SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported)
September 30, 1996
M.G. Products, Inc.
(Exact Name of Registrant as Specified in Charter)
California 0-18660 33-0098392
(State or Other (Commission File (IRS Employer
Jurisdiction if Number) Indentification)
of Incorportion
8154 Bracken Creek, San Antonio, Texas 78266-2143
(Address of Principal Executive Offices) (ZipCode)
Registrant's telephone number,including area code
(210)651-5188
Item 1. Changes in Control of Registrant.
On September 30, 1996, M.G. Products, Inc.
("M.G.") sold 3,642,076 shares (the "Shares") of its
authorized but theretofore unissued no par value common
stock to Exportadora Cabrera, S.A. de C.V. ("Exportadora"),
a major M.G. shareholder and creditor, pursuant to a
Purchase Agreement dated as of September 30, 1996 between
Exportadora and M.G. The Purchase Agreement constitutes
Exhibit 1 to this Report.
The Shares were issued in cancellation of
$2,003,141 of M.G.'s indebtedness to Exportadora. The
$2,003,141 indebtedness was incurred in M.G.'s acceptance of
cash advances and the purchase of goods and services from
several subsidiaries of Exportadora. Immediately after the
closing of the transaction, Exportadora owned 7,245,144 of
the then outstanding 14,206,154 shares, being 51%.
The price of 55> per share was determined by
arms-length negotiations between the independent directors
of M.G. and representatives of Exportadora in June of 1996.
The delay in closing the transaction was due, inter alia, to
the requirement of filing a pre-merger notification under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
Exportadora purchased the Shares for
investment. The Shares are subject to the Shareholders'
Agreement referred to below.
Concurrent with the execution of the Purchase
Agreement and as a condition to the sale of the Shares,
M.G., Exportadora, Michael P. Farrah, the Michael Patrick
Farrah Trust, a recently created and as yet unfunded
revocable inter-vivos trust, the Shannon Ann Farrah Trust,
Shannon Ann Farrah, the 1996 Shannon Ann Farrah Trust and
the 1996 Michael P. Farrah Trust (collectively hereinafter
referred to as the "Participants") entered into a
Shareholders' Agreement dated September 30, 1996. A copy
constitutes Exhibit 2 to this Report.
The major provisions of the Shareholders'Agreement
are:
(i) Restrictions Against Transfer.
The Shareholders' Agreement contains
restrictions against the transfer of shares of M.G. common
stock by the Participants, and grants Participants options
and rights of first refusal to purchase shares from other
Participants, under certain circumstances.
(ii) Voting Agreement and Irrevocable Proxy.
The Shareholders' Agreement provides that for
voting purposes the shares of the Participants will be
pooled and then equally divided between two groups (the
Farrah Group and the Exportadora Group) so as to achieve
equal voting power between the two groups despite the fact
that one group owns a greater number of shares than the
other.
The Farrah Group consists of Michael P.
Farrah, the Michael Patrick Farrah Trust, the 1996 Michael
P. Farrah Trust, Shannon Ann Farrah, the 1996 Shannon Ann
Farrah Trust, and the Shannon Ann Farrah Trust. Michael
Farrah is the sole beneficiary of the independently trusteed
1996 Michael P. Farrah Trust, and of the Michael Patrick
Farrah Trust, of which he is the trustee. Shannon Ann
Farrah is the sole beneficiary of the independently trusteed
Shannon Ann Farrah Trust and of the independently trusteed
1996 Shannon Ann Farrah Trust.
The Exportadora Group consists of Exportadora
Cabrera, S.A. de C.V. and of Mr. Juan Pablo Cabrera. Mr.
Juan Pablo Cabrera, who on September 30, 1996 owned 30,770
shares of M.G.'s common stock is a director of M.G. and its
Chairman of the Board and Chief Executive Officer. Mr.
Cabrera is also an officer of Rooster Products, Inc., the
U.S. marketing and distribution subsidiary of Exportadora,
based in San Antonio, Texas.
The pooled shares will be voted for the
Farrah Group by Michael P. Farrah and for the Cabrera Group
by Alejandro Cabrera Robles, or their successors or assigns,
pursuant to irrevocable proxies. Michael Farrah is Vice
President of Manufacturing of an affiliate of M.G. and a
Director of M.G. Mr. Alejandro Cabrera Robles is the
Chairman of Exportadora, a Mexican holding company which he
controls, based in Guadalajara, Mexico, is a director of
M.G. and is the father of Juan Pablo Cabrera.
As shown in the table on page 4, on October
1, 1996 the Farrah Group owned 3,642,965 shares and the
Cabrera Group owned 7,275,914 shares of M.G. common stock.
