CORPSA:2131.5 30296-1
AND ADJUST T SHAREHOLDERS' AGREEMENT
dated September 30, 1996
by and among
M.G. PRODUCTS, INC.
a California corporation
and
EXPORTADORA CABRERA, S.A. DE C.V.,
a Mexican corporation,
MICHAEL P. FARRAH,
THE MICHAEL PATRICK FARRAH TRUST,
THE SHANNON ANN FARRAH TRUST,
SHANNON ANN FARRAH ,
THE 1996 SHANNON ANN FARRAH TRUST, and
THE 1996 MICHAEL P. FARRAH TRUST
as shareholders
TABLE OF CONTENTS
ARTICLE 1
General Restriction Against Transfer
1.1 No Transfers Except Pursuant to Agreement.
1.2 Statement on Certificates.
1.3 Delivery of Agreement to All Parties;
Company to Maintain Master Copy.
1.4 Shares Subject Hereto.
ARTICLE 2
Voting Agreement
2.1 Voting.
2.2 Number of Shares.
ARTICLE 3
Optional Purchase Upon Occurrence of Certain Purchase Events
3.1 Purchase Events.
3.2 Notice of Purchase Event.
3.3 Company's Option to Purchase.
3.4 Other Shareholders' Option to Purchase.
3.5 Purchase Price; Manner of Payment; Closing.
3.6 Right to Transfer Unpurchased Shares; Continuation of
Restrictions.
ARTICLE 4
Purchase Price of Shares
4.1 If Purchase Event is a Proposed Sale of Shares.
4.2 Listed Shares.
4.3 Unlisted Shares.
ARTICLE 5
Closings and Payment of Purchase Price
5.1 Place and Date of Closing.
5.2 Payment of Purchase Price.
5.3 Delivery of Shares.
5.4 Insufficient Corporate Surplus.
5.5 Status of Shares Purchased by Company.
ARTICLE 6
Registration Rights
6.1 Piggyback Registration.
6.2 Demand Registration.
6.3 Expenses.
6.4 Maintenance of Registration Statement and Prospectus.
6.5 Blue Sky Qualification.
6.6 Indemnification.
ARTICLE 7
Pledges
7.1 Right to Pledge.
7.2 Foreclosure on Pledged Shares.
ARTICLE 8
Termination of Agreement
8.1 Events Causing Termination.
8.2 Issuance of New Certificates.
ARTICLE 9
Defined Terms
ARTICLE 10
Miscellaneous
10.1 Prior Agreements Superseded.
10.2 Governing Law.
10.3 Notices.
10.4 Amendment.
10.5 Waiver of Option Period.
10.6 Successors and Assigns.
10.7 Waiver of Breach.
10.8 Specific Performance.
10.9 Legal Construction.
10.10Counterparts.
10.11Headings.
10.12Gender.
Schedule A A-1
Shareholders and Shares Subject to Agreement A-1
Schedule B B-1
Valuation of Shares B-1
SHAREHOLDERS' AGREEMENT
THIS SHAREHOLDERS' AGREEMENT is entered into effective the 30th
day of September, 1996 by and among the Company and the
Shareholders, with respect to all of the issued and outstanding
Shares.
Capitalized terms used in this Agreement shall have the
meanings set forth in Article 9 hereof.
W I T N E S S E T H:
WHEREAS, this Agreement serves as a voting agreement and
irrevocable proxy among the Company and the Shareholders for the
purpose of achieving voting parity among certain of the
Shareholders;
WHEREAS, this Agreement also provides for the optional purchase
of Shares held by a Shareholder upon the occurrence of various
events, including (i) a proposed transfer of the Shareholder's
Shares to a third party or another Shareholder, (ii) the occurrence
of an Event of Bankruptcy with respect to the Shareholder, (iii) the
mental incompetence of a Shareholder who is a natural person, or
(iv) the death of the Shareholder; and
WHEREAS, the Company and the undersigned Shareholders have
determined that it is in their respective best interests to enter
into this Agreement for the following reasons:
1. the Agreement provides that, only for purposes
of shareholder voting, the Shares will be pooled and then
equally divided between two different groups, which
collectively constitute all of the Shareholders, so as to
achieve equal voting power between the two groups, despite
the fact that one group owns a greater number of Shares
than does the other group;
2. the Agreement will facilitate continuity of
harmonious management by allowing the Shareholders to
prevent ownership of the Shares from passing to persons
unacceptable to them;
3. the Agreement establishes a fair price for the
Shares if such shares are no longer listed on a securities
exchange or other trading system and in the event of any
transfer under the circumstances described above;
NOW, THEREFORE, in consideration of the mutual representations,
warranties and covenants herein contained, and other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
ARTICLE
General Restriction Against Transfer
1.1 No Transfers Except Pursuant to Agreement. Each Shareholder
agrees that he will not transfer, assign, hypothecate, or in any way
alienate any of his Shares, or any right or interest therein,
whether voluntarily or by operation of law, or by gift or otherwise,
except in accordance with the terms and conditions of this
Agreement. Any purported transfer in violation of any provision of
this Agreement shall be void and ineffectual, and shall not operate
to transfer any interest or title to the purported transferee;
provided, however, that any member of the Cabrera Group or the
Farrah Group may transfer their Shares to any other member of their
respective Group.
