SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934
Date of Report (Date of earliest event reported) October 20, 1999
METALCLAD CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 0-2000
(State or Other Jurisdiction) (Commission File Number)
95-2368719
(I.R.S. Employer Identification No.)
2 Corporate Plaza, Suite 125
Newport Beach, CA 92660
(Address of Principal Executive Office) (Zip Code)
Registrant's telephone number, including area code (949) 719-1234
Item 2. Acquisition or Disposition of Assets
The Registrant has sold a substantial part of its business in Mexico.
In an agreement dated July 30, 1999 and finalized with the receipt of
the first payment on October 12, 1999, Metalclad Corporation has sold to a
Mexican company, Geologic S.A. de C.V., all of its interest in the
businesses known as Administracion Residuos Industriales S.A. de C.V. (ARI),
Ecosistemas Nacionales S.A. de C.V. (ECONSA), Quimica Omega S.A. de C.V.,
and Ecosistemas El Llano S.A. de C.V.
Total purchase price for the businesses sold is Five Million Dollars
plus assumption by Buyer of all liabilities of Seller. Payment of the
purchase price will occur in stages as various benchmarks are achieved in
the operation of the businesses.
The Company has reserved the right of pursuing a claim under the NAFTA
Treaty for the loss of its investment in the El Llano landfill project in
the State of Aguascalientes due to the interference of the Secretaria de
Comercio Y Fomento Industrial of Mexico (SECOFI).
In addition, the Company has kept ownership of the El Confin project in
San Luis Potosi, which is the subject of a current arbitration under the
NAFTA.
Exhibit
The following exhibit is being filed with this Current Report on Form 8-K:
Stock Purchase Agreement dated July 30, 1999 between Registrant and
Geologic S.A. de C.V.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
METALCLAD CORPORATION
October 20, 1999 By: /s/Grant S. Kesler
----------------------
Grant S. Kesler
President
<PAGE>
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT EXECUTED ON THE ONE PART BY METALCLAD
CORPORATION, AND ECO-METALCLAD, INC. (JOINTLY REFERRED TO HEREINAFTER AS
"SELLERS") AND ON THE OTHER PART BY GEOLOGIC, S.A. DE C.V. (REFERRED TO
HEREINAFTER AS "BUYER"), PURSUANT TO THE FOLLOWING REPRESENTATIONS AND
CLAUSES.
R E P R E S E N T A T I O N S
I. Each of the Sellers hereby represents and warrants that:
A. Sellers are the registered owners of 499 (Four Hundred
Ninety Nine) Series "A" shares and 1,035,599 (One Million Thirty Five
Thousand Five Hundred Ninety Nine) Series "B" shares of the capital stock
of Ecosistemas Nacionales, S.A. de C.V. ("Econsa") and of 7,385,795 (Seven
Million Three Hundred and Eighty Five Seven Hundred and Ninety Five)
Series "A" shares of the capital stock of Quimica Omega, S.A. de C.V.
("Omega"), both corporations organized and in operation under the laws of
the United Mexican States ("Mexico"), which are all of the issued and
outstanding shares ("Outstanding Shares") that Sellers own in Econsa and
Omega (the "Companies"), covered by the stock certificates ("Stock
Certificates") indicated in Exhibit "A" attached hereto.
B. The Companies are engaged in the recollection, storage,
transportation, recycling, treatment, and final disposition of urban,
industrial and hazardous waste (the "Business"). To better accomplish
their corporate purpose, the Companies operate by themselves and through
subsidiary companies ("Affiliates") in which the Companies or their
Affiliates are the registered owners of the majority of the shares and
therefore have control over them as listed in Exhibit "B" attached hereto.
C. Metalclad Corporation submitted a claim to arbitration
("NAFTA Arbitration") against Mexico under Chapter XI of the North America
Free Trade Agreement in 1997. As a result of that the Companies and their
Affiliates, in particular Ecosistemas El Llano, S.A. de C.V. ("Eco-Llano"),
have suffered interference and have experienced considerable
negative influence against its projects from the Ministry of Trade
(Secretaria de Comercio y Fomento Industrial) of Mexico, thus considerably
endangering the feasibility of its projects in Mexico.
D. The Companies and/or their Affiliates have all requisite
power and authority to own and operate their properties and to conduct the
Business as it has been and is now conducted, and have obtained licenses,
permits, approvals, qualifications or the like required for such purposes,
as reflected in Exhibit "C" attached hereto; all of which are in full
force and effect and will remain in full force and effect following the
execution hereof in accordance with their terms provided Buyer causes the
Companies and/or thier Affiliates to comply with all requisites required
by the licenses, permits, approvals and qualifications to remain in full
force and effect.
