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.
<TABLE>
<CAPTION>
Shareholder No. of Shares Percent of
Name and Address Outstanding Shares
<S> <C> <C>
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%
</TABLE>
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
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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."
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
THE 1996 MICHAEL P. FARRAH TRUST
dated September 29, 1996
* * * * *
BARRY R. SHREIAR, Trustor
BARRY R. SHREIAR, Trustee
September 29, 1996
THE 1996 MICHAEL P. FARRAH TRUST
dated September 29, 1996
THIS 1996 MICHAEL P. FARRAH TRUST dated
September 29, 1996 (hereinafter referred to as the
"Trust Agreement" or the "Trust") is made this 29th
day of September, 1996, by and between BARRY R.
SHREIAR, Trustor (hereinafter referred to as
"Trustor"), and BARRY R. SHREIAR, Trustee in order to
establish a separate trust for the benefit of MICHAEL
P. FARRAH (herein "Beneficiary") under the terms and
conditions herein stated.
ARTICLE I.
THE TRUST ESTATE
Trustor, without any consideration on the part
of Trustee, has delivered to Trustee money and
property, as described in Exhibit "A", attached
hereto as part of this Trust Agreement. Said
property and the proceeds received by Trustee
therefrom, and all money and property hereinafter
held by or received by Trustee, as Trustee hereunder,
shall constitute the Trust estate ("Trust Estate").
Trustee acknowledges delivery of said property and
agrees to hold and manage the same, in trust, for the
uses and in the manner hereinafter set forth.
Trustor or any other legal person or entity shall
have the right by Will or otherwise to add to this
Trust any other property acceptable to Trustee, and
such property shall become a part of the Trust
Estate.
The name of this Trust shall be "THE 1996
MICHAEL P. FARRAH TRUST dated September 29, 1996."
I. ARTICLE
IRREVOCABILITY
Trustor hereby designates this Trust as an
irrevocable trust and hereby irrevocably commits any
and all funds and property listed on Exhibit "A" to
the purposes set forth herein, to be held,
administered, and distributed in accord with the
herein provisions. No person shall have the power to
alter, amend or revoke this Trust Agreement in whole
or in part.
I. ARTICLE
POWER TO WITHDRAW TRUST ESTATE
Trustee agrees, if Trustee accepts any
additions, to hold and manage such additions in trust
for the use and in the manner set forth in this Trust
Agreement. In the event such addition constitutes a
lifetime gift from Trustor, then the following shall
apply:
A. For a period of fifteen (15) days
following any contribution to the Trust Estate by the
Trustor or any other person, each Beneficiary shall
have the right to withdraw from any part of the Trust
Estate (including but not limited to the actual
contribution) an amount equal to the lesser of:
1. The entire contribution; or
1. A portion of the contribution
having a fair market value equal to the amount
specified for gift tax exclusion in Internal Revenue
Code Section 2503(b) as from time to time amended,
determined as of the date of the contribution. If
the donor is married at the time of the gift, this
portion shall be doubled whether or not the donor's
spouse joins in the gift pursuant to Internal Revenue
Code Section 2513 as from time to time amended,
except where married donors each make simultaneous
gifts to the Trust Estate, then the exclusion in
Internal Revenue Code Section 2503(b) shall be
applied on a per donor basis.
Provided, that the aggregate withdrawals with
respect to contributions made by one donor during any
single calendar year shall not exceed the fair market
value of the foregoing Internal Revenue Code
limitation determined as of the date of contribution.
A. Withdrawals shall be by written
request delivered to Trustee.
A. If Beneficiary is under a legal
disability during part or all of a withdrawal period,
the guardian of Beneficiary may exercise such
withdrawal on Beneficiary's behalf.
A. Each time Beneficiary acquires a right
of withdrawal as above provided, Trustee shall so
notify Beneficiary or Beneficiary's guardian.
A. On the death of Beneficiary,
Beneficiary shall have the power to appoint the
principal and any undistributed income of the Trust
Estate, or any part thereof, to Beneficiary's spouse,
to one or more of Beneficiary's issue then living, to
one or more of Trustors' issue then living, or to a
trust or trusts for their benefit. Such power of
appointment shall be exercised only by a provision in
the Last Will and Testament of Beneficiary expressly
exercising such power. Unless within ninety (90)
days after Beneficiary's death, Trustee has actual
notice of the existence of a Will exercising such
power, Trustee shall, without incurring any liability
to any appointee, proceed as if such power had not
been exercised; provided, however, that this sentence
shall not bar any right which an appointee may have
to enforce the appointment.
I. ARTICLE
DISTRIBUTION OF INCOME AND PRINCIPAL
A. So long as Beneficiary is under the
age of twenty-one (21), Trustee shall pay to or apply
for the benefit of Beneficiary, as much of the net
income and principal of the Trust as Trustee, in
Trustee's discretion, deems necessary for the proper
health, support, maintenance, and education of
Beneficiary, after taking into consideration, to the
extent Trustee deems advisable, any other income or
resources of Beneficiary known to Trustee. Any net
income not distributed shall be accumulated and added
to the principal.
A. When Beneficiary attains age twenty-
one (21), Trustee shall pay to or apply for the
benefit of Beneficiary the entire net income of
Beneficiary's trust, quarter-annually or at more
frequent intervals. Trustee may also pay to or apply
for the benefit of Beneficiary as much of the
principal of Beneficiary's trust as Trustee, in
Trustee's discretion, deems necessary for the proper
health, support, maintenance, and education of
Beneficiary, after taking into consideration, to the
extent Trustee deems advisable, any other income or
resources of Beneficiary known to Trustee.
A. At the time Beneficiary attains age
forty (40), Trustee shall distribute to Beneficiary
the remainder of the principal and any and all
accumulated income on the principal of Beneficiary's
trust as then constituted.
A. If Beneficiary dies before becoming
entitled to receive distribution of his or her entire
trust, the undistributed balance of that
Beneficiary's trust shall thereupon be divided into
as many equal shares as there are living children of
the deceased Beneficiary and Trustee shall distribute
such shares outright and free of trust. If
Beneficiary dies leaving no living children, the
undistributed balance of that Beneficiary's trust
shall be distributed to the then living brothers and
sisters of Beneficiary in equal shares; provided,
however, that if a brother or sister is then deceased
leaving children then living, said deceased sibling's
share shall be distributed to said living children in
equal shares. Notwithstanding the above, if any part
of that balance would otherwise be distributed to a
person for whose benefit a trust is then being
administered under this Trust Agreement, that part
shall instead be added to that trust and shall
thereafter be administered according to its terms.
A. If at any time before full
distribution of the Trust Estate, all persons
described above are deceased but issue of Trustor are
then living, the Trust Estate shall thereupon be
distributed outright to said living issue based on
the principal of representation, but if all Trustors'
issue are deceased and no other disposition of the
property is directed by this Trust, the Trust Estate
or the portion of it then remaining shall thereupon
be distributed to those persons who would then be
Trustors' heirs, their identities and respective
shares to be determined according to the laws of the
State of California then in effect relating to the
succession of separate property not acquired from a
predeceased spouse, and assuming an equal share for
each Trustor hereunder.