1.2 Statement on Certificates. The Company and the Shareholders
agree that all certificates representing the Shares shall bear the
following legend:
"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."
All Shares hereafter issued by the Company to the
Shareholders shall bear a similar legend.
1.3 Delivery of Agreement to All Parties; Company to Maintain
Master Copy. A fully executed counterpart of this Agreement shall
be delivered to each of the parties hereto, but the counterpart
delivered to the Company shall be deemed the master copy of this
Agreement, and in the event of any discrepancies among the various
counterparts hereof such master copy shall control.
1.4 Shares Subject Hereto. This Agreement shall apply to all of
the Shares presently owned by the Shareholders, as listed on
Schedule A attached hereto, and to all Shares of the Company's
common stock hereafter acquired by the Shareholders. A listing of
any additional Shares hereafter acquired by the Shareholders, shall
be endorsed on Schedule A attached to the counterpart of this
Agreement maintained at the principal offices of the Company, and
each listing so endorsed shall be verified by the signatures of the
President or Vice President and of the Secretary of the Company. If
a Shareholder becomes the record or beneficial owner of any Shares
which, through inadvertence or oversight, are not listed on Schedule
A hereto, such Shares shall nevertheless be subject to all of the
terms and conditions of this Agreement.
ARTICLE
Voting Agreement
3.1 Voting. Before exercising their voting rights on any matter
submitted to a vote at a meeting of the shareholders or to be acted
upon by the shareholders by written consent, the Shareholders will
pool all of the Shares. The Shareholders will then, and only for
the purposes of shareholder voting, equally divide the number of
Shares between the Cabrera Group and the Farrah Group, as such terms
are defined in Article 9 hereof. By doing so, the Cabrera Group and
the Farrah Group will have equal voting power as shareholders of the
Company. It is the Shareholders' intent that the Cabrera Group and
the Farrah Group are to have equal voting power with respect to any
and all matters brought to a vote of the shareholders of the
Company, despite the fact that either the Farrah Group or the
Cabrera Group may possess a greater number of Shares than the other.
Therefore, the Farrah Group grants to the Cabrera Group, and the
Cabrera Group grants to the Farrah Group an irrevocable proxy upon
execution of this Agreement and until the termination of this
Agreement, whereby each proxy holder agrees to vote the necessary
number of Shares with the proxy grantor to achieve the equal voting
power referred to in this Section 2.1. The individuals directing
the voting for each group shall be: Michael P. Farrah on behalf of
the Farrah Group and Alejandro Cabrera on behalf of the Cabrera
Group, or their successors or assigns.
3.2 Number of Shares. At the time of execution of this Agreement,
the Cabrera Group and the Farrah Group each held the following
number of Shares in the Company:
CABRERA GROUP: 7,275,914 SHARES
FARRAH GROUP: 3,642,965 SHARES
ARTICLE
Optional Purchase Upon Occurrence of Certain Purchase Events
3.1 Purchase Events. Upon the occurrence of any of the following
Purchase Events with respect to a Selling Shareholder, the Company
and the other Shareholders shall have options to purchase the
Selling Shareholder's Shares, as hereinafter described in this
Article 3:
A the Selling Shareholder receives and desires to
accept a bona fide offer for the purchase of all or a portion
of his Shares (or any rights or interests therein), whether
from a person who is not a party to this Agreement or from
another Shareholder;
B. the Selling Shareholder, if a natural person, is
adjudged to be mentally incompetent by a court of competent
jurisdiction;
C. an Event of Bankruptcy occurs with respect to the
Selling Shareholder;
D. any of the Selling Shareholder's Shares are
foreclosed against or levied upon for the payment of his debts;
E. the Selling Shareholder who is a natural person dies;
F. the Selling Shareholder who is a trust is required
pursuant to the terms of the agreement creating such trust to
transfer, sell or otherwise dispose of the Shares held in such
trust to an individual or entity other than those appearing in
the definition of the Cabrera Group if such trust is part of
the Cabrera Group or the Farrah Group if such trust is part of
the Farrah Group; or
G. the Selling Shareholder proposes or is required to
make any other voluntary or involuntary transfer of his Shares.
