appeared
ROBERT M. LONG, President of Oro Bueno, Inc., known to me to be the person who
executed the foregoing document this __ day of April, 1999.
/s/ Mary M. Henschel
Notary Public
art-merg.oro
2
<PAGE>
CERTIFICATE OF ACKNOWLEDGEMENT OF EXECUTION OF AN INSTRUMENT
-----------------------------------------
Republic of Hungary
City of Budapest
Embassy of the united States } SS:
of America
I, Jennifer M. Lee, Vice Consul of the united States of America at Budapest,
Hungary, duly commissioned and qualified, do hereby certify that on this 23rd
day of April, 1999, before me personally appeared Mr. Herbert George Case, Jr.,
personally known, and known to me to be the individual described in, whose
name(s) is subscribed to, and who executed the annexed instrument, and being
informed by me of the contents of the said instrument she duly acknowledged to
me that she executed the same freely and voluntarily for the uses and purposes
therein mentioned.
In witness whereof I have hereunto set my hand and official seal the day
and year last above written.
(SEAL)
/s/ Jennifer M. Lee
Jennifer M. Lee
Vice Consul of the
United States of America
art-merg.oro
3
<PAGE>
Exhibit 2.3
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 04/27/1999
991164736 - 2824166
CERTIFICATE OF MERGER
OF
CEVA INTERNATIONAL, INC., a Delaware Corporation
INTO
ORO BUENO, INC., a Nevada Corporation
Under Section 252 of the
General Corporation Law of the State of Delaware
The undersigned corporation, CEVA International, Inc., organized and existing
under and by virtue of the Delaware General Corporation Law;
DOES HEREBY CERTIFY:
FIRST: That the name and state of incorporation of each of the
constituent corporations of the merger is as follows:
NAME STATE OF INCORPORATION
CEVA International, Inc. Delaware
Oro Bueno, Inc. Nevada
SECOND: That an Agreement and Plan of Merger between the parties to the
merger has been approved, adopted, certified, executed and acknowledged by the
Board of Directors and by unanimous written consent of Stockholders of CEVA
International, Inc., all in accordance with the requirements of subsection (c)
of Section 252 of the General Corporation Law of the State of Delaware and by
Oro Bueno, Inc. in accordance with Section 92A.200 of the Nevada General
Corporation Law.
THIRD: That the name of the surviving corporation of the merger is
Oro Bueno, Inc., a Nevada corporation.
FOURTH; That the Articles of Incorporation of the surviving
corporation, Oro Bueno, Inc., shall be its certificate of incorporation.
1
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 04/27/1999
991164736 - 2824166
FIFTH: That the executed Agreement and Plan of Merger is on file at the
principal place of business of Oro Bueno, Inc., the surviving corporation. The
address of the principal place of business of Oro Bueno, Inc., the surviving
corporation, is 77 North Bridge Street, Somerville, New Jersey 08876.
SIXTH: That a copy of the Agreement and Plan of Merger will be
furnished by Oro Bueno, Inc., the surviving corporation, on request and without
cost, to any stockholder of any constituent corporation.
SEVENTH: That Oro Bueno, Inc., the surviving corporation, may be served
with process in the State of Delaware in any proceeding for enforcement of any
obligation of CEVA International, Inc., the Delaware corporation which is a
constituent corporation to the merger described herein, as well as for
enforcement of any obligation of Oro Bueno, Inc., a Nevada corporation, which is
a constituent and the surviving corporation of the merger described herein,
including any suit or other proceeding to enforce the right of any stockholders
as determined in appraisal proceedings pursuant to the provisions of Section 262
of the Delaware General Corporation Law, and irrevocably appoints the Secretary
of State of the State of Delaware as its agent to accept service of process in
any such suit or proceedings. The address to which a copy of such process shall
be mailed by the Delaware Secretary of State is 77 North Bridge Street,
Somerville, New Jersey 08876.
IN WITNESS WHEREOF, Oro Bueno, Inc. has caused this Certificate to be
signed by Robert M. Long, who affirms under the penalties of perjury that its
contents are true this 26th day of April, 1999.
ORO BUENO, INC.
By:/s/ Robert M. Long
Robert M. Long, President
certmerg.oro
2
<PAGE>
Exhibit 3.1
ARTICLES OF INCORPORATION
OF
RIO ORO, INC.
The undersigned natural person, being more than eighteen years
of age and acting as an incorporator pursuant to NRS 78 (the "Act"), hereby
adopts the following Articles of Incorporation:
ARTICLE I
The name of this corporation is "RIO ORO, INC." (the
"Corporation").
ARTICLE II
The address of the initial registered office of the
Corporation is 195 - 6 Mountain City Highway, Elko, Nevada 89801. The name of
the initial registered agent of the Corporation at that address is Nolan A.
Barnum.
ARTICLE III
The Corporation is authorized to issue a total of Twenty Five
Million (25,000,000) shares, which shares are all of the same class, to-wit:
$0.001 par value common stock, and when issued shall all have unlimited voting
rights and be entitled to receive the net assets of the Corporation on
dissolution.
ARTICLE IV
The Governing Board shall be styled as Directors. The first
Board of Directors shall consist of four members whose names and addresses are
as follows:
Gary M. Lee George D. Fehr
445 East 200 South #39 10 Exchange Place Suite 610
Salt Lake City, Utah 84111 Salt Lake City, Utah 84111
James N. Marin Tim Neal
3600 Hartstrand Gulch P. O. Box 488
Etna, CA 96027 Friant, CA 93626
<PAGE>
ARTICLE V
The Corporation is organized to engage in any and all lawful
acts and/or activities for which corporations may be organized under the Act.
ARTICLE VI
Pursuant to NRS 78.037, neither the Directors, the Officers
nor the Stockholders of the Corporation shall have any personal liability for
damages or for breach of fiduciary duty except for acts of omissions which
include misconduct or fraud.
ARTICLE VII
The name and address of the incorporator of the Corporation
is:
Gary M. Lee
445 East 200 South #39
Salt Lake City, Utah 84111
IN WITNESS WHEREOF, the undersigned executes these Articles of
Incorporation, and certifies to the truth of the facts stated herein, on this
30th day of January, 1994.
/s/Gary M. Lee
Gary M. Lee
Incorporator
Subscribed and sworn to before me this 30th day of January, 1994.
/s/Adrian Gerritsen
Notary Public
My commission expires on:
ARTICLE VIII
The undersigned hereby accepts his appointment as the initial
registered agent of Rio Oro, Inc.
/s/Nolan A. Barnum
Nolan A. Barnum
Registered Agent
2
<PAGE>
Exhibit 3.2
CERTIFICATE OF AMENDMENT
OF ARTICLES OF INCORPORATION
OF
ORO BUENO, INC.
We the undersigned, Ray H. Albrechtsen, President, and Julie Twelves, Secretary
of Oro Bueno, Inc., do hereby certify:
That the Board of Directors of said corporation at a meeting duly convened, held
on the 10th day of July, 1997, adopted a resolution to amend the original
articles as follows:
Article I which presently reads as follows:
Article I
The name of this corporation is "Rio Oro, Inc." (the "Corporation)
Is hereby amended to read:
Article I
The name of the corporation is "Oro Bueno, Inc." (the "Corporation)
Article III which presently reads:
Article III
The Corporation is authorized to issue a total of Twenty Five Million
(25,000,000) shares, which shares are all of the same class, to-wit: $0.001 par
value common stock, and when issued shall all have unlimited voting rights and
be entitled to receive the net assets of the Corporation on dissolution.
Is hereby amended to read:
Article III
The total authorized capital stock of the Corporation is 100,000,000
shares of Common Stock, with a par value of $0.001 (1 mil). All stock when
issued shall be deemed fully paid and non-assessable. No cumulative voting, on
any matter to which Stockholders shall be entitled to vote, shall be allowed for
any purpose.
The authorized stock of this corporation may be issued at such time,
upon such terms and conditions and for such consideration as the Board of
Directors shall, from time to time, determine. Shareholders shall not have
pre-emptive rights to acquire unissued shares of the stock of this Corporation.
Article IV which presently reads:
Article IV
The Governing Board shall be styled as Directors. The first Board of
Directors shall consist of four members whose names and addresses are as
follows:
<PAGE>
Gary M. Lee George D. Fehr
445 East 200 South #39 10 Exchange Place Suite 610
Salt Lake City, Utah 84111 Salt Lake City, Utah 84111
James N. Marin Tim Neal
3600 Hartstrand Gulch P. O. Box 488
Etna, CA 96027 Friant, CA 93626
Is hereby amended to read:
Article IV
The Governing Board shall be styled as Directors. The Directors are
hereby granted the authority to do any act on behalf of the Corporation as may
be allowed by law. Any action taken in good faith, shall be deemed appropriate
and in each instance where the Business Corporation Act provides that the
Directors may act in certain instances where the Articles of Incorporation so
authorize, such action by the Directors, shall be deemed to exist in these
Articles and the authority granted by said Act shall be imputed hereto without
the same specifically having been enumerated herein.
The Board of Directors may consist of from one (1) to nine (9)
directors, as determined from time to time, by the then existing Board of
Directors.
The first Board of Directors shall consist of four members whose names
and addresses are as follows:
Gary M. Lee George D. Fehr
445 East 200 South #39 10 Exchange Place Suite 610
Salt Lake City, Utah 84111 Salt Lake City, Utah 84111
James N. Marin Tim Neal
3600 Hartstrand Gulch P. O. Box 488
Etna, CA 96027 Friant, CA 93626
THE FOLLOWING NEW ARTICLES ARE HEREBY ADOPTED
ARTICLE VIII
COMMON DIRECTORS
As provided by Nevada Revised Statutes 78.140,
without repeating the section in full here, the same is
adopted and no contracts or other transaction between this
Corporation and any of its officers, agents or directors shall
be deemed void or voidable solely for that reason. The balance
of the provisions of the code section cited, as it now exists,
allowing such transactions, is hereby incorporated into this
Article as though more fully set- forth, and such Article
shall be read and interpreted to provide the greatest latitude
in its application.
2
<PAGE>
ARTICLE IX
LIABILITY OF DIRECTORS AND OFFICERS
No Director, Officer or Agent, to include counsel,
shall be personally liable to the Corporation or its
Stockholders for monetary damage for any breach or alleged
breach of fiduciary or professional duty by such person acting
in such capacity. It shall be presumed that in accepting the
position as an Officer, Director, Agent or Counsel, said
individual relied upon and acted in reliance upon the terms
and protections provided for by this Article. Notwithstanding
the foregoing sentences, a person specifically covered by this
Article, shall be liable to the extent provided by applicable
law, for acts or omissions which involve intentional
misconduct, fraud or a knowing violation of law, or for the
payment of dividends in violation of NRS 78.300.
ARTICLE X
ELECTION REGARDING NRS 78.378 - 78.3793 AND 78.411-78.444
This Corporation shall NOT be governed by nor shall
the provisions of NRS 78.378 through and including 78.3793 and
NRS 78.411 through and including 78.444 in any way whatsoever
affect the management, operation or be applied in this
Corporation. These Articles may only be amended by a majority
vote of not less than 90% of the then issued and outstanding
shares of the Corporation. A quorum of outstanding shares for
voting on an Amendment to these articles shall not be met
unless 95% or more of the issued and outstanding shares are
present at a properly called and noticed meeting of the
Stockholders. The super-majority set-forth in these Articles
only applies to any attempted amendment to these Articles.
The number of shares of the corporation outstanding and entitled to vote on an
amendment to the Articles of Incorporation is 5,052,500 that the said change(s)
and amendment have been consented to and approved by an affirmative vote of
4,804,500 shares.
/s/Ray H. Albrechtsen /s/Julie Twelves
Ray H. Albrechtsen, President Julie Twelves, Secretary
State of Utah
County of Salt Lake
On July 10, 1997 , personally appeared before me, a Notary Public, Ray H.
Albrechtsen and Julie Twelves, who acknowledged that they executed the above
instrument.
/s/Margaret Bullick
Notary Public
3
<PAGE>
Exhibit 3.3
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
ORO BUENO, INC.
The undersigned, being the President and Secretary of Oro Bueno, Inc.,
a Nevada corporation (hereinafter referred to as the "Corporation"), having been
authorized to execute these Amended and Restated Articles of Incorporation,
hereby certifies to the Secretary of State of the State of Nevada that:
FIRST: The Corporation desires to amend and restate its Articles of
Incorporation as currently in effect as hereinafter provided.
SECOND: The provisions set forth in these Amended and Restated Articles
of Incorporation supersede the original Articles of Incorporation and all
amendments thereto. These Amended and Restated Articles of Incorporation
correctly set forth the provisions of the Articles of Incorporation, as amended
to the date hereof.
THIRD: The Board of Directors duly adopted and declared the
advisability of the Amended and Restated Articles of Incorporation.
FOURTH: Shareholders of the Corporation holding 496,600 of the 505,300
outstanding shares (98.28%) of the Corporation's common stock approved and
adopted the amendments contained in the Amended and Restated Articles of
Incorporation by written consent dated April 5, 1999.
FIFTH: The Articles of Incorporation of the Corporation, as amended
and restated, are set forth on Exhibit A attached hereto.
/s/Robert M. Long
Robert M. Long, President and Secretary
ACKNOWLEDGMENT
State of New York
County of Dutchess
On April 24, 1999, personally appeared before me, a Notary Public,
Robert M. Long who acknowledged that he executed the above instrument.
/s/Mary M. Henschel
Mary M. Henschel
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Exhibit A
ARTICLE I
NAME
The name of this Corporation is CEVA International, Inc.
ARTICLE II
PURPOSES AND POWERS
The Corporation is organized to engage in any and all lawful acts
and/or activities for which corporations may be organized under the laws of the
State of Nevada.
ARTICLE III
AUTHORIZED CAPITAL STOCK
The amount of total authorized capital stock which the Corporation
shall have authority to issue is 100,000,000 shares of common stock, each with
$0.001 par value, and 25,000,000 shares of preferred stock, each with $0.001 par
value. To the fullest extent permitted by the laws of the State of Nevada
(currently set forth in NRS 78.195), as the same now exists or may hereafter be
amended or supplemented, the Board of Directors may fix and determine the
designations, rights, preferences or other variations of each class or series
within each class of capital stock of the Corporation.
No cumulative voting, on any matter to which shareholders shall be
entitled to vote, shall be allowed for any purpose.
The authorized stock of this Corporation may be issued at such time,
upon such terms and conditions and for such consideration as the Board of
Directors shall, from time to time, determine. Shareholders shall not have
pre-emptive rights to acquire unissued shares of the stock of this Corporation.
Series A Redeemable Non-Dividend Preferred Stock
There shall be a series of preferred stock, designated as the "Series A
Redeemable Non-Dividend Preferred Stock", and hereinafter referred to as the
"Redeemable Preferred Stock". The powers, designations, preferences and voting
powers and relative participating, optional, and other special rights of the
shares of the Redeemable Preferred Stock of the Corporation and the
qualifications, limitations or restrictions of such shares, shall be as follows:
1. General. The Redeemable Preferred Stock shall initially consist of
100 shares having a par value of $.05 per share and a stated value of $50,000
per share (the "Stated Value"). All shares of Redeemable Preferred Stock shall
in all respects be equal, and shall have the powers, designations,
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preferences and voting powers, and relative, participating, optional,
redemption, conversion, and other special rights, and limitations, restrictions
and qualifications thereof, hereinafter set forth. The Board of Directors is
expressly authorized (within the limit of the authorized amount thereof) to
cause the shares of Redeemable Preferred Stock to be issued from time to time,
and to determine the consideration to be received therefor in cash, property,
including stock or securities of other entities, or services. The Redeemable
Preferred Stock may be issuable on or after the effective date of the filing of
this document (the "Effective Date") with the Secretary of State of Nevada in
compliance with the Nevada General Corporation law. The Redeemable Preferred
Stock shall be of a junior and subordinate rank, after the common stock, as to
the payment of dividends (other than dividends payable solely in shares of
junior stock).
For purposes hereof, any class or series of stock shall be deemed to
rank (i) prior to the Redeemable Preferred Stock, as to dividends if the holders
of such class or series shall be entitled to the receipt of dividends, in
preference or priority to the holders of the Redeemable Preferred Stock,; and
(ii) subordinate and junior to the Redeemable preferred Stock, as to
distributions in liquidation, whether or not the liquidation prices per share
thereof be different from those of the Redeemable Preferred Stock, if the
holders of such class or series of stock shall be entitled to the receipt of
amounts distributable upon liquidation of the Corporation.
2. Dividends. The holders of record of shares of the Redeemable
Preferred Stock shall not be entitled to receive any dividends.
3. Redemption. The Corporation shall be obliged to redeem all or part
of the Redeemable Preferred Stock outstanding subject and pursuant to the
following terms and conditions: in the event the Corporation shall have earned,
in any previous fiscal year, after-tax profits in an amount equal to or greater
than One Million ($1,000,000.00) Dollars calculated in accordance with generally
accepted accounting principles, consistently applied, (the "After Tax Profit"),
the Corporation shall redeem for cash that number of shares of Redeemable
Preferred Stock whose aggregate Stated Value is equal to twenty-five (25%)
percent of the aggregate and total After Tax Profit; for example, in the event
the Corporation earns $1,200,000 in after tax profits in a prior fiscal year,
the After Tax Profit would be $300,000 and the Corporation would be obligated to
redeem 6 shares of the Redeemable Preferred Stock outstanding $1,200,000 x 25%)
= $300,000 divided by $50,000, the Stated Value, = 6 shares of Redeemable
Preferred Stock. No call for redemption of any amount of Redeemable Preferred
Stock shall be made without setting apart funds sufficient to pay the redemption
price.
Notice of redemption setting forth the redemption price, the
date and place of redemption of the shares called for redemption shall be mailed
by regular mail, postage prepaid, at least 30 days but not more than 90 days
before the redemption date to each holder of record (as of such record date as
may have been fixed therefor by the Board of Directors) of shares of Redeemable
Preferred Stock to be redeemed at such holder's address as shown on the books of
the Corporation, but no failure to mail such notice or defect therein or in the
mailing thereof shall affect the validity of redemption of
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any shares of Redeemable Preferred Stock so to be redeemed.
Unless the Corporation shall default in providing moneys at
the time and place specified for the payment of the redemption price as
aforesaid, all rights of the holders of Redeemable Preferred Stock as
stockholders (other than the right to receive the redemption price as aforesaid)
shall cease from and after the date fixed in the notice of redemption as the
date of redemption. The Corporation shall have the right, on the date on which
notice of redemption has been given as above provided or any subsequent date
prior to the date of redemption, to deposit in trust an amount equal to the
aggregate redemption price of the shares of Redeemable Preferred Stock to be
redeemed to the date of redemption; and in the event of such deposit,
notwithstanding that any certificates for shares of Redeemable Preferred Stock
so called for redemption shall not have been surrendered for cancellation, all
rights of the holders of shares of Redeemable Preferred Stock to be redeemed
shall cease from and after the date of such deposit, other than the right to
receive the redemption price as aforesaid.
Any interest accrued on any funds so deposited shall belong to
the Corporation and be paid to it from time to time. Any funds so deposited and
unclaimed at the end of seven years from the date fixed for redemption, shall be
paid to the Corporation, after which repayment the holders of shares of
Redeemable Preferred Stock so called for redemption shall look only to the
Corporation for the payment thereof, without interest.
4. Liquidation. The "Liquidation Value" shall be equal to the Stated
Value of $50,000.
In the event of the liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, the holders of shares of
Redeemable Preferred Stock shall be entitled to be paid out of the assets of the
Corporation before any distribution or payment is made to or set apart for the
holders of any shares of junior stock or the Common Stock of the Corporation,
the Liquidation Value per share of Redeemable Preferred Stock as of the date of
payment thereof, and no more. In case the amounts available for distribution to
the holders of all outstanding shares of Redeemable Preferred Stock are not
sufficient to pay the holders of all outstanding shares of Redeemable Preferred
Stock the full amounts to which they are respectively entitled as aforesaid,
then such amounts shall be distributed ratably to the holders of all the
outstanding shares of Redeemable Preferred Stock in proportion to the full
amounts to which they are respectively entitled. Neither the merger or
consolidation of the Corporation into or with any one or more other corporations
or entities, nor the sale, conveyance, exchange or transfer of all or
substantially all the property or assets of the Corporation, shall be deemed a
liquidation, dissolution or winding up of the Corporation, voluntary or
involuntary.
5. Voting Rights of Redeemable Preferred Stock.
(a) General. Except as set forth in subpargraphs (b) and (c)
of this paragraph 5 otherwise required by law, holders of Redeemable Preferred
Stock shall have no right to vote at, or participate in, any meeting of
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stockholders of the Corporation. Except as required by law, holders of
Redeemable Preferred Stock shall not be entitled to receive notice of any
meeting of stockholders at which they are not entitled to vote on or consent to
any matter.
There shall be no cumulative voting in elections for
directors. The number of directors of the Corporation may be further increased
or decreased in such manner as may be permitted by the By-laws and without the
vote of the holders of Redeemable Preferred Stock. No such action shall impair
the right of the holders of Redeemable Preferred Stock to elect directors as
provided in subparagraph (b) above.
(b) Corporate Action Requiring Affirmative Vote of Holders of
Shares of Redeemable Preferred Stock. So long as any shares of Redeemable
Preferred Stock are outstanding, the Corporation shall not:
(1) Without first obtaining the affirmative vote by written
consent, in person or by proxy, or at any meeting called for the purpose, of the
holders of at lest a majority of the outstanding shares of Redeemable Preferred
Stock, or if holders of other classes or series of preferred stock have the
right to vote on such matter, the holders of at lest a majority of shares of
Redeemable Preferred Stock and such other classes or series of preferred stock
voting as a single class,
(A) authorize or create any shares of stock
of any other class or series, or authorize an increase in the
authorized amount of any class or series of shares, which
shall rank in any respect prior to or on a parity with the
Redeemable Preferred Stock; or
(B) increase the authorized number of shares
of Redeemable Preferred Stock.
(C) amend, alter, change, or repeal any of
the express terms and provisions of the Redeemable Preferred
Stock in a manner which would adversely affect the rights or
preferences of the Redeemable Preferred Stock.
(2) For the purpose of this subparagraph (b), except as
otherwise specifically provided, the holders of shares of Redeemable Preferred
Stock shall vote as one class, and each holder of Redeemable Preferred Stock
shall be entitled to one vote for each share held.
(c) Voting Rights After Notice of Redemption. The voting
provisions described in this paragraph 5 shall not apply if, at or prior to the
time when the act with respect to which such vote would otherwise be required
shall be effected, notice shall have been given to holders of Redeemable
Preferred Stock that all outstanding shares of Redeemable Preferred Stock shall
be redeemed with 90 days after the giving of such notice.
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6. Status of Redeemed and Converted Shares. All shares of Redeemable
Preferred Stock redeemed, retired, purchased or otherwise acquired by the
Corporation shall not be reissued or resold, but shall be canceled, and the
Corporation may from time to time cause all such shares to be retired in the
manner provided by law.
7. No Preemptive Rights. The Redeemable Preferred Stock is not
entitled to any preemptive or subscription rights in respect of any
securities of the Corporation.
ARTICLE IV
DIRECTORS
The Governing Board shall be styled as Directors. The Directors are
hereby granted the authority to do any act on behalf of the Corporation as may
be allowed by law. Any action taken in good faith, shall be deemed appropriate
and in each instance where the Nevada General Corporation law provides that the
Directors may act in certain instances where the Articles of Incorporation so
authorize, such action by the Directors, shall be deemed to exist in these
Articles and the authority granted by said Act shall be imputed hereto without
the same specifically having been enumerated herein.
The Board of Directors may consist of from one (1) to nine (9)
directors, as determined, from time to time, by the then existing Board of
Directors.
ARTICLE V
NON-ASSESSABLE STOCK
The capital stock, after the amount of the subscription price has been
paid, shall not be subject to assessment to pay the debts of said Corporation,
whether issued for money, services, property or otherwise. The private property
of the stockholders shall not be subject to the payment of corporate debts to
any extent whatever.
ARTICLE VII
PERSONAL LIABILITY
Pursuant to NRS 78.037, neither the Directors, the Officers, nor the
Stockholders of the Corporation shall have any personal liability for damages or
for breach of fiduciary duty except for acts or omissions which include
misconduct or fraud.
ARTICLE VII
INCORPORATOR
The name and addresses of the incorporation of this Corporation is:
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Name Post Office Address
Gary M. Lee 445 E. 200 South, Suite 300
Salt Lake City, Utah
ARTICLE VIII
COMMON DIRECTORS
As provided by Nevada Revised Statutes 78.140, without repeating the
section in full here, the same is adopted and no contract or other transaction
between this Corporation and any of its officers, agents, or directors shall be
deemed void or voidable solely for that reason. The balance of the provisions of
the code section cited, as it now exists, allowing such transactions, is hereby
incorporated into this Article as though more fully set forth, and such Article
shall be read and interpreted to provide the greatest latitude in its
application.
ARTICLE IX
LIABILITY OF DIRECTORS AND OFFICERS
No Director, Officer, or Agent, to include counsel, shall be personally
liable to the Corporation or its stockholders for monetary damages for any
breach or alleged breach of fiduciary or professional duty by such person acting
in such capacity. It shall be presumed that in accepting the position as an
Officer, Director, Agent, or Counsel, said individual relied upon and acted in
reliance upon the terms and protections provided for by this Article.
Notwithstanding the foregoing sentences, a person specifically covered by this
Article, shall be liable to the extent provided by applicable law, for acts or
omissions which involve intentional misconduct, fraud, or a knowing violation of
law, or for the payment of dividends in violation of NRS 78.300.
ARTICLE X
ELECTION REGARDING NRS 78.###-##-#### and 78.411-78.444
This Corporation shall NOT be governed by nor shall the provisions of
NRS 78.378 through and including 78.3793 and NRS 78.411 through and including
78.444 in any way whatsoever affect the management, operation or be applied in
this Corporation.