A. With respect to any sum or property,
whether income or corpus, which is required or
permitted to be distributed out of any trust
hereunder to or for the benefit of any person who, at
the time, is a minor or whom Trustee of such trust,
in Trustee's reasonable discretion, determines to be
under any disability preventing such person from
acting properly in his or her own behalf
(irrespective of whether legally so adjudicated),
Trustee of such trust may properly make distribution
of the same in any one or more of the following ways
as such Trustee, from time to time, in Trustee's sole
discretion, shall deem to be most expedient in the
best interests of such person; namely, by paying,
distributing, or applying the same to:
1. Such person directly,
1. The legal guardian of such
person,
1. An apparently qualified
individual or bank who, in taking the same "as
custodian for" such person "under the" appropriate
state's "uniform gifts to minors act", indicates that
such sum or property will be treated in all respects
as "custodial property" for the benefit of such
person in accordance with the provisions of the
Uniform Gifts to Minors Act of such state (whether or
not such act permits custodial property of such an
origin),
1. The parent, spouse, or other
individual having the care and custody of such person
who, as such person's natural guardian, shall
preserve the same for the immediate or ultimate
benefit of such person (or such person's estate), but
who shall not be obligated to qualify as a legal
guardian or account to any probate court therefor,
1. Trustee or Trustees of any trust
all of the assets of which are then fully and
unqualifiedly withdrawable by such person,
1. The direct payment of any
educational, medical, or other proper expense of such
person (including expenses, such as taxes, repairs,
etc., reasonably appropriate to preserving any assets
belonging to such person) as long as such expense is
not the legal obligation of any other person,
1. The purchase of stocks, bonds,
insurance (the term "purchase" shall include any
premium payment), or other properties of any kind,
the ownership of which is registered in the sole name
of such person, or
1. The making of a deposit into a
bank, savings and loan association, brokerage, or
other similar account in the sole name of such
person; provided, if distribution in the manner
described in subparagraphs (3) and (4) is made,
Trustee may require legally enforceable
indemnification in favor of such person against
anyone other than such person (or his or her estate)
benefiting thereby (even through the discharge of an
obligation to support such person). The receipt for
or evidence of any such payment, distribution, or
application shall be a complete discharge and
acquittance of Trustee to the extent of such payment,
distribution, or application and, except for
enforcement of any above described indemnification,
Trustee shall have no duty to see to the actual
application of amounts so paid or distributed to
others.
Even in the absence of minority or disability,
distributions made in the manner provided in
subparagraphs 1, 5, 6, 7, or 8 above shall be
conclusively deemed to have been made for the
"direct" benefit of such person.
A. In exercising Trustee's discretion
hereunder, Trustee shall be entitled to rely upon the
written certification of Beneficiary or the parent or
legal guardian of Beneficiary as to the nature and
extent of Beneficiary's needs and the inadequacy of
Beneficiary's resources apart from the Trust. When
relying upon such certifications, Trustee shall not
be required to make further inquiry into the
authenticity of the need or to the availability of
other resources to satisfy the need. It is Trustors'
desire that Trustee consider the needs of Beneficiary
in keeping with the standard of living that has been
previously enjoyed by Beneficiary and that Trustee
consider the needs of Beneficiary for support, care,
maintenance, and education as the primary purposes of
the Trust.
I. ARTICLE
POWERS OF TRUSTEE
A. In order to carry out the purposes of
this Trust and subject to any limitation stated
elsewhere in this Trust, Trustee is vested with the
following powers, in addition to those now or
hereafter conferred by law, affecting the Trust and
the Trust Estate:
1. To retain any property or
business interest transferred, devised or bequeathed
to Trustee, or any undivided interest therein,
regardless of any lack of diversification, risk, or
nonproductivity and regardless of whether or not such
property be of a character authorized by the laws of
the State of California for investment of Trust funds
and to continue the operation of any such business
interest at the risk of the Trust Estate as long as
Trustee deems advisable.
1. To invest and reinvest the Trust
Estate in any property or undivided interest therein,
wherever located, including bonds, notes, (whether
secured or unsecured), contracts of life insurance,
stocks of corporations, interests in general or
limited partnerships, real estate or any interest
therein and interests in trusts, including but not
limited to interests in any common trust fund or
funds now or hereafter established and being
administered by a corporate Trustee of this Trust
solely for the investment of Trust funds.
1. To have all the rights, powers,
and privileges of an owner with respect to securities
held in trust, including, but not limited to the
power to vote and give proxies and pay assessments or
other charges, to participate in voting trusts,
pooling agreements, foreclosures, reorganizations,
consolidations, mergers and liquidations and in
connection therewith to deposit securities with and
transfer title to any protective or other committee
under such terms as Trustee may deem advisable, and
do all other acts which men of prudence, discretion
and intelligence would do or take for their own
account.
1. To manage, control, grant options
on, sell (for cash or on deferred payments), convey,
exchange, partition, divide, improve, and repair
trust property and to margin, option, and deal with
and in commodities, futures and all similar
securities, as Trustee shall deem advisable, from
time to time.
1. To lease Trust property for terms
within or beyond the terms of the Trust and for any
purpose, including exploration for and removal of
gas, oil, and other minerals; and to enter into
community oil leases, pooling and unitization
agreements.
1. To borrow money, and to encumber
or hypothecate Trust property by mortgage, deed of
trust, pledge, or otherwise for the debts of the
Trust or the joint debts of the Trust and others as
co-owners of Trust property.
1. To loan or advance Trustee's own
funds to the Trust for any Trust purpose, with
interest at current rates; to receive security for
such loans in the form of a mortgage, pledge, deed of
trust, or other encumbrance of any assets of the
Trust, to purchase assets of the Trust at their fair
market value as determined by an independent
appraisal of those assets; and to sell property to
the Trust at a price not in excess of its fair market
value as determined by an independent appraisal.
1. To keep any property in the name
of Trustee or a nominee with or without disclosure of
any fiduciary relationship.
1. To carry, at the expense of the
Trust, insurance of such kinds and in such amounts as
Trustee deems advisable to protect the Trust Estate
and Trustee against any hazard.
1. To employ managers, agents,
attorneys, accountants, auditors, depositories and
proxies, with or without discretionary powers and to
rely on the advice given by such advisors.
1. To commence or defend, at the
expense of the Trust, such litigation with respect to
the Trust or any property of the Trust Estate as
Trustee may deem advisable, and to compromise or
otherwise adjust any claims or litigation against or
in favor of the Trust.
1. To take any action and to make
any election, in Trustee's discretion, to minimize
the tax liabilities of this Trust and its
beneficiaries, and it shall have the power to
allocate the benefits among the various
beneficiaries, and Trustee shall have the power to
make adjustments in the rights of any beneficiaries,
or between the income and principal accounts, to
compensate for the consequence of any tax election or
any investment or administrative decision that
Trustee believes has had the effect of directly or
indirectly preferring one beneficiary or group of
beneficiaries over others.
1. Except as otherwise specifically
provided in this Trust, Trustee shall have the power,
exercisable in Trustee's discretion, to determine
what is principal or income of the Trust Estate and
to apportion and allocate receipts and expenses and
other charges between these accounts, including also
the power to charge in whole or in part against
principal, or to amortize out of or charge forthwith
to income, premiums paid on the purchase of bonds or
other obligations. Trustee shall not be required to
establish a reserve for depreciation or to make
charges against income therefor, but may do so if
Trustee, in Trustee's discretion, so determines such
reserve and charges to be established on such
assumptions and in such amounts as Trustee shall
determine. If the Trust shall be a member of a
partnership, Trustee shall be entitled to accept,
with respect to such partnership interest, any
accounting methods used by the partnership,
regardless of whether such methods shall include
depreciation reserves, regardless of the assumptions
on which any such reserve may be based, and
regardless of whether such accounting methods are
inconsistent with those methods used by Trustee with
respect to other property of the Trust Estate. No
inference of imprudence or partiality shall arise
from the fact that Trustee, in exercising the
discretion conferred here on Trustee, shall have
allocated a receipt or expenditure in a manner
contrary to any provision of the California Revised
Uniform Principal and Income Act. Except insofar as
Trustee shall exercise the discretion conferred on
Trustee and except as otherwise provided in this
Trust, matters relating to principal and income shall
be governed by the provisions of the California
Revised Uniform Principal and Income Act from time to
time existing.