3.2 Notice of Purchase Event. Promptly following the occurrence of
a Purchase Event described in Section 3.1 above, the Selling
Shareholder shall give written notice of the Purchase Event to the
Company and the other Shareholders (the "Notice"). The Notice shall
be effective at a date determined in accordance with Section 10.3
hereof (the "Effective Date of the Notice"). The Notice shall
contain the following information:
the nature and relevant details of the Purchase
Event;
the number of Shares affected by the Purchase
Event (the "Offered Shares"); and
if the Purchase Event is an offer to purchase the
Selling Shareholder's Shares under Section 3.1.A
above:
1. the name of the proposed purchaser;
2. the price per Offered Share offered by the
proposed purchaser (or the cash equivalent price
per Offered Share if the proposed purchaser
offered to exchange property other than cash for
the Offered Shares);
3. whether payment is to be made in lump sum
or in installments;
4. if payments are to be made in installments,
the number of installments, the schedule of
payments and the rate of interest to be charged
on outstanding unpaid amounts;
5. all other terms and conditions of the
proposed transfer; and
6. a statement signed by the proposed
purchaser that he has agreed to execute and
become a party to this Agreement following such
transfer.
3.3 Company's Option to Purchase. During a period of thirty(30)
days after the Effective Date of the Notice, the Company shall have
an exclusive option to purchase all, but not less than all, of the
Offered Shares. If the Selling Shareholder is a member of the board
of directors of the Company, he shall not participate in or vote
upon the Company's decision as to whether to exercise this option.
If the Company decides to exercise this option, it shall give
written notice of exercise to the Selling Shareholder prior to the
expiration of the thirty (30) day option period.
3.4 Other Shareholders' Option to Purchase. If the Company does
not exercise its purchase option, then during a period from thirty-
one (31) to sixty (60) days after the Effective Date of the Notice,
the Shareholders other than the Selling Shareholder shall have an
exclusive option to purchase all, but not less than all, of the
Offered Shares. If the other Shareholders decide to exercise this
option, they shall give written notice of exercise to the Selling
Shareholder prior to the expiration of the option period described
in this Section 3.4. Unless the purchasing Shareholders agree
otherwise, each purchasing Shareholder shall be entitled to purchase
that portion of the Offered Shares that the number of Shares held by
him bears to the number of Shares held by all of the purchasing
Shareholders.
3.5 Purchase Price; Manner of Payment; Closing. The purchase price
for Shares purchased pursuant to this Article 3 shall be determined
in accordance with Article 4 of this Agreement. The manner in which
the purchase price may be paid, and the place, date and manner of
closing of the purchase, shall be determined in accordance with
Article 6 of this Agreement.
3.6 Right to Transfer Unpurchased Shares; Continuation of
Restrictions. If the purchase options provided in this Article 3
are not exercised, the Selling Shareholder shall have the following
rights:
If the Purchase Event is an offer to purchase the
Selling Shareholder's Shares under Section 3.1.A above, then
during a period from sixty-one (61) to ninety (90) days after
the Effective Date of the Notice the Selling Shareholder shall
have the right to transfer the Offered Shares to the proposed
transferee on the same terms and conditions and at a price
equal to or in excess of (but not less than) the price
specified in the Notice. The purchaser must execute and become
a party to this Agreement.
If the Purchase Event is one of the events described
in Sections 3.1.B through .G, then during a period from sixty-
one (61) to one hundred eighty (180) days after the Effective
Date of the Notice the Selling Shareholder, or its
representatives, may proceed to transfer the Offered Shares in
the manner contemplated by the Notice (if the Notice
contemplated any transfer).
If the Offered Shares are not transferred within the
applicable period set forth above, the restrictions contained
in this Agreement shall resume and continue in effect
thereafter as to the Selling Shareholder.