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ARTICLE XI
INDEMNIFICATION
The Corporation shall indemnify, to the fullest extent permitted by
applicable law in effect from time to time, any person against all liability and
expense (including attorneys's fees) incurred by reason of the fact that he is
or was a director or officer of the Corporation, he is or was serving at the
request of the Corporation as a director, officer, employee, or agent of, or in
any similar managerial or fiduciary position of, another corporation,
partnership, joint venture, trust or other enterprise. The Corporation shall
also indemnify any person who is serving or has served the Corporation as a
director, officer, employee, or agent of the Corporation to the extent and in
the manner provided in any bylaw, resolution of the shareholders or directors,
contract, or otherwise, so long as such provision is legally permissible.
/s/Robert M. Long
Robert M. Long, President and Secretary
ACKNOWLEDGMENT
State of New York )
)ss.
County of Dutchess )
On April 23, 1999, personally appeared before me, a Notary Public,
Robert M. Long, who acknowledged that he executed the above instrument.
(Notary Stamp or Seal) /s/Mary M. Henschel
Mary M. Henschel
Notary Public
orobueno.art
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Exhibit 3.4
BYLAWS OF
CEVA INTERNATIONAL, INC.
A Nevada Corporation
ARTICLE I
OFFICES
Section 1 PRINCIPAL OFFICES. The principal office for the transaction of
the business of the corporation is fixed and located at 75-77 North Bridge
Street, Somerville, New Jersey 08876. The Board of Directors may change the
principal office from one location to another as from ti to time may be
necessary. Any change of this location shall be noted by the Secretary on these
Bylaws opposite this section, or this section may be amended to state the new
location.
Section 2. OTHER OFFICES. The Board of Directors may, at any time,
establish branch or subordinate offices at any place or places.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. ANNUAL MEETING. The annual meeting of shareholders may be held
on the last Saturday of March of each year at 10:00 a.m. or at such other date
and time which may be scheduled by the Board of Directors to the extent that
such scheduling is in compliance with the laws of the state of incorporation of
the Company. At this meeting, Directors shall be elected, and any other proper
business within the power of the shareholders may be transacted. In the event
that an annual meeting is not held in any year, the Board of Directors, as then
constituted, shall continue to perform their duties until such annual or special
meeting is properly called and they, or any of them, are re-elected or replaced.
Section 2. PLACE OF MEETINGS. All annual shareholders meetings shall be
held at the corporation's principal office, or a location selected by the Board
of Directors and notice to the shareholders as required by Section 4 of these
Articles, and all other shareholders meetings shall be held either at the
principal office or any other place within or outside the State of Nevada that
may be designated either by the Board of Directors in accordance with these
Bylaws, or by the written consent of all persons entitled to vote at the
meeting, given either before or after the meeting and filed with the Secretary
of the Corporation.
Section 3. SHAREHOLDER ACTION WITHOUT MEETING. Pursuant to Nevada law, any
action which could be taken at a meeting of the shareholders may be taken
without a meeting, if a written consent thereto is signed by shareholders
holding at least a majority of the meeting, if a written consent thereto is
signed by shareholders holding at least a majority of the
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voting power of the Corporation, except that if a different proportion of voting
power is required for such action at a meeting, then that proportion of written
consent shall be required.
Section 4. SPECIAL MEETINGS. A Special shareholders meeting for any
purpose whatsoever may be called at any time by the President, any
Vice-President, the Board of Directors, or one or more shareholders holding not
less than one-tenth (1/10) of the voting power or the Corporation.
Section 5. NOTICE OF MEETINGS. Written notices specifying the place,
day, and hour of the meeting and, in the case of a special meeting, the general
nature of the business to be transacted, shall be given not less than ten (10)
days, nor more than fifty (50) days before the date of the meeting. Such notice
must be given personally or by mail or by other means of written communication,
addressed to the shareholder at the address appearing on the books of the
corporation or given by the shareholder to the corporation for the purpose of
notice. If no such address appears or is given by a shareholder of record
entitled to vote at the meeting, notice is given at the place where the
principal executive office of the corporation is located, or by publication at
least once in a newspaper of general circulation in the country where the
principal executive office is located.
The notice shall be deemed to have been given at the time when
delivered personally or deposited in the mail or sent by other means of written
communication. An affidavit of mailing of any notice in accordance with the
provisions of this section executed by the Secretary shall be prima facie
evidence of the giving of notice.
Section 6. WAIVER OF NOTICE. A shareholder may waive notice of any annual
or special meeting by signing a written notice of waiver either before or after
the date of such
meeting.
Section 7. QUORUM. The presence in person or by proxy of the holders of
at least fifty-one percent (51%) of the outstanding shares entitled to vote at
any meeting of the shareholders shall constitute a quorum for the transaction of
business. The shareholders present at a duly called or held meeting at which a
quorum is present may continue to do business until adjournment notwithstanding
the withdrawal of enough shareholders to leave less than a quorum, any action
taken (other than adjournment) is approved by at least a majority of the shares
required to constitute a quorum.
Section 8. PROXIES. Every person entitled to vote at a shareholders
meeting of the corporation, or entitled to execute written consent authorizing
action in lieu of a meeting, may do so either in person or by proxy executed in
writing by shareholder or by his duly authorized attorney-in-fact. No proxy
shall be valid after eleven (11) months from the date of its execution unless
otherwise provided in the proxy.
Section 9. VOTING. Except as otherwise provided in the Articles of
Incorporation or by agreement or by the general corporation law, shareholders at
the close of business on the record date are entitled to notice and to vote.
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Section 10. LIST OF SHAREHOLDERS. The Secretary shall prepare, at least
ten (10) days before every meeting of shareholders, a complete list of the
shareholders entitled to vote at the meeting, arranged in alphabetical order,
showing the address of each shareholder and the number of shares registered in
the name of each shareholder. Such list shall be open to the examination of any
shareholder, for any purpose germane to the meeting. This list shall be produced
and kept at the time and place of the meeting during the whole time thereof and
may be inspected by any shareholder present.
Section 11. INSPECTORS. At each meeting of shareholders, the chairman
of the meeting may appoint one or more inspectors of voting, whose duty it shall
be to receive and count the ballots and make a written report showing the result
of the balloting. The Secretary of the Corporation may perform this function.
Section 12. ORDER OF BUSINESS. The order of business at the annual meeting
of the shareholders insofar as possible, and at all other meetings of
shareholders, shall be as follows:
1. Call to order.
2. Proof of notice of meeting.
3. Reading and disposing of any unapproved minutes.
4. Reports of officers.
5. Reports of committees.
6. Election of Directors.
7. Disposition of unfinished business.
8. Disposition of new business.
9. Adjournment.
ARTICLE III
BOARD OF DIRECTORS
Section 1. GENERAL POWERS. Subject to the provisions of the Nevada
Corporation Act, and any limitations in the Articles of Incorporation and these
Bylaws relating to actions required to be approved by the shareholders or by the
outstanding shares, the business and affairs of the Corporation shall be managed
and all corporate powers shall be exercised by or under the direction of the
Board of Directors.
Section 2. ENUMERATION OF DIRECTORS' POWER. Without prejudice to these
general rules, and subject to the same limitation, the Board of Directors shall
have the power to:
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(a) Select and remove all officers, agents and employees of the
Corporation; prescribe any powers and duties for them that are
consistent with law, with the Articles of Incorporation, and
these Bylaws; fix their compensation; and require from them
security for faithful service.
(b) Change the principal executive office or the principal
business office from one location to another; cause the
Corporation to be qualified to do business in any other state,
territory, dependency, or country and conduct business within
or outside the State of Nevada; and designate any place within
or outside the State of Nevada for the holding of any
shareholders meeting of meetings, including annual meetings.
(c) Adopt, make, or use a corporate seal; prescribe the forms of
certificates of stock; and alter the form of the seal and
certificate.
(d) Authorize the issuance of shares of stock of the Corporation
on any lawful terms, in consideration of money paid, labor
done, services actually rendered, debts or securities
canceled, or tangible or intangible property actually
received.
(e) Borrow money and incur indebtedness on behalf of the
Corporation, and cause to be executed and delivered for the
Corporation's purposes, in the corporate name, promissory
notes, bonds, debentures, deeds of trust, mortgages, pledges,
hypothecations, and other evidences of debt and securities.
(f) Engage in and/or adopt employment agreements, contracts, or
other employment contracts with independent contractors,
companies, government agencies, or individuals.
Section 3. NUMBER, TENURE, QUALIFICATION AND ELECTIONS.
To the extent allowed by the Articles of Incorporation, the Board of
Directors shall be fixed from time to time by resolution of the Board, but shall
not be less than one (1), nor shall it exceed five (5). Directors need not be
shareholders of the Corporation. The number of Directors may be increased beyond
five (5) only by approval of the outstanding shares of the Corporation. The
Directors of the Corporation shall be elected at the annual meeting of the
shareholders and shall serve until the next annual or special meeting is
properly called and they, or any of them, are re-elected and until their
successors have been elected and qualified.
Section 4. VACANCIES. A vacancy or vacancies on the Board of Directors
shall be deemed to exist in the event of the death, resignation, or removal of
any Director, or if the Board of Directors by resolution declares vacant that
office of a Director who has been declared of unsound mind by an order of court
of convicted of a felony, or if the authorized number of Directors is increased,
the shareholders fail at any meeting of shareholders at which any Director of
Directors are elected, to elect the number of Directors to be voted for at that
meeting.
Any Director may resign effective on giving written notice to the
Chairman of the Board, the President, the Secretary, or the Board of Directors,
unless a notice specifies a later time for that resignation to become effective.
If the resignation of a Directors is effective at a future time,
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the Board of Directors may elect a successor to take office when the resignation
becomes effective.
Vacancies on the Board of Directors may be filled by a majority of the
remaining Directors, whether or not less than a quorum, or by a sole remaining
Director, except that a vacancy created by the removal of a Director by the vote
or written consent of the shareholders or by court order may be filled only by
the vote of a majority of the shares entitled to vote represented at a duly held
meeting at which a quorum is present, or by the unanimous written consent of the
shareholders of the outstanding shares entitled to vote. The shareholders may
elect a Director or Directors at any time to fill any vacancy or vacancies not
filled by the Directors, but any such election by written consent shall require
the consent of a majority of the outstanding shares entitled to vote, except
that filling a vacancy created by a removal of a Director shall require the
written consent of the holders of all outstanding shares entitled to vote.
Each Director so elected shall hold office until the next annual
meeting of the shareholders and until a successor has been elected and
qualified.
Section 5. ANNUAL MEETING. Immediately following each annual meeting of
shareholders, the Board of Directors may hold a regular meeting at the place
that the annual meeting of shareholders was held or at any other place that
shall have been designated by the Board of Directors for the purpose of
organization, any desired election of officers, and the transaction of other
business. Notice of this meeting shall not be required.
Section 6. NOTICE OF MEETINGS. Notice need not be given of regular
meetings of the Board of Directors, nor is it necessary to give notice of
adjourned meetings. Notice of special meetings shall be in writing by mail at
least four (4) days prior to the date of the meeting or forty-eight (48) hours'
notice delivered personally or by telephone or telegraph or telecopier. Neither
the business to be transacted at, nor the purpose of any such meeting need by
specified in the notice. Attendance of a Director at a meeting shall constitute
a waiver of notice of that meeting except when the Director attends for the
express purpose of objecting to the transaction of any business in that the
meeting is not lawfully called or convened.
Section 7. PLACE OF MEETINGS AND MEETINGS BY TELEPHONE.
Regular and special meetings of the Board of Directors may be held at
any place within or outside the State of Nevada that has been designated from
time by the Board. In the absence of such designation, meetings shall be at the
principal executive office of the Corporation. Any meeting, regular or special,
may be held by conference telephone, or similar communication equipment, as long
as all Directors participating in the meeting can hear one another, and all such
Directors shall be deemed to be present in person at the meeting.
Section 8. SPECIAL MEETINGS. Special meetings of the Board of Directors for
any purpose or purposes may be called at any time by the Chairman of the Board
of the President, any Vice President, or the Secretary.
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Section 9. MAJORITY OR QUORUM. A majority of the authorized number of
Directors constitutes a quorum of the Board for the transaction of business
except as hereinafter provided.
Section 10. TRANSACTIONS OF BOARD. Except as otherwise provided in the
Articles or these Bylaws, or by law, every act or decision done or made by a
majority of the Directors present at a duly held meeting at which a quorum is
present, is the act of the Board, provided, however, that any meeting at which a
quorum was initially present may continue to transact business notwithstanding
the withdrawal of Directors if any action taken is approved by at lest a
majority of the required quorum for such meeting.
Section 11. ADJOURNMENT. A majority of Directors present at any
meeting, whether or not a quorum is present, may adjourn the meeting to another
time and place. If the meeting is adjourned for more than twenty-four (24)
hours, notice of the adjournment to another time and place must be given prior
to the time of the adjourned meeting to the Directors who were present at the
time of the adjournment.
Section 12. CONDUCT OF MEETING. The Chairman of the Board, of if there
is not such officer, the President, or in his absence, any Director selected by
the Director present shall preside at the meeting of the Board of Directors. The
Secretary of the Corporation or, in the Secretary's absence any person appointed
by the presiding officer, shall act as Secretary of the Board.
Section 13. ACTION WITHOUT MEETING. Any action required or permitted to
be taken by the Board of Directors may be taken without a meeting, if all
members of the Board shall individually or collectively consent in writing to
such action. Such action by written consent shall have the same force and effect
as a unanimous vote of the Board of Directors. Such written consent(s) shall be
filed with the minutes of the proceedings of the Board.
Section 14. FEES AND COMPENSATION OF DIRECTORS. Directors and members
of committees may receive such compensation, if any, for their services, and
such reimbursement of expenses, as may be fixed or determined by resolution of
the Board of Directors. Nothing herein contained shall be construed to preclude
any Director from serving the corporation in any other capacity as an officer,
agent, employee, or otherwise, and receiving compensation for such services.
Section 15. APPROVAL OF BONUSES FOR DIRECTORS AND OFFICERS.
No bonuses or share in the earnings or profits of the Corporation shall
be paid to any of the officers, Directors, or employees of the Corporation
except as approved by the Board of Directors.
ARTICLE IV
OFFICERS
Section 1. OFFICERS. The officers of the Corporation shall be a President,
a Vice- President, a Secretary, and a Chief Financial Officer (Treasurer). The
Corporation may also have,
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at the discretion of the Board of Directors, a Chairman of the Board, one or
more Assistant Secretaries, one or more Assistant Treasurers, and such other
officers as may be appointed in accordance with the provisions of Section 3 of
this Article IV. Any number of offices may be held by the same person, except
the offices of President and Secretary.
Section 2. ELECTION OF OFFICERS. The officers of the Corporation,
except such officers as may be appointed in accordance with the provisions of
Section 3 or Section 5 of this Article IV shall be chosen by the Board of
Directors, and each shall serve at the pleasure of the Board, subject to the
rights, if any, of an officer under any contract of employment.
Section 3. SUBORDINATE OFFICERS. The Board of Directors may appoint,
and may empower the President to appoint, such other officers as the business of
the corporation may require. Each of them shall hold office for such period,
have such authority and perform such duties as are provided in the Bylaws, or as
the Board of Directors may from time to time determine.
Section 4. REMOVAL AND RESIGNATION OF OFFICERS. Subject to the rights,
if any, of an officer under a contract of employment, any officer may be
removed, either with or without cause, by the Board of Directors, at any regular
or special meeting of the Board, or, except in case of an officer chosen by the
Board of Directors, by the Board of Directors.
Any officer may resign at any time by giving written notice to the
Corporation. Any resignation shall take effect on the date of receipt of that
notice or at any later time specified in that notice, unless otherwise specified
in that notice. Any resignation is without prejudice to the rights, if any, of
the corporation under any contract for which the officer is a party.
Section 5. VACANCIES IN OFFICES. A vacancy in any office because of
death, resignation, removal, disqualification, or any other cause, shall be
filled in the manner prescribed in these Bylaws for regular appointments to that
office.
Section 6. PRESIDENT. Subject to such powers, if any, as may be given
by the Bylaws or Board of Directors to other officers of the Corporation, the
President shall be General Manager and Chief Executive Officer of the
Corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction, and control of the business and the officers of
the Corporation. He shall preside at all meetings of the shareholders and at all
meetings of the Board of Directors. He shall have the general powers and duties
of management usually vested in the office of President of a corporation, and
shall have such other powers and duties as may be prescribed by the Board of
Directors or the Bylaws.
Section 7. VICE-PRESIDENT. In the absence or disability of the
President, the Vice-President designated by the Board of Directors shall perform
all the duties of the President, and when so acting shall have all the powers of
and be subject to all of the restrictions upon, the President. The sole duty of
the Vice-President of this Corporation shall be to function as a representative
of the President in such case as the President may be absent or disabled. The
Vice- President may, when not acting in the representative capacity of the
President, hold other positions and be assigned other duties within the
Corporation.
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Section 8. SECRETARY. The Secretary shall keep or cause to be kept, at
the principal executive office or such other place as the Board of Directors may
direct, a book of minutes of all meetings and actions of Directors, committees
of Directors and shareholders, with the time and place of holding, whether
regular or special, and, if special, how authorized, the notice given, the names
of those present at Director meetings or committee meetings, the number of
shares present or represented at shareholders meetings, and the proceedings.
The Secretary shall keep, or cause to be kept, at the principal
executive office or at the office of the Corporation's transfer agent or
registrar, as determined by resolution of the Board of Directors, a record of
shareholders, or a duplicate record of shareholders showing the names of all
shareholders and their addresses, the number of shares held by each, the number
and date of certificates issued for the same, and the number and date of
cancellation of every certificate surrendered for cancellation.
The Secretary or Assistant Secretary, if they are absent or unable to
act or refuse to act, any other officer of the Corporation shall give, or cause
to be given, notice of all meetings of the shareholders, of the Board of
Directors, and of committees of the Board of Directors required by the Bylaws or
by law to be given. The Secretary shall keep the seal of the Corporation, if one
is adopted, in safe custody and shall have such other powers and perform such
other duties as may be prescribed by the Board of Directors or by the Bylaws.
Section 9. CHIEF FINANCIAL OFFICER. The Chief Financial Officer
(Treasurer) shall keep and maintain, or cause to be kept and maintained,
adequate and correct books and records of accounts of the properties and
business transactions of the Corporation, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, capital, retained earnings,
and shares. The book of accounts shall at all reasonable times be opened to
inspection by any Director.
The Chief Financial Officer shall deposit all monies and other
valuables in the name and to the credit of the Corporation with such
depositories as may be designated by the Board of Directors. He shall disburse
the funds of the corporation as may be ordered by the Board of Directors, shall
render to the President and Directors, whenever they request it, an account of
all of his transactions as Chief Financial Officer and of the financial
condition of the Corporation, and shall have other powers and perform other such
duties as may be prescribed by the Board of Directors of the Bylaws.
ARTICLE V
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES
AND OTHER AGENTS
Section 1. AGENTS, PROCEEDINGS AND EXPENSES. For the purpose of this
Article, "agent" means any person who is or was a Director, officer, employee,
or other agent of this Corporation, or is or was serving at the request of this
Corporation as a Director, officer, employee, or agent of another foreign or
domestic corporation, partnership, joint venture, trust or other enterprise, or
was a Director, officer, employee, or agent of a foreign or domestic
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corporation which was a predecessor corporation of this corporation or of
another enterprise at the request of such predecessor corporation; "proceeding"
means any threatened, pending or completed action or proceeding, whether civil,
criminal, administrative, or investigative; and "expenses" includes, without
limitation, attorneys' fees and any expenses of establishing a right to
indemnification under Section 4 of Section 5(c) of this Article.
Section 2. ACTIONS OTHER THAN BY THE CORPORATION. This Corporation
shall defend and indemnify any person who was or is a party, or is threatened to
be made a party, to any proceeding (other than an action by or in the right of
this Corporation) by reason of the fact that such person is or was an agent of
this Corporation, against expenses, judgments, fines, settlements and other
amounts actually and reasonably incurred in connection with such proceeding if
that person acted in good faith and in a manner that that person reasonably
believed to be in the best interests of this corporation and, in the case of a
criminal proceeding, had no reasonable cause to believe the conduct of that
person was unlawful. The termination of any proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which the person reasonably believed to be in the best
interest of this Corporation or that the person had reasonable cause to believe
that the person's conduct was lawful.
Section 3. ACTIONS BY THE CORPORATION. This Corporation shall indemnify
any person who was or is a party, or is threatened to be made a party, to any
threatened, pending or completed action by or in the right of this Corporation
to procure a judgment in its favor by reason of the fact that said person is or
was an agent, counsel to the Corporation, officer or director of this
Corporation, against expenses actually and reasonably incurred by that person in
connection with the defense or settlement of that action if that person acted in
good faith, in a manner that that person believed to be in the best interests of
this Corporation and with such care, including reasonably inquiry, that such
action would not be deemed grossly negligent on the part of such agent (for the
purposes of this Article V, the term "agent" shall mean and include all
officers, directors, counsel, and employees). Indemnification shall be available
under this Section 3, conditioned only upon the following:
(a) In respect of any claim, issue or matter as to which that
person may be liable to this Corporation, the duty and
obligation of the Corporation to defend and indemnify such
agent shall be absolute unless and only to the extent that the
court in which that action was brought shall determine, upon
application, that in view of all the circumstances of the
case, said person acted with reckless disregard equated to
gross negligence with regard to the specific claims made
against said person;
(b) The indemnification provisions set-forth herein are to be
interpreted as broadly as possible in their application to any
officer, director, counsel or agent of the corporation, to
include accountants and counsel for the corporation. Such
interpretation shall treat these provisions as continuing
contractual obligations of the corporation and subsequent
modification shall not limit the effect of these provisions as
applied to the covered classes who were so covered, at any
time following adoption hereof.
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Section 4. SUCCESSFUL DEFENSE BY AGENT. To the extent that an agent of
this corporation has been successful on the merits or otherwise in defense of
any proceeding referred to in Section 2 or 3 of this Article, or in defense of
any claim, issue, or matter therein, the agent shall be indemnified against
expenses actually and reasonably incurred by the agent in connection therewith.
An agent shall be deemed successful if the Court fails to make a specific
finding regarding the degree of fault as set forth in Section 3, hereinabove.
Section 5. REQUIRED APPROVAL. Except as provided in Section 4 of this
Article, any indemnification under this Article shall be made by this
Corporation only if authorized in the specific case on a determination that
indemnification of the agent is proper in the circumstances because the agent
has met the applicable standard of conduct set forth in Section 2 or 3 of this
Article, by:
(a) A majority vote of a quorum consisting of Directors who are
not parties to the proceeding;
(b) Approval by the affirmative vote of a majority of the shares
of this corporation entitled to vote represented at a duly
held meeting at which a quorum is present or by written
consent of holders of a majority of the outstanding shares
entitled to vote; or
(c) The court in which the proceeding is or was pending, on
application made by this corporation or the agent or the
attorney or other person rendering services in connection with
the defense, whether or not such application by the agent,
attorney or other person is opposed by this Corporation.
Section 6. ADVANCE OF EXPENSES. Expenses incurred in defending any
proceeding may be advanced by this Corporation before the final disposition of
the proceeding on receipt of an undertaking by or on behalf of the agent to
repay the amount of the advance unless it shall be determined ultimately that
the agent is entitled to be indemnified as authorized in this Article.
Section 7. OTHER CONTRACTUAL RIGHTS. Nothing contained in this Article
shall affect any right to indemnification to which persons other than Directors
and officers of this Corporation or any subsidiary hereof may be entitled to
contract or otherwise.
Section 8. INSURANCE. Upon and in the event of a determination by the
Board of Directors of this Corporation to purchase such insurance, this
Corporation shall purchase and maintain insurance on behalf of any agent of the
corporation against any liability asserted against or incurred by the agent in
such capacity or arising out of the agent's status as such whether or not this
Corporation would have the power to indemnify the agent against that liability
under the provisions of this section.
Section 9. FIDUCIARIES OF CORPORATE EMPLOYEE BENEFIT PLAN. This Article
does not apply to any proceeding against any trustee, investment manager, or
other fiduciary of an employee benefit plan in that person's capacity as such,
even though that person may also be an agent of the Corporation as defined in
Section 1 of this Article. Nothing
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contained in this Article shall limit any right to indemnification to which such
trustee, investment manager, or other fiduciary may be entitled by contract or
otherwise, which shall be enforceable to the extent permitted by applicable law
other than this Article.
ARTICLE VI
STOCK CERTIFICATES
Section 1. FORM. The shares of the Corporation shall be represented by
certificates signed by the President or Vice President and the Chief Financial
Officer or the Secretary of the Corporation. Any or all of such signatures may
be facsimiles if countersigned by a transfer agent, or registered by a
registrar, other than the Corporation itself or an employee of the Corporation.
Each such certificate shall also state:
(a) The name of the record holder of the shares represented by such
certificate;
(b) The number of shares represented thereby;
(c) A designation of any class or series of which such shares are a part;
(d) That the shares have a par value of $0.001;
(e) That the corporation is organized under the laws of the State of Nevada;
(f) any restrictions applicable to the shares shall be so designated on the
face thereof.
Section 2. TRANSFERS. Transfer of shares of the Corporation shall be
made in the manner set forth in the Nevada Uniform Commercial Code. The
Corporation shall maintain stock transfer books, and any transfers shall be
registered thereon only on request and surrender of the stock certificate
representing the transferred shares, duly endorsed; if transfer is by Power of
Attorney, the Power of Attorney shall be deposited with the Secretary of the
Corporation or with the designated Transfer Agency.
Section 3. LOST, DESTROYED AND STOLEN CERTIFICATES. No certificate or
shares of stock in the Corporation shall be issued in place of any certificate
alleged to have been lost, destroyed, stole, or mutilated except on production
of such evidence and provision of such indemnity to the Corporation as the Board
of Directors may prescribe.