1. In any case in which Trustee is
required pursuant to the provisions of the Trust, to
divide any Trust property into parts or shares for
the purpose of distribution, or otherwise, Trustee is
authorized, in Trustee's absolute discretion, to make
the division and distribution in kind, including
undivided interests in any property, or partly in
kind and partly in money, and for this purpose to
make such sales of the Trust property as Trustee may
deem necessary on such terms and conditions as
Trustee shall see fit.
1. Early Termination. Trustee, or
any Successor Trustee, shall have the power to
terminate this Trust should the balance on hand
decrease to an amount less than Twenty-Five Thousand
Dollars ($25,000), which amount Trustee or the
Successor Trustee deems could not be efficiently and
economically administered by Trustee, or the
Successor Trustee, or distribute free of Trust any
property determined by the Trustee in the Trustee's
sole and absolute reasonable discretion to be
unproductive or under productive and not readily
saleable. Included within the definition of
unproductive or underproductive property shall be any
Trust property which has been at any time subject to
environmental contamination or hazard.
1. To comply fully with all present
and future laws applicable to the Trust or the
Trustee in the administration of the Trust whether
enacted by federal, state or local authorities
including all environmental laws, regulations and
ordinances, at the sole expense of the Trust,
including actions which require the Trust to be
classified as a generator or transporter of
environmentally hazardous or suspect materials.
17. The enumeration of certain powers of
Trustee shall not limit Trustee's general powers,
Trustee, subject always to the discharge of Trustee's
fiduciary obligations, being vested with and having
all the rights, powers and privileges which an
absolute owner of the same property would have.
A. From the income and principal of the
Trust Estate Trustee shall pay and discharge all
expenses incurred in the administration of this Trust
and the protection of this Trust against legal or
equitable attack, including counsel fees and a
reasonable fee for his own services as such Trustee,
which compensation and expenses constitute a first
lien on the Trust Estate.
II. ARTICLE
REGULATION OF TRUSTEE
6.1 Successor Trustees. BARRY R. SHREIAR is
hereby designated as Trustee of this Trust. He shall
have the right to appoint any person to act with him
as Co-Trustee or as sole Trustee, remove such
appointed Trustee, reinstate himself as Trustee, and
designate Successor Trustees. Upon the death,
resignation or inability of BARRY R. SHREIAR to act
or to continue to act as Trustee, and no Successor
Trustee is designated, then TED CHRISTENSEN is hereby
designated to act as Successor Trustee with all of
the same powers of appointment, removal, and
designation as above granted to the original Trustee.
Upon the death, resignation or inability of TED
CHRISTENSEN to act or to continue to act as Trustee,
and no Successor Trustee is designated, then WELLS
FARGO BANK is hereby designated to act as Successor
Trustee with all of the same powers of appointment,
removal, and designation as above granted to the
original Trustee. In the event of any vacancy in the
office of Trustee which is not filled as above
provided, a court of competent jurisdiction shall
appoint a Trustee upon the application of any
Beneficiary, present or contingent, interested in
this Trust. No bond shall be required of any Trustee
or Successor Trustee. All references to "Trustee" or
"Trustees" hereunder shall include the Successor
Trustee.
6.2 Powers of Successor Trustees. The
Successor Trustee shall have all the powers, rights,
discretions, obligations, and immunities of Trustee
hereunder, to the same effect as though such
Successor Trustee was originally named herein as
Trustee, except that such Successor Trustee shall be
chargeable only with the assets delivered to it by
the preceding Trustee, and shall not be under any
obligation to investigate or be accountable for any
act or omission of any prior Trustee in the
administration of this Trust.
6.3 Compensation of Trustees. For his or her
ordinary services an individual Trustee shall receive
reasonable compensation and a Corporate Trustee shall
receive annual compensation in accordance with its
fees schedule in effect at the time such fees are
taken. It is understood and agreed that said Trustee
may adopt different fee schedules from time to time
relating to trusts of a type similar to the trust
created by this Trust Agreement and that said
Trustee's annual compensation hereunder for ordinary
services shall as aforesaid be based upon the fee
schedule in effect at the time that fees are taken.
At the time that said Trustee adopts a new fee
schedule which would affect the amount of fees which
said Trustee is entitled to receive in administering
this Trust, it shall mail a copy of same to Trustors
and to all of the then income Beneficiaries. In the
event that said Trustee performs services of an
extraordinary nature, it shall be entitled to
reasonable compensation for such services in addition
to the annual compensation for its ordinary services.
6.4 Resignation of Trustee. A Trustee may at
any time resign from the Trust hereby created by
depositing in the United States mail, postage
prepaid, a notice of such resignation addressed to
the persons or person then entitled to receive
payments hereunder at the addresses of such persons
or person last known to Trustee, and such resignation
shall take effect at the expiration of sixty (60)
days from the date of mailing of such notice and the
affidavit of any officer of the Corporate Trustee, as
to the date of mailing of such notice, shall be
conclusive evidence of its mailing.
6.5 Removal of Trustee. Whenever Trustee
hereunder is a trust company or bank, a majority of
the then living adult income beneficiaries (or if
none of the beneficiaries is an adult, then the
guardian or guardians of the estate of the minor
beneficiaries), shall have the power to designate a
Successor Trustee in the place of the then acting
Trustee. Such Successor Trustee must be a trust
company or bank qualified to do a trust business and
may be located in any state of the United States.
Such designation shall be in writing addressed to the
then acting Trustee, and shall include the written
consent of the named Successor Trustee to act as
Trustee hereunder. As soon as practicable after the
receipt of such designation, the then acting Trustee
shall deliver all assets of the Trust to such
Successor Trustee. The Successor Trustee shall have
all the powers, rights, discretions, obligations and
immunities of Trustee hereunder, to the same effect
as though such Successor Trustee were originally
named herein as Trustee.
6.6 Liability of Trustee. Trustee shall be
exonerated and indemnified by the Trust, to the full
extent or its assets, from any and all liability,
loss, cost or damage incurred by Trustee in its
individual or fiduciary capacity for acts or
omissions occurring in connection with the
administration of the Trust, including acts believed
reasonably necessary by Trustee in order to comply
with all laws, including environmental laws relating
to Trust property or former Trust property provided
that Trustee shall not be exonerated or indemnified
from his own grossly negligent actions or omissions.
I. ARTICLE
SPECIAL TAX PROVISIONS
7.1 Restrictions Relating to Trustor. Without
exception of any kind or nature, Trustor hereby
renounces all interests, either vested or contingent,
including reversionary interests and possibilities of
reverter or appointment, which Trustor might at any
time otherwise be held to have in the income and/or
corpus of this Trust. Notwithstanding anything
herein contained to the contrary, no powers
enumerated herein or accorded to Trustee generally
pursuant to law, singly or as a whole, shall be
construed:
1. To enable Trustor (i) to vote any
stock which may at any time be directly or indirectly
given to this Trust, or (ii) to exercise any power of
appointment with respect to this Trust,
1. To enable Trustor to borrow any
part of the assets or funds of any trust hereunder,
directly or indirectly, unless such loan provides for
at least such security and such interest as a
commercial bank would deem to be adequate under the
then circumstances or unless such loan is made by and
with the continuing consent of a then acting Trustee
of such trust who is "independent" (i.e., one who is
neither Trustor nor related to Trustor in any of the
following classifications: spouse, ancestor, lineal
descendant, brother, or sister; nor an employee of
Trustor;
nor a corporation or an employee of any corporation,
firm, or partnership in which Trustor is an executive
or in which Trustor and/or any trust hereunder has
stock or other holdings which are significant from
the viewpoint of control),
1. To permit any Trust distribution
which would have the effect of discharging any legal
obligation of Trustor (including any obligation which
Trustor may have at any time relating to the support
and/or education of any Beneficiary hereunder),
1. To permit any Trust income of any
kind to at any time be applied to the payment of any
premium on any policy of insurance on the life of
Trustor (or Trustor's spouse), or
1. To enable Trustor to reacquire
any Trust property by substituting other property of
equal value. If at any time any person other than
Trustor makes any additional gift in Trust hereunder,
such person shall be deemed thereafter to be an
additional "Trustor" with respect to such addition
for the purposes of the enunciation and restriction
provisions referring to "Trustor" contained in this
Article and for the purposes of all limitations,
exceptions, restrictions, and exclusions referring to
"Trustor" contained in other provisions of this Trust
Agreement.