E. Sellers have full power and unrestricted right and
authorization to enter into this Agreement and to transfer the Buyer the
Outstanding Shares. All of the Outstanding Shares are duly authorized,
validly issued, fully paid and nonassessable. The Outstanding Shares are
free and clear of any and all liens and encumbrances, security agreements,
options, warrants, claims, charges, pledges and restrictions. There are no
outstanding options, warrants, agreements or rights to purchase any of the
Outstanding Shares of the Companies and/or their Affiliates.
F. The Companies financial statements ("Financial Statements")
as of December 31, 1998 attached hereto as Exhibit "D", present completely
and accurately the financial position, assets and liabilities of the
Companies and their Affiliates, as of the date thereof.
G. The name of each bank or depositary in which the Companies
and/or their Affiliates maintain any savings or other bank accounts, trust
account or safety deposit box and the name of all persons authorized to
draw thereon or who have access thereto, are set forth in Exhibit "E"
attached hereto.
H. The Companies and/or their Affiliates are the owners of all
the operating assets ("Assets") involved in the Business, including
without limitation:
(a) Cash, investments, accounts receivable and inventory as
shown in the Financial Statements.
(b) All property and equipment (including spare parts),
vehicles, inventory of materials and products, equipment on order but not
delivered as of the execution thereof, and similar tangible assets listed
in Exhibit "D" attached hereto.
(c) Other intangible assets including without limitation,
customer lists, licenses, operating permits and other intellectual
property rights described in Exhibit "F" attached hereto.
I. Except as established in Exhibit "G", Assets (i) are free
and clear of liens, security agreements, encumbrances, charges, pledges
and/or limitations of ownership, and (ii) have been acquired by the
Companies and/or their Affiliates only in bona fide transactions entered
into in the ordinary course of Business.
J. There is no material litigation, suit proceeding, action,
claim or investigation, pending or threatened against or affecting the
Assets, before any court, agency, authority or arbitration board.
Exceptions to this representation are listed in Exhibit "H" attached
hereto.
K. Assets (i) are in good working condition according to their
nature, usable in the ordinary course of Business, and (ii) meet the
applicable specifications for their present use.
L. The Companies and/or their Affiliates have not infringed or
violated, and are not infringing or violating any intellectual property
rights of any third party, including without limitation, any patent,
trademark, registered design, trademark or copyright.
M. The Companies and/or their Affiliates are not party to any
material contract or agreement that is not in line with the Business.
Neither the Companies and/or their Affiliates nor any person with which
they have contracted are in any material default in the performance of any
of their respective obligations under any material agreement, commitment
or contract thereunder between the Companies and/or their Affiliates and
any person.
N. The Companies and/or their Affiliates do not have any
material liabilities of any nature, whether absolute, fixed, contingent or
otherwise, which are not fully reflected against the Financial Statements.
O. As of the date hereof, all accounts receivable have been
accurately recorded in the accounting records of the Companies and/or
their Affiliates, are bona fide, good and collectible at the full face
value thereof, without discount, rebate, set off or counterclaim, except
for the proper and sufficient allowances for doubtful accounts which are
provided for in the accounting records of the Companies and/or their
Affiliates.
P. As of the date hereof, all material financial transactions
of the Companies and/or their Affiliates have been properly recorded in
the accounting records of the Companies and/or their Affiliates.
Q. From the date of the Financial Statements to the date of
execution hereof, there have been and will be no changes in the condition
(financial or otherwise), business, net worth, asset, obligations or
liabilities (fixed or contingent) of the Companies and/or their
Affiliates, or which have had or may have a material adverse effect on the
Business, Assets, financial condition, or operations of the Companies
and/or their Affiliates, and there has been no occurrence or circumstance
which might reasonably be expected to result in any such adverse effect
after the date hereof. Since the date of the Financial Statements to the
date of execution hereof, the Business of the Companies and/or their
Affiliates has been conducted only in the ordinary and usual course of
business and no event or transaction has occurred or been entered into
outside of the ordinary and usual course of business. Exceptions to this
representation are listed in Exhibit "I" attached hereto.
R. Neither the execution and delivery of this Agreement by
Sellers, nor the consummation of the transactions set forth herein and
contemplated hereby will constitute a breach of or default under any
contract or instrument to which Sellers or the Companies and/or their
Affiliates are a party or by which any of them is bound, nor will it
result in the acceleration in the time for performance of any obligation
under any such contract or instrument, nor will it result in the creation
of any lien or encumbrance upon the assets.