ARTICLE VII
CORPORATE ACTIONS
Section 1. CONTRACTS. The Board of Directors may authorize any officer
or officers, or any agent or agents of the Corporation, to enter into any
contract or to execute and deliver any instrument in the name of and on behalf
of the Corporation, and such authority may be general or confined to specific
instances.
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Section 2. LOANS. No loan shall be made by the Corporation to its
officers or Directors, and no loan shall be made by the Corporation secured by
its shares. No loan shall be made or contracted on behalf of the Corporation and
no evidences of indebtedness shall be issued in its name unless authorized by
resolution of the Board of Directors. Such authority may be general or confined
to specific instances.
Section 3. CHECKS, DRAFTS OR ORDERS. All checks, drafts, or other
orders for the payment of money by or to the Corporation and all notes and other
evidence of indebtedness issued in the name of the Corporation shall be signed
by such officer or Officers, agent or agents of the Corporation, and in such
manner as shall be determined by resolution of the Board of Directors.
Section 4. BANK DEPOSITS. All funds of the Corporation not otherwise
employed, shall be deposited to the credit of the Corporation in such banks,
trust companies, or other depositories as the Board of Directors may select.
ARTICLE VIII
MISCELLANEOUS
Section 1. INSPECTION OF CORPORATE RECORDS. The stock ledger and minute
books may be kept by any information storage device if readily convertible into
legible form. Any shareholder of record, in person or by any attorney or agent
who presents proof of such position with guaranteed signature on such proof,
may, upon written demand under oath, stating purpose, inspect for any proper
purpose, the stock ledger, list of shareholders and make written extracts of the
same. Such extracts shall be made in writing by the individual preparing or
requesting such inspection and such inspections shall be during normal business
hours and shall not be made without at least five (5) business days written
notice thereof. Such notice, to be effective must be received not at least five
(5) business days prior to the proposed inspection date, a signed receipt from
the U.S. Postal Service shall be proof of such notice and the date of receipt.
Section 2. INSPECTION OF ARTICLES OF INCORPORATION AND BYLAWS. The original
or a copy of the Articles of Incorporation and Bylaws of the Corporation, as
amended or otherwise altered to date, and certified by the Secretary of the
Corporation, shall at all times be kept at the principal executive office of the
Corporation. Such Articles and Bylaws shall be open for inspection to all
shareholders of record or holders of voting trust certificates at all reasonable
times during the business hours of the Corporation.
Section 3. FISCAL YEAR. The fiscal year of the Corporation shall begin on
the first day of January of each year and end at midnight on the last day of
December of the same year or as otherwise determined by the Board of Directors.
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Section 4. CONSTRUCTION AND DEFINITION. Unless the context requires
otherwise, the general provisions, rules of construction, and definitions
contained in the applicable Nevada Statutes which shall govern the construction
of these Bylaws.
Without limiting the foregoing, the masculine gender where used
included the feminine and neuter; the singular number includes the plural, and
the plural number includes the singular; "shall" is mandatory and "may" is
permissive; and "person" includes the Corporation as well as a natural person.
ARTICLE IX
AMENDMENTS TO BYLAWS
These Bylaws may be amended at any time by a majority vote of the Board
of Directors or by a majority vote of the outstanding shares held by the
shareholders of the corporation.
CERTIFICATE OF SECRETARY OF ADOPTION BY DIRECTORS
I HEREBY CERTIFY that I am the duly elected, qualified and acting
Secretary of the above named Corporation and that the above and foregoing Bylaws
were adopted as the Bylaws of said Corporation on the date set forth above by a
majority of vote of the shareholders of said Corporation.
Dated: March 18, 1994
/s/
Secretary
byl-cev.oro
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Exhibit 10.1
LOAN AND MASTER LTTD SERVICES AGREEMENT
THIS AGREEMENT, made this 6th day of Day of December, 199, by
and between CEVA International, Inc., its permitted successors and assigns, a
New Jersey corporation, having its principal offices located at 380 Foothill
Road, Bridgewater, New Jersey 08807 (hereinafter referred to as the
("Corporation"), David Green, having an address c/o Phoenix Soil, Inc., 130
Freight Street, Waterbury, Connecticut 06723 ("D. Green"), Green Globe, LLC, a
single member Connecticut limited liability company having D. Green as its sole
member with its principal offices located at 130 Freight Street, Waterbury,
Connecticut 06723 ("Green Globe") and Herbert G. Case, an individual having his
residence located at 50 Fieldstone Road, Bedminster, New Jersey 07921 (sometimes
hereinafter referred to as either "Case" or"Guarantor").
B A C K G R O U N D
WHEREAS, the Corporation and Case have contacts and in an
knowledge of doing business in the CEE (as defined herein), and Green Globe has
expertise in providing LTTD services (as defined herein) and said parties have
been discussing entering into certain agreements for which Green Globe shall
provide his expertise in LTTD and the Corporation and Case their contacts and
knowledge of the CEE; and
WHEREAS, pursuant to the general terms mutually agreed to by
the parties, D. Green has agreed to make a loan in the aggregate amount of
$250,000 to the Corporation to fund its capital requirements in return for which
the Corporation has agreed to give to Green Globe exclusive rights to provide
equipment, technology and services for low temperature thermal desorption
projects ("LTTD") that the Corporation may contract for with their parties in
Central and Eastern Europe (the"CEE") as defined more specifically hereunder,
and;
WHEREAS, the Corporation, Case and Green Globe desire to set
forth in this definitive agreement all of the terms and provisions that shall
further define and govern their agreements and promises set forth herein (the
"Agreement").
NOW, THEREFORE, in consideration of the mutual premises and
promises made by each party to the other, it is agreed:
Loan. Subject to the terms and conditions of this Agreement,
D. Green hereby agrees to loan to the Corporation the sum of Two Hundred Fifty
Thousand ($250,000) Dollars (the "Loan") by delivering to the corporation by
certified or bank draft or by wire transfer to its designated account the sum of
U.S.
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Two Hundred Fifty Thousand ($250,000) Dollars upon the closing of this Agreement
pursuant to the terms and provisions set forth herein.
Evidence of Indebtedness. Upon the closing of the Loan, the
Corporation shall execute and deliver a Commercial Term Promissory Note
evidencing the amount of the Loan which shall be in the form and contain all of
the terms and provisions set forth in the Commercial Term Promissory Note
annexed hereto as Exhibit A and incorporated by reference herein. Any default
under the Agreement by Case or the Corporation not cured within any applicable
cure period shall constitute an immediate "default" under the commercial Term
Promissory Note referred to in Section 2 hereof.
Security for the Loan. In order to provide Green Globe with
adequate security for the repayment of the Loan, Case shall provide Green Globe
with (a) his personal guarantee, the form of which is also annexed hereto as
Exhibit B and incorporated herein by reference (b) a certificate or certificates
evidencing the collateral assignment of a policy or policies insuring Case's
life in the amount of the Loan, as applicable, (c) his most current personal
financial statement.
Representations and Warranties of Investor. Green Globe hereb
represents and warrants to the Corporation as follows:
(a) Green Globe has the full legal right and power and all
authority and approval required to enter into, execute and deliver this
Agreement and to perform fully its obligations hereunder. The Agreement has been
duly executed and delivered and is the valid and binding obligation of Green
Globe, enforceable in accordance with its terms, except to the extent that
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or other such laws affecting the enforcement of creditors' rights
generally and by principles of equity (regardless or whether enforcement is
sought in a proceeding at law or in equity).
(b) The execution, delivery and performance of this Agreement
by Green Globe will not: (i) require the approval or consent of any Person or
(ii) conflict with or result in any breach or violation of any of the terms and
conditions of, or constitute (or with notice or lapse of time or both
constitute) a default under any statute, regulation, order, judgment or decree
of or applicable to Green Globe, or any instrument, contract or other agreement
to which Green Globe is a party or by or to which Green Globe is bound or
subject.
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(c) Green Globe LLC is duly organized and validly existing
under the laws of the State of Connecticut and has all requisite power to
execute, deliver and perform all of the terms and conditions required of it
under this agreement.
Representations, Warranties and Covenants of the Corporation.
The Corporation and Case, as the case may be, hereby jointly and severally
represent and warrant to Green Globe as follows:
(a) Case and the Corporation have the full legal right and
power and all authority and approval required to enter into, execute and deliver
this Agreement and to perform fully its obligations hereunder. The Agreement has
been duly executed and delivered and is the valid and binding obligation of Case
and the Corporation, enforceable in accordance with its terms, except to the
extent that enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or other such laws affecting the enforcement of creditors' rights
generally and by principles of equity (regardless of whether enforcement is
sought in a proceeding at law or in equity).
(b) The execution, delivery and performance of this Agreement
by Case and the Corporation will not: (i) require the approval orconsent of any
Person (ii) conflict with or result in any breach or violation of any of the
terms and conditions, of or constitute (or with notice or lapse of timeor both
constitute) a default under any statute, regulation,order,judgment or decree of
or applicable to Case and/or the Corporation, or any instrument, contract or
other agreement to which Case and/or the Corporation is a party or by or to
which Case and/or the Corporation is bound or subject.
(c) The Corporation is duly organized and validly existing
under the laws of the State of New Jersey and hasall requisitepower to execute,
deliver and perform all of the terms and conditions required of it under this
Agreement
(d) The parties acknowledge that the Corporation shall merge
with or reorganize as a Delaware corporation which when merged or reorganized
shall assume all of the obligations and duties, warranties and representations
of the Corporation set forth in this Agreement and in which Herbert G. Case
shall be the controlling and majority shareholder. In the event of any further
reorganization, recapitalization, merger or the like, the Corporation shall be
permitted to undertake any and all such activity without the prior written
consent of Green Globe provided that the resulting entity assumes all of the
obligations and duties under this Agreement and Herbert G. Case is the majority
owner of this resulting entity.
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(e) No material changes have occurred in the financial
condition of Case since March 13, 1997, the date of the Personal Financial
Statement of Herbert G. Case for which said Personal Financial Statement was
provided to Green Globe prior to the date hereof.
(f) The Corporation will maintain its legal existence and good
standing under the laws of its jurisdiction of organization or upon prior
written notice to Green Globe, the laws of a substituted jurisdiction being the
State of Delaware, maintain its qualification to do business in each state and
country in which failure to do so would have a material adverse effect on the
condition, financial or otherwise of the Corporation, and maintain all of its
rights and corporate privileges reasonably necessary to the conduct of its
business.
(g) The Corporation will not consolidate with or merge with or
into or enter into or undertake any plan or agreement of consolidation, merger,
or reorganization with an person or legal entity. The corporation will not at
any time sell, assign, transfer, lese (as lessor) outside of its ordinary course
of business or otherwise transfer all or any substantial part of its properties
or assets to any person or legal entity (either by or through a single
transaction or by or through a series of separate but related transactions).
(h) Case, as majority shareholder of the Corporation, shall
not sell or transfer his stock ownership in the Corporation pursuant to a
transaction resulting in Case owning less than 51% of the outstanding and issued
shares of stock of the Corporation representing both voting and equity
interests.
Green Globe's Right to Participate in Projects.
A. "LTTD" Participation. The parties acknowledge that the
Corporation and Case have developed extensive relationships with private and
public sector entities in the CEE that have led to opportunities to engage in
LTTD Projects. In consideration of D. Green's commitment to loan the Corporation
the aggregate amount of $250,000 and for other good and valuable consideration,
plus Green Globe's undertakings Seaforth in Section 6A(b) below, the
Corporation, its subsidiaries and affiliates hereby grants to Green Globe the
exclusive right to provide the Corporation equipment and services for low
temperature thermal desorption ("LTTD") that may be required under any
agreements, understandings and contracts as the Corporation, including its
subsidiaries and affiliates, which said Corporation may have throughout the term
of this Agreement with third parties for utilization in the CEE. The parties
acknowledge that the terms and provisions that shall govern the provisions for
LTTD equipment and services shall be memorialized in a separate contract or
contacts (the "LTTD") Contract(s)"). The Corporation hereby warrants and
represents to Green Globe that it shall utilize
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its "best efforts' to negotiate any and all LTTD Contract(s) with Green Globe
throughout the term of this Agreement. Notwithstanding the parties' agreement to
enter into a separate and distinct contract, the LTTD Contract(s) shall either
include or further define, as the case may be, the following terms and
provisions:
(a) Exclusive Rights to Participate.
At anytime during the term of this Agreement the Corporation
enters into any agreement, understanding or contract with a third party that
requires the furnishings of LTTD equipment and services to any Corporation
project in the CEE (a "LTTD Project"), the Corporation shall develop a proposal
for the utilization of Green Globe's LTTD equipment and services for the LTTD
Project. The Corporation shall communicate its LTTD contract proposal to Green
Globe at its designated offices. Green Globe and the Corporation shall utilize
their best efforts to negotiate a binding contract for utilization of Green
Globe's LTTD equipment and services for the LTTD Project. Subject to the
"Required LTTD Contract Terms- Green Globe" set forth below, in the event that
the Corporation and Green Globe are unable to negotiate a mutually agreed upon
contract during the 45 day period commencing upon Green Globe's receipt of the
Corporation's LTTD Project contract proposal, then and in that event Green Globe
and the Corporation shall utilize their joint and best efforts to identify and
contract with a third party mutually acceptable to all parties hereof to furnish
the LTTD equipment and services for the subject proposed LTTD Project.
(b) Required LTTD Contract(s) Terms - Green Globe
All LTTD Contract(s) that may be executed and delivered by
and between the Corporation under this Agreement shall require the following
commitments and/or provisions: Green Globe shall utilize his best efforts to
provide all LTTD equipment and services required under any LTTD Project,
including but not limited to electrical wiring and controls so that the same is
operational at its expected capacities; Green Globe shall utilize his best
efforts to institute the necessary mobilization of the LTTD equipment and
services which shall include but not be limited to assuming the obligations to
transport, insure and cause its passage through all ports of entry and country
boundaries and to provide for its timely arrival at the site or site(s) as
required under the LTTD Contract (s); Green Globe shall utilize his best efforts
to provide training to on-site personnel for the effective operation and safety
of the LTTD equipment and technology, and; Green Globe shall utilize his best
efforts to support the Corporation with any necessary applications and the like
to obtain applicable environmental permits and certifications to operate the
LTTD equipment required.
(c) Required LTTD Contract(s) Terms-the Corporation.
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All LTTD Contract(s) that may be executed and delivered by
and between the Corporation under this Agreement shall require the following
commitments and/or provisions by the Corporation: the Corporation shall utilize
its best efforts to obtain, maintain and renew applicable government permits,
licenses and other approvals required for the installation and operation of LTTD
equipment; the Corporation and Green Globe shall provide or arrange for
day-to-day management of the LTTD Project operations and support through its in-
country operating companies, and; the Corporation shall use it best efforts to
assist Green Globe in arranging for the day-to-day management, transportation
and mobilization of any LTTD equipment and services to the subject LTTD Project.
(d) Payment to Green Globe in LTTD Contract(s).
The Corporation and Green Globe agree that after payment of
all direct and indirect costs associated with any LTTD Project (as listed on
Schedule A attached hereto and made a party hereof), they shall share equally
the profits generated from the LTTD Contract. The Corporation and Green Globe
hereby agree to utilize their best efforts to mutually agree upon the direct and
indirect costs for each LTTD Contract. Notwithstanding, all depreciation and/or
amortization recognized over a five 950 year period on a straight line method
basis for the LTTD equipment, shall be considered either direct or indirect
costs of Green Globe incurred in the performance of its duties under Section 6
of this Agreement. Payments to Green Globe shall be made on a processed ton
basis within the earlier of ten (10) days of payment received by the Corporation
in or sixty (60) days from invoice date.
(e) Purchase of LTTD Equipment.
All of the LTTD Contract(s) shall provide the Corporation
with the right to purchase all or part of the LTTD Equipment and, if applicable,
any technology or proprietary licenses and royalties associated therewith, at a
purchase price that shall be mutually agreed upon by Green Globe and the
Corporation. The insertion of this provision in all the LTTD Contracts shall not
alter any of the other material terms and provisions therein. Notwithstanding,
neither the Corporation, or any of its related or affiliated entities, shall
purchase, rent, lease, or contract for LTTD equipment during the term of this
Agreement without theprior written consent of Green Globe. Any permitted third
party purchase, rent, lease, or contract regarding LTTD services are subject to
6(d).
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(f) Mutual Cooperation.
The Corporation and Green Globe shall agree to utilize their
best efforts to identify and to provide to each other access to any services,
guaranties, funding mechanisms or repatriation options that may be provided by
the Ex-Im Bank, or others and that would benefit any and all LTTD Projects for
which an LTTD Contract has been executed and delivered. The parties hereto shall
also provide in writing from time to time to each other the names and identities
of all their related (by ownership) or affiliated (by contract) entities for
purposes of drafting and completing project budgets to the extent necessary to
eliminate doing business with unknown related or affiliated entities, unless
agreed to in writing by the parties hereto.
7. Confidentiality and Public Statements. Except as otherwise provided
in this Section 7, the terms and conditions of this Agreement and all data,
reports, records and other information of any kind whatsoever developed,
acquired or delivered or obtained by any party from the other in connection with
either party's businesses, business plans, financial information, financial
plans, processes, trade secrets, technical information and know-how, customers,
suppliers and other business prospects which may be obtained during the term of
this Agreement shall be treated by the parties as confidential (hereinafter
"Confidential Information") and neither party shall reveal or otherwise disclose
such Confidential Information to third parties without the prior written consent
of the other party.
The foregoing restrictions shall not apply to the disclosure
of Confidential Information to the following Persons on a need to know basis for
any legitimate purpose under this Section 9, provided that reasonable steps are
taken to insure that such Persons shall also maintain the confidentiality of the
Confidential Information:
(1) Any Affiliate;
(2) Any Authorized Person;
(3) Any public or private financing agency or institution;
(4) Any contractors or subcontractors that the parties may
engage;
(5) Confidential Information that otherwise comes into the
public domain; or
(6) Confidential Information that is required, in either
party's reasonable opinion, to be disclosed to any U.S. or foreign federal,
state or local
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government or appropriate agencies and departments thereof or that is required,
in any party's reasonable opinion, to be publicly announced, to the extent
required by law.
The provisions of this Section 7 shall be applicable only as
long as this Agreement remains in full force and effect.
Except as otherwise provided herein, no party to this
Agreement shall make any public announcement or public disclosure with regard to
any information concerning an LTTD Project, and LTTD Contract, including
Confidential Information, except as may be required by law, without the prior
written consent of the other parties as to the content and timing of such
announcement or disclosure, which consent shall not be unreasonably withheld.
8. Non-Competition Provision. D. Green, Green Globe, Case and the
Corporation, their successors and permitted assigns, subsidiaries,
sub-contractors, advisors, hereby agree that during the term of this Agreement
they will not perform or sell LTTD services or LTTD products now offered or sold
by the business of the Corporation, its subsidiaries or affiliates or which may
be developed during the term of this Agreement by the Corporation, its
subsidiaries or affiliates in the countries of Hungary, Romania, Czech Republic,
Slovakia, Poland, Yugoslavia, Croatia, Serbia, Bulgaria and the Ukraine
("Central and Eastern Europe"or the "SEE"). Green Globe hereby consents to the
jurisdiction of the United States District Court, District of Connecticut for
all purposes under this Section 8.
9. Assignment. This contract is not assignable without the prior
written consent of the non-assigned parties.
10. Modification. This Agreement sets forth the entire understanding of
the Parties hereto with respect to the subject matter hereof, supersedes all
prior agreements, whether oral or written, and may not be modified, discharged
or terminated except by a written instrument duly executed by each party.
11. Binding Effect. The provisions of this Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
12. Governing Law; Term of Agreement. This Agreement shall be
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governed by and construed in accordance with the laws of the State of
Connecticut without regard to principles of conflicts of law.
13. Term and Termination. The term of this Agreement shall commence
upon the Closing Date, defined below, and shall continue until the tenth
anniversary date of such Closing Date. This Agreement may be terminated prior to
the expiration of its term as follows:
(a) By the mutual agreement of the parties; or
(b) By a party on 90 days' prior written notice in the event
of a default or breach under this Agreement and the failure by the alleged
defaulting or breaching party to undertake reasonable measures to cure said
default or breach within said 90 day period.
(c) At any time during the term of this Agreement, and because
of D. Green unique expertise and skills in connection with the performance,
know-how and technology associated with the LTTD equipment and services
contemplated to be performed during the course of this Agreement, the
Corporation may take out a policy or policies insuring D. Green life in an
amount deemed appropriate by the Corporation and naming itself as beneficiary
thereof in order to protect itself in the event of D. Green's untimely death.
14. Closing. The closing of this Agreement and the closing of the Loan
shall occur on or about December , 1997 (the "Closing Date"), at a mutually
agreed upon place, and shall be consummated by Green Globe's transfer of funds
in the amount of $250,000, through delivery of its bank or certified check or by
wire transfer to the Corporation at its designated bank account and shall be
consummated by the Corporation by its issuance and delivery to D. Green of the
Corporation's promissory note in the form set forth as Exhibit A annexed hereto
as well as certificates of insurance evidencing the naming of D. Green as a
beneficiary thereunder for an amount of life insurance proceeds equal to
$250,000.
15. Default. Upon a default by any party hereto, in addition to
remedies available to the non-breaching party hereunder or under relevant law,
the prevailing party(ies) shall be entitled to recover reasonable attorneys fees
and other costs of litigation incurred in connection with pursuing its rights
against the breaching party.
16. Miscellaneous. Notwithstanding anything to the contrary herein
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contained, neither D. Green, by making the loan or Green Globe, by providing
LTTD services and equipment to the Corporation for application by the
Corporation in the CEE, shall be deemed a partner or joint venturer with the
Corporation, and the Corporation agrees to hold Green Globe and D. Green
harmless from any damages and expenses resulting from such a construction of the
relationship of the parties or any assertion thereof.
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of
the day, month and year first above written.
ATTEST: CEVA INTERNATIONAL, INC.
/s/Joseph J. Tomasek By:/s/ Herbert G. Case
Herbert G. Case
President
WITNESS: DAVID GREEN
s/s s/s David Green
WITNESSETH: GREEN GLOBE, LLC
- - ----------------------- -------------------------------
/s/ By /s/ David Green, Sole Member
WITNESS:
- - ----------------------- ------------------------------
/s/ Joseph J. Tomasek s/s Herbert G. Case
Herbert G. Case, Individually
cev-lttd.gre
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Schedule A
NATURAL GAS
ELECTRICITY
LABOR
PAYROLL
TAXES
BENEFITS
INSURANCE
LEGAL FEES
LOAN
EQUIPMENT
FUEL
MAINTENANCE AND REPAIR
FINISHED SOIL
TRANSPORTATION COST
DISPOSAL COST
LABORATORY
EQUIPMENT
SUPPLIES
LIME
OFFICE
OFFICE
EQUIPMENT
SUPPLIES
PHONE
SUBCONTRACTORS
This Schedule is only illustrative and indirect and direct costs may be added or
deleted as appropriate, from time to time.
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COMMERCIAL TERM PROMISSORY NOTE
$250,000.00 December 6, 1997
New Jersey
FOR VALUE RECEIVED, the undersigned, CEVA International, Inc., a New
Jersey corporation with a principal address of 380 Foothill Road, Bridgewater,
New Jersey 08807 (the "Borrower"), promises to pay to the order of David Green,
("Lender"), with a principal address of 130 Freight Street, Waterbury, CT 06723
or at such other place as the holder hereof (including Lender, hereinafter
referred to as "Holder'), may designate, the sum of TWO HUNDRED AND FIFTY
THOUSAND AND 00/100 ($250,000.00) DOLLARS, together with interest on the unpaid
balance of this Note beginning as of the date hereof, before or after maturity
or judgment (but subject to the default rate of interest set forth below), at
the per annum rate set forth in Paragraph 1 below, which interest rate shall be
computed daily and payable monthly in arrears on the basis of a Three Hundred
Sixty-Five (365) day year and the actual days elapsed, together with all taxes
levied or assessed on this Note or the debt evidenced hereby against the Holder,
and together with all reasonable costs, expenses and reasonable attorneys' and
other reasonable professional's fees incurred in any action to collect and/or
enforce this Note or to enforce, protect, preserve, defend, realize upon or
foreclose any security agreement, mortgage or other agreement securing or
relating to this Note, including without limitation, all reasonable costs and
expenses incurred to sustain the lien of said security agreement, or other
agreement or in any litigation or controversy arising from or connected in any
manner with said security agreement or other agreement, or this note. Borrower
further agrees to pay all reasonable costs, expenses and reasonable attorneys'
and other reasonable professionals' fees incurred by Holder in connection with
any "workout" or default resolution negotiations involving legal counselor other
professionals and further in connection with any re-negotiation or restructuring
of the indebtedness evidenced by this Note. Any such costs, expenses and/or fees
remaining unpaid after demand therefor, may, at the discretion of the Holder, be
added to the principal amount of the indebtedness evidenced by this Note.
This Note has been executed and delivered subject to the following
terms and conditions:
1. Interest. Interest on the unpaid balance of this Note shall accrue at the
fixed rate of Twelve (12%) per cent per annum from the date hereof.
2. Lawful Interest. Notwithstanding any provisions of this Note, it is the
understanding and agreement of the borrower and Holder that the maximum rate of
interest to be paid by Borrower to the Holder shall not exceed the highest or
the maximum rate of interest permissible to be charged by lender such as Lender
to a commercial borrower such as Borrower under the laws of the State of
Connecticut. Any amounts paid in excess of such rate
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shall be considered to have been payments in reduction of principal.
3. Payments of Principal and Interest. The indebtedness evidenced by this Note
shall be due and payable as follows:
Payments of principal and interest shall be due and payable monthly in
arrears commencing on June 1, 1998 continuing on the first day of each and every
month thereafter until the sixtieth (60th) month thereafter whereby all amount
due and payable hereunder shall be paid in full. The monthly payment shall
consist of an equal payment of principal and interest to fully amortize the loan
amount over sixty (60) months.