7.2 Restrictions on Fiduciary Actions. It is
intended that all Trustees hereunder shall act as
fiduciaries and not as the holders of powers for
their own benefit. Accordingly and in order to
eliminate the negative tax implications which might
otherwise be drawn from various broadly worded
provisions of this Trust Agreement, the following
specific restrictions shall apply to all fiduciaries
acting hereunder:
1. Except as otherwise expressly provided
herein, each fiduciary, in the exercise of the powers
and discretions conferred upon such fiduciary by this
Trust Agreement, shall be guided by the best
interests, as a whole and in a broad sense, of any
Beneficiary hereunder, both present and contingent.
2. Notwithstanding the broad generality
of the administrative powers granted to the
fiduciaries hereunder by the terms of this Trust
Agreement nor of any powers which may be accorded to
Trustee generally pursuant to law, neither Trustee
nor any other person or persons shall purchase,
exchange, or otherwise deal with or dispose of any of
the assets held in trust hereunder for less than an
adequate consideration in money or money's worth.
The foregoing shall not, however, be construed to
prohibit any fiduciary hereunder from abandoning
property reasonably deemed by such fiduciary to be of
insufficient value to warrant the expense of
retention.
3. Any fiduciary who is under a legal
obligation to support and/or educate any Beneficiary
shall under no circumstances partake in any decisions
relating to any discretionary distributions which
might be used for the support and/or education of
such Beneficiary.
4. No person acting in a nonfiduciary
capacity shall have any power to either vote or
direct the voting of any stock or other securities
constituting any part of the property of any trust
hereunder or to direct investments or veto proposed
investments as to any trust hereunder.
5. Any power which any one Trustee may
have to remove another Trustee is likewise to be
exercised only in furtherance of Trust purposes and
not as a means of improperly influencing the manner
in which discretions granted exclusively to that
other Trustee are to be exercised. Thus, if one
Trustee removes another under circumstances which
indicate to the removed Trustee that a substantial
purpose of such removal was to improperly influence
or change the way in which some Trustee discretion
(held exclusively by the thus removed Trustee) is or
may be exercised, such Trustee, within thirty (30)
days of receipt of the notice of removal, shall
deliver to Trustee who gave such notice an affidavit
substantiating those circumstances, in which event
the removal shall be void for all purposes unless and
until a court of proper jurisdiction has determined
that such alleged improper influence was not in fact
a substantial purpose of such removal.
I. ARTICLE
GENERAL PROVISIONS
8.1 Prohibition Against Assignment. No
interest in the principal or income of any trust
created under this Trust Agreement shall be
anticipated, assigned, or encumbered, or subject to
any creditor's claim or to legal process, prior to
its actual receipt by Beneficiary.
8.2 Termination. Unless sooner terminated in
accordance with other provisions herein contained,
each trust created hereunder shall terminate twenty-
one (21) years after the later of the death of the
last survivor of Trustors or the death of all
Trustors' issue living on the date of execution of
this Trust, and upon such termination, Trustee shall
pay and distribute the undistributed income and
principal of the Trust Estate to the person or
persons, for whom said trust is held hereunder.
8.3 Notice of Events. It shall be the duty of
the several persons interested herein to notify
Trustee and furnish Trustee with reasonable proof of
any fact or the happening of any event calling for
any change in the administration or distribution of
the Trust Estate, and any and all action taken or
suffered hereunder by Trustee in good faith in the
absence of such notice and proof shall be deemed to
be in the proper discharge of the Trust.
8.4 Statements. Trustee shall mail annual
statements of account to the persons or person then
entitled to receive payments hereunder, and unless
such persons or person notify Trustee to the contrary
within thirty (30) days from the date of such
mailing, such statements shall be conclusively deemed
to be correct.
8.5 Definition of "Issue" and "Children". As
used in this Trust Agreement, the term "issue" shall
refer to lineal descendants of all degrees, and the
terms "child," "children," and "issue" shall include
adopted persons. As used in this Trust Agreement,
the masculine, feminine, or neuter gender, and the
singular or plural number, shall each be allowed to
include the others whenever the context so indicates.
8.6 Definition of "Education". Whenever
provision is made in this Trust Agreement for payment
for the "education" needs of Beneficiary, the terms
"educational" or "education" shall be construed to
include any accredited trade school, college, and
postgraduate study, so long as pursued to advantage
by Beneficiary, at an institution of Beneficiary's
choice; and in determining the payments to be made
for such trade school, college or postgraduate
education, Trustee shall take into consideration
Beneficiary's related living expenses to the extent
that they are reasonable.
8.7 Governing Law. This Trust will be
administered in the State of California, and its
validity, construction, and all rights thereunder,
shall be governed by the laws of the State of
California. If any provision of this Trust Agreement
shall be invalid or unenforceable, the remaining
provisions thereof shall continue to be fully
effective.
Trustors and Trustee have executed this Trust
Agreement as of and on the date above first written.
TRUSTOR: SUCCESSOR TRUSTEE:
_______________________________
______________________________
BARRY R. SHREIAR TED CHRISTENSEN
TRUSTEE:
_______________________________
BARRY R. SHREIAR
SCHEDULE "A"
One Hundred Dollars ($100)
Nine hundred thirty nine thousand nine hundred thirty
(939,930) shares of M.G. Products, Inc.
ACKNOWLEDGEMENTS
STATE OF CALIFORNIA )
)ss.
COUNTY OF ______________ )
On ___________________ before me,
___________________________ personally appeared
______________________________, /____/ personally
known to me or /___/ proved to me on the basis of
satisfactory evidence to be the person(s) whose
name(s) is/are subscribed to the within instrument
and acknowledged to me that he/she/they executed the
same in his/her/their authorized capacity(ies), and
that by his/her/their signature(s) on the instrument
the person(s), or entity upon behalf of which the
person(s) acted, executed the instrument.
WITNESS my hand and official seal.
____________________________________
____________________________________
Name (Typed or
Printed)
CAPACITY CLAIMED BY SIGNER:
_____ individual signing for oneself/themselves.
_____ corporate officer(s)
___________________________(Titles)
_____ partner(s)
_____________________________Limited
_____________________________General
_____ attorney-in-fact
_____ trustee(s)/trustor(s)
_____ guardian/conservator
_____
other:_______________________________________________
__
SIGNER IS REPRESENTING:
Name of Person(s) or Entity(ies)
_____________________________________________________
__
_____________________________________________________
__
_____________________________________________________
__
STATE OF CALIFORNIA )
)ss.
COUNTY OF ______________ )
On ___________________ before me,
___________________________ personally appeared
______________________________, /____/ personally
known to me or /___/ proved to me on the basis of
satisfactory evidence to be the person(s) whose
name(s) is/are subscribed to the within instrument
and acknowledged to me that he/she/they executed the
same in his/her/their authorized capacity(ies), and
that by his/her/their signature(s) on the instrument
the person(s), or entity upon behalf of which the
person(s) acted, executed the instrument.
WITNESS my hand and official seal.