S. The Companies and/or their Affiliates maintain such policies
of insurance, issued by the corresponding insurers, as appropriate to
their Business and to the Assets, in such amounts and against such risks
as are customarily carried and insured by owners of comparable business,
properties and assets. All such policies of insurance are in full force
and effect and the Companies and/or their Affiliates are not in default,
whether as to the payment of the premium or otherwise, under the terms of
any such policy. All of such policies are listed in "Exhibit "J" attached
hereto.
T. As of the date hereof, the Companies and/or their Affiliates
have correctly prepared and timely and properly filed with all appropriate
governmental authorities, including tax, customs, social security, housing
fund, retirement system and other pertinent authorities, all returns,
information returns, and other reports required to be filed and have paid
or accrued in full all taxes, contributions, duties, interests, penalties
or deficiencies ("Taxes"), due to, or claimed to be due if so, by any
authority. The Companies and/or their Affiliates are not a party to any
pending action or proceeding, nor is any such action or proceeding
threatened, by any governmental authority for the assessment or collection
of any Taxes, and no claim for assessment or collection of any Taxes has
been asserted against the Companies and/or their Affiliates. Exceptions to
this representation are listed in Exhibit "K" attached hereto.
U. There is no material litigation, suit, proceeding, action,
claim or investigation, pending or threatened against or affecting the
Companies and/or their Affiliates, before any court, agency, authority or
arbitration board.
V. The Companies and/or their Affiliates have complied with all
laws, regulations, rules, orders, judgements, decrees and other
requirements and policies imposed by governmental authorities applicable
to it, or to the operation of the Business. The Companies and/or their
Affiliates have not received any notice or citation for noncompliance with
any legal requirement or policy, and there exists no condition, situation
or circumstance, which after notice or lapse of time, or both, would
constitute noncompliance with or give rise to future liability with regard
to any of the foregoing. Exceptions to this representation are listed in
Exhibit "L" attached hereto.
W. The Companies and/or their Affiliates have complied with all
laws, regulations, rules, norms, standards, and other requirements and
policies imposed by governmental authorities on environmental matters,
including those relating to water discharges, air emissions, soil
contamination and hazardous waste.
X. The Companies and/or their Affiliates have obtained all
permits, licenses, and authorizations to lawfully operate the equipment,
processes, and the operations at the facility and real property; all such
permits, licenses and authorizations are in full force and effect; and all
equipment, processes and other operations are in compliance with such
permits, licenses and authorizations.
Y. The Companies and/or their Affiliates have no obligation to
pay any fees to any broker or finder related to the transaction described
in this Agreement. Further, Sellers have no knowledge of any basis for
any claim against the Companies and/or Affiliates for such fees.
Z. The above representations and warranties of Sellers are made
by all Sellers as owners of the Outstanding Shares of the Companies and by
the President and Secretary of the Board of Directors of the Companies
respectively.
II. The representative of the Buyer hereby represents and
warrants that:
A. The Buyer is a corporation organized and in operation under
the laws of Mexico, as it appears from pulic deed number 8,762, dated
October 25th, 1996, granted before notary public number 5 of the State of
Hidalgo, attorney Juan Jose del Valle Alvarado which first certified copy
was recorded in the Public Registry of Commerce of Hidalgo.
B. The entering into this Agreement falls within the corporate
purpose of the Buyer.
C. The Buyer has taken all corporate action necessary for the
entering into and execution of this Agreement.
D. The Buyer has granted upon them the necessary powers and
authority to enter into this Agreement, which powers and authority have
not been revoked, amended or restricted in any manner whatsoever.
E. The Buyer, has reviewed the contents of the Exhibits listed
in Sellers representations, as well as other accounting and tax records
and documents of the Companies, to the extent it deemed necessary to
satisfy itself with all such documents and the matters pertaining thereto.
F. The Buyer wishes to purchase the Outstanding Shares and to
enter into this Agreement pursuant to the terms and conditions to be
covenanted in the Clauses hereof.
In consideration of the foregoing representations, the parties
hereto hereby agree as follows:
C L A U S E S
FIRST. PURCHASE AND SALE OF SHARES; PRICE
1.1 Sale of Shares. Subject to the terms and conditions of this
Agreement, and in reliance on the representations and warranties of
Sellers contained herein, Sellers hereby sell and transfer the Outstanding
Shares, and deliver to Buyer the Stock Certificates representing the
Outstanding Shares duly endorsed in property in favor of Buyer, who
acknowledges receipt hereof.