Holder may, at its option, debit principal, interest, fees, costs and
expenses due and payable hereunder to any of Borrower's accounts maintained with
Holder on each date any such amount is due and payable.
4. Late Charge & Default Rate. In the event Borrower fails to pay any
installment of principal and/or interest within ten (10) days of when it is due
and payable, without in any way affecting the Holder's right to accelerate this
Note, a late charge equal to ten (10%) percent of such late payment shall, at
the option of Holder, be assessed against Borrower.
5. Prepayments. Borrower may prepay principal of this Note, in whole or impart,
at any time without penalty or premium. Any and all such prepayments shall be
applied first to accrued and unpaid interest and then to unpaid principal in the
inverse order of maturity, and shall not affect the obligation of Borrower to
pay the regular installments required hereunder until the entire indebtedness
has been paid.
6. Events of Default. The Borrower Agrees that each of the following shall
constitute an "Event of Default" hereunder:
(a) Failure of Borrower to pay or perform any of Borrower's liabilities
or obligations to Holder (whether under this Note or otherwise and whether now
existing or hereafter incurred), including without limitation, any installment
of principal and/or interest or any other sum due hereunder, when due to be paid
or performed provided, however, in regards to the failure to make such payment
before a 10% payment surcharge will be added. The Borrower shall have 25 days
from the loan payment's due date to make such payment before an Event of Default
occurs; or
(b) Institution of or consent to proceedings, or the taking of any
action in furtherance of, or the entry of any order or decree of a court of
competent jurisdiction with respect to any of the following:
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(i) Bankruptcy, insolvency or reorganization, readjustment,
arrangement, composition or similar relief as to Borrower or any guarantor of
any obligation of the Borrower or any guarantor to Holder under federal or state
bankruptcy or insolvency statutes or related laws.
(ii) Appointment of a receiver, liquidator, trustee or
assignee in bankruptcy or insolvency as to Borrower or any guarantor of any
obligation of the Borrower to Holder or a substantial part of their respective
properties, or
(iii) Assignment of the Borrower or any guarantor of any
obligation of the Borrower to Holder for the benefit of creditors, the winding
up or liquidation of the affairs of the Borrower or such guarantor, or the
admission of Borrower or such guarantor in writing of its inability to pay its
debts; or
(c) Filing of an involuntary petition against Case or the Corporation
under the United States Bankruptcy Code, or under an other insolvency act or
law, state or federal, now or hereafter existing; or the involuntary appointment
of a receiver or trustee for all or a substantial part of the Corporation's
property; or the issuance of a warrant of attachment, execution or similar
process against any substantial part of the events for ninety (90) days
undismissed, unbonded or undischarged.
(d) All or any substantial part of the assets of Case or the
Corporation shall be subjected to any lien with a face amount in excess of
$250,000 in favor of the united States Internal Revenue Service, or custody or
control of such property shall be assumed by any governmental agency or any
court of competent jurisdiction at the instance of any governmental agency, and
shall be retained for a period of ninety (90) days.
(e) Dissolution of the Corporation.
(f) Cessation or liquidation of the Corporation's business or
suspension of the Corporation's business for more than forty-five (45)
consecutive days.
(g) Failure to maintain the collateral assignment of life insurance
policy or policies to the Payee in an amount of $250,000 until this Note is paid
in full.
(h) Default by the Corporation or any guarantor of this Note of their
respective obligations set forth in the LOAN AND MASTER LTD. SERVICES AGREEMENT
for which said default is not cured within any applicable cure period.
Upon the occurrence of any Event of Default, the entire indebtedness
with accrued interest thereon and any other sums due under this Note, shall, at
the option of the Holder, become immediately due and payable without presentment
or demand for payment, notice of non-payment, protest or any other notice or
demand of any kind, all of which are expressly
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<PAGE>
waived by the Borrower. Failure to exercise such option shall not constitute a
waiver of the right to exercise the same in the event of any subsequent default.
7. No Waiver. No delay or omission by Holder in exercising any rights hereunder,
nor failure by the Holder to insist upon the strict performance by Borrower of
any terms and provisions herein shall operate as or be deemed to be a waiver of
such right, any other right hereunder, or any terms and provisions herein, and
the Holder shall retain the right thereafter to insist upon strict performance
by the Borrower of any and all terms and provisions of this Note or any document
securing the repayment of this Note. No waiver of any right shall be effective
unless in writing and signed by Holder, nor shall a waiver on one occasion be
constituted as a bar to, or waiver of, any such right on any future occasion.
8. Prejudgment Remedy and other Waivers. BORROWER ACKNOWLEDGES THAT THE LOAN
EVIDENCED BY THIS NOTE IS A COMMERCIAL TRANSACTION AND WAIVES BORROWER'S RIGHTS
TO NOTICE AND HEARING, OR THE ESTABLISHMENT OF A BOND, WITH OR WITHOUT SURETY,
UNDER CHAPTER 903a OF THE CONNECTICUT GENERAL STATUES, OR AS OTHERWISE ALLOWED
BY ANY STATE OR FEDERAL LAW WITH RESPECT TO ANY PREJUDGMENT REMEDY WHICH HOLDER
MAY DESIRE TO USE, and further waives diligence, demand, presentment for
payment, notice of nonpayment, protest and notice of protest, and notice of any
renewals or extensions of this Note, and all rights under any statute of
limitations. THE BORROWER ACKNOWLEDGES THAT BORROWER MAKES THESE WAIVERS
KNOWINGLY AND VOLUNTARILY, WITHOUT DURESS AND ONLY AFTER EXTENSIVE CONSIDERATION
OF THE RAMIFICATIONS OF THIS WAIVER. THE BORROWER FURTHER ACKNOWLEDGES THAT THE
LENDER HAS NOT AGREED WITH OR REPRESENTED TO BORROWER OR ANY OTHER PARTY HERETO
THAT THE PROVISIONS OF THE PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL
INSTANCES.
9. Jury Waiver. THE BORROWER HEREBY WAIVES TRIAL BY JURY IN ANY COURT AND IN ANY
SUIT, ACTION OR PROCEEDING ON ANY MATTER ARISING IN CONNECTION WITH OR IN ANY
WAY RELATED TO THE FINANCING TRANSACTIONS OF WHICH THIS NOTE IS A PART AND/OR
THE ENFORCEMENT OF ANY OF YOUR RIGHTS AND REMEDIES, INCLUDING WITHOUT
LIMITATION, TORT CLAIMS, THE BORROWER ACKNOWLEDGES THAT BORROWER MAKES THIS
WAIVER KNOWINGLY AND VOLUNTARILY, WITHOUT DURESS AND ONLY AFTER EXTENSIVE
CONSIDERATION OF THE RAMIFICATIONS OF THIS WAIVER. THE BORROWER FURTHER
ACKNOWLEDGES THAT THE LENDER HAS NOT AGREE WITH OR REPRESENTED TO BORROWER OR
ANY OTHER PARTY HERETO THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY
ENFORCED IN ALL INSTANCES.
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<PAGE>
10. Successors and/or Assigns. All of the terms and provisions of this Note
shall be binding, inure to the benefit of and be enforceable by each of the
parties hereto, and their respective successors, heirs, personal
representatives, and permitted assigns.
11. Acknowledgment of Copy, Use of Proceeds. The Borrower acknowledges receipt
of a copy of this Note and attests that the proceeds of this Note are to be used
for general commercial purposes and that no part of such proceeds will be used,
in whole or in part, for the purpose of purchasing or carrying any "margin
security" as such term is defined in Regulation U of the Board of Governors of
the Federal Reserve System.
12. Miscellaneous. The provisions of this Note shall be binding upon the
successors and assigns and shall inure to the benefit of Holder, its successors
and assigns. If any provision of this Note shall, to any extent, be held invalid
or unenforceable, then only such provision shall be deemed ineffective and the
remainder of this Note shall not be affected. This Note shall be governed by and
construed in accordance with the laws of the State of Connecticut (but not its
conflicts of law provisions).
CEVA International, Inc.
By:/s/ Herbert Case
/s/ Joseph J. Tomasek Herbert Case
Witness
Title President
Its Duly Authorized
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<PAGE>
UNLIMITED CONTINUING GUARANTY AGREEMENT
This UNLIMITED CONTINUING GUARANTY AGREEMENT (the 'Guaranty") is made
as of this 6th day of December, 1997, by Herbert Case, an individual with his
principal residence located at 50 Fieldstone Road, Bedminster, New Jersey 07921
("Guarantor"), in favor and for the benefit of David Green, an individual with a
principal residence located at 317 Jinny Hill Road, Cheshire, Connecticut 06410
("Bank")
WITNESSETH:
WHEREAS, Bank has agreed to make a loan to CEVA International, Inc., a
New Jersey corporation with its chief executive offices located at 380 Foothill
Road, Bridgewater, New Jersey 08807 ("Borrower") in the principal amount of TWO
HUNDRED FIFTY THOUSAND AND 00/100 DOLLARS ($250,000.00) (the"Loan"); and
WHEREAS, the Loan is evidenced by a certain promissory note dated of
even date herewith from Borrower in favor of Bank (the "Note"); and
WHEREAS, Guarantor is an officer, director and majority shareholder of
Borrower and, as such, has and will derive substantial benefits from the making
of such loans, advances and extensions of credit to Borrower by Bank; and
WHEREAS, in consideration of such benefits, Guarantor has agreed to
guarantee the payment and performance of Borrower's obligations to Bank;
NOW, THEREFORE, Guarantor agrees as follows:
Guaranty of Payment and Performance. Guarantor hereby
absolutely, unconditionally and irrevocably guarantees to Bank the full and
punctual payment and performance of any and all loans, advances, indebtedness,
liabilities, obligations, covenants or duties of Borrower to Bank of any kind or
nature, but only arising under the Loan, whether in whole or in part, whether
created directly by Bank or acquired by assignment, purchase, discount or
otherwise, whether any of the foregoing are direct or indirect, joint or
several, absolute or contingent, due or to become due, now existing or hereafter
arising, whether under any present or future document, agreement or other
instrument, and whether or not evidenced by a writing and specifically
including, but not being limited to, unpaid principal, plus all accrued and
unpaid interest thereon, together with all fees, expenses, commissions, charges,
penalties and other amounts owing by or chargeable to Borrower under the Note
and any other Loan Document related thereto (collectively, the "Obligations"),
as and when the same shall become due and payable, whether at maturity, by
acceleration or otherwise.
maximum Guaranteed Amount. Notwithstanding any other provision of this
Guaranty to the contrary, if the obligations of Guarantor hereunder would
otherwise beheld or
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determined by a court of competent jurisdiction in any action or proceeding
involving any state corporate law or any state or Federal bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or other law
affecting the rights or creditors generally, to be void, invalid or
unenforceable to any extent on account of the amount of guarantor's liability
under this guaranty, then notwithstanding any other provision of this Guaranty
to the contrary, the amount of liability shall, without any further action by
Guarantor or any other person, be automatically limited and reduced to the
highest amount which is valid and enforceable as determined in action or
proceeding.
Continuing Nature. This guaranty is a primary and original
obligation of guarantor and is an absolute, unconditional, continuing and
irrevocable guaranty of Payment and performance and not of collectibility and is
in no way conditioned or contingent upon any action or omission by Bank,
including any requirement that Bank first attempt to collect any of the
Obligations from Borrower or resort to any security therefor, or upon any other
action, occurrence, or circumstance whatsoever other than the failure of
borrower to promptly and completely make any payment due to Bank in respect to
the Obligations as and when the same become due and payable, whether at
maturity, by acceleration or otherwise. This Guaranty is in addition to, and not
in substitution for or in reduction of, any other guaranty by Guarantor or any
other guarantor in favor of Bank. This Guaranty shall be continuing and shall
not be discharged, impaired or affected by (i) the power or authority or lack
thereof of Borrower to incur or contract for the Obligations or to execute,
acknowledge or deliver any document, agreement or other instrument evidencing,
securing or otherwise executed in connection with the Obligations; (ii) the
regularity or irregularity, validity or invalidity, or enforceability or
unenforceability of the Obligations; (iii) any defenses or counterclaims
whatsoever that Borrower may or might have to the payment or performance of the
Obligations or to the assertion of a default under any document agreement or
other instrument evidencing, securing or otherwise executed in connection with
the Obligations including, but not limited to, lack of consideration, statute of
frauds, infancy, breach of warranty, lender liability, usury, fraud and statute
of limitations; (iv) the existence or non-existence of Borrower as a legal
entity; (v) the transfer by Borrower of all or any part of the property securing
the Obligations except by the permitted assumption; (vi) any right of set off,
counterclaim or defense (other than the payment and performance of the
Obligations in full) that Guarantor may or might have to its respective
undertakings, liabilities and obligations under this guaranty, each and every
such defense being hereby waived by Guarantor; or (vii) the inability of Bank to
claim any amount of interest, fees, costs, or charges from Borrower pursuant to
Section 506(b) of the united States Bankruptcy Code, as amended.
Guarantor's Agreement to Pay. Guarantor further agrees, as the
principal obligor and not as a guarantor or surety only, to pay to Bank, on
demand, all costs and expenses (including court costs and legal expenses)
incurred or expended by Bank in connection with the Obligations, this Guaranty
and the enforcement thereof, together with interest on amounts recoverable under
this Guaranty from the time such amount become due until payment, at the rate
per anum equal to the rate of interest charged by the Bank pursuant to
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the Note, including the increased default rate of interest; provided, however,
that if such interest exceeds the maximum amount permitted to be paid under
applicable law, then such interest shall be reduced to such maximum permitted
amount.
Unlimited Guaranty. The liability of Guarantor hereunder shall be
unlimited.
Waivers by guarantor; Bank's Freedom to Act. Guarantor agrees that
the Obligations will be paid and performed strictly in accordance with their
representative terms regardless of any law, regulation or order now or hereafter
in effect in any jurisdiction affecting any of such terms or the rights of Bank
with respect thereto. Guarantor waives presentment, demand, protest, notice of
acceptance, notice of obligations incurred and all other notices of any kind,
all defenses which may be available by virtue of any valuation, stay, moratorium
or other similar law now or hereafter in effect, any right to require the
marshaling of assets of Borrower, and all suretyship defenses generally. Without
limiting the generality of the foregoing, Guarantor agrees to the provisions of
any document, agreement or other instrument evidencing, securing or otherwise
executed in connection with any Obligations and agrees that the Obligations of
Guarantor hereunder shall not be released or discharged, in whole or in part, or
otherwise affected by: (i) the failure of Bank to assert any claim or demand or
to enforce any right or remedy against Borrower; (ii) any extensions or renewals
of any Obligations; (iii) any rescissions, waivers, amendments or modifications
of any of the terms or provisions of any document, agreement or other instrument
evidencing, securing or otherwise executed in connection with the Obligations;
(iv) the substitution or release of any person or entity primarily or
secondarily liable for the Obligations; (v) the adequacy of any rights or
remedies Bank may have against any collateral or other means of obtaining
repayment of the Obligations; (vi) the impairment of of any collateral securing
the Obligations, including without limitation the failure to perfect or preserve
any rights or remedies Bank might have in such collateral or the substitution,
exchange, surrender, release, loss or destruction of any such collateral; or
(vii) any other act or omission which might in any manner or to any extent vary
the risk of Guarantor or otherwise operate as a release or discharge of
Guarantor, all of which may be done without notice to Guarantor.
Proceedings on Default. Upon the failure of Borrower to
promptly and completely make any required payment and performance of the
Obligations, Bank may, at its option: (a) proceed directly and at once without
notice of such default, against Guarantor to collect and recover the full amount
of the liability hereunder, or any portion thereof, without proceeding against
Borrower or any other person, or endorser, surety or Guarantor, or foreclosing
upon, selling, or otherwise disposing of, or enforcing, or collecting or
applying any property, real or personal, Bank may then have as security for the
Obligations, and without enforcing or proceeding under any other guaranty; (b)
sell the real and personal property Bank may then have as security for the
Obligations under the power of sale contained in any mortgage deed, security
agreement or similar instrument pursuant to which such property is held or to
which such property is subject or sell such property through judicial
foreclosure, as Bank may elect, notice of any such election being expressly
waived by Guarantor, and proceed
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against Guarantor for an amount equal to the difference between the net proceeds
of such sale to Bank and the amount of the Obligations then due and owing.
Nothing herein shall prohibit Bank from exercising its rights against Guarantor,
any other guarantor, endorser, or surety, the security, if any, for the
Obligations, and Borrower simultaneously jointly and/or severally.
Representations. Guarantor represents and warrants to Bank
that this Guaranty does not violate the provisions of any document, agreement or
other instrument by which Guarantor is bound; no consent or authorization is
required as a condition to the execution of this Guaranty; Guarantor is fully
aware of the financial condition of Borrower; Guarantor delivers this Guaranty
based solely upon Guarantor's own independent investigation and understanding of
the transaction of which this Guaranty is a part and in no part upon any
representation or statement of Bank with respect thereto; Guarantor is in a
position to and hereby assumes full responsibility for obtaining any additional
information concerning Borrower's financial condition or business operations as
Guarantor may deem material to his obligations hereunder and Guarantor is not
relying upon, nor expecting Bank to furnish guarantor with, any information in
Bank's possession concerning Borrower's financial condition or business
operations. Guarantor acknowledges and agrees that he hereby knowingly accepts
the full range of risk encompassed within a contract of "continuing guaranty",
which risk includes, without limitation, the possibility that Borrower will
incur or contract for additional indebtedness for which Guarantor will be liable
hereunder.
Independent Obligation. The obligations of Guarantor
hereunder shall be absolute and unconditional and are independent of the
obligations of Borrower or of any other person, endorser, surety or guarantor.
Bankruptcy. All of the Obligations shall, at the option of
Bank, forthwith become due and payable if there shall be filed against Borrower
a petition in bankruptcy or for insolvency proceedings or for reorganization,
dissolution or liquidation, or for appointment of a receiver or trustee, or if
Borrower makes an assignment for the benefit of creditors. This Guaranty shall
remain in full force and effect, without abatement, until the Obligations have
been paid or performed in full and all other obligations guaranteed hereunder
have been performed to the satisfaction of Bank, it being expressly understood
and agreed to by Guarantor that this Guaranty shall continue to be effective or
shall be reinstated, as the case may be, if at any time payment, in whole or in
part, of any of the Obligations is rescinded, invalidated, declared to be
fraudulent or preferential, set aside or must otherwise be restored or returned
by Bank upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of Borrower all as though such payment had not been made, to
Borrower or a trustee, receiver or any other party. Guarantor understands and
agrees that in the event Bank is required to so return all or any portion of a
payment received from Borrower, Guarantor shall be required to pay Bank for such
amount.
Unenforceability of Obligations Against Borrower. If for any
reason Borrower has no legal existence or under no legal obligation to
discharge any of the Obligations, or if
4
<PAGE>
any of the Obligations have become irrecoverable from Borrower by operation of
law or for any other reason, this Guaranty shall nevertheless be binding on
Guarantor to the same extent as if guarantor at all times had been the principal
obligor on all such Obligations. In the event that acceleration of the time for
payment of the Obligations is stayed upon the insolvency, bankruptcy or
reorganization of Borrower or for any other reason, all such amounts otherwise
subject to acceleration under the terms of any document, agreement or other
instrument evidencing, securing or otherwise executed in connection with any of
the Obligations shall be immediately due and payable by Guarantor.
Guarantor's Solvency. Guarantor represents and warrants to the
Bank that (both before and after giving effect to the transactions contemplated
in this Guaranty) he is solvent on a going concern basis, and has assets having
a fair value in excess of the amount required to pay his probable liabilities on
his existing debts as they become absolute and matured, and has, and will have,
access to the adequate capital for the conduct of his business and the ability
to pay his debts from time to time incurred therewith as such debts mature.
Payments. Guarantor covenants and agrees that the Obligations
will be paid strictly in accordance with their respective terms regardless of
any law, regulation or order now or hereinafter in effect in any jurisdiction
affecting any of such terms of the rights of the Bank with respect thereto.
Without limiting the generality of the foregoing, Guarantor's obligations
hereunder with respect to any Obligation shall not be discharged by payment in a
currency other than U.S. dollars or at a place other than the place specified
for the payment of the Obligations, whether pursuant to a judgment or otherwise,
to the extent that the amount so paid on conversion to U.S. dollar and
transferred to the Bank at its main office under normal banking procedures does
not yield the amount of U.S. dollars due thereunder.
Further Assurances. Guarantor agrees that it will provide to
Bank information relating to the financial condition and business operations of
guarantor as Bank may reasonably request.
Successors and Assigns. This Guaranty shall be binding upon
Guaranty and his heirs, executors, personal representatives, successors and
assigns, and shall inure to the benefit of and be enforceable by Bank and its
successors, transferees and assigns. Without limiting the generality of the
foregoing sentence, Bank may assign or otherwise transfer any document,
agreement or other instrument held by it evidencing, securing or otherwise
executed in connection with the Obligations, or sell participations in any
interest therein to any other Person or entity, and such other person or entity
shall thereupon become vested, to the extent set forth in the agreement
evidencing such assignment, transfer or participation, with all rights in
respect thereof granted to Bank herein.
Amendments and Waivers. No amendment or waiver of any provision of
this Guaranty nor consent to any departure by guarantor therefrom shall be
effective unless the same shall be in writing and signed by Bank. No failure
on the part of Bank to exercise, and
5
<PAGE>
no delay in exercising, any rights or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise of any other right.
Notice. All notices, requests, demands, and other
communications called for hereunder shall be made in writing and, unless
otherwise specifically provided herein, shall be deemed to have been duly made
or given when delivered by hand or mailed first class mail postage prepaid or,
in the case of telecopy or facsimile notice, when transmitted, answer back
received, addressed as set forth above, or at such address as either party may
designate in writing.
Joint and Several Obligations. If this Guaranty is now, or
hereafter shall be, signed by more than one Person, it shall be the joint and
several obligation of all such persons (including, without limitation, all
makers, endorsers, Guarantor and sureties, if any) and shall be binding on all
such persons and their respective heirs, executors, administrators, legal
representatives, successors and assigns.
Governing law; Consent to Jurisdiction. This Guaranty, and the
rights and obligations of the parties hereunder, shall be governed by, and
construed and interpreted in accordance with, the laws of the State of
Connecticut. Guarantor agrees that any suit for the enforcement of this Guaranty
may be brought in the courts of the State of Connecticut or any Federal Court
sitting therein and consents to the non-exclusive jurisdiction of such court and
to services of process in any such suit being made upon Guaranty by mail at the
address specified in Section 22 hereof. Guarantor hereby waives any objection
that it may now or hereafter have to the venue of any such suit or any such
court or that such suit was brought in an inconvenient court.
Termination. This Guaranty shall remain in full force and
effect, without abatement, until the obligations have been paid or performed in
full and all other obligations guaranteed hereunder have been performed to the
satisfaction of Bank.
Amendments and Modifications. The provisions of this Guaranty
shall extend and be applicable to all renewals, amendments, extensions and
modifications of the Obligations and the documents, agreements and other
instruments evidencing, securing or otherwise executed in connection with the
Obligations, and all references to the Obligations and such documents,
agreements or instruments shall be deemed to include any renewal, extension,
amendment or modification thereof.
Commercial Transaction. GUARANTOR ACKNOWLEDGES THAT THE
TRANSACTION OF WHICH THIS GUARANTY IS APART IS A COMMERCIAL
TRANSACTION, AND HEREBY WAIVES HIS RIGHT TO NOTICE AND HEARING
UNDER CHAPTER 903a OF THE CONNECTICUT GENERAL STATUTES OR BY
OTHER APPLICABLE LAW WITH RESPECT TO ANY PREJUDGMENT REMEDY
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<PAGE>
WHICH BANK MAY DESIRE TO USE.
Waiver of Jury Trial. GUARANTOR HEREBY WAIVES TRIAL BY JURY IN
ANY COURT IN ANY SUIT, ACTION OR PROCEEDING OR ANY MATTER ARISING IN CONNECTION
WITH OR IN ANY WAY RELATED TO THE TRANSACTION OF WHICH THIS GUARANTY IS A PART
AND/OR THE ENFORCEMENT OF ANY OF ITS RIGHTS AND REMEDIES. GUARANTOR ACKNOWLEDGES
THAT HE MAKES THIS WAIVER KNOWINGLY, VOLUNTARILY AND ONLY AFTER CONSIDERATION OF
THE RAMIFICATIONS OF THIS WAIVER WITH HIS ATTORNEY.
25. Miscellaneous. This Guaranty constitutes the entire agreement of
Guarantor with respect to the matters set forth herein. The rights and remedies
herein provided are cumulative and not exclusive of any remedies provided by law
or any other document, agreement or other instrument and This Guaranty shall be
in addition to any other guaranty of the Obligations. The invalidity or
Unenforceability of any one or more sections of This Guaranty shall not affect
the validity or enforceability of its remaining provisions. All section headings
in this guaranty are included for convenience of reference only and shall not
constitute a part of this Guaranty for any other purpose. The meanings of all
defined terms used in this Guaranty shall be equally applicable to the singular
and plural forms of the terms defined.
IN WITNESS WHEREOF, Guarantor has executed this Guaranty as of
the date first set forth above.
/s/ Herbert Case
Herbert Case
cev-lttd.gre
<PAGE>
Exhibit 10.2
LEASE CONTRACT
This lese contract is entered into on May__ 1998 by and between GREEN GLOBE LLC,
having an address at PO BOX 1550, 130 Freight Street, Waterbury Connecticut
06721 USA (hereinafter referred to as the 'Lessor') and CEVA HUNGARY
ENVIRONMENTAL PROTECTION AND ENVIRONMENTAL SECURITY LTD., having an address at
11-1097 Budapest, Illatos Street 7(hereinafter referred to as the "Lessee" or
"CEVA") under the terms and conditions set forth below.