____________________________________
____________________________________
Name (Typed or
Printed)
CAPACITY CLAIMED BY SIGNER:
_____ individual signing for oneself/themselves.
_____ corporate officer(s)
___________________________(Titles)
_____ partner(s)
_____________________________Limited
_____________________________General
_____ attorney-in-fact
_____ trustee(s)/trustor(s)
_____ guardian/conservator
_____
other:_______________________________________________
__
SIGNER IS REPRESENTING:
Name of Person(s) or Entity(ies)
_____________________________________________________
__
_____________________________________________________
__
_____________________________________________________
__
THE 1996 SHANNON ANN FARRAH TRUST
dated September 29, 1996
* * * * *
BARRY R. SHREIAR, Trustor
BARRY R. SHREIAR, Trustee
September 29, 1996
THE 1996 SHANNON ANN FARRAH TRUST
dated September 29, 1996
THIS 1996 SHANNON ANN FARRAH TRUST dated
September 29, 1996 (hereinafter referred to as the
"Trust Agreement" or the "Trust") is made this 29th
day of September, 1996, by and between BARRY R.
SHREIAR, Trustor (hereinafter referred to as
"Trustor"), and BARRY R. SHREIAR, Trustee in order to
establish a separate trust for the benefit of SHANNON
ANN FARRAH (herein "Beneficiary") under the terms and
conditions herein stated.
ARTICLE I.
THE TRUST ESTATE
Trustor, without any consideration on the part
of Trustee, has delivered to Trustee money and
property, as described in Exhibit "A", attached
hereto as part of this Trust Agreement. Said
property and the proceeds received by Trustee
therefrom, and all money and property hereinafter
held by or received by Trustee, as Trustee hereunder,
shall constitute the Trust estate ("Trust Estate").
Trustee acknowledges delivery of said property and
agrees to hold and manage the same, in trust, for the
uses and in the manner hereinafter set forth.
Trustor or any other legal person or entity shall
have the right by Will or otherwise to add to this
Trust any other property acceptable to Trustee, and
such property shall become a part of the Trust
Estate.
The name of this Trust shall be "THE 1996
SHANNON ANN FARRAH TRUST dated September 29, 1996."
I. ARTICLE
IRREVOCABILITY
Trustor hereby designates this Trust as an
irrevocable trust and hereby irrevocably commits any
and all funds and property listed on Exhibit "A" to
the purposes set forth herein, to be held,
administered, and distributed in accord with the
herein provisions. No person shall have the power to
alter, amend or revoke this Trust Agreement in whole
or in part.
I. ARTICLE
POWER TO WITHDRAW TRUST ESTATE
Trustee agrees, if Trustee accepts any
additions, to hold and manage such additions in trust
for the use and in the manner set forth in this Trust
Agreement. In the event such addition constitutes a
lifetime gift from Trustor, then the following shall
apply:
A. For a period of fifteen (15) days
following any contribution to the Trust Estate by the
Trustor or any other person, each Beneficiary shall
have the right to withdraw from any part of the Trust
Estate (including but not limited to the actual
contribution) an amount equal to the lesser of:
1. The entire contribution; or
1. A portion of the contribution
having a fair market value equal to the amount
specified for gift tax exclusion in Internal Revenue
Code 2503(b) as from time to time amended,
determined as of the date of the contribution. If
the donor is married at the time of the gift, this
portion shall be doubled whether or not the donor's
spouse joins in the gift pursuant to Internal Revenue
Code 2513 as from time to time amended, except where
married donors each make simultaneous gifts to the
Trust Estate, then the exclusion in Internal Revenue
Code 2503(b) shall be applied on a per donor basis.
Provided, that the aggregate withdrawals with
respect to contributions made by one donor during any
single calendar year shall not exceed the fair market
value of the foregoing Internal Revenue Code
limitation determined as of the date of contribution.
A. Withdrawals shall be by written
request delivered to Trustee.
A. If Beneficiary is under a legal
disability during part or all of a withdrawal period,
the guardian of Beneficiary may exercise such
withdrawal on Beneficiary's behalf.
A. Each time Beneficiary acquires a right
of withdrawal as above provided, Trustee shall so
notify Beneficiary or Beneficiary's guardian.
A. On the death of Beneficiary,
Beneficiary shall have the power to appoint the
principal and any undistributed income of the Trust
Estate, or any part thereof, to Beneficiary's spouse,
to one or more of Beneficiary's issue then living, to
one or more of Trustors' issue then living, or to a
trust or trusts for their benefit. Such power of
appointment shall be exercised only by a provision in
the Last Will and Testament of Beneficiary expressly
exercising such power. Unless within ninety (90)
days after Beneficiary's death, Trustee has actual
notice of the existence of a Will exercising such
power, Trustee shall, without incurring any liability
to any appointee, proceed as if such power had not
been exercised; provided, however, that this sentence
shall not bar any right which an appointee may have
to enforce the appointment.
I. ARTICLE
DISTRIBUTION OF INCOME AND PRINCIPAL
A. So long as Beneficiary is under the
age of twenty-one (21), Trustee shall pay to or apply
for the benefit of Beneficiary, as much of the net
income and principal of the Trust as Trustee, in
Trustee's discretion, deems necessary for the proper
health, support, maintenance, and education of
Beneficiary, after taking into consideration, to the
extent Trustee deems advisable, any other income or
resources of Beneficiary known to Trustee. Any net
income not distributed shall be accumulated and added
to the principal.
A. When Beneficiary attains age twenty-
one (21), Trustee shall pay to or apply for the
benefit of Beneficiary the entire net income of
Beneficiary's trust, quarter-annually or at more
frequent intervals. Trustee may also pay to or apply
for the benefit of Beneficiary as much of the
principal of Beneficiary's trust as Trustee, in
Trustee's discretion, deems necessary for the proper
health, support, maintenance, and education of
Beneficiary, after taking into consideration, to the
extent Trustee deems advisable, any other income or
resources of Beneficiary known to Trustee.
A. At the time Beneficiary attains age
forty (40), Trustee shall distribute to Beneficiary
the remainder of the principal and any and all
accumulated income on the principal of Beneficiary's
trust as then constituted.
A. If Beneficiary dies before becoming
entitled to receive distribution of his or her entire
trust, the undistributed balance of that
Beneficiary's trust shall thereupon be divided into
as many equal shares as there are living children of
the deceased Beneficiary and Trustee shall distribute
such shares outright and free of trust. If
Beneficiary dies leaving no living children, the
undistributed balance of that Beneficiary's trust
shall be distributed to the then living brothers and
sisters of Beneficiary in equal shares; provided,
however, that if a brother or sister is then deceased
leaving children then living, said deceased sibling's
share shall be distributed to said living children in
equal shares. Notwithstanding the above, if any part
of that balance would otherwise be distributed to a
person for whose benefit a trust is then being
administered under this Trust Agreement, that part
shall instead be added to that trust and shall
thereafter be administered according to its terms.
A. If at any time before full
distribution of the Trust Estate, all persons
described above are deceased but issue of Trustor are
then living, the Trust Estate shall thereupon be
distributed outright to said living issue based on
the principal of representation, but if all Trustors'
issue are deceased and no other disposition of the
property is directed by this Trust, the Trust Estate
or the portion of it then remaining shall thereupon
be distributed to those persons who would then be
Trustors' heirs, their identities and respective
shares to be determined according to the laws of the
State of California then in effect relating to the
succession of separate property not acquired from a
predeceased spouse, and assuming an equal share for
each Trustor hereunder.