1.2 Purchase Price. The purchase price of the Outstanding
Shares is US$ 5,000,000.00 (Five Million Dollars 00/100 United States of
America Currency) ("Purchase Price").
1.3 Annual Net Income. The following definition shall be
applicable for the determination of the Annual Net Income:
"Annual Net Income" is the net income reported on a fiscal
year by a Mexican company to the Ministry of Finance (Secretaria de
Hacienda y Credito Publico) of Mexico, before adding earnings or
substracting losses from previous fiscal years.
1.4 Payments of Purchase Price. All payments should be divided
by Buyer in two checks, one for each Seller, according to the proportions
and percentages established in Exhibit "A". Sellers shall be entitled to
receive the Purchase Price as follows:
(a) US $125,000.00 (One Hundred and Twenty Five Thousand
Dollars 00/100 United States of America Currency), on August 15, 1999.
Sellers will deliver the stock certificates and will acknowledge receipt
of such amount thereof.
(b) US$ 125,000.00 (One Hundred and Twenty Five Thousand
Dollars 00/100 United States of America Currency), thirty days after
receipt of all necessary authorizations from authorities of the State of
Aguascalientes to enable Buyer to build and operate a hazardous waste
treatment plant located either in El Llano or in an industrial park within
the State of Aguascalientes.
(c) US$ 322,000 (Three Hundred and Twenty Two Thousand
Dollars 00/100 United States of America Currency). Such payment should
only be made directly and received by Mr. Javier Guerra Cisneros and the
Sellers would consider themselves paid with a copy of the receipt duly
signed by Mr. Javier Guerra Cisneros and a release issued by said person
in favor of the Sellers in connection with Clauses 3.1, 3.2, 3.3, 3.5.2,
and 10 of the Employment Agreement below mentioned. Payment can be made at
any moment during the course of the following three years starting from
the date of execution of this Agreement This payment is related to the
Employment Agreement entered into and between Metalclad Corporation and
Mr. Javier Guerra Cisneros attached hereto as Exhibit "M". Buyer and
Sellers agree that Buyer has no other obligation whatsoever derived from
the Employment Agreement.
(d) Twenty five per cent of the Annual Net Income of Eco-Llano,
at latest on the last day of the month of April of each year
following the year to which the Annual Net Income pertains. Annual Net
Income shall be determined as the result of audited financial statements.
Buyer will retain the services of a well-known, independent and reliable
accounting firm for such purposes. Seller will have the right to designate
an accountant to work jointly with Buyer's auditors.
(e) Ten per cent of the Annual Net Income of the Affiliate
Administracion de Residuos Industriales, S.A. de C.V. ("ARI") at latest on
the last day of the month of April of each year following the year to
which the Annual Net Income pertains. Annual Net Income shall be
determined as the result of audited financial statements. Buyer will
retain the services of a well-known, independent and reliable auditor for
such purposes. Seller will have the right to designate an auditor to work
with Buyer's auditors.
(f) US$ 500,000.00 (Five Hundred Thousand 00/100 United
States of America Currency), ten days after the day of the start up of
commercial operations of the non-hazardous waste industrial landfill
located either in the Municipality of El Llano and/or in an alternative
location within the State of Aguascalientes.
(g) US$ 500,000.00 (Five Hundred Thousand Dollars 00/100
United States of America Currency), ten days after the day of the start up
of commercial operations of the hazaradous waste treatment plant located
either in the Municipality of El Llano or in an alternative location
within the State of Aguascalientes
(h) US$ 250,000.00 (Two Hundred and Fifty Thousand Dollars
00/100 United States of America Currency), ten days after the day at when
Eco-Llano has had three consecutive months of positive cash flows.
"Positive Cash Flow" shall be determined on the basis of Mexican Generally
Accepted Accounting Principles, and include all items of income and
expense and gain or loss including expenses related to Taxes, customs,
social security, housing fund, retirement system and mandatory profit
sharing to employees (PTU).
(i) US$ 250,000.00 (Two Hundred and Fifty Thousand Dollars
00/100 United States of America Currency), ten days after the day in which
the volume of waste handled by Eco-Llano reaches 350,000 (Three Hundred
and Fifty Thousand) tons in the accumulated 12 (twelve) preceding months.
