N:\DOCS\57415\000\4950607Z.040 If you are looking for initial codes, hit CTRL-I. You can edit the format of your document here, such as: page length, fonts, left/right/top/bottom margins, etc. PURCHASE AGREEMENT September 30, 1996 Exportadora Cabrera, S.A. de C.V. Paraiso #1750 Colonia Del Fresno Guadalajara, Jal. Mexico C.P. 44900 Gentlemen: M.G. Products, Inc., a California corporation (the "Company"), proposes to issue and sell to you 3,642,076 fully paid and nonassessable shares of its authorized but heretofore unissued common stock, no par value per share (hereinafter called the "Stock"). You have advised the Company that you desire to purchase the Stock upon the terms and subject to the conditions set forth in this Purchase Agreement. 1. PURCHASE AND SALE OF STOCK. Subject to the terms and conditions and upon the representations, warranties and agreements herein set forth, on September 30, 1996 (the "Closing Date") the Company agrees to issue and sell the Stock to you and you agree to purchase the Stock from the Company at a total purchase price of $2,003,141.85 ($0.55 per share) which will be paid by the cancellation on the Closing Date of $2,003,141.85 of our indebtedness to you. 2. REPRESENTATIONS AND WARRANTIES BY COMPANY. The Company represents, warrants and agrees with you that: (a) The Company is duly organized and validly existing and in good standing under the laws of the State of California and has all requisite corporate power and authority to carry on its business. (b) The Company's Report on Form 10-K for the fiscal year ended December 31, 1995 and the Company's Reports on Form 10- Q for the quarters ended March 31 and June 30, 1996 (collectively herein referred to as the "Reports") are attached as Exhibits A, B and C. The financial statements included in the Reports (hereafter referred to as the "Financial Statements") have been prepared in accordance with generally accepted accounting principles for such Reports, consistently followed throughout the periods covered. The June 30, 1996 balance sheet fairly presents the condition of the Company at June 30, 1996 and the statement of profit and loss for the quarter then ended fairly presents the results of the operations of the Company for such period. (c) Neither this Agreement, nor the Financial Statements, nor any certificate furnished or to be furnished to you by the Company or any officer thereof, contain or will contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading and the Company has apprised you of all such facts as would be relevant to a prudent investor's determination in making an additional investment in the Company. (d) To the knowledge of the Company, no fact or condition exists or is contemplated or threatened which might result in a material adverse change in the assets, liabilities or condition (financial or otherwise) or business of the Company in the future, which have not been disclosed to you in the Financial Statements, other supporting documents or in discussions. (e) Since June 30, 1996, the Company has not declared any cash dividend or declared or made any other distribution on any of its stock, and has not directly or indirectly, purchased or otherwise acquired any stock of the Company or agreed to do so. (f) Since June 30, 1996, neither the business nor the condition (financial or otherwise) of the Company, nor any of its properties or assets has been materially adversely affected in any way (whether or not insured) as the result of any revocation of license or right to do business, fire, explosion, labor trouble, condemnation, Act of God or otherwise. (g) Except as set forth in the Financial Statements there is no action, proceeding, or investigation pending or, to the knowledge of the Company, threatened which might result in any materially adverse change in the Company's business or condition (financial or otherwise) or in any of its properties or assets, or in any liability on the part of the Company (not covered by insurance), or which questions the validity of this Agreement or of the Stock or of any action taken or to be taken by the Company pursuant to or in connection with this Agreement. The Financial Statements set forth accurately and in reasonable detail all litigation to which the Company is a party at the date hereof wherein relief sought is other than money damages or if the only relief sought is money damages, involving an amount in excess of $50,000. (h) The Company's Articles of Incorporation, as amended, authorize the issuance of 15,000,000 shares of common stock of which 10,564,078 shares are outstanding on the date hereof. Except as shown in the Reports, no rights, options, warrants or other agreements for the issuance of stock of the Company, nor any securities convertible into stock of the Company are outstanding. All corporate action necessary for the issuance of the Stock has been duly taken. (i) Except as shown in the Reports, the Company has no stock option plan, pension plan, profit sharing plan, or bonus plan for its employees. 3. MECHANICS OF THE CLOSING. (a) The delivery to you of the Stock and the payment by you therefor shall be made at the Company's office in San Antonio, Texas at 10 A.M. on September 30, 1996. This date may by agreement in writing signed by the Company and Mr. Juan Carlos Rodriguez, as your representative, be changed to a date and/or an hour other than set forth above, and in the event that any such agreement is entered into the altered date or hour shall for all purposes of this Agreement become the Closing Date. (b) Delivery of the Stock shall be made to you on the Closing Date against cancellation of the indebtedness referred to in Section 1 hereof. (c) The certificate for the Stock when delivered shall be in definitive form, shall be registered in your name and shall bear the legends shown on Exhibit D. 4. PURCHASER'S CONDITIONS PRECEDENT TO THE CLOSING. Your obligations to purchase and pay