A. With respect to any sum or property,
whether income or corpus, which is required or
permitted to be distributed out of any trust
hereunder to or for the benefit of any person who, at
the time, is a minor or whom Trustee of such trust,
in Trustee's reasonable discretion, determines to be
under any disability preventing such person from
acting properly in his or her own behalf
(irrespective of whether legally so adjudicated),
Trustee of such trust may properly make distribution
of the same in any one or more of the following ways
as such Trustee, from time to time, in Trustee's sole
discretion, shall deem to be most expedient in the
best interests of such person; namely, by paying,
distributing, or applying the same to:
1. Such person directly,
1. The legal guardian of such
person,
1. An apparently qualified
individual or bank who, in taking the same "as
custodian for" such person "under the" appropriate
state's "uniform gifts to minors act", indicates that
such sum or property will be treated in all respects
as "custodial property" for the benefit of such
person in accordance with the provisions of the
Uniform Gifts to Minors Act of such state (whether or
not such act permits custodial property of such an
origin),
1. The parent, spouse, or other
individual having the care and custody of such person
who, as such person's natural guardian, shall
preserve the same for the immediate or ultimate
benefit of such person (or such person's estate), but
who shall not be obligated to qualify as a legal
guardian or account to any probate court therefor,
1. Trustee or Trustees of any trust
all of the assets of which are then fully and
unqualifiedly withdrawable by such person,
1. The direct payment of any
educational, medical, or other proper expense of such
person (including expenses, such as taxes, repairs,
etc., reasonably appropriate to preserving any assets
belonging to such person) as long as such expense is
not the legal obligation of any other person,
1. The purchase of stocks, bonds,
insurance (the term "purchase" shall include any
premium payment), or other properties of any kind,
the ownership of which is registered in the sole name
of such person, or
1. The making of a deposit into a
bank, savings and loan association, brokerage, or
other similar account in the sole name of such
person; provided, if distribution in the manner
described in subparagraphs (3) and (4) is made,
Trustee may require legally enforceable
indemnification in favor of such person against
anyone other than such person (or his or her estate)
benefiting thereby (even through the discharge of an
obligation to support such person). The receipt for
or evidence of any such payment, distribution, or
application shall be a complete discharge and
acquittance of Trustee to the extent of such payment,
distribution, or application and, except for
enforcement of any above described indemnification,
Trustee shall have no duty to see to the actual
application of amounts so paid or distributed to
others.
Even in the absence of minority or disability,
distributions made in the manner provided in
subparagraphs 1, 5, 6, 7, or 8 above shall be
conclusively deemed to have been made for the
"direct" benefit of such person.
A. In exercising Trustee's discretion
hereunder, Trustee shall be entitled to rely upon the
written certification of Beneficiary or the parent or
legal guardian of Beneficiary as to the nature and
extent of Beneficiary's needs and the inadequacy of
Beneficiary's resources apart from the Trust. When
relying upon such certifications, Trustee shall not
be required to make further inquiry into the
authenticity of the need or to the availability of
other resources to satisfy the need. It is Trustors'
desire that Trustee consider the needs of Beneficiary
in keeping with the standard of living that has been
previously enjoyed by Beneficiary and that Trustee
consider the needs of Beneficiary for support, care,
maintenance, and education as the primary purposes of
the Trust.
I. ARTICLE
POWERS OF TRUSTEE
A. In order to carry out the purposes of
this Trust and subject to any limitation stated
elsewhere in this Trust, Trustee is vested with the
following powers, in addition to those now or
hereafter conferred by law, affecting the Trust and
the Trust Estate:
1. To retain any property or
business interest transferred, devised or bequeathed
to Trustee, or any undivided interest therein,
regardless of any lack of diversification, risk, or
nonproductivity and regardless of whether or not such
property be of a character authorized by the laws of
the State of California for investment of Trust funds
and to continue the operation of any such business
interest at the risk of the Trust Estate as long as
Trustee deems advisable.
1. To invest and reinvest the Trust
Estate in any property or undivided interest therein,
wherever located, including bonds, notes, (whether
secured or unsecured), contracts of life insurance,
stocks of corporations, interests in general or
limited partnerships, real estate or any interest
therein and interests in trusts, including but not
limited to interests in any common trust fund or
funds now or hereafter established and being
administered by a corporate Trustee of this Trust
solely for the investment of Trust funds.
1. To have all the rights, powers,
and privileges of an owner with respect to securities
held in trust, including, but not limited to the
power to vote and give proxies and pay assessments or
other charges, to participate in voting trusts,
pooling agreements, foreclosures, reorganizations,
consolidations, mergers and liquidations and in
connection therewith to deposit securities with and
transfer title to any protective or other committee
under such terms as Trustee may deem advisable, and
do all other acts which men of prudence, discretion
and intelligence would do or take for their own
account.
1. To manage, control, grant options
on, sell (for cash or on deferred payments), convey,
exchange, partition, divide, improve, and repair
trust property and to margin, option, and deal with
and in commodities, futures and all similar
securities, as Trustee shall deem advisable, from
time to time.
1. To lease Trust property for terms
within or beyond the terms of the Trust and for any
purpose, including exploration for and removal of
gas, oil, and other minerals; and to enter into
community oil leases, pooling and unitization
agreements.
1. To borrow money, and to encumber
or hypothecate Trust property by mortgage, deed of
trust, pledge, or otherwise for the debts of the
Trust or the joint debts of the Trust and others as
co-owners of Trust property.
1. To loan or advance Trustee's own
funds to the Trust for any Trust purpose, with
interest at current rates; to receive security for
such loans in the form of a mortgage, pledge, deed of
trust, or other encumbrance of any assets of the
Trust, to purchase assets of the Trust at their fair
market value as determined by an independent
appraisal of those assets; and to sell property to
the Trust at a price not in excess of its fair market
value as determined by an independent appraisal.
1. To keep any property in the name
of Trustee or a nominee with or without disclosure of
any fiduciary relationship.
1. To carry, at the expense of the
Trust, insurance of such kinds and in such amounts as
Trustee deems advisable to protect the Trust Estate
and Trustee against any hazard.
1. To employ managers, agents,
attorneys, accountants, auditors, depositories and
proxies, with or without discretionary powers and to
rely on the advice given by such advisors.
1. To commence or defend, at the
expense of the Trust, such litigation with respect to
the Trust or any property of the Trust Estate as
Trustee may deem advisable, and to compromise or
otherwise adjust any claims or litigation against or
in favor of the Trust.
1. To take any action and to make
any election, in Trustee's discretion, to minimize
the tax liabilities of this Trust and its
beneficiaries, and it shall have the power to
allocate the benefits among the various
beneficiaries, and Trustee shall have the power to
make adjustments in the rights of any beneficiaries,
or between the income and principal accounts, to
compensate for the consequence of any tax election or
any investment or administrative decision that
Trustee believes has had the effect of directly or
indirectly preferring one beneficiary or group of
beneficiaries over others.
1. Except as otherwise specifically
provided in this Trust, Trustee shall have the power,
exercisable in Trustee's discretion, to determine
what is principal or income of the Trust Estate and
to apportion and allocate receipts and expenses and
other charges between these accounts, including also
the power to charge in whole or in part against
principal, or to amortize out of or charge forthwith
to income, premiums paid on the purchase of bonds or
other obligations. Trustee shall not be required to
establish a reserve for depreciation or to make
charges against income therefor, but may do so if
Trustee, in Trustee's discretion, so determines such
reserve and charges to be established on such
assumptions and in such amounts as Trustee shall
determine. If the Trust shall be a member of a
partnership, Trustee shall be entitled to accept,
with respect to such partnership interest, any
accounting methods used by the partnership,
regardless of whether such methods shall include
depreciation reserves, regardless of the assumptions
on which any such reserve may be based, and
regardless of whether such accounting methods are
inconsistent with those methods used by Trustee with
respect to other property of the Trust Estate. No
inference of imprudence or partiality shall arise
from the fact that Trustee, in exercising the
discretion conferred here on Trustee, shall have
allocated a receipt or expenditure in a manner
contrary to any provision of the California Revised
Uniform Principal and Income Act. Except insofar as
Trustee shall exercise the discretion conferred on
Trustee and except as otherwise provided in this
Trust, matters relating to principal and income shall
be governed by the provisions of the California
Revised Uniform Principal and Income Act from time to
time existing.
1. In any case in which Trustee is
required pursuant to the provisions of the Trust, to
divide any Trust property into parts or shares for
the purpose of distribution, or otherwise, Trustee is
authorized, in Trustee's absolute discretion, to make
the division and distribution in kind, including
undivided interests in any property, or partly in
kind and partly in money, and for this purpose to
make such sales of the Trust property as Trustee may
deem necessary on such terms and conditions as
Trustee shall see fit.