ARTICLE
Purchase Price of Shares
4.1 If Purchase Event is a Proposed Sale of Shares. If the
Purchase Event is the Selling Shareholder's receipt of a bona fide
offer for the purchase of his Shares, the purchase price at which
the Company or the other Shareholders may exercise their options to
purchase shall be determined as follows:
A. The purchase options of the Company and the other
Shareholders shall be exercisable at the price per Share stated in
the Notice.
B. If the proposed transferee offered the Selling
Shareholder property other than cash in exchange for the Offered
Shares, so that the Notice states a cash equivalent price per
Offered Share, then in such event the Company or any Shareholder
shall be entitled to demand an appraisal of the noncash property
offered by the proposed transferee to verify the cash equivalent
price per offered Share set forth in the Notice. If the appraised
value is lower than the price per Share reflected in the Notice,
then the appraised value shall be used to determine the price per
Share at which the offered Shares may be purchased by the Company or
the Shareholders. If the appraised value is higher than the price
per Share reflected in the Notice, then the price per Share set
forth in the Notice shall prevail.
4.2 Listed Shares. Except as stated in Section 4.1, the purchase
price of Shares pursuant to this Agreement shall equal the market
price of the Common Stock of the Company (the "Market Price"). The
Market Price shall mean the average of the daily market prices of
the Common Stock over a period of twenty (20) consecutive business
days ending five (5) calendar days prior to the Effective Date of
the Notice. The Market Price for each such business day shall be
the average of the closing prices on such day of the Common Stock on
all domestic exchanges on which the Common Stock is then listed, or
if there shall have been no sales on any exchange on such day, the
average of the highest bid and lowest asked prices on all such
exchanges at the end of such day, or, if the Common Stock shall not
be so listed, the average of the representative bid and asked prices
quoted on the NASDAQ System as of 4:30 P.M., Eastern time, on such
day, or if the Common Stock shall not be quoted in the NASDAQ
System, the average of the high and low bid and asked prices on such
day in the domestic over-the-counter market as reported by the
National Quotation Bureau, Incorporated, or any similar successor
organization. If the Common Stock is listed on any domestic
exchange, the term "business days" as used in this Article 4 shall
mean business days on which such exchange is open for trading.
4.3 Unlisted Shares. If at any time the Common Stock of the
Company is not listed as described in Section 4.2, then the purchase
price of the Shares shall equal the Fixed Price as determined in
this Section 4.3.
A. Initial Fixed Price. The Fixed Price of each Share
shall be $1.00. By executing this Agreement, the parties
hereto acknowledge and agree that this amount represents a fair
and equitable valuation of each Share as of the date hereof and
until subsequently changed.
B. Annual Review of Fixed Price by Shareholders.
Annually, the Shareholders or more frequently if the
Shareholders desire, shall review the Fixed Price of each Share
and be adjusted, if necessary, by the agreement of each of the
Shareholders. If the Shareholders are unable to agree on a
Fixed Price, then the Shareholders shall appoint an independent
appraiser for the purpose of fixing such a price. If the
Shareholders are unable to agree on an independent appraiser,
then the Farrah Group shall select one appraiser, the Cabrera
Group shall select another appraiser, and those two appraisers
shall then select the independent appraiser who shall be
engaged to fix the per share price. Each of the Farrah and
Cabrera Groups shall divide the costs of the appraisal process
equally. Each Fixed Price so determined shall be endorsed on
Schedule B attached to the master copy of this Agreement
maintained at the principal offices of the Company. Each Fixed
Price so endorsed shall be verified by the signatures of the
President or Vice President and of the Secretary of the
Company. Each Fixed Price shall remain in effect until
subsequently altered pursuant to this Section 4.3.B.
ARTICLE
Closings and Payment of Purchase Price
5.1 Place and Date of Closing. The closing of any purchase and
sale of Shares pursuant to this Agreement shall take place at the
office of the Company at a date agreed to by the Selling Shareholder
and each purchaser, subject to the following limitations:
if the purchase is by the Company pursuant to Section
3.3, the closing shall be held within thirty (30) days after
the effective date of the Company's notice that it is
exercising its purchase option;
if the purchase is by the Shareholders pursuant to
Section 3.4, the closing shall be held within thirty (30) days
after the effective date of the Shareholders' notice that they
are exercising their purchase option;
if a decedent's Shares are being purchased pursuant to
death under Section 3.1.E, the closing shall not be held until the
decedent's personal representatives have been qualified
5.2 Payment of Purchase Price.
The purchase price for any Shares purchased pursuant
to this Agreement may be paid, at the option of the
purchaser(s), either (i) in cash or (ii) by giving the seller
one-third of the purchase price in cash and a promissory note
in the amount of the remaining two-thirds of the purchase
price.