In no event shall the Sellers receive a total payment that
exceeds the Purchase Price. Any payment obligation will be enforceable as
long as the Purchase Price has not been totally paid. At the time, the
Purchase Price is fully paid through any possible combination, Sellers
will lose their rights to other additional payments except for what has
been established in Clauses 2.1 and 2.2.
1.5 Income Tax. Sellers represent that under Mexican Tax Income
Law ("Ley del Impuesto Sobre la Renta") and its Bylaws ("Reglamento de la
Ley del Impuesto Sobre la Renta") no witholding proceeds regarding this
Agreement; therefore Sellers and Buyer shall pay, if any, their
corresponding income tax, levied on the Purchase Price and any other
aspects of the Agreement.
1.6 Depositary. Sellers and Buyer agree that Mr. Carlos Ramirez
Trueba (the "Depositary") with address in Paseo de la Reforma 369, Col.
Cuauhtemoc, Mexico D.F. 06500, will act as depositary of the Stock
Certificates with all the duties and obligations established for
depositaries in articles 2516-2538 of the Mexican Civil Code for the
Federal District on Local Matters and for the Republic on Federal Matters
(Codigo Civil para el Distrito Federal en Materia Comun, y para toda la
Republica en Materia Federal) for depositaries. Stock Certificates will be
delivered, to Buyer or to the Acquiring Party as established in clause 4.1
hereunder, only when the Buyer or the Acquiring Party deliver to the
Depositary a receipt of total or partial payments in exactly the form of
Exhibit "O" attached hereto. If partial payments are made by Buyer or by
the Acquiring Party, the Depositary will deliver enough Stock
Certificates as to match the proportion of the payment made.
SECOND. ADDITIONAL CONSIDERATION
2.1 Sellers will be entitled to receive US$ 100,000.00 (One
Hundred Thousand Dollars 00/100 United States of America Currency), at the
time in which operations begin at the Integral Center of Handling and
Development of Industrial Waste (Centro Integral de Manejo y
Aprovechamiento de Residuos Industriales) located in the State of Puebla
which is being currently developed by Econsa and which has received
initial approval by the federal environmental authorities.
2.2 Sellers will be entitled to receive US$ 100,000.00 (One
Hundred Thousand Dollars 00/100 United States of America Currency), at the
time in which operations begin at the Integral Center of Handling and
Development of Industrial Waste (Centro Integral de Manejo y
Aprovechamiento de Residuos Industriales) located in the State of Mexico
which is being currently developed by Econsa and which has received
initial approval by the federal environmental authorities.
THIRD. SELLERS REPRESENTATIONS REVIEW
3.1 Sellers Representations Review. Prior to execution of this
Agreement, Buyer has not taken the necessary actions to carry out a
thorough review of Seller's Representations. Buyer shall complete such
review within ninety days following the closing, the cost of which will be
on the account of the Buyer.
FOURTH. SUBSTITUTION OF BUYER
4.1 Buyer has the right to assign to a third party ("Acquiring
Party"), without the prior written authorization of the Sellers, up to one
hundred per cent of the Outstanding Shares during the ninety days in which
the Representations Review is being carried and sixty days after the
Representations Review has been carried out. The terms of this Agreement
can not be altered or modified in any way by the Acquiring Party. For the
assignment of the Outstanding Shares to be valid, Buyer should provide
Sellers with the written consent of the Acquiring Party to obligate itself
in exactly the terms of this Agreement in the form of Exhibit "N" attached
hereto.
FIFTH. EXECUTION OF THE AGREEMENT
At the execution of this Agreement or during the following
thirty days when needed and applicable, the parties will execute and/or
deliver the following:
5.1 Delivery to Buyer. Sellers will execute and/or deliver to
Buyer the following:
(a) Certificates representing the Outstanding Shares, duly
endorsed in favor of Buyer;
(b) A certificate signed by the Sellers dated as of the
date of execution of this Agreement and in form and substance acceptable
to Buyer, to the effect that;
(i) The representations and warranties set forth in
the Seller's Representations were true and correct on the date hereof and
are true and correct on the date of execution of this Agreement as if made
at that time; and
(ii) Sellers have performed and complied with all
agreements, undertaking, and obligations which are required to be
performed or complied with by them at or prior to the date of execution of
this Agreement.
(c) Notarized certification or sufficient powers of
attorney to fully demonstrate without doubt the authority of the signatory
to bind each of the Sellers in executing this Agreement.
(d) Notarized certifications that the members of the
Board of Directors of the Companies and their Affiliates have resigned to
their posts.