1. Early Termination. Trustee, or
any Successor Trustee, shall have the power to
terminate this Trust should the balance on hand
decrease to an amount less than Twenty-Five Thousand
Dollars ($25,000), which amount Trustee or the
Successor Trustee deems could not be efficiently and
economically administered by Trustee, or the
Successor Trustee, or distribute free of Trust any
property determined by the Trustee in the Trustee's
sole and absolute reasonable discretion to be
unproductive or under productive and not readily
saleable. Included within the definition of
unproductive or underproductive property shall be any
Trust property which has been at any time subject to
environmental contamination or hazard.
1. To comply fully with all present
and future laws applicable to the Trust or the
Trustee in the administration of the Trust whether
enacted by federal, state or local authorities
including all environmental laws, regulations and
ordinances, at the sole expense of the Trust,
including actions which require the Trust to be
classified as a generator or transporter of
environmentally hazardous or suspect materials.
17. The enumeration of certain powers of
Trustee shall not limit Trustee's general powers,
Trustee, subject always to the discharge of Trustee's
fiduciary obligations, being vested with and having
all the rights, powers and privileges which an
absolute owner of the same property would have.
A. From the income and principal of the
Trust Estate Trustee shall pay and discharge all
expenses incurred in the administration of this Trust
and the protection of this Trust against legal or
equitable attack, including counsel fees and a
reasonable fee for his own services as such Trustee,
which compensation and expenses constitute a first
lien on the Trust Estate.
II. ARTICLE
REGULATION OF TRUSTEE
6.1 Successor Trustees. BARRY R. SHREIAR is
hereby designated as Trustee of this Trust. He shall
have the right to appoint any person to act with him
as Co-Trustee or as sole Trustee, remove such
appointed Trustee, reinstate himself as Trustee, and
designate Successor Trustees. Upon the death,
resignation or inability of BARRY R. SHREIAR to act
or to continue to act as Trustee, and no Successor
Trustee is designated, then TED CHRISTENSEN is hereby
designated to act as Successor Trustee with all of
the same powers of appointment, removal, and
designation as above granted to the original Trustee.
Upon the death, resignation or inability of TED
CHRISTENSEN to act or to continue to act as Trustee,
and no Successor Trustee is designated, then WELLS
FARGO BANK is hereby designated to act as Successor
Trustee with all of the same powers of appointment,
removal, and designation as above granted to the
original Trustee. In the event of any vacancy in the
office of Trustee which is not filled as above
provided, a court of competent jurisdiction shall
appoint a Trustee upon the application of any
Beneficiary, present or contingent, interested in
this Trust. No bond shall be required of any Trustee
or Successor Trustee. All references to "Trustee" or
"Trustees" hereunder shall include the Successor
Trustee.
6.2 Powers of Successor Trustees. The
Successor Trustee shall have all the powers, rights,
discretions, obligations, and immunities of Trustee
hereunder, to the same effect as though such
Successor Trustee was originally named herein as
Trustee, except that such Successor Trustee shall be
chargeable only with the assets delivered to it by
the preceding Trustee, and shall not be under any
obligation to investigate or be accountable for any
act or omission of any prior Trustee in the
administration of this Trust.
6.3 Compensation of Trustees. For his or her
ordinary services an individual Trustee shall receive
reasonable compensation and a Corporate Trustee shall
receive annual compensation in accordance with its
fees schedule in effect at the time such fees are
taken. It is understood and agreed that said Trustee
may adopt different fee schedules from time to time
relating to trusts of a type similar to the trust
created by this Trust Agreement and that said
Trustee's annual compensation hereunder for ordinary
services shall as aforesaid be based upon the fee
schedule in effect at the time that fees are taken.
At the time that said Trustee adopts a new fee
schedule which would affect the amount of fees which
said Trustee is entitled to receive in administering
this Trust, it shall mail a copy of same to Trustors
and to all of the then income Beneficiaries. In the
event that said Trustee performs services of an
extraordinary nature, it shall be entitled to
reasonable compensation for such services in addition
to the annual compensation for its ordinary services.
6.4 Resignation of Trustee. A Trustee may at
any time resign from the Trust hereby created by
depositing in the United States mail, postage
prepaid, a notice of such resignation addressed to
the persons or person then entitled to receive
payments hereunder at the addresses of such persons
or person last known to Trustee, and such resignation
shall take effect at the expiration of sixty (60)
days from the date of mailing of such notice and the
affidavit of any officer of the Corporate Trustee, as
to the date of mailing of such notice, shall be
conclusive evidence of its mailing.
6.5 Removal of Trustee. Whenever Trustee
hereunder is a trust company or bank, a majority of
the then living adult income beneficiaries (or if
none of the beneficiaries is an adult, then the
guardian or guardians of the estate of the minor
beneficiaries), shall have the power to designate a
Successor Trustee in the place of the then acting
Trustee. Such Successor Trustee must be a trust
company or bank qualified to do a trust business and
may be located in any state of the United States.
Such designation shall be in writing addressed to the
then acting Trustee, and shall include the written
consent of the named Successor Trustee to act as
Trustee hereunder. As soon as practicable after the
receipt of such designation, the then acting Trustee
shall deliver all assets of the Trust to such
Successor Trustee. The Successor Trustee shall have
all the powers, rights, discretions, obligations and
immunities of Trustee hereunder, to the same effect
as though such Successor Trustee were originally
named herein as Trustee.
6.6 Liability of Trustee. Trustee shall be
exonerated and indemnified by the Trust, to the full
extent or its assets, from any and all liability,
loss, cost or damage incurred by Trustee in its
individual or fiduciary capacity for acts or
omissions occurring in connection with the
administration of the Trust, including acts believed
reasonably necessary by Trustee in order to comply
with all laws, including environmental laws relating
to Trust property or former Trust property provided
that Trustee shall not be exonerated or indemnified
from his own grossly negligent actions or omissions.
I. ARTICLE
SPECIAL TAX PROVISIONS
7.1 Restrictions Relating to Trustor. Without
exception of any kind or nature, Trustor hereby
renounces all interests, either vested or contingent,
including reversionary interests and possibilities of
reverter or appointment, which Trustor might at any
time otherwise be held to have in the income and/or
corpus of this Trust. Notwithstanding anything
herein contained to the contrary, no powers
enumerated herein or accorded to Trustee generally
pursuant to law, singly or as a whole, shall be
construed:
1. To enable Trustor (i) to vote any
stock which may at any time be directly or indirectly
given to this Trust, or (ii) to exercise any power of
appointment with respect to this Trust,
1. To enable Trustor to borrow any
part of the assets or funds of any trust hereunder,
directly or indirectly, unless such loan provides for
at least such security and such interest as a
commercial bank would deem to be adequate under the
then circumstances or unless such loan is made by and
with the continuing consent of a then acting Trustee
of such trust who is "independent" (i.e., one who is
neither Trustor nor related to Trustor in any of the
following classifications: spouse, ancestor, lineal
descendant, brother, or sister; nor an employee of
Trustor;
nor a corporation or an employee of any corporation,
firm, or partnership in which Trustor is an executive
or in which Trustor and/or any trust hereunder has
stock or other holdings which are significant from
the viewpoint of control),
1. To permit any Trust distribution
which would have the effect of discharging any legal
obligation of Trustor (including any obligation which
Trustor may have at any time relating to the support
and/or education of any Beneficiary hereunder),
1. To permit any Trust income of any
kind to at any time be applied to the payment of any
premium on any policy of insurance on the life of
Trustor (or Trustor's spouse), or
1. To enable Trustor to reacquire
any Trust property by substituting other property of
equal value. If at any time any person other than
Trustor makes any additional gift in Trust hereunder,
such person shall be deemed thereafter to be an
additional "Trustor" with respect to such addition
for the purposes of the enunciation and restriction
provisions referring to "Trustor" contained in this
Article and for the purposes of all limitations,
exceptions, restrictions, and exclusions referring to
"Trustor" contained in other provisions of this Trust
Agreement.