The Shareholders' Agreement terminates on
September 30, 1999 or earlier if sales or other dispositions
by the Farrah Group or the Cabrera Group pursuant to the
Shareholders' Agreement have resulted in such Group owning
less than 50% of that Group's shares shown in the preceding
paragraph.
(iii) Registration Rights.
The Shareholders' Agreement grants the
Participants the right to include all or any of their shares
of M.G. common stock in Registration Statements that M.G.
may file under the Securities Act of 1933. If before
September 30, 1998 no Participant had the opportunity to
participate in any such Registration Statement, the
Participants have the one-time right to demand that M.G.
register any or all of their M.G. shares.
(iv) Other Provisions.
The foregoing summary of certain provisions
of the Shareholders' Agreement does not fully describe the
agreement, which includes numerous other provisions
typically contained in agreements of this type. Reference
is made to the Shareholders' Agreement of which a copy is
filed as Exhibit 2 to this Report.
The following table sets forth as of October
1, 1996 information with respect to the beneficial ownership
of M.G.'s common stock by each member of the Farrah Group
and of the Exportadora Group.
Shareholder No. of Shares Percent of
Name and Address Outstanding Shares
Exportadora Cabrera,
SA de CV.
Paraiso 1750
Colonia del Fresno
Guadalajara, Jalisco
Mexico 44900 7,245,144 51%
Juan Pablo Cabrera
8154 Bracken Creek
San Antonio, Texas
78266-2143 30,770 *
Michael Farrah
8154 Bracken Creek
San Antonio, Texas
78266-2143 883,557 6.22%
Michael Patrick Farrah Trust
c/o Michael Farrah
8154 Bracken
CreekSan Antonio, Texas
78266-2143 0 0
Shannon Ann Farrah
11730 E. Lusitano Place
Tucson, Arizona
85748 100,000 *
The Shannon Ann Farrah Trust
Edward C. Kliem, Jr., trustee
21671 Branta Circle
Huntington Beach,
California 92646 779,547 5.49%
The1996 Michael P.Farrah Trust
Barry R. Shreiar, trustee
4590 MacArthur Boulevard,Suite 390
Newport Beach, California
92660 939,930 6.62%
1996 Shannon Ann Farrah Trust
Barry R. Shreiar, trustee
4590 MacArthur Boulevard,Suite 390
Newport Beach, California
92660 939,931 6.62%
*Less than 1%
The voting rights and investment power with
respect to all of these shares are restricted pursuant to
the terms of the Shareholders' Agreement.
The shares in the 1996 Michael P. Farrah
Trust and the 1996 Shannon Ann Farrah Trust were sold to the
Trusts by Mr. Patrick Farrah, the father of Michael and of
Shannon and formerly a director and the Chief Executive
Officer of M.G.
Each Trust paid for the shares with its
Promissory Note which is collateralized by a pledge of the
shares. Accordingly, should there be a default in the
payment of principal or interest on the Promissory Notes or
any other default under the Pledge Agreements, Patrick
Farrah has the right to foreclose on the shares in the Trust
involved. In such event the Participants have the right of
first refusal to acquire the shares proposed to be
foreclosed on.
The 1996 Michael P. Farrah Trust and the 1996
Shannon Ann Farrah Trust and the attachments thereto are
filed as Exhibits 3 and 4 respectively, to this Report on
Form 8-K.
Item 7. Financial Statements, Pro Forma Financial
Information and Exhibits.
(a) Financial Statements of Businesses Acquired.
None
(b) Pro Forma Financial Information.
None
(c) Exhibits.
Exhibit 1 Purchase Agreement dated
September 30, 1996, exclusive of the exhibits
thereto.
Exhibit 2 Shareholders' Agreement dated
September 30, 1996
Exhibit 3 The 1996 Michael P. Farrah Trust
Exhibit 4 The 1996 Shannon Ann Farrah Trust
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.
M.G. PRODUCTS, INC.
October 8, 1996 By /s/ ISHMAEL D.GARCIA
Ishmael D. Garcia
Chief Financial
Officer
EXHIBIT INDEX
Exhibit No. Description
Exhibit 1 Purchase Agreement dated September 30, 1996
between M.G. Products, Inc. and Exportadora Cabrera, S.A. de
C.V., exclusive of exhibits thereto.
Exhibit 2 Shareholders' Agreement dated September 30,
1996 among M.G. Products, Inc., Exportadora Cabrera, S.A. de
C.V., Michael P. Farrah, The Shannon Ann Farrah Trust,
Shannon Ann Farrah, The 1996 Shannon Ann Farrah Trust, and
The 1996 Michael P. Farrah Trust.
Exhibit 3 The 1996 Michael P. Farrah Trust
Exhibit 4 The 1996 Shannon Ann Farrah Trust