INTRODUCTION
A. WHEREAS, Budapest XVIII, district Pestszentlorinc-Pestszentimre
Municipality (the "Municipality") entered into a contract for work with ELGOSCAR
International Hungarian- American Environmental protection and Engineering
(Columb Street17-23, H-1145 Budapest),GENDER Budapest ltd. 9Ulloi ut 259, H-1191
Budapest) and CEVA as entrepreneurs regarding the treatment of the contaminated
ground and ground water on the site of Szent Laszlo street 2 in XVIII district
Budapest (the "Site")(the "Contract for Work").
B. WHEREAS, CEVA shall provide, among others, the treatment services in
a total volume of 24,000mthe Site. The majority shareholder of CEVA, CEVA
International, Inc., has entered into a certain Loan and Master LTTD Services
Agreement, dated December 6, 1997, with David Green, Herbert G. Case and Green
Globe LLC (the "Loan and Master LTTD Services Agreement"), in order to provide
the equipment and technology necessary to provide low temperature thermal
desorption processing of certain contaminated soil under the Contract for Work
and for other projects.
C. WHEREAS, GREEN GLOBE LLC or its assignee wishes to lease the low
temperature thermal desorption equipment and technology to CEVA in order to
fulfill the obligations arising from the Contract for Work and CEVA wishes to
lease the equipment and technology from GREEN GLOBE LLC under the terms and
conditions of this contract.
D. WHEREAS, it is the intention of the Lessor, CEVA International, Inc.
and the Lessee that Lease Contract not take the place or modify any of the
agreements and obligations set forth in the Loan and Master LTTD Services
Agreement but that it serve as a component and operational mechanism that serves
part of the intentions of the parties set forth in that agreement.
1. SUBJECT OF THE LEASE
1. The subject of the lease is the Low Temperature Thermal Desorption
Unit ("LTTD") made by ASTEC Industries, Inc. and the Mobil Thermal Recycling
Unit with all their fixtures and connected technology, as well as all electrical
wiring and controls necessary to make the LTTD operational (collectively, the
"Equipment'); in addition, this Lease also requires that the Lessor provide for
the transportation and mobilization of the LTTD to the Site and other sites as
determined by Lessee and lessor),as well as the training of on-site personnel of
the lessee in order to operate the Equipment.
2. Lessor hereby declares that it is the lawful owner of the LTTD and
it has the right
<PAGE>
2
to lease the LTTD to Lessee under the terms and conditions of this Contract.
3. All documents, papers, permissions, certificates and other material
relating to the LTTD, which are needed to comply with the terms and conditions
of the Contract for Work will be provided by Lessor to Lessee at the execution
of this Contract.
4. Lessor shall cooperate with Lessee and take all necessary action
reasonably needed in order to order and to supply all information, materials,
parts, and spare parts needed for the ordinary use of the LTTD during the terms
of this Contract.
5. Lessee shall obtain, maintain and keep in full force and effect all
administrative permits required under the law for the set up and operation of
the LTTD in Hungary. furthermore Lessee shall bear all costs relating to the
permits and consents. Lessor shall cooperate in all reasonable manner with
Lessee in connection with obtaining any required administrative permits and
consents.
6. Lessee shall pay the rent and bear all costs agreed on this Contract
in the event it fails to obtain the permits or other consents needed for the set
up and operation of the LTTD.
2. LEASE TERM
1. This Lease Contract is entered into for a fixed period of time set
forth in Section 2.2.
2. The lease term shall commence upon the date hereof and shall
continue until May 1, 2001 (the "Lease Term") and may be renewed for an
additional two year period at either party's option.
3. This Lease Contract shall terminate and be no longer of any force or
effect on May 1,2001, except, however, this Lease Contract shall not terminate
at such date if either the Lessee has not paid all of the Rent as defined in 3.1
below, or in the event the Lessee has exercised its right to extend the Lease
Term pursuant to Paragraph 3.2 below. All parties agree that the Lessee may
prepay the aggregate Rent due under this Lease Contract at any time during the
Lease Term without penalty and in such event this Lease Contract shall terminate
upon any such prepayment in full.
4. In the event this Lease Contract is not terminated pursuant to
Section 2.3 above or Section 3.2 below, this Lease Contract shall remain valid
and in full force under the same terms and conditions for an additional period
to extend for no more than two years.
<PAGE>
3
3. RENT
The Lessee agrees to pay an aggregate amount of US$2,864,951.40 as rent
to the Lessor during the Lease Term in accordance with Paragraph 4 below. In the
event the Lessee, either by default or business decision, cannot or chooses to
amortize the Rent over a longer period than that represented by the Lease Term,
Lessee may do so by written notice to the Lessor and may extend such Lease Term
for an additional period not to exceed two (2) years. In such event, the Lessee
shall set forth in its notice to the Lessor the amortization of the Rent over
such then remaining Lease Term and extended period.
4. RENT PAYMENT
1. The Rent shall be due and payable in twelve (12) equal quarterly
payments of $143,247.50 each, beginning on August 1, 1998, and continuing for
the next consecutive dates of November 1, February 1 and May 1, until May 1,
2001, when the last Rent payment is due. In the event a party exercises it
option to extend the Lease Term pursuant to Section 2.2 above before May 1,
2001, the outstanding amount of the Rent shall be due and payable in equal
quarterly payments on and after May 1, 2001 as set forth in the previous
sentence of this Paragraph.
2. Lessee shall make payment of the due rent plus VAT by bank transfer
to the bank account of the Lessor referred to in the invoice of the Lessor.
3. If any rent payment or other payments due under this Lease are not
paid within the due dates set forth herein, the Lessee shall be obligated to pay
an interest charge onthe payment(s) due calculated at the rate of fifteen
percent (15%) per annum. Any such late payment interest charges shall be deemed
paid in full when the total amount thereof is debited to the account of Lessee
and in all such cases, Lessee shall send to the Lessor, as soon as practicable
but in no event later than 30 days following any such late payment(s), an
invoice(s) documenting all such debits. Notwithstanding any such debit
allocations to the account of the Lessee, Lessor shall retain all of its rights
to make claim for any damages, expenses and costs arising out of any such late
payments.
<PAGE>
4
4. The Lessee keeps the bank accounts at the time of the execution of
the Lease as follows:
(i) Budapest Bank Rt. account number 1010319439563222200000000
(ii) Hanwha Bank Hungary Rt. account number 114000402294340169901015
5. The parties agree that Lessor shall have the right to demand its
claim against Lessee by way of payment demand from any of the bank accounts of
Lessee pursuant to Section 10(4)(b) of the order of the Hungarian National Bank
No. 6/1997(MK.61.). Pursuant to this provision of the law the contracting
parties agree that Lessee shall inform his banks that Lessor has the right to
demand payment directly from the bank of Lessee.
6. If Lessee shall default in the payment of any rent beyond any notice
or cure period provided in paragraph 8 below, Lessor shall have the right to
terminate this Lease under the provisions of such paragraph 8, and all of
Lessor's obligations hereunder, and Lessor shall have the right to recover the
Equipment, in good condition and repair, other then ordinary wear and tear.
Lessee agrees in such instance to cooperate with Lessor in recovering the
Equipment.
5. INSURANCE
1. Lessee shall at all times pay for and carry policies of
comprehensive general liability insurance including products completed
operations and contractual liability for bodily injury or property damage with a
combined single limit of not less than the HUF equivalent of (USD $2,000,000)
for each occurrence. Such insurance shall name Lessor and its agents as
additional insured; and
2. Lessee shall carry, at its expense, adequate insurance against loss
or damage by fire and other various risks on all fixtures, improvements and
other property controlled by Lessee and located upon the Leased Premises,
thereby holding Lessor and its agents harmless for any losses or damages to such
property.
3. All policies shall be specifically endorsed to provide that the
coverage obtained by virtue of this Lease Agreement will be primary and that any
insurance carried by Lessor shall be excess and non-contributory.
4. All policies shall be specifically endorsed to provide that such
coverage shall not be canceled or materially changed without at least thirty
days prior written notice to the Lessor. Lessee shall deliver certificates of
insurance and any renewals thereof to the Lessor which evidences the required
coverage.
5. Lessee shall promptly provide, upon Lessor's request, copies of all
insurance policies referenced in this Section 5. In addition, if Lessee shall
fail to provide the insurance required in this Section 5 to be provided by it,
Lessor shall have the right to itself provide such insurance and to be promptly
reimbursed by Lessor for the cost thereof.
<PAGE>
5
6. CLEARANCE OF THE LTTD
1. The LTTD will be transported by MASPED Rt. to Hungary based upon the
agreement between the Lessor and MASPED and Lessor shall pay all transport
costs. Lessee shall clear the LTTD in Hungary as "temporary imported good" in
accordance with the Hungarian laws and to cooperate with MASPED Rt. in the
clearance.
2. The costs, expenses and duties of the clearance of the LTTD shall be
borne by Lessor. Once those costs are determined, they will be added to the rent
otherwise payable hereunder through a straight-line amortization of such amount
over the term hereof, plus the initial two-year extension. The contracting
parties shall cooperate in order to obtain and provide all documents, papers,
declarations required to the clearance of the LTTD as "temporary imported good".
3. Lessee shall consigned MASPED Rt. to clear the LTTD in Hungary as
"temporary imported good".
7. OPERATIONAL RULES
1. Lessee shall be liable to ensure that in the course of the use LTTD
shall not depreciate at a higher than normal rate.
2. Lessor shall be responsible for the installation and installment of
the LTTD and all accessory equipment at such sites during the Lease Term as
reasonably requested by Lessee. Following the initial installation of the LTTD
and accessory equipment at the first site in the Country of Hungary and
following any period of initial on-site training, Lessor and Lessee shall
mutually and in good faith agree upon the time when the Lessee shall take over
full operational control of the LTTD and accessory equipment and shall reduce
such memorandum to writing and append it as an exhibit to this Lease Contract.
The LTTD and accessory equipment shall be in good working condition upon the
date operational control is turned over the Lessee.
3. Lessee shall operate the LTTD at his own costs and risk;
furthermore, Lessee shall pay all costs relating to the operation and
maintenance of the LTTD. Lessee shall obtain and keep at its expense all permits
and consents required for the set up and operation of the LTTD.
4. Lessee shall provide all data asked by the authorities or other
governmental agencies.
5. The Lessor and its agents and representatives shall be entitled at
any time during
<PAGE>
6
business hours/working hours following prior notice to enter the area where the
LTTD is; in the case of emergency the Lessee and also its agent shall be
entitled to enter the area without prior notice and to take the necessary
actions.
6. Lessee shall take any and all necessary and appropriate measures to
utilize the LTTD and accessory equipment in proper operational manner, ordinary
wear and tear excepted, and shall maintain the LTTD and accessory equipment in
good working condition throughout the Lease Term and any permitted extension
thereof.
7. The operation of and any necessary repairs to the LTTD and accessory
equipment performed by Lessee shall be at its own expense and costs.
8. Lessee is liable and responsible for all damages arising from the
breach of the obligations as set forth above.
9. The contact persons of the parties relating to the operations of the
LTTD are the following:
(i) on behalf of the Lessor
Mr. David Green
at the address of the Lessor as set forth in the preamble
(ii) on behalf of the Lessee
Messrs. Jozsef Laszlo and Robert Deak
at the address of the Lessee as set forth in the preamble.
10. Lessor shall provide at Lessee's expense all necessary personnel to
train Lessee's on-site personnel in the operation and maintenance of the LTTD
and accessory equipment at the conception of this Lease Term so that Lessee's
personnel shall acquire the necessary technical knowledge in order to
effectively operate the LTTD and accessory equipment.
11. Lessee is aware that the LTTD is built up and made for a different
technical parameters than the Hungarian standards. The Lessor shall fix or
otherwise be responsible for ensuring that the Equipment meets such parameters
for its initial operations at the Site under the Contract. Any design or other
changes to the Equipment made at any time shall be through mutual agreement of
the parties, and in all cases shall be at Lessee's cost.
8. TERMINATION OF THE LEASE CONTRACT BEFORE EXPIRATION
OF THE LEASE TERM
1. The Lessor shall be entitled to terminate this Lease Contract
upon 15 days notice by registered letter to Lessee, if
a) the Lessee fails to meet its payment obligations relating
to the Rent, or any other payment obligation arising from
the present Lease Contract partly or
<PAGE>
7
wholly, in spite of a written notice, prior to a
payment deadline of 15 (fifteen) days calculated from
the receipt of the notice;
b) the lessee fails to perform any one of its other
obligations arising in the present contract in spite
of a written notice from the Lessor and the fair
extended deadline for performance of at least 15 days
specified therein (i.e.) use of the LTTD contrary to
the Contract for Work, inadequate maintenance);
c) bankruptcy or liquidation proceedings are initiated
against the Lessee and the same are not dismissed
within 90 days; or
d) the necessary licenses obtained for the business
activities of the Lessee finally expire in any way,
or withdrawn or their validity terminates for any
other reason whatsoever, and the Lessee fails to
renew the license within the period of time
established at law or in the relevant official
decision, plus an additional 30 days.
2. The Lessee shall inform the Lessor of the circumstances referred to
above without any delay.
3. If this Lease is terminated by reason of a default by Lessee, Lessee
shall be liable for all damage incurred thereby to the Lessor, including, but
not limited to the damage incurred through the loss of Rent, and other costs
payable during the term of this Lease Contract. The Lessor is not obliged to
provide additional services to the Lessee.
4. Upon the termination hereof, Lessee shall have no right to use the
LTTD and shall be obliged to carry the transport and delivery of the LTTD to the
place instructed by Lessor within 45 days from the receipt of the termination.
9. ASSIGNMENT, SUBLEASE
1. Lessee is not entitled without written approval of Lessor to (a)
assign or sublease the LTTD partly or wholly or to transfer its use either free
of charge or for consideration, e.g. to assign it into a company as in kind
contribution or as additional service or to create an encumbrances, pledge or
other thereon or (b) to assign, sublease or transfer this Lease. Notwithstanding
anything set forth in this Paragraph 9.1 to the contrary, in the event Lessee
becomes the subject of a reorganization resulting in the Lessee being merged
into CEVA International, Inc. or another corporation in which CEVA
International, Inc. has a majority ownership and voting interest, then and in
that event this Lease Contract shall be assumed by CEVA International, Inc. or
such other corporation in which it has a majority ownership and voting without
the prior approval of the Lessor but subject to the receipt of a written
assumption by the assignee of this Lease Contract.
2. Lessee shall immediately notify Lessor in writing regarding any
important change
<PAGE>
8
occurring concerning its owners, the owners relationship or its business form or
any other circumstances whatsoever.
3. Lessee shall promptly inform Lessor the place where the LTTD is
operating or where it will be moved.
10. MAINTENANCE
1. The Lessee shall maintain the LTTD in good condition and repair for
the ordinary use.
2. The Lessee shall at its own expense keep the LTTD at all times in
operable faultless and suitable condition needed for its use together with the
equipment and fixtures. The Lessee shall ensure that LTTD remain in the same
condition as it is now, reasonable wear and tear excepted.
3. The Lessee will comply with all rules, governmental regulations
concerning the maintenance or operation of the LTTD.
4. Lessor shall not be liable for any damages to Lessee or any other
party caused by the operation of the LTTD unless such was caused while the LTTD
was under the direct and primary control of the Lessor.
5. Should the Lessee fail to meet the obligations listed above, the
Lessor shall be entitled to have - after notice as set forth in paragraph 9 the
necessary repairs carried out or other measures taken pursuant to the provisions
listed above at the cost of the Lessee. Should the notice likely cause any
damage, then no notice need to be given to the Lessee.
6. Any damage incurred to the LTTD, known by the Lessee or which can be
known by the exercise of due diligence by the Lessee shall be made known as soon
as practicable to the Lessor irrespective of who shall bear the costs of repair.
The omission to notify the Lessor shall give rise to the liability of the Lessee
for the damage. If damage is incurred, the Lessee shall take all necessary
measures, to help reduce the damage to the possible minimum (obligation of
mitigation of damage).
7. Each party hereto shall be liable to the other party for all damages
by the first party's employees, suppliers, agents, clients.
11. FAULT CLEARANCE
1. The Lessor may perform any necessary work without the consent of the
Lessee in order to avert any damage to the LTTD and to prevent any danger, but
without effecting Lessee's duty to repair and maintain the Equipment under
paragraph 10. The elimination and reparation of damage and defects or the
carrying out of alterations to the LTTD - should it be necessary for the upkeep,
maintenance and repair of the LTTD in accordance with its designated purpose
- - -can be
<PAGE>
9
performed without the consent of the Lessee, but, if possible, with giving prior
notice to it. The Lessee shall ensure access for the Lessor to the area of the
LTTD. Any impediment or hindrance to the performance of such work by the Lessee
shall be prohibited, and it shall give rise to the liability of the Lessee for
damages. The Lessor shall make efforts to avoid any disturbance of the Lessee in
the course of the performance of such work.
2. Once the Lessor has delivered the Equipment in functioning order in
accordance with the Contract for Work, should the Lessee or Lessor make repairs
to or maintain the equipment, the Rent shall not be reduced or suspended and
Lessee shall not be entitled to claim damages for the duration of such work.
3. The prior written approval of Lessor is required for any physical
change in the make-up, configuration or location of the LTTD.
12. RETURNING OF THE LTTD TERMINATION OF THE
LEASE
1. Lessee shall return LTTD upon the request of the Lessor in such
manner and to such location as the Lessor shall request.
2. Should the lease Contract terminate, the parties will mutually and
in good faith agree on the transport and related costs.
13. REPRESENTATIONS
The Lessor and the Lessee represent to each other the following:
1. Lessee is a limited liability company duly and validly existing
under the laws of the Republic of Hungary. Lessor is a duly and validly existing
limited liability company. Each is entitled to enter into this Lease Contract,
and they have obtained prior to the conclusion of this contract any and all
corporate and other consents required for entering into the present Lease
Contract.
2. The present Lease Contract gives rise to legally correct, valid
binding obligations of the parties, which shall be enforced in accordance with
their provisions.
3. The signing and execution of this Lease Contract is not in any way
in breach of any provision of the Acts and Decrees in force or any other rules
relating to the contracting parties, and it is not contrary to any other
contractual or other obligations of the parties.
14. CLAUSE OF VALIDITY
<PAGE>
10
1. Beside the present Lease Contract there are no oral side-agreements;
the amendment, supplement and termination of the contract shall be valid in
writing.
2. Should certain provisions of the Lease contract be or become
invalid, this shall not affect the validity of the other provisions of the
contract. In this case, the contracting parties shall be obliged to supplement
the contract in the appropriate manner ensuring its business objectives. In such
a case, a regulation shall be applied which validly secures the business result
intended by the parties, that is, a value-secured revenue for the lessor,
resulting from the lease activity, corresponding to the legal currency of the
United States of America.
3. If a provision is not performed or there is not notice for its
performance, it shall notwithstanding remain valid. The omission of notice
cannot be considered as waiver. The other unaffected parts of the contract shall
remain in force.
15. WAIVER
Should the Lessor need to waive for a definite period of time the
enforcement of a right due to it, this cannot be considered in any case as a
general waiver of the enforcement of this or another similar right. For a valid
waiver of the rights resulting from this Lease Contract by the Lessor, the
express written declaration of the Lessor shall be required.
16. COURT, APPLICABLE LAW
1. In the event that disagreement or disputes arise with respect to the
interpretation or performance of this contractor any of its provisions, the
parties will use their best efforts to resolve them through consultation in
peaceful manner.
2. This Lease and the rights and obligations of the parties hereunder
shall be governed by and construed and interpreted in accordance with, the laws
of the Republic of Hungary.
17. MISCELLANEOUS
1. The parties agree that in respect of the delivery of any document,
the address of the parties shall be valid as an address indicated in this Lease
Contract. In the case of a registered letter, posting it at the post office
shall be considered as delivery.
2. The parties agree that they shall consider and handle the terms and
conditions of this contract as confidential.
3. The lessor shall be entitled at its discretion to sell and transfer
the Equipment and to assign its rights and obligations under this Lease even
separately, to third person(s), provided that any such sale or transfer made to
an entity as to which David Green is not, directly or indirectly, the majority
owner, shall be made only with Lessee's consent, which consent shall not be
unreasonably withheld or delayed. Lessee acknowledges that Lessor intends to
assign this
<PAGE>
11
Lease to an affiliate corporation to be formed in the Netherlands or other
foreign jurisdiction and hereby agrees to such assignment automatically and
without any further action. Lessee also acknowledges and agrees that if Lessor
shall decide, in its sole discretion, to sell and transfer the Equipment to such
assignee, then the consent of Lessee shall not be required and Lessee shall take
all reasonable action requested by Lessor to reflect such sale and transfer.
18. PREPARATION OF THE CONTRACT
1. The present Lease Contract has been prepared in three copies, in
Hungarian and in English from which each party receives one copy and the third
copy to be submitted at the Hungarian Custom Office.
2. Both Hungarian and English language copies are true and correct
confirming the agreement of the parties. In the case of any dispute, the
Hungarian version shall prevail.
3. Any communication, notices, correspondence between the parties in
relation to the present Lease Contract shall be made and served to the other
party in the English language.
4. All costs arising from the preparation and drawn up of this
agreement shall be borne by Lessee.
5. The parties hereby agree to execute any and all documents and other
instruments and to take any and all measures or acts as are necessary or
appropriate to give full effect to, and in order to fulfill the terms,
conditions and provisions of this Agreement and any other obligations arising
out of or in connection with this Agreement in order to make them binding and
enforceable upon the parties within a reasonable time, after receipt of written
request from a party, but in no event not later than fourteen (14) days from the
date of receipt of any such request from the other party. Should a party fail to
comply with this obligation the other party shall not be liable for any damages
arising from such other party's delay.
6. Each party verifies by affixing their signatures hereto that it has
checked the contents of the present Lease Contract thereto, has understood it
and acknowledged them as binding on itself.
LESSOR
GREEN GLOBE LLC.
By:______________________________
LESSEE
<PAGE>
12
CEVA HUNGARY ENVIRONMENTAL
PROTECTION AND ENVIRONMENTAL
SECURITY, LTD.
By:______________________________
Janos Soos
Managing Director
cev-leas.hun
<PAGE>
1
AGREEMENT
This Agreement is made as of May 18, 1998 between CEVA INTERNATIONAL, INC.
("CEVA"), CEVA HUNGARY ENVIRONMENTAL PROTECTION AND
ENVIRONMENTAL SECURITY LTD ("CEVA Hungary") and GREEN GLOBE, LLC ("Green
Globe")
WITNESSETH
WHEREAS, CEVA, Green Globe, and other parties have entered into a Loan and
Master LTTD Services Agreement, dated as of December 6, 1997 (the "Services
Agreement"), pursuant to which CEVA and Green Globe have agreed to participate
in LTTD projects (as defined in the Services Agreement) and to share equally in
the profits therefrom; and
WHEREAS, CEVA Hungary, an affiliate of CEVA, has entered into a contract (the
"Contract" with Budapest XVIII, District Pestszentlorinc-Pestszentimre
Municipality and ELGOSCAR International Hungarian-American Environmental
Protection and Engineering, for the treatment of contaminated ground and ground
water at Szent Laszlo street 2 in XVIII district Budapest, Hungary; and
WHEREAS, the Contract requires LTTD services and, thus, is an arrangement
contemplated by and subject to the Services Agreement, and the LTTD equipment
and certain services under the Contract are to be provided pursuant to a Lease
Contract between Green Globe or its affiliate and CEVA Hungary, dated May 18,
1998 (the "Lease"); and
WHEREAS, the parties hereto wish to set forth their agreement regarding the
sharing of profits from the Contract as provided for in the Services Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
1. CEVA and Green Globe hereby agree that the Contract and the Lease are
agreements provided for and subject to the Section of the Services
Agreement entitled "Green Globe's Right to Participate in Projects".
CEVA and CEVA Hungary hereby represent and warrant to Green Globe that
the Contract is as set forth in Schedule A attached hereto and that
they shall promptly deliver to Green Globe any modifications or
amendments to the Contract.
2. Notwithstanding the specific provisions of the Lease, the parties agree
that the term of the Lease shall be five years (the intent being that
the initial two-year extension term be part of the original term). The
Rent shall remain at $43,247.57 per quarterly payment for the entire
five year term, so that the total lease payment under the Lease shall
be $864,951.40.
<PAGE>
2
3. After the termination of the Lease and the payment by the Lessee
(CEVA Hungary) of all of the Rent identified in Paragraph 2 above to
Green Globe (the Lessor), Lessee (CEVA Hungary) shall have the option
for a period of 60 days thereafter to purchase the Equipment for its
then appraised value, as determined by AZTEC Industries. If Lessee
exercises such option, all of Green Globe's (Lessor's) right, title
and interest in the Equipment shall be automatically conveyed to
Lessee (CEVA HUNGARY) (or perhaps to CEVA International, Inc.) upon
the payment of the purchase price and Green Globe (Lessor) shall have
no further interest in the LTTD; notwithstanding any termination of
the Lease, all of the parties acknowledge and approve of Green Globe's
(Lessor's)continuing rights under the Service Agreement.
4. The Lease will be translated into and executed in Hungarian. Either
party shall have the right in good faith to have the Lease amended
after its execution if such translation does not appropriately reflect
the agreed to Lease terms as drafted in English.
5. Notwithstanding anything in the Lease to the contrary, the Lease shall
be governed by and construed in accordance with the laws of the State
of Connecticut and any dispute under the Lease shall be brought
exclusively in the courts of the State of Connecticut and may not be
brought in Hungarian or any other courts.
6. In accordance with the aforementioned Section of the Services
Agreement, CEVA and CEVA Hungary hereby jointly and severally agree to
pay to Green Globe or its designee one-half of the net profits from
the Contract or any other agreements relating thereto and the work
thereunder, regardless of the source or recipient thereof, all in
accordance with the Services Agreement and Schedule A attached thereto.