The portion of the purchase price for Shares
purchased hereunder which is to be paid in cash, shall be paid
by certified check or cashier's check.
Where a promissory note is given, the amount of the
note shall be paid in twenty-four (24) equal monthly
installments, with the first installment being due on the first
day of the second month following the date of the closing.
Interest shall be payable with each installment on the then-
outstanding principal amount, at the "applicable Federal rate"
(as determined under Section 1274 of the Internal Revenue Code
of 1986) as of the date upon which the promissory note is
given. The promissory note shall be subject to prepayment,
without penalty, in whole or in part, at any time. The due
date of the note shall be accelerated upon default in the
payment of any monthly installment or upon default in the
payment of interest.
If the purchaser(s) elect to pay the purchase price
by delivery of a promissory note, the purchaser(s) shall grant
to the seller a security interest in all of the purchased
Shares as security for repayment of the debt evidenced by such
promissory note. The purchaser(s) shall execute all such
security agreements, financing statements and other
instruments, and shall do all such acts and things (including,
if necessary, appointment of a bailee to hold the certificates
representing the purchased Shares) as shall be reasonably
necessary to perfect the seller's security interest in the
purchased Shares under the terms of the California Uniform
Commercial Code.
5.3 Delivery of Shares. At the closing of any purchase and sale of
Shares pursuant to this Agreement, and upon receipt of cash and/or a
promissory note in payment for the Shares being sold, the seller
shall endorse in blank and deliver such Shares to the purchasing
party or parties (unless delivery to a bailee is required under
Section 5.2.D above). The seller shall also execute and deliver any
other documents or instruments necessary to transfer ownership of
the Shares.
5.4 Insufficient Corporate Surplus. If the Company is not
permitted to purchase such Shares under the California Corporation's
Code, then the Company shall not be permitted to elect to purchase
pursuant to this Agreement.
5.5 Status of Shares Purchased by Company. Any Shares purchased by
the Company pursuant to this Agreement shall be held as authorized
and unissued shares.
ARTICLE
Registration Rights
6.1 Piggyback Registration. The Company for a period of three (3)
years, will give written notice to the Shareholders not less than 30
days in advance of the initial filing of any registration statement
under The Securities Act of 1933 (the "1933 Act") (other than a
registration statement pertaining to securities issuable pursuant to
employee stock option, stock purchase, or similar plans or a
registration statement pertaining to securities issuable in
connection with the merger, consolidation, acquisition of assets, or
exchange of securities) covering any Common Stock or other
securities of the Company and will afford the Shareholders the
opportunity to have included in such registration all or such part
of the shares of Common Stock then held by the Shareholders as may
be designated by written notice to the Company not later than 10
days following receipt of such notice from the Company. The Company
shall not be entitled to exclude the shares of Common Stock held by
the Shareholders if shares of other shareholders are being included
in any such registration statement and, in such circumstances, the
Shareholders shall be entitled to include the shares of Common Stock
held by them on a pro-rata basis in the proportion that the number
of shares of Common Stock held by the Shareholders bears to the
shares of Common Stock held by all other shareholders who hold pre-
existing registration rights, including the shares proposed to be
included in such registration statement. The Shareholders shall not
be entitled to include shares in more than two registration
statements pursuant to the provisions of Sections 6.1 or 6.2, and
all rights of the Shareholders under Sections 6.1 or 6.2 shall
terminate after the Shareholders have included shares of Common
Stock in two registration statements pursuant to Sections 6.1 or
6.2.
6.2 Demand Registration. In the event that during the term of this
Agreement, commencing upon the second (2nd) anniversary date of this
Agreement, no Shareholder has had the opportunity to participate in
any registration pursuant to Section 6.1 above, any Shareholder or
Shareholders owning in the aggregate not less than five percent (5%)
of the then outstanding shares shall have the one-time right to
demand that the Company register under the 1933 Act up to all of its
shares of Common Stock. The Company shall, as promptly as possible,
and in no event more than sixty (60) days after being requested in
writing by the Shareholder to do so, prepare and file an appropriate
registration statement under the 1933 Act as to the shares of Common
Stock referred to herein and use it best efforts to cause such
registration statement to become effective, provided that if there
is more than one Shareholder, the Company shall have an additional
sixty (60) day period to notify all other Shareholders of the demand
by any one of them and to allow all Shareholders to participate in
the registration if, in the judgment of the Company, this
participation would be in the best interests of the Company. The
Company shall not be required to file more than one registration
statement for all of the Shareholders pursuant to this Section 6.2.
