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Pursuant to the stock purchase agreement, on a date that
does not appear in the record but which could not have been any
earlier that November 22, 1996, Zalman Melnik transferred 6,300
of his 8,400 HouTex shares to Clend in exchange for an annuity to
commence on January 1, 2006, when he attained the age of 57, with
quarterly payments of $129,114, payable until the death of both
Zalman and Lea Melnik. The HouTex shares that Zalman Melnik
transferred to Clend were valued at $2,520,000 for purposes of
computing the annuity amount.
After the Melniks transferred their HouTex stock to Clend,
Moshe Melnik retained a 14.5-percent ownership interest in
HouTex, and Zalman Melnik retained a 10.5-percent ownership
interest in HouTex. After the transfer, Clend owned 15,000 of
the 20,000 outstanding HouTex shares, representing a 75-percent
ownership interest in HouTex.
HouTex Merger
Sometime during 1996, Moshe Melnik and Mr. Jennings of MMI
negotiated the sale of HouTex. As a result of those
negotiations, HouTex and MMI entered into a merger agreement,
executed on December 10, 1996, and a first amendment to the
merger agreement dated as of December 10, 1996. The agreement
specified that the transaction would close before the end of 1996
unless the parties agreed to extend the closing to a later date.
The merger was dependent upon MMI’s ability to secure $37 million
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