Payments shall be made at the times set forth in the Services
Agreement. All payments shall be in U.S. Dollars. Green
Globe shall have the right to ask questions and receive answers from
CEVA, CEVA Hungary and/or any other applicable CEVA affiliate regarding
calculations of such questions and comments. Accepting funds under
this Agreement shall not constitute a waiver by Green Globe of its
right to challenge the amount payable to it at any time.
7. Green Globe shall have the right at any time to audit the books and
records of CEVA, CEVA Hungary and/or any other applicable CEVA
affiliate to confirm the accuracy and appropriateness of the payments
made or to be made to it hereunder. CEVA and CEVA Hungary agree to make
available such books and records at such times and places as are
reasonably convenient to Green Globe. Green Globe agrees to keep
confidential all information received in connection with any such
audit.
8. If CEVA, CEVA Hungary and/or any other applicable CEVA affiliate shall
default under the Lease and Green Globe shall exercise its rights to
terminate the Lease, then Green Globe shall thereupon automatically be
released, as to the Equipment only, from all non competition agreements
to which it is subject under the Services Agreement.
<PAGE>
3
IN WITNESS WHEREOF, this Agreement has been entered into as of the date set
forth above
CEVA INTERNATIONAL, INC.
By:____________________________
Its
CEVA HUNGARY ENVIRONMENTAL
PROTECTION AND ENVIRONMENTAL
SECURITIES
By:___________________________
Its
GREEN GLOBE, LLC
By:___________________________
Its
cev-leas.hun
7
<PAGE>
Exhibit 10.3
(2)
DATED 16 October 1995
CEVA INTERNATIONAL INC
- and -
ILONA BAYER
- and -
ANDRAS TOTH
- and -
JANOS SOOS
- and -
CEVA HUNGARY LTD.
- and -
ERNO TOROK
JOINT VENTURE AND SHAREHOLDERS' AGREEMENT
Dewey Ballantine Theodore Goddard
Vadasz utca 31
H-1051 Budapest
<PAGE>
I N D E X
Clause Description
No.
Recitals 1
1 Interpretation 2
2 Object of Joint Venture 4
3 participation and Obligations of Dr. 4
4 Funding and Proposed Transaction 6
5 Management of the Company 7
6 Bank Accounts and Mandates etc. 8
7 Dividend Policy 8
8 Provision of Information 9
9 Accounting Principles 10
10 Restriction of Encumbrances 10
11 Transfer and Alienation of Shares 10
12 Waiver of Rights of Exclusion 11
13 Restrictive Covenants 11
14 Use of CEVA Name 11
15 Termination of this Agreement 12
16 Confidentiality 12
17 Announcements 13
18 Representation and Warranties 13
19 No Partnership or Agency 13
20 Compliance 13
21 Waiver 14
22 Variation 14
23 Conflict with Articles 14
24 Notices 14
25 Fair clause 15
26 Costs 15
27 Severability 15
28 Entire Agreement 15
29 Successors and Assigns 15
30 Further Assurances 16
31 Headquarters of the Company 16
32 Governing Law 16
33 Disputes 16
<PAGE>
THIS JOINT VENTURE AND SHAREHOLDERS AGREEMENT is made the 16th day of
October 1995
BETWEEN:
(1) CEVA INTERNATIONAL INC. a New Jersey corporation with its principal
office at 1967 Highway 27, Suite 32-B, Edison, New Jersey 08817, USA
("CEVA");
(2) ILONA BAYER of 1132 Budapest, Visegradi u. 25 ("Bayer");
(3) DR. ANDRAS TOTH of 1139 Budapest, Orszagbiro u. 2 ("Toth);
(4) JANOS SOOS of 1091 Budapest, Ulloi u. 169 ("Soos");
(5) CEVA HUNGARY LTD. a Hungarian corporation with its principal office
at 2030 Erd, Mester utca 50 (the "Company"); and
(6) DR. ERNO TOROK of 1125 Budapest, Diosarok u. 65/c ("Torok").
WHEREAS:
(A) CEVA, Bayer, Toth and Soos have agreed to enter into a joint venture
through the holding of shares in the Company for the purpose of
establishing and operating the Business (as hereinafter defined).
(B) CEVA, Bayer, Toth and Soos have, immediately before the execution of
this Agreement, established the Company (subject to the
registration of the Company at the Court of Registration in Pest
County by executing the Deed of Association relating to the Company
(a copy of which is annexed hereto and marked "A"). The Company has
been established as a Hungarian corporation with an initial capital
of HUF 1,000,000 to be paid and contributed as provided for in
the Deed of Association, as to HUF 500,000 thereof by CEVA, as to
HUF 350,000 thereof by Bayer and Toth jointly and as to HUF 150,000
thereof by Soos.
(c) CEVA has a 50% business share in the Company, Bayer and Toth have a 35%
business share in the Company and Soos has a 15% business share in the
Company.
(D) The business share in the Company of Bayer and Toth is a joint business
share held jointly between them and comprising, as at the date hereof,
35% of the aggregate business shares in the Company. The rights
attaching to such business share are exercisable solely by Bayer on
behalf of Bayer and Toth and the liabilities attaching thereto are
joint and several liabilities of Bayer and Toth.
<PAGE>
(E) The parties hereto contemplate that as soon as it is practicable for
Torok, Bayer and Toth will (i) transfer to Torok and Toth jointly 20/35
of the joint business share in the Company of Bayer and Toth (to beheld
as to 75% thereof by Torok and 25% thereof by Toth) and (ii) transfer
to Bayer the balance of 15/35 such joint business share of Bayer and
Toth.
(F) The parties desire to set forth in this Agreement certain rights and
obligations with respect, amongst other things, to the operation
manager and control of the Company.
IT IS HEREBY AGREED as follows:
1. INTERPRETATION
1.1 In this Agreement the following words and expressions shall (save where the
context otherwise requires) have the meanings hereinafter respectively ascribed
to them:
"Affiliated Company" means, in relation to any company, any
entity which controls, is controlled by or is under
common control with such company and 'control' of an
entity in this context means direct or indirect
ownership of at least 50% of the equity in such
entity or the direct or indirect ability to exercise
50% or more of the votes of such entity;
"the Deed of Association" means the Deed of Association of the Company as
amended or restated from time to time;
"the Auditors" the auditors for the time being of the Company;
"the business: the business of establishing and operating within the
Republic of Hungary plants and sites for the processing of
industrial and other waste materials and products and the
provision of comprehensive environmental management
and consultancy services together with such other business
or businesses as Shareholders comprising a Requisite
Majority shall agree that the Company shall carry on from
time to time;
<PAGE>
"Business Day" a day which is not a Saturday or Sunday or public holid
in the Republic of Hungary;
"CEVA Nominated
Director" means a Director nominated by CEVA pursuant to Section
11.2 of the Deed of Association;
"Non-CEVA Nominated
Director" means a Director nominated by the Non-CEVA
Shareholders pursuant to Section 11.2 of the Deed of
Association;
"Non-CEVA Shareholders" means all the Shareholders for the time being in the
Company, other than CEVA;
"Requisite Majority" means Shareholders entitled between them to exercise at
least 60% of the votes capable of being cat at a
members' meeting of the Company;
"Security Interest" any mortgage, lien
(otherwise than arising by statute
or operation of law), pledge, charge
or other encumbrance, lease, option,
agreement to assign or transfer, or
any other third party rights or any
other similar arrangement or
agreement to create the same;
"Share" means a business share in the Company;
"Shareholder" means the holder or a joint holder for the time being
of a Share.
1.2 References to Recitals, Clauses, Schedules, Annexures and parties are
to recitals, clauses, schedules, annexures or parties to this
Agreement.
1.3 References to the plural shall include the singular and vice versa and
references denoting gender shall include all genders.
1.4 References to persons shall include bodies corporate, unincorporated
associations, partnerships and individuals.
1.5 The headings and index hereto are inserted for convenience only and
shall not affect the construction of this Agreement.
<PAGE>
1.6 Words denoting an obligation on a party to do any act, matter or thing
include, except as otherwise specified, an obligation to procure that
it be done and words placing a party under a restriction include an
obligation not to permit or allow infringement of that restriction.
2. OBJECT OF THE JOINT VENTURE
2.1 The objects of the joint venture, the subject of this Agreement, are: -
2.1.1 the carrying on of the Business in accordance with th
principles set out in Clause 2.2; and
2.1.2 the doing of such acts matters and things as may be consisted
with, necessary for or incidental to the attainment of the
preceding object.
2.2 The principles upon which the Business shall be conducted are:
2.1.1 to reflect a proper commercial basis and to generate and
maximise profits; and
2.1.2 bona fide for the benefit of the Company.
2.3 The Shareholders shall each use their respective endeavors to procure
that the Company carries out the preceding objects in accordance with
the stated principles, and that it does not engage in any other
activity or business which is not in accordance with such objects or
consistent with such principles.
3. PARTICIPATION AND OBLIGATIONS OF DR. TOROK
3.1 Each of Bayer, Toth and Torok undertake to each other and also to CEVA
and to Soos that within 30 days of the Relevant Date (as defined in
Clause 3.2) Bayer and Toth will make such transfers of parts of the
Share held jointly by Bayer and Toth as will result in 20/35 of such
Share being held jointly by Torok and Toth who shall accept such
transfer and the balance of 15/35 thereof being held solely by Bayer as
a separate business share and Bayer shall accept such transfer, to the
intent that, following such transfers, the Share held by Torok and Toth
jointly shall be a joint business share in the Company (held as to 75%
thereof by Torok and as to 25% thereof by Toth) in respect of which the
rights relating thereto shall be exercisable solely by Torok on behalf
of Torok and Toth.
3.2 Forthwith upon it becoming possible for Torok to become a member or
joint member of the Company without being in breach of any material
duty or obligation imposed upon him in the context of any employment or
consultancy arrangement with MOL rt. which is in existence as at the
date hereof, Torok shall notify each of the Shareholders of that fact
in writing (the date of such notification being the "Relevant Date").
The transfers referred to in Clause 3.1 shall take place on such terms
as to price as Bayer, Toth and
<PAGE>
Torok shall agree, provided always that any failure to reach such
agreement shall not prejudice or affect the obligations of Bayer, Torok
and Toth to effect the transfers referred to in Clause 3.1 within the
period specified in such Clause.
3.3 Each of Bayer, Toth and Torok agree (i) to enter into and execute all
such documents as shall be necessary in order legally and effectively
to carry out and effect the transfers referred to in Clause 3.1 and
(ii) to notify the Company forthwith in writing upon such transfers
being completed.
3.4 Each of the parties hereto (other than CEVA and the Company)
acknowledges that CEVA has agreed to participate in the Company and
enter into this Agreement on the understanding that (i) Torok will
become a shareholder in the Company on the basis specified in and in
accordance with Clause 3.1 and (ii) in anticipation of such parties
entering into the obligations set out in Clauses 3.5 and 14.
3.5 Each of the Shareholders and Torok undertakes to the Company and
separately to each of the other parties hereto as follows:
3.5.1 that he shall actively promote wherever possible the Company and the
business (but so that, for the avoidance of doubt, he shall not
thereby be obliged to incur any liability or expense);
3.5.2 that, in the case of Soos, Torok and Toth, he shall
devote as much time, effort and attention during
normal business hours to the development of the
Business as it is possible for him to do taking into
account any obligations upon him imposed by any
employment, consultancy or similar agreement to which
he is a party and which is in effect as at the date
hereof and without causing him to be in breach of any
such obligations;
3.5.3 that he will ensure that the Company receives,in priority to any other
company or enterprisein which he is at the date hereof or subsequently
becomes concerned or interested, the benefit of any opportunity for the
development of or carrying on of the Business of which he is or of which
he becomes aware provided always that this Clause 3.5.3 shall not oblige
him to do any act or thing which would cause him to be in breach of the
obligations referred to in Clause 3.5.2.
3.6 Clause 3.5 shall bind and be enforceable (i) against each of the
Shareholders for so long as such party remains a Shareholder; and (ii)
against Torok at all times until he becomes a Shareholder as
contemplated by Clause 3.1 (or until he ceases, by agreement in writing
with the Shareholders, to have any interest or involvement with the
Company) and at all times whilst he remains a Shareholder.
4. FUNDING AND PROPOSED TRANSACTION
<PAGE>
4.1 The Company and the Business shall initially be financed by the
contributions agreed to be made by the Shareholders as specified in
Recital (B).
4.2 The parties hereto shall use reasonable endeavours to procure that any
borrowings or loan facilities for the benefit of the Company from banks
and other similar sources shall be obtained on the most favourable
terms reasonably obtainable as to interest, repayment and security, but
without allowing any prospective lender a right to participate in the
equity share capital of the Company as a condition of any loan. No
shareholders shall be required to guarantee or provide any security or
accept any other liability with respect to any borrowings by or loan
facilities made available to the Company.
4.3 The parties acknowledge that it is contemplated that, as soon as
practicable following the date hereof, the Company will seek out
appropriate business opportunities and that, in order to finance such
opportunities it may be necessary to increase the primary stock of the
Company by an amount to be determined at the relevant time by a
members' meeting of the Company. Upon a member's meeting of the Company
determining the increase in the primary stock of the Company necessary
in order to finance any such business opportunity, the Shareholders
shall forthwith contribute such additional primary stock to the Company
in proportion to their respective Shares and otherwise in accordance
with the terms (as to the manner and timing of payment) determined by
the members' meeting.
4.4 The Shareholders and the Company agree to promptly execute all
documents and to make such amendments and/or modifications to the Deed
of Association as are necessary in order to give effect to or to
reflect any such increase in the primary stock of the Company.
4.5 Save as set out in this Clause 4, there shall be no obligation upon the
Shareholders to provide additional capital to the Company or to
provide, or procure to the provided, to the Company loans or loan
facilities.
5. MANAGEMENT OF THE COMPANY
5.1 The Shareholders agree that CEVA and the Non-CEVA Shareholders shall
each have the rights to nominate and request the removal of Directors
as are prescribed to them respectively in the Deed of Association. Each
of the Shareholders hereby agrees with the other Shareholders that upon
any nomination for the appointment or removal of a Director being made
by CEVA or by the Non-CEVA Shareholders pursuant to Section 11.2 of the
Deed of Association, it will exercise all voting and other rights and
powers of control available to it in connection with the Company so as
to procure (in so far as it is able by the exercise of such voting and
other rights and powers) that a members' meeting of the Company is held
as soon as practicable thereafter and that such members' meeting
approves such appointment or removal.
<PAGE>
5.2 The Shareholders agree that the initial Directors shall be:
5.2.1 Herbert Case who shall be deemed be a CEVA Nominated Director;
5.2.2 Janos Soos who shall be deemed to be a non-CEVA Nominated Director.
5.3 The Shareholders further agree that, unless and until a Requisite
Majority otherwise agrees, the management of the day-to-day routine
operations of the Company shall be carried out by Soos for so long as
he remains a Director and a Shareholder. In the event that Soos ceases
to be either a Director or a Shareholder, the Director with
responsibility for the management of the day-to-day operations of the
Company shall be selected by agreement of a Requisite Majority or, in
default of agreement by a Requisite Majority within a 28 day period, by
a resolution passed by a simple majority at a members' meeting of the
Company.
5.4 For so long as Soos is a Director with responsibility for the
management of the day-to-day routine operations of the Company, Soos
shall (and Soos hereby agrees to)devote as much time and attention and
effort to the Company and the Business as shall be reasonably necessary
in order to properly and effectively carry out such management.
5.5 CEVA undertakes that each CEVA Nominated Director and the Non-CEVA
Shareholders undertake that each Non-CEVA Nominated Director will (i)
at all times comply with and observe the restrictions on the authority
of the Directors set forth in the Deed of Foundation and with such
other restrictions and directions that may from time to time apply to
the Directors (including any such restrictions or directions imposed by
the members' restrictions or directions imposed by the members' meeting
of the Company); and (ii) keep the other Directors fully and promptly
informed as to matters within his knowledge which relate to the
business, operation, affairs or financial state of the Company.
5.6 Save as provided for in Section 11.5 of the Deed of Association, no
Director shall receive any remuneration or any other benefit from the
Company without the consent required by Section 10.1.5 of the Deed of
Association. For the avoidance of doubt the aforesaid restriction shall
not apply to the payment or reimbursement of expenses properly incurred
by any Director in the course of carrying out his duties in relation to
the Company.
6. BANK ACCOUNTS AND MANDATE
6.1 Any cheques or other orders for payment from any bank account of the
Company or any bills of exchange or promissory notes drawn or requested
by the Company which are of a value of HUF 250,000 ( or its equivalent
in any foreign currency) or more shall require the signatures of a CEVA
Nominated Director and a Non-CEVA Nominated Director. All such cheques,
orders, or payments, bills of exchange or promissory notes of a lesser
value may be signed by any Director. All mandates and other
instructions to the Company's banker relating to such matters shall
contain provisions to such effect.
<PAGE>
6.2 The Company shall maintain a U.S. dollar bank account pursuant to
Section 3193) of Act No. XXV of 1988 on foreign investments in Hungary
for the purpose of receiving and holding any U.S. dollar amounts from
time to time remitted to the Company by CEVA by way of capital
contribution or otherwise.
7. DIVIDEND POLICY
The Shareholders and the Company shall procure that they shall exercise all
voting rights and other powers of control exercisable by them in relation to the
Company so as procure (insofar as they are able by the exercise of such rights
and powers) that dividends shall be declared and paid by the Company within 4
months after the end of any financial year or, if later, within one month after
the audited accounts for that financial year have been approved by the members'
meeting (whichever is the later) in respect of 50% of the profits available for
distribution but after making such provision for actual, deferred or contingent
liabilities as is agreed by Shareholders comprising a Requisite Majority (or, in
default of agreement by a Requisite Majority, as is determined by the Auditors
as being a reasonable provision for such liabilities) unless otherwise
restricted by law or unless Shareholders comprising a Requisite Majority
otherwise agree.
8. PROVISION OF INFORMATION
8.1 The Company agrees to keep each of the Shareholders regularly informed
of the progress of the business of and the affairs of the Company and
shall promptly furnish each of the Shareholders, to such extent and in
such form and detail as they may from time to time reasonably require,
with particulars of any matters concerning or arising out of the
activities of the Company, including without limitation:
8.1.1 copies of the audited consolidated profit and loss
account and balance sheet in respect of each
financial year of the Company forthwith upon the same
becoming available and in any event not later than
the expiration of three months from the end of each
such financial year and copies of the management
accounts of the Company as soon as practicable after
they are prepared; and
8.1.2 a copy of the Company's business plan, operating plan
and financial budget and cash flow projection for
each financial year of the Company, such copy to be
provided prior to the commencement of the financial
year to which it relates or, if such plans, budget
and projection have not been approved pursuant to
Clause 8.2 before the commencement of such financial
year, then within 14 days of such approval being
given.
8.2 The Company shall, not later than 60 days prior to the commencement of
each financial year of the Company, submit to the shareholders for
their approval a draft business plan, operating plan, financial budget
and cash flow projection for the next succeeding financial year of the
Company. In the case of the first financial year of the Company, the
Company shall endeavour to submit such plans, budget and projection for
such year shall
<PAGE>
to the Shareholders for their approval not later than 60 days following
the date hereof. The Company shall revise or amend such plans, budget
and projection in accordance with directions with respect thereto given
by Shareholders comprising a Requisite Majority. Following their
approval by Shareholders comprising a Requisite Majority, the Company
shall adopt such plans, budget and projection.
8.3 The company agrees that it will allow each of the Shareholders, their
respective agents and advisers from time to time to have full access to
the financial, accounting and other confidential records of the Company
and to inspect the assets of the Company if so required by the
Shareholders upon each such Shareholder giving reasonable notice to the
Company.
8.4 The Company shall produce quarterly unaudited management accounts which
shall be prepared and distributed to the Directors and to the
Shareholders not later than 28 days after the end of the quarter to
which they relate.
9. ACCOUNTING PRINCIPLES
The accounts of the Company shall be prepared in accordance with the accounting
principles and practices generally accepted and applicable in the Republic of
Hungary.
10, RESTRICTION ON ENCUMBRANCES
Save as contemplated in this Agreement each of the Shareholders hereby
undertakes that it will not create or permit to exist any Security Interest over
or in respect of all or any part of its Share.
11. TRANSFER AND ALIENATION OF SHARES
11.1 No Shareholder shall be entitled to transfer, sell, dispose of or
otherwise alienate his Share or part thereof save in the circumstances
permitted in the Deed of Association.
11.2 The Shareholders agree that, in relation to the sale, transfer or other
alienation of a share (or part thereof) in the circumstances
specifically referred to in Clause 11.3 below, they will not exercise
their right of first refusal under Section 171 (10 of Act VI of 1988 on
Economic Associations (the "Companies Act") in relation to the Share or
part thereof the subject of such sale, transfer or alienation and that
they will exercise all voting rights and powers of control available to
them in relation to the Company so as to ensure that the Company does
not exercise its right of refusal pursuant to such section in relation
thereto and that no person other than the proposed transferee is
designated to acquire such Share or part thereof.
11.3 The specific circumstances referred to in Clause 11.2 are as follows:
11.3.1 the transfers of parts of the Share of Bayer and Toth
contemplated by Clause 3.1.;
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11.3.2 a transfer of any Share or part thereof with the approval of
Shareholders comprising a Requisite Majority; and
11.3.3 the transfer, whether or not for valuable consideration, of a
Share or part thereof by CEVA to an Affiliate Company of CEVA
or by any such Affiliate Company to CEVA or to any other
Affiliate Company of CEVA.
11.4 If any Shareholder transfers its Share or part thereof to another
person or otherwise alienates its Share or any part thereof in favour
of another person the transferor shall procure that the transferee
enters into an agreement with the Shareholders in such form as the
other Shareholder(s) may reasonably require, undertaking to be bound by
all the provisions of this Agreement as if it were party hereto and,
where the context so permits, as if each reference herein to the
transferor were a reference also to it.
12. WAIVER OF RIGHTS OF EXCLUSION
The Shareholders agree that for so long as this Agreement is in effect, they
will not exercise their right to exclude any members of the Company under
Section 182 of the Companies Act and each Shareholders hereby unconditionally
waives any such rights of which he has the benefit.
13. RESTRICTIVE COVENANTS
Each of the Shareholders covenants and agrees with each of the other
Shareholders and the Company that it will not either on its own account or in
conjunction with or on behalf of or through any person directly or indirectly at
any time whilst it remains a Shareholder (and Torok covenants and agrees with
the Company and each of the other parties that he will not either on his own
account or in conjunction with or on behalf of or through any person directly or
indirectly at any time of or through any person directly or indirectly at any
time whilst he is, pursuant to Clause 3.6, bound by the provisions of Clause
3.5) carry on or be engaged, concerned or interested in or assist in carrying on
any business carried on in the Republic of Hungary which is concerned with the
processing of industrial and other waste products and/or the provision of
environmental management or consultancy services or any business carried on in
the Republic of Hungary which is otherwise competitive with the Business from
time to time save that for the avoidance of doubt this Clause 13 shall not
prevent, restrict or prohibit (i) CEVA from being engaged concerned or
interested in or assisting CEVATech International Ltd. (a Czech corporation) or
its business or any other company or business in which CEVA International Inc is
concerned or interested as at the date hereof; or (ii) Torok from providing
environmental protection consultancy services in a personal capacity to persons
other than persons who are direct or indirect competitors of the Company.
14. USE OF CEVA NAME
The Company and the Shareholders hereby acknowledge to an agree with CEVA that
all intellectual property and other ownership rights in connection with the word
"CEVA" are the sole and exclusive property of CEVA and that the use of such word
in the name of the Company
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is with the specific consent and approval of CEVA which may be withdrawn at any
time. The Shareholders and the Company agree with and undertake to CEVA that,
forthwith upon a written request being made by CEVA to the Company, they will do
all such things and execute all necessary documents and, in the case of the
Shareholders, will exercise all voting rights and other powers of control
available to them in relation to the Company (including passing an appropriate
resolution at a members' meeting of the Company) to ensure that the name of the
Company is changed so as to remove the word "CEVA" and that the new name of the
Company does not imply or suggest any association with CEVA. This Clause 14
shall survive any termination of this Agreement.
15. TERMINATION OF THIS AGREEMENT
<PAGE>
Exhibit 10,4
SERVICE AGREEMENT
which was entered into between the Research and Development
Directorate Hungarian Oil and Gas Rt. with an address at H-1117
Budapest, Oktoberhuszonharmadika u. 18 (the "MOL") and CEVA
Hungary Kft. with an address at H-1097 Budapest, Illatos UT 7 and
CEVA International Inc. with an address at 1967 Highway 27, Suite
32B Edison, New Jersey, 08817, USA) as the contractors of the
agreement jointly (together: "CEVA")with the following terms and
conditions:
RECITALS
A. Approximately 80,000 metric tonnes of acid tar and maleic acid has been
accumulated at the Csepel site located in Budapest and at the
Szazhalombatta site owned by MOL, which materials are listed under "Oil
Refinery Waste" as a material in Section 5.4.8 of the II. hazardous
material category in Appendix 2 of the Government Decree No. 102/1996
(VII.12.).
B. Based on a formula called KALOREX-1 and KALOREX-3 owned by
MOL, alternative fuel can be processed by using the
accumulated acid tar and maleic acid, which MOL, is entitled
to burn at the Bakony Power Station until December 31, 1996
as trial processing based on the contract executed with
Bakony Power Station. The permit of the trial burning is
issued for 5,000-5,000 metric tonnes concerning each type of
alternative fuel based on which 5,000 metric tonnes KALOREX-
1 shall be prepared from 1,750 metric tonnes acid tar on the
Csepel site and 4,000 metric tonnes KALOREX-3 shall be
prepared from 2,800 metric tonnes maleic acid on the
Szazhalombatta site under the terms of this Agreement.
C. The indicated proportions and quantities may change based on
the information acquired during the trial processing. The
extent of this is mutually accepted by the parties based on
the government permit. CEVA declares that it is aware of
the provisions of the agreement between MOL and the Bakony
Power Station regarding the burning of KALOREX-1 and
KALOREX-3 and declares that it will take it into
consideration during its performance under this Agreement.