6.3 Expenses. The Company will pay all out-of-pocket costs and
expenses of any registration effected pursuant to the provisions of
Sections 6.1 or 6.2, including registration fees, legal fees,
accounting fees, printing expenses (including such number of any
preliminary and the final prospectus as may be reasonably
requested), blue sky qualification fees and expenses, and all other
expenses, except for underwriting commissions or discounts
applicable to the shares of Common Stock being sold by the
Shareholders and the fees of counsel for the Shareholders, all of
which shall be paid by the Shareholders.
6.4 Maintenance of Registration Statement and Prospectus. The
Company will maintain the effectiveness of any registration
statement filed pursuant to Sections 6.1 or 6.2 for a period of time
reasonably sufficient for the Shareholders to dispose of the shares
of Common Stock included therein, and will file any amendments or
supplements to any such registration statement necessary to
accomplish the foregoing; provided, that in no event shall the
Company be required to maintain effectiveness of any such
registration statement for more than one hundred and eighty (180)
days after the effective date thereof. The Company shall furnish
such number of prospectuses and other documents incident thereto as
any of the Shareholders may reasonably request.
6.5 Blue Sky Qualification. The Company shall use its best efforts
to effect qualification of the shares of Common Stock included in
any registration statement filed pursuant to the provisions of
Sections 6.1 or 6.2 in such states as the Shareholders shall
request, but the Company shall not be required in connection
therewith to execute a general consent to service of process or
qualify to do business in any state.
6.6 Indemnification. Each party will agree to indemnify the other
with respect to any and all loss, liability, claim, damage and
expense whatsoever arising out of any alleged untrue statement of a
material fact contained in such registration statement (or any
amendment thereto), or the omission or alleged omission therefrom of
a material fact required to be stated therein or necessary to make
the statements therein not misleading, or arising out of any alleged
untrue statement of a material fact contained in any preliminary
prospectus or prospectus (or any amendment or supplement thereto) or
the omission or alleged omission therefrom, of a material fact
necessary in order to make the statements therein not misleading, or
arising out of any violation or alleged violation by the Company of
the 1933 Act, the 1934 Act, any state securities law or any rule or
regulation promulgated under the 1933 Act, the 1934 Act or any state
securities law in connection with any registration effected pursuant
to this Article 6, provided that in the case of any indemnification
sought against any of the Shareholders, the indemnification provided
for herein shall extend only to information furnished in writing by
such Shareholder for inclusion in any such registration statement.
ARTICLE
Pledges
7.1 Right to Pledge. Notwithstanding any other provision of this
Agreement, a Shareholder shall have the right to pledge, subject to
lien or otherwise encumber his Shares, provided (1) that such
transaction shall constitute a bona fide security arrangement with
respect to a bona fide lending arrangement, and (2) that such
transaction shall provide no voting rights or other ownership
interest (other than a secured lender's interest) to any person not
a signatory to this Agreement.
7.2 Foreclosure on Pledged Shares. If pledged Shares are
foreclosed against or levied upon by the secured lender, then the
Company and the other Shareholders will have an option to purchase
such Shares as described in Section 3.1.D hereof.
ARTICLE
Termination of Agreement
8.1 Events Causing Termination. This Agreement shall terminate and
the certificates representing the Shares subject to this Agreement
shall be released from the terms hereof, on the occurrence of any of
the following events:
the cessation of the Company's business;
the unanimous written agreement of the Company and
the Shareholders to terminate this Agreement;
when either the Farrah Group or the Cabrera Group,
pursuant to the terms of this Agreement,
transfers, assigns, sells or otherwise disposes of
Shares and such disposition results in such group
owning less than 50% of that group's Shares as
listed in Schedule A;
an Event of Bankruptcy with respect to the
Company;
upon the election of a Shareholder if the Company
or another Shareholder violates any material
provision of this Agreement and does not cure such
violation within thirty (30) days after written
notice thereof has been given by the electing
Shareholder; or
upon the third anniversary date of the execution
of this Agreement; provided, however, that the
Agreement may be renewed by the written agreement of
the Company and the Shareholders.