for the Stock are subject to the accuracy on the Closing Date of all representations and warranties by the Company contained herein or otherwise made by or on behalf of the Company in writing in connection with the transactions contemplated hereby, and to the fulfillment to your satisfaction, prior to or at the Closing Date, of the following additional conditions: (a) You shall have received from Kindel & Anderson L.L.P., securities counsel for the Company, a favorable opinion addressed to you and dated the Closing Date, substantially in the form of Exhibit E. (b) The Company shall have performed and complied with all covenants and conditions contained herein required to be performed or complied with by it prior to or at the Closing Date. (c) The Company shall have delivered to you its certificate dated the Closing Date and signed by its Chief Financial Officer certifying in form satisfactory to you and to your counsel that the conditions specified in sub-paragraph (b) of this paragraph 4 have been met and that, in particular, the issue and sale of the Stock are in full compliance with the provisions of the Articles of Incorporation of the Company, as amended, and the By-laws of the Company, as amended. (d) The Company shall have delivered to you the certificate evidencing the Stock. 5. COMPANY'S CONDITIONS PRECEDENT TO THE CLOSING. (a) The Company shall have received a fully executed copy of a shareholder's agreement, substantially in the form of Exhibit F hereto. (b) The Company shall have received the evidence of cancellation of indebtedness provided for in Section 3. 6. INVESTMENT REPRESENTATIONS. You understand that the Stock is offered and sold to you pursuant to an exemption commonly referred to as the "Private Placement" or "Non-public Offering" exemption from the registration requirements under the Securities Act of 1933 (the "Act"). You also understand that the Stock is subject to restrictions on transfer and resale and may not be transferred or resold except as permitted under the Act and the applicable state securities laws, pursuant to registration or exemption therefrom, and that, except as shown in Exhibit F, the Company has no intention to register the shares under the Act. You agree that you will purchase the Stock for your own account for investment and with no present intention of distributing or reselling the same, but subject to your right to dispose of the Stock if at some future time you deem it advisable so to do. 7. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All covenants, agreements, representations and warranties made herein and in any documents delivered at the Closing or pursuant thereto, shall be deemed to be material and to have been relied upon by you, and shall survive the Closing to the extent immediately hereinafter provided. All liabilities of the Company with respect to such covenants, agreements, representations and warranties shall terminate and expire on the first anniversary of the Closing Date; provided, however, that all such liabilities shall survive beyond the aforesaid one-year period in respect of any claim that shall be asserted in reasonable detail by written notice mailed to the Company on or prior to said first anniversary. 8. NOTICES. Any notice, request, instructions or other document deemed by either party to be necessary or desirable to be given to the other parties shall be in writing and shall be delivered by public courier service as follows: If to Exportadora: Exportadora Cabrera, S.A. de C.V. Paraiso #1750 Colonia Del Fresno Guadalajara, Jal. Mexico C.P. 44900 Attn: Mr. Juan Carlos Rodriguez If to the Company: M.G. Products, Inc. 8154 Bracken Creek San Antonio, Texas 78266-2143 Attn: Chief Financial Officer The addresses to which deliveries must be made may be changed from time to time by a notice delivered as aforesaid. 9. MISCELLANEOUS. (a) All the terms and provisions of this Agreement shall be binding upon and shall inure to the benefit of and be enforceable by the respective successors and assigns of the parties hereto whether so expressed or not. (b) This Agreement shall be construed and enforced in accordance with and governed by the laws of the State of California without giving effect to principles of conflicts of laws. (c) This Agreement may be executed in several counterparts each of which shall be deemed an original but all of which together shall constitute one and the same instrument. Please confirm that the foregoing correctly sets forth the agreement between us by signing a copy of this agreement in the place provided below and returning the same to us. When confirmed by you, this letter will constitute the Agreement between the Company and you. M.G. PRODUCTS, INC. By: EXPORTADORA CABRERA, S.A. DE C.V. By: LIST OF EXHIBITS EXHIBIT A 10-K B 10-Q for first quarter C 10-Q for second quarter D Legends E Kindel & Anderson L.L.P. opinion F Shareholder Agreement EXHIBIT D "The securities evidenced by this certificate have not been registered pursuant to the Securities Act of 1933, as amended (the "Act"), or any state securities law, and such securities may not be sold, transferred or otherwise disposed of unless the same are registered and qualified in accordance with the Act and any applicable state securities laws, or in the opinion of counsel reasonably satisfactory to the Company, such registration and qualification are not required." "The shares represented by this certificate are subject to an irrevocable proxy and certain restrictions against transfer under the terms of a Shareholders' Agreement entered into by and among this Company and certain of its shareholders, effective as of September 30, 1996, a copy of which is on file at the Company's principal place of business or registered office. A copy of such Agreement will be furnished to the holder hereof without charge upon written request to the Company at its principal place of business or registered office."