(e) Such other documents, instruments, or agreements as
may be reasonably requested by Buyer to effectuate the transactions
contemplated by this Agreement.
5.2 Delivery to Seller. At the execution of this Agreement or
during the following thirty days when needed, Buyer shall execute and/or
deliver to Sellers the following:
(a) Payment of US $125,000.00 (One Hundred and Twenty
Five Thousand Dollars 00/100 United States of America Currency) on August
15, 1999.
(b) Notarized certification or sufficient powers of
attorney to fully demonstrate without doubt the authority of the signatory
to bind the Buyer in executing this Agreement.
(c) Notarized copy of the minutes of the shareholders
meetings of the Companies and the Affiliates at which the resignation of
their directors, officers and members of the Board of Directors is
accepted, their performance is approved and they are released from any and
all liabilities, in form and substance acceptable to Sellers.
(d) Notarized copy of the minutes of the shareholders
meetings of the relevant Companies and/or Affiliates in which it was
resolved to release Sellers, their directors and officers if such is the
case, from obligations after the date of execution of this Agreement,
under any personal guarantees they may have provided to lenders for the
benefit of the Companies and Affiliates, in form and substance acceptable
to Sellers.
(e) Such other documents, instruments, or agreements as
may be reasonably requested by Sellers to effectuate the transactions
contemplated by this Agreement.
SIXTH. COVENANT OF SELLERS
6.1 Strict Confidence. The Sellers covenant and agree that for
a period of five years from and after the execution hereof, each of the
parties shall hold and shall cause their respective consultants, advisors,
officers and employees to hold in strict confidence (i) all documents,
material and information concerning or directly or indirectly related to
the business and operations of the other party, and (ii) the terms and
conditions of this Agreement and of any other transactions connected with
and/or ancillary to this Agreement. Therefore, except for disclosures
legally requested by the Securities Exchange Commission of the United
States of America, the parties agree not to make any independent use of,
publish, divulge, disclose, or reproduce, or allow any person, firm, or
entity to use, publish, divulge, or disclose any such confidential
information without the prior written consent of the other party.
6.2 Non-Competition Undertaking. Each of the Sellers covenants
and agrees that for a period of five years from and after the execution
hereof they shall not either directly or indirectly (whether as agent,
partner, shareholder, consultant, supplier, independent contractor or
through any partnership, corporation, unincorporate joint venture or
otherwise), without the prior written consent of Buyer, carry on or be
engaged and/or have any financial interest in or be otherwise commercially
involved, in all or part of the territory of Mexico, in the Business or in
any other business which competes with the Business. Notwithstanding the
foregoing, in the event as a result of the NAFTA Arbitration, Sellers
obtain the authorization to operate the hazardous waste landfill located
in Guadalcazar, State of San Luis Potosi owned by Confinamiento Tecnico de
Residuos Industriales, S.A. de C.V., the foregoing undertaking will not
apply exclusively regarding to the operation of the hazardous waste
landfill located in Guadalcazar, San Luis Potosi by Sellers subsidiaries
Confinamiento Tecnico de Residuos Industriales, S.A. de C.V. and/or
Ecosistemas del Potosi, S.A. de C.V.
SEVENTH. COVENANTS OF BUYER
The Buyer covenants and agrees that as long as there is any
amount unpaid of the balance of the Purchase Price, or any other amount is
owed to Sellers hereunder, Buyer shall do its best efforts to:
7.1 Operation of Facilities of the Companies and the
Affiliates. Continue the operation of the existing facilities of the
Companies and the Affiliates in a professional manner.
7.2 Existing Permits and Authorizations, etc. Carry out in due
and timely manner all necessary acts to maintain in force the existing
licenses, permits and authorizations, whether federal, state or municipal,
held by the Companies, the Affiliates and their facilities to operate the
Business.
7.3 Existing Projects. Dilligently continue with all necessary
acts, representations and actions, required or related to the completion
of the existing projects of the Companies and the Affiliates.
7.4 Conduct of Business. Cause the Companies and the Affiliates
to continue to engage in the normal conduct of Business as now conducted
by them.
7.5 Maintenance of Property. Cause each Company and each
Affiliate to maintain their property (including where so obligated,
property leased by them) in good condition; and make proper renewals,
replacements, additions and improvements to their property (including,
where so obligated, property leased by them); and observe and perform all
obligations under the leases of property, so that the business carried on
in connection therewith may be conducted properly and efficiently at all
times.