7.2 Restrictions on Fiduciary Actions. It is
intended that all Trustees hereunder shall act as
fiduciaries and not as the holders of powers for
their own benefit. Accordingly and in order to
eliminate the negative tax implications which might
otherwise be drawn from various broadly worded
provisions of this Trust Agreement, the following
specific restrictions shall apply to all fiduciaries
acting hereunder:
1. Except as otherwise expressly provided
herein, each fiduciary, in the exercise of the powers
and discretions conferred upon such fiduciary by this
Trust Agreement, shall be guided by the best
interests, as a whole and in a broad sense, of any
Beneficiary hereunder, both present and contingent.
2. Notwithstanding the broad generality
of the administrative powers granted to the
fiduciaries hereunder by the terms of this Trust
Agreement nor of any powers which may be accorded to
Trustee generally pursuant to law, neither Trustee
nor any other person or persons shall purchase,
exchange, or otherwise deal with or dispose of any of
the assets held in trust hereunder for less than an
adequate consideration in money or money's worth.
The foregoing shall not, however, be construed to
prohibit any fiduciary hereunder from abandoning
property reasonably deemed by such fiduciary to be of
insufficient value to warrant the expense of
retention.
3. Any fiduciary who is under a legal
obligation to support and/or educate any Beneficiary
shall under no circumstances partake in any decisions
relating to any discretionary distributions which
might be used for the support and/or education of
such Beneficiary.
4. No person acting in a nonfiduciary
capacity shall have any power to either vote or
direct the voting of any stock or other securities
constituting any part of the property of any trust
hereunder or to direct investments or veto proposed
investments as to any trust hereunder.
5. Any power which any one Trustee may
have to remove another Trustee is likewise to be
exercised only in furtherance of Trust purposes and
not as a means of improperly influencing the manner
in which discretions granted exclusively to that
other Trustee are to be exercised. Thus, if one
Trustee removes another under circumstances which
indicate to the removed Trustee that a substantial
purpose of such removal was to improperly influence
or change the way in which some Trustee discretion
(held exclusively by the thus removed Trustee) is or
may be exercised, such Trustee, within thirty (30)
days of receipt of the notice of removal, shall
deliver to Trustee who gave such notice an affidavit
substantiating those circumstances, in which event
the removal shall be void for all purposes unless and
until a court of proper jurisdiction has determined
that such alleged improper influence was not in fact
a substantial purpose of such removal.
I. ARTICLE
GENERAL PROVISIONS
8.1 Prohibition Against Assignment. No
interest in the principal or income of any trust
created under this Trust Agreement shall be
anticipated, assigned, or encumbered, or subject to
any creditor's claim or to legal process, prior to
its actual receipt by Beneficiary.
8.2 Termination. Unless sooner terminated in
accordance with other provisions herein contained,
each trust created hereunder shall terminate twenty-
one (21) years after the later of the death of the
last survivor of Trustors or the death of all
Trustors' issue living on the date of execution of
this Trust, and upon such termination, Trustee shall
pay and distribute the undistributed income and
principal of the Trust Estate to the person or
persons, for whom said trust is held hereunder.
8.3 Notice of Events. It shall be the duty of
the several persons interested herein to notify
Trustee and furnish Trustee with reasonable proof of
any fact or the happening of any event calling for
any change in the administration or distribution of
the Trust Estate, and any and all action taken or
suffered hereunder by Trustee in good faith in the
absence of such notice and proof shall be deemed to
be in the proper discharge of the Trust.
8.4 Statements. Trustee shall mail annual
statements of account to the persons or person then
entitled to receive payments hereunder, and unless
such persons or person notify Trustee to the contrary
within thirty (30) days from the date of such
mailing, such statements shall be conclusively deemed
to be correct.
8.5 Definition of "Issue" and "Children". As
used in this Trust Agreement, the term "issue" shall
refer to lineal descendants of all degrees, and the
terms "child," "children," and "issue" shall include
adopted persons. As used in this Trust Agreement,
the masculine, feminine, or neuter gender, and the
singular or plural number, shall each be allowed to
include the others whenever the context so indicates.
8.6 Definition of "Education". Whenever
provision is made in this Trust Agreement for payment
for the "education" needs of Beneficiary, the terms
"educational" or "education" shall be construed to
include any accredited trade school, college, and
postgraduate study, so long as pursued to advantage
by Beneficiary, at an institution of Beneficiary's
choice; and in determining the payments to be made
for such trade school, college or postgraduate
education, Trustee shall take into consideration
Beneficiary's related living expenses to the extent
that they are reasonable.
8.7 Governing Law. This Trust will be
administered in the State of California, and its
validity, construction, and all rights thereunder,
shall be governed by the laws of the State of
California. If any provision of this Trust Agreement
shall be invalid or unenforceable, the remaining
provisions thereof shall continue to be fully
effective.
Trustors and Trustee have executed this Trust
Agreement as of and on the date above first written.
TRUSTOR: SUCCESSOR TRUSTEE:
_______________________________
______________________________
BARRY R. SHREIAR TED CHRISTENSEN
TRUSTEE:
_______________________________
BARRY R. SHREIAR
SCHEDULE "A"
One Hundred Dollars ($100)
Nine hundred thirty nine thousand nine hundred thirty
one (939,931) shares of M.G. Products, Inc.
ACKNOWLEDGEMENTS
STATE OF CALIFORNIA )
)ss.
COUNTY OF ______________ )
On ___________________ before me,
___________________________ personally appeared
______________________________, /____/ personally
known to me or /___/ proved to me on the basis of
satisfactory evidence to be the person(s) whose
name(s) is/are subscribed to the within instrument
and acknowledged to me that he/she/they executed the
same in his/her/their authorized capacity(ies), and
that by his/her/their signature(s) on the instrument
the person(s), or entity upon behalf of which the
person(s) acted, executed the instrument.
WITNESS my hand and official seal.
____________________________________
____________________________________
Name (Typed or
Printed)
CAPACITY CLAIMED BY SIGNER:
_____ individual signing for oneself/themselves.
_____ corporate officer(s)
___________________________(Titles)
_____ partner(s)
_____________________________Limited
_____________________________General
_____ attorney-in-fact
_____ trustee(s)/trustor(s)
_____ guardian/conservator
_____
other:_______________________________________________
__
SIGNER IS REPRESENTING:
Name of Person(s) or Entity(ies)
_____________________________________________________
__
_____________________________________________________
__
_____________________________________________________
__
STATE OF CALIFORNIA )
)ss.
COUNTY OF ______________ )
On ___________________ before me,
___________________________ personally appeared
______________________________, /____/ personally
known to me or /___/ proved to me on the basis of
satisfactory evidence to be the person(s) whose
name(s) is/are subscribed to the within instrument
and acknowledged to me that he/she/they executed the
same in his/her/their authorized capacity(ies), and
that by his/her/their signature(s) on the instrument
the person(s), or entity upon behalf of which the
person(s) acted, executed the instrument.
WITNESS my hand and official seal.
____________________________________
____________________________________
Name (Typed or
Printed)
CAPACITY CLAIMED BY SIGNER:
_____ individual signing for oneself/themselves.
_____ corporate officer(s)
___________________________(Titles)
_____ partner(s)
_____________________________Limited
_____________________________General
_____ attorney-in-fact
_____ trustee(s)/trustor(s)
_____ guardian/conservator
_____
other:_______________________________________________
__
SIGNER IS REPRESENTING:
Name of Person(s) or Entity(ies)
_____________________________________________________
__
_____________________________________________________
__
_____________________________________________________
__