The above mentioned agreement is attached as Appendix 1.
D. The acid tar and maleic acid shall be owned by MOL during the entire
period of the industrial trial.
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CONTRACTING PARTIES
1.1 CEVA Hungary Kft. is an economic association established
pursuant to Act VI of 1988 and registered at the Court of
Registration under Reg. No. 13-09-07-1199/02. The court's
decision regarding the registration is attached as Appendix
2.
1.2 CEVA International Inc. is registered according to the laws
of the U.S. and is a partial owner of CEVA Hungary Kft.
1.3 The Hungarian Oil and Gas Rt. is registered by the Court of
Registration under Reg. No. 01-10-041683/199...
1.4 The following persons are authorized to represent the
parties regarding:
MOL Rt.: Istvan Nadasy
Janos Gergely, dr.
CEVA Hungary Kft.: Janos Soos
CEVA International Inc.: Herbert Case
the agreement with the
Szazhalombatta site; Lajos Horvath
Laszlo Simor, dr.
the agreement with the
Csepel site: Bela Langyel
2. OBJECT OF THE AGREEMENT
CEVA agrees to process 5,000 metric tonnes KALOREX-1 and 4,000 metric
tonnes KALOREX-3 from the acid tar and maleic acid accumulated on the
Csepel and Szazhalombatta sites in the amount determined in Section B
based on the formula described in the Call for Offer. The formula
regarding KALOREX-1 and KALOREX-3 is attached as Appendix 3.
3. CONDITIONS OF THE PERFORMANCE OF THE AGREEMENT
3.1 Government Approvals
CEVA shall commence its activities regarding the performance of this contract
only with the relevant environmental and other government approvals and it shall
certify that it is entitled to remove acid tar and maleic acid and process
KALOREX-1 and
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KALOREX-3 fuel according to the technology described in its proposal and in the
Call for Offer which is in conformity with the process described in Appendix 3.
MOL is obliged to ensure that nothing prevents the performance of the work
including the government approvals mentioned in the Call for Offer. The permits
necessary for the performance of this Agreement are attached hereto and
constitute attachments to this Agreement.
3.2 Agreement with the Sites
Parties agree, that in order to perform under this Agreement, they
shall enter into agreements with each sites regarding the fulfilment of
the obligations set forth in Sections 4.2.3, 5.1.2, 5.1.3 and 5.2.3.
However, the performance of the recultivation work is not part of this
Agreement and a new agreement will be entered into regarding the design
and execution of the recultivation task.
4. CEVA'S RIGHTS AND OBLIGATIONS
4.1.1 CEVA shall obtain the following government permits
regarding the processing and shipping of the
materials mentioned in this Agreement:
(i) government permit that it is entitled to the
processing of dangerous waste materials
(Appendix 4);
(ii) government permit regarding the shipping of
dangerous waste materials (Appendix 5).
4.1.2 CEVA shall set up the equipments, materials and the
machinery on the site according to the preliminary
discussions with MOL's site manager.
4.1.3 CEVA shall provide its demands in writing regarding
each site until the execution of agreement with the
site but the latest until September 20, 1996 and it
shall communicate which site shall be used to start
the processing of KALOREX materials.
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4.2 CEVA's obligations following commencing the performance:
4.2.1 CEVA shall measure the materials shipped to the
site of the removal and shall certify their origin
with a certificate. CEVA shall not transport
materials qualified as dangerous waste materials
to the territory of the site. CEVA shall measure
the finished KALOREX-1 and KALOREX-3 materials and
certify them with the certificate of quality and
it shall hand over a copy to the appointed
representative of the sites both at shipping in
and shipping out the materials. CEVA shall not
use other dangerous waste materials besides acid
tar and maleic acid used to the processing of
KALOREX-1 and KALOREX-3 alternative fuels and the
processed materials will be delivered to the
Bakony Power Station with the ingredients put
together on the site.
4.2.2 CEVA shall comply with the relevant rules and orders
of the site and it shall also ensure that its
subcontractors observe the abovementioned rules as
well. CEVA shall inform MOL regarding any requested
information in connection with its subcontractors.
4.2.3 CEVA shall keep a log-book during the performance of
the work under this Agreement. The following
information shall be included in the log-book:
(i) the date of handing over the work area;
(ii) the quality and quantity of the
materials transported in accordance with
the relevant parameters;
(iii) any extraordinary events occurred during
the performance of the work;
(iv) any extraordinary events occurred during
the performance of the work;
(v) any circumstances preventing the
performance of the work;
(vi) the time of starting and finishing the
work daily;
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(vii) names of the workers; and
(viii) the performed activity.
CEVA shall compensate the services provided by MOL
for CEVA's requests. The parties will enter into a
separate agreement with each site regarding the above
mentioned fees at the handing over of the work area.
4.2.4 CEVA shall create a fence to surround the work
area, it shall place warning signs on the work
area and it shall arrange guarding the work area.
CEVA shall ensure the protection of property and
fire protection on the work area. CEVA shall
immediately remove any contamination of the road
caused by it.
4.2.5 CEVA shall decontaminate the waste water produced
during the removal of acid tar(pH 5-8) and following
the gravitational separation discharge it according
to the waste water capacity of the site.
4.3 CEVA's rights:
4.3.1 CEVA is entitled to review and make copies of all
relevant data, description, information and other
documents relevant to the performance of this
Agreement in accordance with the relevant rules of
MOL.
4.3.2 CEVA shall obtain all reasonable assistance from MOL
to perform its obligations under this Agreement.
5. MOL'S RIGHTS AND OBLIGATIONS
5.1 MOL's obligations before the commencing of CEVA's activities:
5.1.1 MOL shall designate the necessary area - where the
removal of acid tar and maleic acid and the
production of KALOREX-1 and KALOREX-3 shall occur
- for the performance of the work and hand it over
to CEVA in proper condition within 5 days from the
date determined by CEVA according to Section
4.1.3. MOL shall hand over the work area with a
5
<PAGE>
minutes of the meeting to CEVA.
5.1.2 MOL shall create a waste water channel or receiver at
the border of the work area which is suitable for
receiving the removed and decontaminated waste water.
MOL shall provide two containers with the
satisfactory measurements for CEVA to the
decontamination of the acidic water.
5.1.3 MOL shall ensure the necessary electric energy with
proper connector at the border of the work area as
designated by CEVA. CEVA shall pay for the electric
energy according to the agreement with the site.
5.1.4 MOL shall inform CEVA and its subcontractors
regarding the rules in connection with safety, labour
protection and environmental protection and deliver
it in writing. The written rules are attached as
Appendix 6.
5.1.5 MOL shall permanently ensure the use of proper
social areas to the employees of CEVA.
5.2 MOL's obligations after the commencing of CEVA's activities:
5.2.1 MOL shall ensure that all employees of CEVA that had
been reported previously to MOL have access to the
work area 24 hours a day including weekends and
holidays.
5.2.2 MOL shall obtain the permits listed in the Call for
Offer and it shall assign them CEVA during the term
of this Agreement. The above mentioned permits are
attached as Appendix 7.
5.2.3 The employees of MOL shall not be allowed to enter
into the work area following the transfer of the work
area, unless it is previously agreed by CEVA in
writing on the sites respectively.
5.3 MOL's rights following the handing over of the work area:
5.3.1 MOL is entitled to control CEVA's activity
permanently and is entitled to write any remarks in
CEVA's log book through its appointed representative.
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<PAGE>
5.3.2 MOL is entitled to temporarily limit CEVA's activity
if there is any safety, personnel or property
protection or environmental protection reason for
such limitation.
5.3.3 MOL is entitled to measure the transported and
removed materials after each shipping, to remove a
sample from the materials in order to establish its
quality and to review CEVA's certificate of quality.
6. DETERMINATION AND STORING OF ADDITIONAL MATERIAL
The parties agree that they consider all materials that are not derived
from acid tar or maleic acid (construction debris, metal barrel or such
materials which were not created during the refinery technology and the
MSA technology) additional material. CEVA shall separately store the
additional material on the work area in accordance with the agreement
with the site manager in a container provided by MOL.
7. LOCATION OF THE PROCESSING OF KALOREX-1 AND KALOREX-3
The processing KALOREX-1 and KALOREX-3 - from acid tar and maleic acid
- shall take place on the Csepel and Szazhalombatta site of MOL. CEVA
shall commence its activity on the site determined in Section 4.1.3 and
in accordance with the minutes of the meeting determined in Section
5.1.1.
8. TIME AND PLACE OF PERFORMANCE
CEVA shall commence the processing of 5,000 metric tons of KALOREX-1
and 4,000 metric tons of KALOREX-3 at the latest by September 30,1996
on the place of performance stipulated in this Agreement. CEVA agrees
that it shall process the above mentioned alternative fuel at the
latest by November 30, 1996.
The place of the performance of this Agreement is the plant of the
Bakony Power Station, where CEVA shall be obliged to hand over the
KALOREX-1 and KALOREX-3 alternative fuels processed by it with the
relevant certificates by permanently shipping it.
9. SERVICE FEE
The service fee is established based on the quantity of the
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utilized acid tar and maleic acid sludge according to the measuring
described in Section 4.2.1 and 5.3.3. The fee for the processing of the
measured maleic acid is 146.86 USD/ tonne + VAT.
The service fee includes all expenses of the processing and shipping to
the place of the performance of the KALOREX materials and the costs of
the separation of the materials necessary to the processing of KALOREX
and additional materials and the storage fees exclusive of the acid tar
and maleic acid sludge. The fee for the decontamination of the acidic
waste water originated during the removal of acid tar is 15 USD/m3.
The service fee is charged in USD and the issuance of the bill will
reflect this. MOL shall pay the bill plus VAT based on the Hungarian
forint equivalent of the service fee calculated at the relevant daily
the mid-rate of the Hungarian National Bank.
10. CONDITION OF PAYMENT
10.1 The basis for the issuance of the service bill is the quantity of the
processed acid tar and maleic acid as established based on Sections
4.2.1 and/or 5.3.3. The condition of the acceptance of the Bill is that
the designated site manager of MOL certifies the fulfilment of the
performance and that it is certified that the KALOREX materials were
accepted by Bakony Power Station.
10.2 MOL shall transfer the payment within fifteen (15) days from the date
of the receipt of CEVA's bill to bank account no.
10103104-39563222-00000000 at Budapest Bank Rt. MOL is obliged to pay
late payment fee in case of delay in payment. The amount of the late
payment charge is equal to the base interest rate of the Hungarian
National Bank +10%.
10.3 Parties agree that the service is indivisible, however CEVA is entitled
to submit bills on a weekly basis during the performance following
October 1, 1996 based on the quantity of the processed acid tar and
maleic acid sludge.
11. BREACH OF CONTRACT
11.1 In case MOL does not perform its obligations in a timely manner, the
performance schedule of CEVA shall be extended.
11.2 If one of the parties is in breach of this Agreement it
8
<PAGE>
shall pay compensation and penalty to the other party with the
limitations set forth by this Agreement except if it proves that it has
performed the obligations expected from an Economic Association in a
given similar situation.
11.3 The acceptance of the performance under this Agreement shall not be
interpreted as a waiver of any rights arising out of the breach of
contract.
11.4 In case CEVA breaches Sections 4.1.1, 4.1.3, 4.2.3 and 6. or prevent
the performance under Section 5.3.3 of if 1/3 of the acid tar and
maleic acid sludge as determined in Section B shall not be processed by
November 30, 1996 due to CEVA's fault, MOL is entitled to cancel this
Agreement as a result of which it will cease to be in force on the
tenth (10.) day following the communication of cancellation. In case of
cancellation the parties shall settle any outstanding debts owed
towards each other.
12. PENALTY
12.1 The parties shall pay a penalty if any of the following occurs:
12.1.1 Delay in performance
In case any of the contracting parties are in delay
with their performance (i)in case of CEVA: the
obligation of penalty payment starts from the tenth
day following the date of the receipt of the notice
requiring the performance in case of delay concerning
the fulfilment of its obligation and (ii) in case of
MOL: it starts from the following day of the last day
of the deadline for the payment of the service fee
and if MOL does not perform its obligations according
to Section 5.1, 5.2 it starts from the date of the
receipt of CEVA's notice requiring performance;
12.1.2 Faulty performance
In case of faulty performance only if CEVA deviates
from the procedure of the Call for Offer which is
permitted by the authorities during the removal and
processing of acid tar and as a result MOL shall be
obliged to pay environmental fine due to CEVA's
fault. The faulty performance occurs if the
resolution imposing the fine shall become
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<PAGE>
final following exercising all available defenses;
12.1.3 Cancellation
In case any of the parties cancel the Agreement under
11.4 or 11.5.
12.2 The basis of the penalty
The penalty is based on the stipulated compensation hereof. The basis
of the Calculation of the penalty is the amount established by
multiplying the service fee with the quantity of the acid tar and/or
maleic acid effected by the delay in performance or faulty performance.
12.3 The amount of penalty
(i) In case of delay in performance the amount of the
penalty is 1% of the service fee monthly calculated
based on the amount of the quantity of acid tar and
maleic acid not processed according to the time
schedule of this Agreement during the time period of
the delay.
(ii) In case of faulty fulfilment the amount of penalty is
equal to the fine imposed against MOL and it shall be
due when the judgment becomes final.
(iii) In case of cancellation 1% of the entire service fee
taking into consideration the quantity as determined
in Section B.
13. FORCE MAJEURE
13.1 In the case of the non-performance of the obligations originating from
this Agreement, the parties shall only be exempted from liability to
the extent and up to the period until fulfilment is considerably
prevented or made impossible by war, civil revolt, natural catastrophe
or other emergency.
In the event of a force majeure arising at any time prior to the
minimum amount offered by CEVA having been processed by CEVA and either
being of a permanent and irreversible nature or, if not, then
continuing in existence for at least 3 months and which in either case,
has the effect of (i) rendering CEVA unable to provide services as
required by MOL; or (ii) rendering MOL unable to utilise or engage the
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<PAGE>
services, then MOL will indemnify and reimburse CEVA in respect of an
amount equal to the aggregate of (i) the difference between the initial
capital cost or value of CEVA's equipment acquired by CEVA for the
purpose of providing the Services and the book value of such equipment
at the date upon which such force majeure occurs and (ii) and amount
equal to 30% of such book value in respect of CEVA's associated
indirect costs. For this purpose force majeure shall include, without
limitation, withdrawals of relevant environmental consents or approvals
and closure of the Power Station and other events (beyond CEVA's
control) making it impossible for CEVA to sell Supplemental Fuel to the
Power Station, but shall exclude normal winter or other programmed
interruptions.
13.2 Liability for damages caused by explosives
In case any war explosive shall be found on the work area handed over
by MOL any costs and damages in any property and/or in human life
related to it shall be borne by MOL. CEVA shall bear all responsibility
regarding and direct and indirect damages exclusively for the U.S.
citizens employed by it.
14. OTHER EXPENSES
Parties agree that CEVA shall transport the necessary equipments to the
processing of acid tar and maleic acid to the site in connection with
which CEVA shall have US$120,000 cost (the "Service Cost") described in
the proposal accepted by MOL which cost was not taken into
consideration during the establishment of the service fee.
CEVA is obliged to certify the origin of the expenses with the relevant
documents. CEVA shall charge the certified costs to MOL by November 30,
1996 the latest. MOL shall compensate CEVA for any certified Service
Costs.
The costs that appear on the certified bills paid and certified in US$
shall be paid in US$. Any expenses occurred in Hungary plus VAT shall
be calculated and paid in HUF.
Parties agree that in case CEVA shall enter into an agreement with MOL
regarding the processing of acid tar and other oil waste material - to
at least 40,500 metric tons during 1997 in accordance with II/13 of the
proposal, the service fee will be proportionately reduced with the
above
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<PAGE>
mentioned costs.
At the accounting of the reduction the Service cost if it is paid in
USD shall be taken into account according to the relevant mid-exchange
rate of the Hungarian National Bank, however the Service Costs paid in
forints shall be taken into consideration with an increase by 25% per
year from the date of MOL's performance based on this Agreement until
the date when the reduction shall occur.
15. GOVERNING LAW
This Agreement will be governed by the laws of Hungary.
16. DISPUTES
Parties agree that they will first try to settle their legal disputes
arising out of this Agreement in a peaceful manner. If a mutually
acceptable agreement cannot be reached within a reasonable period of
time in such manner, the parties will submit themselves to the
exclusive competence of Metropolitan Court of Budapest with respect to
all legal disputes falling on the jurisdiction of county court under
the then prevailing Code for Civil Proceedings, while in all matters
the then prevailing Code for Civil Proceedings refers to the
jurisdiction of the local court, the parties submit themselves to the
exclusive competence of the Pest Central District Court.
17. LANGUAGES
This Agreement and any amendments or other modifications hereof shall
be executed both in English and in Hungarian language and in case of
any dispute the Hungarian version shall prevail.
18. ENTIRE AGREEMENT
This Agreement, its attachments and the agreements with the sites
contain the entire agreement. The parties expressly agree, that CEVA's
proposal submitted on July 24, 1996 accepted by MOL and its supplements
attached as Appendix 8 constitutes the part of the Agreement between
the parties if there is no explicit contradiction in their content and
its provisions shall have full force between the parties regarding all
issues not stipulated in this Agreement.
19. CONFIDENTIALITY
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The terms and conditions of this Agreement are confidential and neither
party may publish any details of this Agreement to the press, to the
radio or to television without the prior written approval of the other
party.
The parties shall not publish any information regarding the technology
or the nature of the materials to a third party regarding this
agreement.
This Agreement was executed by the parties after reading and understanding all
of its provisions, as in harmony with their will.
Szazhalombatta, September 24, 1996
MOL HUNGARIAN OIL AND GAS CO. RT.
REFINING AND MARKETING DIVISION
By s/s Dr. Gergely Janos
Name: Dr. Gergely Janos
Title: fejlesztesl-lkutasi lgazgato
CEVA HUNGARY KFT.
By s/s
Name:
Title:
CEVA INTERNATIONAL INC.
By s/s Herbert Case
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oro-serv.agr
Exhibit 10.5
SERVICE AGREEMENT
which was entered into between the Hungarian Oil and Gas
Industrial Company limited by Shares with an address at H-1117
Budapest, Oktober huszonharmadika u. 18. as Customer and CEVA
Hungary Kft. with an address at H-1097 Budapest, Illatos ut 7.
and CEVA International Inc. with an address at 1967 Highway 27,
Suite-32B, Edison, New Jersey, 08817 USA as the Contractors of
this Agreement (hereinafter together: CEVA) with the following
terms and conditions:
INTRODUCTION
A. On the Nyirbogdany site of MOL approximately 30,000 tonnes acid tar
have been accumulated which is listed under "oil refinery waste
material" in point 5.4.8 of Appendix 2 of the Government Decree No.
102/1996. (VII.12.) (the 'Decree") and classified as Category II.
hazardous material.
B. According to a technical estimate approximately 20,000 tonnes is
suitable to produce a liquid alternative waste fuel material called
"AF" from the accumulated acid tar with the procedure of CEVA
International Inc. and with the procedure elaborated by the local
experts which can be used at Cement Factory and other industrial
establishments in a closed system in accordance with the Decree.
C. The removal of the acid tar and the production of the "AF"
shall take place in the Nyirbogdany plant of MOL, however
the use shall occur according to Section 7. The first 2
months period of the use is experimental. Based on this,
the users shall apply for a 2 months permit and the maximum
quantity belonging to it. Based on the information obtained
during this experimental use the proportion and the quantity
of the ingredients may change. The contracting parties
shall mutually accept and acknowledge this change based on
the permit of the authorities. This permits issued by the
relevant authorities are attached as Attachment 1/a., b.,
and c. of this Agreement.
D. MOL shall enter into an agreement with the users of the alternative
fuels and CEVA acknowledges the agreements regarding the production of
"AF" or the schedule of the users and acts according to MOL's order at
all times regarding the producible quantities. The minutes regarding
the needs of the users and the agreements are attached as Appendix
2/a., b., and c.
E. MOL owns the acid tar and the "AF" alternative waste fuel material made
of it during the entire period of the production and sale.
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1. CONTRACTING PARTIES
1.1 CEVA Hungary Kft. established in accordance with Act VI of
1988 which is registered under No. 13-09-07-1199/02. with
the Metropolitan Court of Registration.
1.2 CEVA International Inc. registered under the laws of the United States
which partly owns CEVA Hungary Kft.
1.3 The Hungarian Oil and Gas Industrial Company Limited by Shares which is
registered under no. 01-10-041683 with the Metropolitan Court of
Registration.
1.4 The following persons are entitled to act on behalf of the
contracting parties:
MOL Rt. Dr. Lengyel Jeno
Dr. Janos Gergely
CEVA Hungary Kft. Janos Soos
Regarding the site agreements Tamas Henyusz
Laszlo Jozsef
2. THE SUBJECT OF THE AGREEMENT
CEVA shall produce "AF" based on the governmental permits on the site
of MOL in Nyirbogdany from the acid tar as determined in Section B and
it shall use acid tar based on the process description and recipe
attached as Appendix 4 to this Agreement, thereby it meets the
quantity-requirements of the users.
3. THE CONDITIONS OF THE PERFORMANCE OF THIS AGREEMENT
3.1 Governmental permits
CEVA shall start the performance of this Agreement only after obtaining
the relevant environmental and other governmental permits. It shall
participate in obtaining the relevant permits in order to ensure the
aforementioned.
MOL shall ensure that nothing interrupts the performance of the work
including obtaining of the relevant permits. The relevant permits shall
be attached to this Agreement and constitute the appendix to it (as
Appendix 1/a., b., and c.) issued by local authorities at the site.
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4. CEVA'S RIGHTS AND OBLIGATIONS
4.1 CEVA's obligations before the recovery of acid tar:
4.1.1 CEVA shall comply with the rules of government
Decree No. 102/1996. (VIII.12.) regarding the
treatment and transportation of the materials
subject of this Agreement.
4.1.2 CEVA shall bring the equipments, materials and the
machinery to the site according to the preliminary
discussions with MOL's site manager.
4.1.3 CEVA shall provide its demands in writing regarding
the site until the execution of agreement with the
site but the latest until September 15, 1997.
4.2 CEVA's obligations following commencing the performance:
4.2.1 CEVA shall measure the materials shipped to the
recovery and processing location at the
Nyirbogdany factory of MOL. CEVA shall measure
materials to be shipped in accordance with the
quality requirements agreed upon by the user. MOL
shall certify the "AF" with a certificate of
quality according to the standard analysis of the
MOL laboratory.
4.2.2 CEVA shall comply with the relevant environmental,
safety, labour safety and accident prevention rules
and orders of the site and it shall also ensure that
its subcontractors observe the above mentioned rules
as well. CEVA shall inform MOL about any requested
data of its subcontractors.
4.2.3 CEVA shall keep a log-book during the performance of
the work under this Agreement. The following
information shall be included in the log-book:
(i) the date of handing over the work area;
(ii) the quality and quantity of the materials
transported in accordance with the relevant
parameters;
(iii) the quality and quantity of the
materials transported out according to
the relevant parameters;
(iv) any extraordinary events occurred during
the performance of the work;
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(v) any circumstances preventing the
performance of the work;
(vi) the time of starting and finishing the
work daily;
(vii) names of the workers; and
(viii) the performed activity.
4.2.4 The parties will enter into a separate agreement in
respect of compensations with the site at the
handing-over of the work-site. CEVA shall pay for the
services ordered by it and performed by MOL in
accordance with the site (Appendix 5).
4.2.5 CEVA shall surround the work area with a visible
warning-ribbon. CEVA shall place warning signs on the
work area and it shall arrange guarding the work area
within the designated area. CEVA shall remove any
contamination of the road caused by it immediately.
4.2.6 CEVA shall neutralize the waste water produced during
the removal of acid tar (pH 5-8) and drain it
according to the waste water capacity of the site
following the gravitational separation.
4.3 CEVA's rights:
4.3.1 CEVA is entitled to review and make copies of all
relevant authority and other data regarding the
disposal of the acid tar and other data, description,
information and other documents relevant to the
performance of this Agreement in accordance with the
relevant rules of MOL.
4.3.2 CEVA shall obtain all reasonable assistance from MOL
to perform its obligations under this Agreement.
5. MOL'S RIGHTS AND OBLIGATIONS
5.1 Mol's obligations before the commencing of CEVA's activities:
5.1.1 MOL shall designate the necessary area - where the
removal of acid tar and the production of the
alternative fuel shall occur - for the performance of
the work and hand it over to CEVA in proper condition
within 30 days from the date determined by CEVA
according to Section 4.1.3. MOL shall
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hand over the work area with a Handover Protocol
to CEVA. (Appendix 6).
5.1.2 MOL shall create a waste water channel or receiver
at the border of the work area which is suitable
for receiving the removed and decontaminated waste
water.
MOL shall provide two containers with the
satisfactory measurements to the decontamination
of the acidic water to CEVA.
5.1.3 MOL shall ensure the necessary electric energy with
proper connector at the border of the work area as
designated by CEVA. CEVA shall pay for the electric
energy according to the agreement with the site.
(Appendix 5).
5.1.4 MOL shall inform CEVA, its subcontractors and its
employees regarding the rules in connection with
safety, labour protection and environmental
protection and deliver it in writing. The written
rules are attached as Appendix 7.
5.1.5 MOL shall permanently ensure the use of proper social
areas to the employees of CEVA.
5.2 MOL's obligations after the commencing of CEVA's activities:
5.2.1 MOL shall ensure that all employees of CEVA that had
been reported previously to MOL have access to the
work area 24 hours a day including weekends and
holidays in accordance with the preliminary report of
CEVA regarding the number of employee.
5.2.2 Exclusively authorized employees of MOL shall be
allowed to enter into the work area following the
handing-over of the work area.
5.3 MOL's rights following the handing over of the work area:
5.3.1 MOL is entitled to monitor CEVA's activity
permanently and is entitled to write any remarks in
CEVA's log book through its appointed representative.