EIGHTH. FINANCIAL STATEMENTS; INSURANCE:
8.1 Financial Statements. Furnish or cause to be furnished by
Buyers:
(a) As soon as avaliable, but in any event within one
hundred twenty (120) days after the end of the fiscal year, copies of the
audited balance sheets of Eco-Llano and ARI as at the end of such year and
the related statements of operations, stockholders' equity, and cash flows
for such year, as applicable, setting forth in each case in comparative
form the figures for the previous year.
(b) As soon as available, but in any event not later than
forty-five (45) days after the end of each quarterly period of each fiscal
year, copies of the unaudited balance sheets of Eco-Llano and ARI as at
the end of such quarter and the related statement of operations,
stockholders' equity, and cash flows for such quarterly period and the
portion of the fiscal year through such date, certified by a responsible
officer of Buyer (subject to normal year-end audit adjustments).
(c) Buyer shall use reputable independent certified
public accountants for the preparation of the annual audited financial
statements to be provided in connection with this Agreement.
8.2 Inspection of Property; Books and Records; Discussions.
Cause each Company and each Affiliate to keep proper books of records and
account in which entries of all dealings and transactions related to the
Business comply with all requirements of law and with Mexican General
Accepted Accounting Principles; and permit representatives of the Sellers
to visit and inspect any of their books, records and facilities under
reasonable notice, and to discuss the Business with Buyer, management of
Companies and Affiliates and with their respective independent certified
public accountants.
8.3 Information. Give notice to the Sellers of any important
development in connection with the Business of each Company and each
Affiliate, as well to provide a monthly summary of developments of the
Business carried out by the Companies and their Affiliates.
8.4 Insurance. Cause each Company and Affiliate to keep insured
their property, substantially in the same form that it has been insured as
reflected in Exhibit "J" attachaed hereto.
NINTH. INDEMNITY
9.1 Misrepresentations. The parties agree to indemnify and hold
each other harmless from and against any claims, demands, costs, expenses
(including reasonable attorney's fees), damages and/or consequential
damages arising out of and/or resulting from any misrepresentation or
breach of warranty hereunder by the other party.
9.2 Outstanding Shares. Sellers guarantee title to Outstanding
Shares and hold the Buyer harmless from and against any kind of claims,
demands, costs, expenses (including reasonable attorney's fees), damages
and/or consequential damages arising out of and/or resulting therefrom.
9.3 Liabilities. Sellers shall indemnify and hold the Buyer
harmless in connection with any claims, demands, costs, expenses
(including reasonable attorney's fees), damages and/or consequential
damages arising out of and/or resulting from: (i) any kind of liabilities
of the Companies and/or their Affiliates, whether absolute, fixed,
contingent or otherwise, which are not fully reflected against the
Financial Statements including, without limitation, Taxes, customs, labor,
social security, housing fund, retirement, system and environmental
liabilities; (ii)any kind of liens, encumbrances and/or liabilities of
Sellers, vis-a-vis, the Companies and/or their Affiliates, vis-a-vis, the
Assets which are not fully reflected against the Financial Statements; and
(iii) any personal injury or property damage arising out of the Assets
when such took place prior to the date of the Agreement.
TENTH. GENERAL PROVISIONS
10.1 Confidential Information. Should the Agreement not be
executed for any reason, Buyer agrees to treat as secret, confidential,
and proprietary to the Companies, all evaluation material and information
concerning or directly or indirectly related to the business and
operations of the Companies ("Confidential Information"). Therefore, Buyer
agrees not to make any independent use of, publish, divulge, disclose, or
reproduce, or allow any person, firm, or entity to use, publish, divulge,
or disclose any such Confidential Information without the prior written
consent of Sellers, as such Confidential Information shall be solely used
for the purposes of determining the possibility of Buyer purchasing the
Outstanding Shares, as contemplated herein. Buyer shall also take all
necessary precautions to ensure that their employees adhere to this
covenant of confidentiality.
The covenants set forth herein will not apply to such portions
of the Confidential Information which a) are or become generally available
to the public through no action by Buyer or b) are or become available to
Buyer on a nonconfidential basis from a source, other than Sellers, which
Buyer believes, after reasonable inquiry, is not prohibited from
disclosing such portion to Buyer by a contractual, legal or fiduciary
obligation, or c) are subject to disclosure by court order or decree, or
d) are subject to disclosure by securities regulations.