8.2 Issuance of New Certificates. Upon the termination of this
Agreement for any of the reasons specified above, the certificates
representing the Shares shall be surrendered to the Company and the
Company shall issue new certificates for the same number of Shares
but without the legend required by Section 1.2 of this Agreement.
ARTICLE
Defined Terms
The capitalized terms used in this Agreement shall have the
meanings specified in this Article 9.
The 1933 Act shall have the meaning specified in Section 6.1
The 1934 Act shall have the meaning specified in Section 6.6.
Agreement means this Shareholders' Agreement.
Cabrera Group shall mean Exportadora Cabrera, S.A. de C.V., a
Mexican corporation and Juan Pablo Cabrera in his individual
capacity.
Common Stock shall mean all of the authorized, issued and
outstanding shares of stock in M.G. Products, Inc. having no par
value.
Company means M.G. PRODUCTS, INC., a California corporation.
Effective Date of the Notice shall have the meaning specified
in Section 3.2 hereof.
Event of Bankruptcy. A Shareholder or the Company shall be
deemed to have suffered an Event of Bankruptcy if: (i) such person
makes a general assignment for the benefit of creditors; (ii) such
person files a voluntary bankruptcy petition; (iii) such person
becomes the subject of an order for relief or is declared insolvent
in any federal or state bankruptcy or insolvency proceeding; (iv)
such person files a petition or answer seeking for such person a
reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any law; (v) such person files
an answer or other pleading admitting or failing to contest the
material allegations of a petition filed against such person in a
proceeding of the types described in clauses (i) through (iv) above;
(vi) such person seeks, consents to or acquiesces in the appointment
of a trustee, receiver or liquidator of such person or of all or any
substantial part of such person's properties; (vii) 120 days expire
after the date of the commencement of a proceeding against such
person of the type referenced in clause (iv) above if the proceeding
has not been previously dismissed; or (viii) 90 days expire after
the date of the appointment, without such person's consent or
acquiescence, of a trustee, receiver or liquidator of the type
referenced in clause (vi) above if the appointment has not
previously been vacated or stayed, or 90 days expire after the date
of expiration of a stay, if the appointment has not previously been
vacated.
Farrah Group shall mean 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.
Fixed Price shall have the meaning specified in Section 4.2 hereof.
Market Price shall have the meaning specified in Section 4.2 hereof.
Notice shall have the meaning specified in Section 3.2 hereof.
Offered Shares shall have the meaning specified in Section 3.2 hereof.
Purchase Event shall mean any of the events specified in
Section 3.1 hereof.
Selling Shareholder shall mean any Shareholder who is required
or elects to sell his Shares pursuant to this Agreement (or any
person appointed or authorized to act on his behalf).
Shareholder(s), singly or collectively, shall mean Exportadora
Cabrera, S.A. de C.V., a Mexican corporation, 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.
Shares shall mean shares of the common stock, no par value, of
the Company that are subject to this Agreement.
ARTICLE
Miscellaneous
10.1 Prior Agreements Superseded. This Agreement constitutes the
sole and only agreement of the parties hereto and supersedes any
prior understanding or written or oral agreements between the
parties respecting the subject matter hereof. This Agreement
specifically supersedes that certain Shareholders Agreement dated
December 30, 1994 entered into by and between M.G. Products and
certain holders of shares of stock in the Company.
10.2 Governing Law. This Agreement shall be interpreted, construed
and governed in accordance with the laws of the State of California
without giving effect to principles of conflicts of law.
10.3 Notices. All notices, payments and other required
communications to the parties shall be in writing, and shall be
addressed to the Company at its principal place of business and to
the Shareholders at their respective addresses as shown on Schedule
A hereto. All notices shall be given (i) by personal delivery, or
(ii) by electronic communication, with a confirmation sent by
registered or certified mail, return receipt requested, or (iii) by
registered or certified mail, return receipt requested. All notices
shall be effective and shall be deemed delivered (i) if by personal
delivery, on the date of delivery if delivered during normal
business hours, and, if not delivered during normal business hours,
on the next business day following delivery, (ii) if by electronic
communication, on the date of receipt of the electronic
communication, and (iii) if solely by mail, on the date of receipt
of the mailing. A party may change its address by notice to the
other parties.
10.4 Amendment. No modification, amendment, addition to, or
termination of this Agreement, nor waiver of any of its provisions,
shall be valid or enforceable unless it is in writing and signed by
all the parties hereto.