5.3.2 MOL is entitled to temporarily limit CEVA's activity
if there is any safety, personnel or property
protection or environmental protection reason for
such limitation.
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5.3.3 MOL is entitled to measure the received, recovered
and dispatched materials after each shipping, to
remove a sample from the materials in order to
establish its quality and to review CEVA's
certificate of quality.
6. DEFINITION AND STORING OF FOREIGN MATERIALS
The parties agree that they consider all materials that are not derived
from acid tar (construction debris, metal. barrel, packing materials or
such materials which were not created during refinery technologies)
using treatment material. CEVA shall separately store the above
determined foreign material on the work area in accordance with the
agreement with the site manager in a container provided by MOL.
7. TIME AND PLACE OF PERFORMANCE
The alternative fuel called "AF" - made of acid tar shall be produced
in MOL's factory in Nyirbogdany.
In accordance with Section B CEVA shall commence the production of the
alternative fuel from acid tar at the latest by October 30, 1997 on the
place of performance stipulated in this Agreement and shall finish it
by June 30, 2000 if the governmental permits are available within this
time period. CEVA agrees that it shall produce the above mentioned
alternative fuel continuously - according to the needs of the users in
accordance with the permits as listed in Appendix 1 or the
Introduction.
Anticipated users:
- Sajobabony Chemical Plant 8,000 tonnes/year
- ICN tiszavasvari 8,000 tonnes/year
- Nyirbogdany 5,000 tonnes/year
8. SERVICE FEE
The service fee is established based on the quantity of the removed
acid tar according to the measuring at designated the site. The fee for
the processing of the measured removed acid tar and the AF is 169
USD/tonne + VAT, additional expenses cannot be charged to MOL regarding
the establishing and operating the service.
The service fee shall not include the shipping costs and the costs of
the type of supplemental hydrocarbon based materials used to the
processing of the alternative fuel and the shipping costs of the "AF"
these shall be stipulated in a separate agreement (MOL and the users).
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The fee for the decontamination of the acidic waste water originated
during the removal of acid tar is 18 USD/m3.
The service fee is charged in USD and the issuance of the bill will
reflect this. MOL shall pay the bill plus VAT based on the Hungarian
forint equivalent of the service fee calculated the working mid-rate of
the Hungarian National Bank on the last working day of the previous
month.
9. CONDITION OF PAYMENT
9.1 The basis for the issuance of the service bill is the quantity of the
removed acid tar as established in Section 8. The condition of the
acceptance of the bill is that the designated site manager of MOL
certifies the fulfilment of the performance and the user accepts the
"AF".
9.2 MOL shall transfer the payment within fifteen (15) days from the date
of the receipt of CEVA's bill to bank account
no.10103104-39563222-00000000 at Budapest Bank Rt. MOL is obliged to
pay late payment fee in case of delay in payment. The amount of the
late payment charge is equal to the base interest rate of the Hungarian
National Bank+ 10%.
9.3 Parties agree that the service is indivisible, however CEVA is entitled
to submit bills on a weekly basis based on the quantity of the removed
acid tar.
9.4 The financial arrangement regarding any intellectual property rights
arising during the production of acid tar as indicted in Section B is
included in the service fees of CEVA (Point 8) or CEVA shall arrange
it. Payment is due quarterly.
9.5 CEVA acknowledges, that its contracts regarding its intellectual
property rights are not confidential and it shall disclose the content
of such rights in case of any legal dispute with MOL or with third
parties. "Third parties" shall mean the entities with whom CEVA
contracted regarding the payment concerning intellectual property
right.
10. BREACH OF CONTRACT
10.1 The parties shall stipulate the conditions of the performance after
obtaining the governmental permits, which conditions shall be
determined based on the needs of the users.
10.2 If one of the parties is in breach of this Agreement it shall pay
compensation and penalty to the other party with the limitations set
forth by this Agreement except if it
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proves that it has performed the obligations expected from an Economic
Association in a given similar situation.
10.3 The acceptance of the performance not in full compliance of this
Agreement shall not be interpreted as a waiver of any rights arising
out of the breach of contract.
10.4 In case CEVA breaches Sections 4.1.1, 4.2.3 or prevent the performance
under Section 5.3.3, or if the acid tar as determined in Section B
shall not be processed due to CEVA's fault within 30 days from the
deadline, MOL is entitled to terminate this Agreement as a result of
which it will cease to be in force on the tenth (10.) day following the
termination notice. In case of termination the parties shall settle any
outstanding debts owed towards each other.
10.5 In case CEVA shall not perform its obligations due to MOL's fault, CEVA
is entitled to cancel the Agreement after November 1, 1997. In case of
cancellation by CEVA the Agreement ceases to be in force from the date
of the receipt of the cancellation. In case of cancellation the parties
shall settle any outstanding debts owed towards each other.
11. PENALTY
11.1 The defaulting party shall pay a penalty if any of the following
occurs:
11.1.1 Delay in performance
In case CEVA is in delay, it shall penalty if the
performance does not occur within 10 days from the
receipt of the notice requesting performance and in
case of MOL it shall pay penalty from the following
day of the last day of the payment deadline.
11.1.2 Faulty performance
Faulty performance occurs if CEVA deviates from the
procedure which is permitted by the authorities
during the removal and processing of acid tar and as
a result MOL shall be obliged to pay environmental
fine due to CEVA's fault. the faulty performance
occurs if the resolution imposing the fine shall
become final following exercising all available
defense;
11.1.3 Cancellation
In case any of the parties cancel the Agreement
under 10.4 or 10.5
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11.2 The basis of the penalty
The penalty is based on the stipulated compensation hereof. The basis
of the calculation of the penalty is the amount established by
multiplying the service fee per tonnes with the quantity of the acid
tar effected by the delay in performance or faulty performance.
11.3 The amount of penalty
In case of delay in performance the amount of the penalty is 1% of the
service fee monthly calculated based on the amount of the quantity of
acid tar not processed during the time period of the delay.
In case of faulty fulfilment the amount of penalty is equal to the fine
imposed against MOL and it shall be due when the resolution becomes
final.
In case of cancellation 1% of the entire service fee taking into
consideration the quantity as determined in Section B.
12. FORCE MAJEURE
12.1 Force Majeure
In the case of the non-performance of the obligations originating from
this Agreement, the parties shall only be exempted from liability to
the extent and up to the period until fulfilment is considerably
prevented or made impossible by war, civil revolt, natural catastrophe
or other emergency. The scheduled interruptions or the regular winter
break or the limits set forth in the agreements mentioned in Section D.
shall not fall under this provision.
12.2 Liability for damages caused by explosives
In case any war explosive shall be found on the work area handed over
by MOL any costs and damages in any property and/or in human life
related to it shall be borne by MOL. CEVA shall bear all responsibility
regarding and direct and indirect damages exclusively for the U.S.
citizens employed by it.
13. OTHER MISCELLANEOUS
The contracting parties shall have separate negotiations regarding the
plant prior the demolishing at the end of the production of "AF".
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14. GOVERNING LAW
This Agreement will be governed by the laws of Hungary.
15. DISPUTES
Parties agree that they will first try to settle their legal disputes
arising out of this Agreement in a peaceful manner. If a mutually
acceptable agreement cannot be reached within a reasonable period of
time in such manner, the parties will submit themselves to the
exclusive competence of Metropolitan Court of Budapest with respect to
all legal disputes falling on the jurisdiction of county court under
the then prevailing Code for Civil Proceedings, while in all matters
the then prevailing Code for Civil Proceedings refers to the
jurisdiction of the local court, the parties submit themselves to the
exclusive competence of the Pest Central District Court.
16. LANGUAGES
This Agreement and any amendments or other modifications hereof shall
be executed both in English and in Hungarian language and in case of
any dispute the Hungarian version shall prevail.
17. entire agreement
This Agreement, its attachments and the agreements with the sites
contain the entire agreement.
This Agreement is valid only together with its attachments.
18. CONFIDENTIALITY AND GOODWILL CLAUSE
The terms and conditions of this Agreement are confidential and neither
party may publish any details of this Agreement to the press, to the
radio or to television without the prior written approval of the other
party.
The parties shall not disclose any information regarding the technology
or the nature of the materials to a third party regarding this
Agreement.
CEVA shall keep the information indicated in Section 4.3.1.
confidential and shall use such information only with the consent of
MOL on other work sites during a technological operation.
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This Agreement was executed by the parties after reading and understanding all
of its provision, as in harmony with their will.
Budapest, ____________, 1997
MOL
By__________________________
Name:
Title:
CEVA
By__________________________
Name:
Title:
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oro-ser2.agr
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Exhibit 10.6
GUARANTEE AGREEMENT
THIS AGREEMENT is made on June 5, 1998
BETWEEN
CEVA International, Inc., a Delaware corporation, having its principal
address at 380 Foothill Road, Bridgewater, 08807 U.S.A. (the "Guarantor")
and
CEVA Hungary Ltd., a Hungarian company with limited liability, having its
principal address at Illatos u 7, H-1097 Budapest, Hungary (the "CEVA Hungary
Ltd.").
RECITALS
A. WHEREAS, the ministry of Environmental Protection and Region
Development (the "Ministry") have entered into a support contract on
May 27, 1998 (Contract No.21197) with Budapest XVIII district
Pestszentlorinc-Pestszentimre Municipality (the "Municipality")(1184
Budapest, Ulloi street 400) regarding the treatment of the contaminated
ground and ground water on the site of Szent Laszlo street 2 in XVIII
district Budapest (the "Support Contract").
B WHEREAS, the municipality has won HUF 180,000,000 (Hungarian Forints
One Hundred Eighty Million) non-refundable support and HUF180,000,000
(Hungarian Forints One Hundred Eighty Million) refundable support from
the Central Environmental Protection Fund (the "Fund").
C. WHEREAS, the refundable support of HUF 180,000,000 (Hungarian Forints
One Hundred Eighty Million) shall be repaid to the Fund by the
Municipality until October 30, 2002.
D. WHEREAS the Municipality is entered into a contract on January 16, 1998
for work with ELGOSCAR International Hungarian-American Environmental
Protection and Engineering Ltd. (Columbus street 17-23, H-1145
Budapest), GENDER Budapest Ltd. (Ulloi ut 259, H-1191Budapest) and CEVA
Hungary Ltd as entrepreneurs regarding the treatment the contaminated
ground and ground water on the site of Szent Laszlo street 2 in XVIII
district Budapest (the "Budapest District XVIII-Contract").
E. WHEREAS, CEVA Hungary Ltd and the Municipality entered into a contract
on January 22, 1998 regarding the assumption of debt, based upon CEVA
Hungary Ltd undertook the repayment obligation HUF 180,000,000
(Hungarian Forints One Hundred Eighty Million) (the "Refundable
Support") of the Municipality in favour of the Fund.
F. WHEREAS, CEVA Hungary Ltd. wishes to consign the Guarantor to issue a
guarantee and the Guarantor wishes to issue a guarantee under the terms
and conditions set forth below the Guarantee.
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IT IS AGREED as follows:
i. DEFINITIONS AND INTERPRETATIONS
1.1 Definitions
In this agreement the following terms have the meaning given to them in this
clause 1.1.
"Budapest District XVIII-Contract" shall have the meaning ascribed thereto in
Recital D;
"Business Day" shall mean the banking days in Hungary;
"CEVA Account" shall have the meaning ascribed thereto in Section 2.7 hereof;
"Default Interest"shall have the meaning ascribed thereto in section 3.5 hereof;
"Event of Default"shall have the meaning ascribed thereto in Section 7.2 hereof;
"GARE-Contract" shall mean the contract between CEVA Hungary Ltd. and Budapest
Vegyimuvek Rt. relating to cleaning of the ground of the total 8,500 tonnes for
an aggregate fee of HUF 127,750,000.
"GARE-Project" shall mean the development and fulfilment of the GARE-Contract.
"Guarantee" shall mean the unconditional guarantee to be issued to the Ministry
by the Guarantor in the form and under the terms and conditions set forth in
Annex;
"Guarantor Account" shall have the meaning ascribed thereto in section
2.6 hereof;
"Guarantee Amount" shall have the meaning ascribed thereto in section
2.2 hereof;
"Guarantee Fee" shall have the meaning ascribed thereto in section 2.3 hereof;
"Interest" shall have the meaning ascribed thereto in Section 3.4 hereof;
"Loan" shall have the meaning ascribed thereto in Section 3.1 hereof;
"Maturity Date" shall mean the date which is at least a 30 days period following
the request of the Guarantor towards CEVA Hungary Ltd. to repayment of the Loan
and which will be due on the 30th day at 24.00 houres, unless otherwise agreed
by the parties.
1.2 Headings
Headings have been inserted in this Agreement for convenience only and shall not
affect the construction or interpretation hereof.
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2. GUARANTEE
2.1 Guarantee
The Contracting Parties agree that at the request and for the account of CEVA
Hungary Ltd. the guarantor shall issue at the date hereof of the Guarantee to
Ministry in order to provide a security for the repayment obligation of the
Refundable Support by CEVA Hungary ltd. in favour to the Ministry. Under the
terms and conditions of this Agreement Guarantor shall make payment in the
aggregate amount of the Guarantee Amount pursuant to the claim for the Guarantee
in the event also if CEVA Hungary Ltd. fails to transfer the necessary amount to
the Guarantor account in accordance with section 2.5 below in due time.
2.2 Terms of the guarantee
The Guarantee shall be issued in the form and under the terms and conditions
agreed in the Annex hereto. The terms of the Guarantee shall include, among
others but without limitation of the forgoing, that the Guarantee to be issued
(i) for a total aggregate amount of HUF 180,000,000(Hungarian Forints One
Hundred Eighty Million)(the "Guarantee Amount") and it can be claimed solely up
to this amount and (ii) the Guarantee shall be valid and effective from the date
hereof until November 30, 2002 unless the Support contract ceases before this
date. After this date the payment obligation of the Guarantor under the
Guarantee expires without any termination or any other declaration.
2.3 The guarantee Fee and costs
CEVA Hungary Ltd. shall pay to the Guarantor 2.5% (two point five per cent) p.a.
interest as guarantee fee for the total Guarantee Amount for every year
effective from the date hereof and continuing for the next consecutive years
until 2002 (the "Guarantee Fee"). The Guarantee Fee shall be paid at the
execution of this Agreement and thereafter not later than January 15 of the
respective year to the account designated by the Guarantor upon receipt an
invoice.
In addition hereto CEVA Hungary Ltd. shall pay and reimburse all reasonable and
verified expenses, costs and fees of the Guarantee incurred or will be incurred
during this Agreement.
2.4 Guarantor right for reclaim
Should the guarantor make payment pursuant the Guarantee the Guarantor shall
have the right to demand the not transferred amount pursuant section 2.5 from
CEVA Hungary Ltd. Any losts of the currency exchange risk or other risk shall be
borne solely by CEVA Hungary Ltd.
2.5 CEVA Hungary Ltd. pre-payment obligation
The Contracting Parties agree that should the Guarantor make a payment pursuant
a demand under the Guarantee CEVA Hungary shall pay the requested amount,
referred to in the notice, to the Guarantor Account within 2 (two) days from the
receipt of such a request of the Guarantor. Should the CEVA Hungary Ltd. pay any
amount in accordance with section 2.6 below to the Guarantor Account, its
payment obligation towards the Guarantor reduces accordingly.
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2.6 Guarantor Account
The Guarantor shall open a separate account (the"Guarantor Account") in order to
provide a fund for its payment obligation as follows: CEVA Hungary shall pay the
following amounts to the Guarantor Account: (1) 3rd quarter of 1998 HUF 20
Million; (2) 4th quarter of 1998 HUF 15 Million; (3) 1st quarter of 1999 HUF 18
Million; (4) 2nd quarter of 1999 HUF 14 Million; (5) 3rd quarter of 1999 HUF 23
Million.
The total amount referred to in the previous sentence shall be credited at the
Guarantor Account on the 10th days of the respective quarter. In case of delay
the provisions of the section 7.1 shall be applied accordingly.
2.7 CEVA Account
CEVA Hungary shall open a separate account with co-signature and authorization
of the representative of the Guarantor (the "CEVA Account") and keep unbroken
the amounts at the CEVA account in order to provide an appropriate fund for its
payment obligation towards to the Guarantor and to the Ministry. CEVA Hungary
shall pay the following amounts to the CEVA Account: (1) 3rd quarter of 1998 HUF
10 Million; (2) 4th quarter of 1998 HUF 18 Million; (3) 2nd quarter of 1999 HUF
5 Million; (4) 3 rd quarter of 1999 HUF 12 Million; (5) 4th quarter of 1999 HUF
25 Million; (6) 1st quarter of 2002 HUF 20 Million.
The second paragraph of the section 2.6 shall be applied.
2.8 Loan
The Contracting Parties agree that should the Guarantor make payment pursuant to
the Guarantee and this amount exceeds the amount held and credited on the
Guarantor Account the difference between these amounts shall be deemed as a loan
between the Guarantor and CEVA Hungary Ltd. The terms and conditions of this
loan are set forth in section 3 below.
2.9 Repayment of the amount from the Guarantor Account
The Guarantor shall pay the amount held on the Guarantor Account to the Fund on
October 30, 2002 provided that (i) CEVA Hungary Ltd will confirm in written form
to the Guarantor that HUF 90 Million was already paid to the Fund and (ii) no
claim or demand was made pursuant to the Guarantee.
3. LOAN
3.1 Loan
Subject to and in accordance with the terms and conditions hereinafter provided,
the outstanding amount referred to in Section 2.7 above shall be deemed and
handled as a loan between CEVA Hungary Ltd. as borrower and the Guarantor as
lender (the "Loan").
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3.2 Purpose of the Loan
The proceeds of the Loan shall be used exclusively to the financing of the
Refundable Support.
3.3 Disbursement of the Loan
Guarantor shall disburse the proceeds of the amount of the Loan directly to the
Ministry pursuant its demand for the guarantee.
3.4 Interest
Except in the event of failure by the CEVA Hungary Ltd. to make payment to the
Guarantor when due in accordance with the terms hereof, the CEVA Hungary Ltd.
shall pay interest to the Guarantor corresponding the rate of the basic rate of
the Hungarian National Bank plus ten percent (10%) per annum on the total amount
of the Loan (the "Interest"). Interest shall be calculated on the basis of a
three hundred and sixty (360) day year, but shall accrue in respect of the
actual number of days elapsed.
3.5 Default interest
The CEVA Hungary Ltd. shall pay, in the event of failure by the CEVA Hungary
Ltd. to make a payment to the guarantor when due in accordance with the terms
hereof, default interest at the rate of additional five percent (5%) per annum
to the Interest on the amount of such payment from the date when such payment
was due ("Default Interest"). Default Interest shall be calculated according to
clause 3.4.
3.6 Maturity and Repayment
The full principal amount of the Loan and the Interest, together with all other
amounts payable or owing hereunder in respect of the Loan, shall be paid by the
CEVA Hungary Ltd. to the Guarantor on the Maturity Date, unless otherwise agreed
by the parties.
4. SECURITY IN FAVOUR OF THE GUARANTOR
As continuing security for the performance of all of the obligations of
the CEVA Hungary Ltd towards the Guarantor pursuant to this Agreement
and in particular the repayment of the Guarantee and the Loan, in
principal, interest, costs and accessories the CEVA Hungary Ltd. hereby
assign in favour of the Guarantor all incomes and other rights arising
from the GARE-Contract and Budapest District XVIII-Contract. CEVA
Hungary Ltd. hereby authorises the Guarantor that the Guarantor may
inform Budapest Vegyimuvek Rt and/or the Municipality on behalf of and
in the name of CEVA Hungary Ltd. at any time on this assignment.
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5. REPRESENTATIONS AND WARRANTIES
5.1 Representations and Warranties
The CEVA Hungary Ltd hereby represents and warrants in favour of the Guarantor
that:
(i) the CEVA Hungary Ltd was duly incorporated and organized in virtue of
the laws of the Republic of Hungary, and is presently in good staying
with full power and authority to carry on the business carried on by
it, to own all of its properties and assets, and to execute this
Agreement and perform its obligations hereunder, and the execution of
this Agreement and the performance of its obligations hereunder have
been duly authorised by all necessary corporate actions.
(ii) this Agreement constitutes legal, valid and binding obligations of the
CEVA Hungary Ltd;
(iii) there is no action, suit, proceeding, judgement or aware pending,
outstanding or, to the best of the CEVA Hungary Ltd, threatened against
the CEVA Hungary Ltd. in any court or before any governmental body or
any arbitration tribunal which, if decided adversely to the CEVA
Hungary Ltd., would have a materially adverse effect upon the business,
operations, properties, assets or financial conditions of the CEVA
Hungary Ltd;
(iv) all information provided to the Guarantor by the CEVA Hungary Ltd. in
connection with the Guarantee and the Loan was true and accurate in all
material respects as at the date such information was provided, and
there have been no material adverse changes to such information since
that time to the best knowledge of the CEVA Hungary Ltd.;
5.2 Changes to Representations and Warranties
The CEVA Hungary Ltd. undertakes to notify the guarantor immediately forthwith
of any change in the forgoing representations and warranties.
5.3 Effect of the Representation
CEVA Hungary Ltd. hereby declares that the representations and warranties given
to the Guarantor herein shall be valid, effective and binding on itself
throughout the period while this Agreement is in effect.
6. UNDERTAKING OBLIGATIONS AND COVENANTS OF THE CEVA
HUNGARY LTD.
6.1 Notification to National Bank of Hungary
Within eight (8) days of the effective date of the Loan, the CEVA Hungary Ltd.
shall notify the National Bank of Hungary of the Loan in the required form and
terms and conditions.
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6.2 Further Actions
The CEVA Hungary Ltd. shall, upon request of the Guarantor, take all such
further actions and provide and deliver all such documents and instruments as
may be required in order to give full effect to this Agreement or to realise
upon any security which may be held by the Guarantor in connection with the
Guarantee and Loan.
7. DEFAULT
7.1 Default
The CEVA Hungary Ltd. shall be default hereunder should any of the following
events (each an "Event of Default") occur:
(i) failure by the CEVA Hungary Ltd. to make, when due, any payment
required to be made hereunder;
(ii) failure by the CEVA Hungary Ltd. to comply with any of its obligations
or undertakings hereunder;
(iii) the material falsehood or inaccuracy of any representation or warranty
or statement made in this Agreement, or the omission of any material
information having the effect of rendering any such representation,
warranty or statement misleading in any manner;
(iv) any change in the financial condition or in the business operations of
the CEVA Hungary Ltd. which constitutes, in the reasonable opinion of
the Guarantor, a material adverse change;
(v) the initiation by or against the CEVA Hungary Ltd. of any action or
proceedings in respect of winding-up, bankruptcy or liquidation, the
adjudication of the CEVA Hungary Ltd. as bankrupt or insolvent, the
admission in writing by the CEVA Hungary Ltd. of its inability to pay
its debts as they become due or its insolvency or bankruptcy, or the
making by the CEVA Hungary Ltd. of an assignment or any proposal for
the benefit of its creditors under any applicable insolvency
legislation;
(vi) the occurrences in respect of the CEVA HUNGARY Ltd. of any of the
events set out in the articles 524(i) or 525 of the Hungarian Civil
Code.
7.2 Recourses of the Guarantor
Upon the occurrences of an Event of Default, the Guarantor may (in addition to
and without prejudice to all other rights and recourses herein or by the law
provided) demand the immediate repayment of all sums then outstanding under the
terms of this Agreement, in principal, interest, costs and accessories,
including but not limited to any amount which shall be paid under the Guarantee.
8. GENERAL
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8.1 Severability
If any provision of this Agreement is declared or becomes invalid, illegal or
unenforceable, in whole or in part, then the validity and enforceability of the
remaining provisions shall continue in full force, unaffected.
8.2 Amendment or Modification
This Agreement may only be amended or modified by written instrument duly
executed by each of the parties hereto.
8.3 Entire Agreement
This Agreement constitutes the entire agreement between the parties concerning
the subject matter hereof and supersedes all prior agreements and undertakings.
8.4 Notices
All notices required or permitted to be given under this agreement shall be
writing and shall be delivered by personal delivery, by registered or certified
mail, return receipt requested, or by facsimile to the following addresses:
(i) to the Guarantor at:
CEVA INTERNATIONAL, INC.
380 Foothill Road
Bridgewater 08807
attn: Herbert J. Case, Jr.
Director
facsimile: + 1 908 231 9099
(ii) to the CEVA Hungary Ltd. at
CEVA HUNGARY LTD.
Illatos u. 7, H-1097 Budapest, Hungary
attn; Mr. Janos Soos
Managing Director
facsimile: +36 1 280 14 49
or such other address as a party may from time to time designated by written
notice to the other in accordance with the procedures described above. Any
notice given in accordance with this provision shall be deemed to be received
upon the date actually received if delivered by personal delivery, registered or
certified mail, and upon the next following Business Day if delivered by
facsimile.
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8.5 Language
At the request of the parties, this Agreement has been executed in the English
and Hungarian language, and in case of dispute the Hungarian version shall
prevail.
8.6 Governing law
This Agreement shall be governed by and interpreted in accordance with the laws
of the Republic of Hungary.
8.7 Dispute Resolution
Any dispute arising in connection with this Agreement or the Loan which can not
amicable resolved shall be referred to exclusive, final and binding arbitration
by the Permanent Court of Arbitration organized under the auspices of the
Hungarian Chamber of Commerce and Industry acting in accordance with its rules.
The arbitration shall be fluent in both Hungarian and English.
IN WITNESS WHEREOF, the parties have executed this agreement as with harmony
with their will of the date first above written.
CEVA INTERNATIONAL, INC.
/s/Herbert J. Case, Jr.
Name: Herbert J. Case, Jr.
Title: Director
CEVA HUNGARY LTD.
/s/ Janos Soos
Name: Janos Soos
Title: Managing Director
Annex:
The Guarantee
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guar-hun
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