10.2 Costs and Fees. Each party shall pay the costs, expenses,
fees, taxes, and duties which it incurs in the course of negotiation,
execution, and performance of its obligations under this Agreement;
including, without limitation, that Buyer will pay all of the costs and
expenses it incurs in conducting the Due Diligence Review as provided in
Clause 3.1.
10.3 Assignability. Except for the terms set forth by Clause 4
of this Agreement, both parties shall be entitled, with the previous
written consent of the other party, to assign its rights and obligations
under this Agreement.
10.4 Notices. All notices required hereunder shall be in
writing and shall be effective upon receipt by addressee, if delivered
personally or sent by facsimile, confirmed in writing, or sent via
overnight courier or registered mail, return receipt requested, postage
prepaid, at the addresses and facsimile numbers set forth below by the
parties, respectively, unless notice of change of address and/or facsimile
numbers is given in writing to the other party, in which case any notices,
to be effective, shall be sent to such new address and/or facsimile
numbers. The parties, for everything pertaining to this Agreement, set
forth as their address and facsimile numbers, the following:
If to Buyer:
Geologic, S. A. de C. V.
Ave. Constituyentes 888-D
Col. Lomas Altas
Mexico D.F., 11950
Attention: Mr. Carlos de Rivas and/or
Mr. Luis Zetina Romay
Facsimile: (5) 529-8814
If to Sellers:
Metalclad Corporation
2 Corporate Plaza
Suite 125
Newport Beach, CA 92660
Attention: Mr. Grant S. Kesler and/or
Mr. Anthony J. Dabbene
Facsimile: (00 1) 949 719-1240
Eco-Metalclad, Inc.
2 Corporate Plaza
Suite 125
Newport Beach, CA 92660
Attention: Mr. Grant S. Kesler and/or
Mr. Anthony J. Dabbene
Facsimile: (00 1) 949 719-1240
10.5 Effect of Agreement. This Agreement supersedes and cancels
any prior agreement, representation, communication, or understanding
between the parties hereto and relating to the transactions contemplated
herein or the subject matter hereof.
10.6 Counterparts. This Agreement may be executed in several
identical counterparts, each of which is executed and delivered by the
parties hereto shall be an original, but all of which together shall
constitute a single instrument.
10.7 Law. This Agreement shall be governed by the laws of
Mexico.
10.8 Conciliation. In the event of any discrepancy or dispute
between the parties relating to or arising out of any provision of this
Agreement, the parties agree to meet promptly, through their respective
representatives, in a good faith effort to resolve the discrepancy or
dispute by agreement. The disputing party shall deliver to the other
party, a written summary of the arguments substantiating its dispute and
shall arrange for a meeting at a time and place mutually acceptable to
both parties; provided, however, that such meeting shall take place within
the next 10 (ten) calendar days following the date in which the disputing
party delivers to the other party the aforementioned written summary of
its arguments. If any party fails to attend the meeting or the meeting
does not result in a resolution of the dispute by agreement or if such
resolution is not agreed upon by the parties within the next 20 (twenty)
calendar days following the meeting, then the parties agree to submit
themselves to arbitration, as provided for in Section 10.9 below.
10.9 Arbitration. Any controversy or claim arising out of or
relating to this contract shall be settled by binding arbitration in
accordance with the International Arbitration Rules of the American
Arbitration Association. The arbitration shall be resolved by a panel of
three independent arbitrators. The place of arbitration shall be Mexico
City. The languages of the arbitration shall be English and Spanish. The
substantive law shall be the laws of Mexico, excluding the conflicts of
laws rules.
10.10 Headings. The headings in this Agreement are for
convenience only and shall not limit or otherwise affect any of the terms
or conditions hereof.
10.11 Modifications. No amendment, variation, modification or
waiver to any of the terms or conditions contained in this Agreement shall
have any force or effect unless the same are evidenced in writing and
executed by the parties' legal representatives with sufficient authority.
10.12 Entire Agreement. This Agreement together with the
Exhibits hereto, shall constitute the entire agreement between the parties
hereto with respect to the transactions contemplated hereby and shall
supersede all prior or contemporaneous negotiations.
<PAGE>
This Agreement is executed by the parties in Mexico City, on
July 30th, 1999.
Metalclad Corporation Geologic, S.A. de C.V.
By /s/Grant S. Kesler By /s/ Carlos A. de Rivas Oest
---------------------------- -------------------------------
Name/position Name/position
Grant S. Kesler, President Carlos A. de Rivas Oest, Managing
Director
Eco-Metalclad, Inc.
By /s/Grant S. Kesler
Name/position
Grant S. Kesler, President