10.5 Waiver of Option Period. When any party to this Agreement has
an option to purchase Shares hereunder exercisable for a specified
period, and such party determines prior to the expiration of the
option period that it will not exercise such option, the option
holder may notify the Selling Shareholder in writing that it is
waiving the option. From and after the date upon which such notice
is effective, the option period shall be deemed to have expired for
all purposes of this Agreement.
10.6 Successors and Assigns. A Shareholder may not assign any of
his rights or obligations under this Agreement except in connection
with transfers of his Shares made in accordance herewith. Subject
to the foregoing, this Agreement shall be binding upon and shall
inure to the benefit of the parties and their heirs, legal
representatives, successors and assigns. All such persons shall
execute such instruments in writing and take such further actions as
shall be necessary or appropriate to carry out the purposes of this
Agreement.
10.7 Waiver of Breach. The waiver by any party to this Agreement of
a breach or violation of any provision hereof shall not operate or
be construed to be a waiver of any subsequent breach hereof.
10.8 Specific Performance. The parties hereto agree that it will be
impossible to measure in money the damages suffered by a party
hereto or by a decedent's personal representatives by reason of a
failure by another party to perform any of such party's obligations
under this Agreement. Therefore, if any party hereto or the
decedent's personal representatives shall institute any action or
proceeding to enforce the provisions hereof, any person (including
the Company) against whom such action or proceeding is brought
hereby waives the claim or defense therein that such party or any
such personal representative has an adequate remedy at law, and the
party instituting such action or proceeding shall be entitled to
specific performance, injunctive relief and to such other relief as
principles of equity may afford.
10.9 Legal Construction. In case any one or more of the provisions
contained in this Agreement shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision
hereof, and this Agreement shall be construed as if such invalid,
illegal or unenforceable provision had never been contained herein.
10.10Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of
which together shall constitute one and the same agreement (except
that the master copy hereof maintained by the Company shall control
in the event of discrepancies, as provided in Section 1.3 hereof).
10.11Headings. The paragraph headings contained in this Agreement
are for convenience only, and shall in no manner be construed to be
part of this Agreement.
10.12Gender. As used herein and when required by the context, the
use of a masculine pronoun herein shall include the feminine.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement effective as of the date first above written.
The Company:
M.G. PRODUCTS, INC.
___________________________________
By: Juan Pablo Cabrera
Its: Chairman and Chief Executive Officer
The Shareholders:
The MICHAEL PATRICK FARRAH TRUST,
_________________________
Michael P. Farrah, trustee Michael P. Farrah, in his individual
capacity
__________________________________
Shannon Ann Farrah, in her individual
capacity
The SHANNON ANN FARRAH TRUST, The 1996 MICHAEL P. FARRAH TRUST,
_____________________________ _________________________________
Edward C. Kleim, Jr., trustee Barry R. Sheiar, trustee
EXPORTADORA CABRERA, The 1996 SHANNON ANN FARRAH TRUST,
S.A. de C.V.
__________________________ _________________________________
By: Alejandro Cabrera Barry R. Shreiar, trustee
Its: Chairman of the Board
Schedule A
Shareholders and Shares Subject to Agreement
Shareholder Number Verifying
Name and Address of Shares Signatures
Exportadora Cabrera 7,245,144 _______________
Paraiso 1750 Title:_________
Colonia del Fresno _______________
Guadalajara, Jalisco Title: ________
Mexico, 44900
Michael Farrah 883,557 ______________
8154 Bracken Creek Title: _______
San Antonio, Texas 78266 ______________
Title:________
Shannon Ann Farrah 100,000 ______________
11730 E Lusitano Title:
Tuscon, Arizona 85748 ______________
Title:________
The Shannon Ann Farrah Trust 779,547 ______________
Edward C. Kleim, Jr., trustee Title:________
21671 Branta Circle ______________
Huntington Beach, CA 92646 Title:________
The 1996 Michael P. Farrah 939,930
Trust,Barry R. Shreiar, Trustee ______________
Lazof and Cos Attorneys at Law Title:________
4590 MacArthur Blvd. Suite 390 ______________
Newport Beach, CA 92660 Title:________
The 1996 Shannon Ann Farrah 939,931
Trust,Barry R. Shreiar, Trustee ______________
Lazof and Cos Attorneys at Law Title:________
4590 MacArthur Blvd. Suite 390 ______________
Newport Beach, CA 92660 Title: _______
Last modified on ________________, ______
Schedule B
Valuation of Shares
If shares are unlisted
Price per Date Verifying
Share Fixed Signatures
President or Vice
President
Secretary