DEFINITIVE PROXY STATEMENT
M.G. PRODUCTS, INC.
8154 Bracken Creek
San Antonio, Texas 78266-2143
May 12, 1997
To Our Shareholders:
You are cordially invited to attend the Annual Meeting
of Shareholders of M.G. Products, Inc. (the "Company") which
will be held at 10:00 a.m. on June 19, 1997 at 8154 Bracken
Creek, San Antonio, Texas 78266-2143. All holders of the
Company's common stock outstanding on April 28 are entitled
to vote at the Annual Meeting of Shareholders.
Enclosed is a copy of the notice of Annual Meeting of
Shareholders, Proxy Statement and Proxy Card. A current
report on the business operations of the Company will be
presented at the Meeting and shareholders will have an
opportunity to ask questions.
This is an important meeting and all shareholders are
invited to attend in person. Those shareholders who are
unable to attend are respectfully urged to execute and
return the enclosed Proxy Card as promptly as possible.
Shareholders who execute a Proxy Card may nevertheless
attend the Meeting, revoke their proxy and vote their shares
in person.
Sincerely,
Juan Pablo Cabrera,
Chief Executive Officer
M.G. PRODUCTS, INC.
8154 Bracken Creek
San Antonio, Texas 78266-2143
Telephone: (210) 651-5188
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held on June 19, 1997
NOTICE IS HEREBY GIVEN that the 1997 Annual meeting of
Shareholders of M.G. Products, Inc. a California corporation
(the "Company"), will be held at 10:00 A.M., local time, on
Thursday, June 19, 1997 at 8154 Bracken Creek , San Antonio,
Texas 78266-2143, for the following purposes:
(1) To elect directors;
(2) To consider and act upon a proposal, heretofore
adopted by the Board of Directors, to increase
the authorized number of shares of Common Stock
that the Company may issue by 35,000,000 shares
(from 15,000,000 to 50,000,000 shares); and
(3) To transact such other business as may properly
come before the Annual Meeting and any adjournments thereof.
The Board of Directors has fixed the close of business
on April 28, 1997 as the record date for determining those
shareholders entitled to notice of, and to vote at, the
Annual Meeting of Shareholders and any adjournments thereof.
By Order of the Board of Directors,
Juan Pablo Cabrera,
Chief Executive Officer
San Antonio, Texas
May 12, 1997
M.G. PRODUCTS, INC.
8154 Bracken Creek
San Antonio, Texas 78266-2143
(210) 651-5188
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
to be held June 19, 1997
Proxies in the form enclosed with this statement are
solicited by the Board of Directors of M.G. Products, Inc.
(hereinafter called the "Company") to be voted at the annual
meeting (the "Meeting") of the shareholders of the Company
to be held on June 19, 1997 at the place and for the purposes
set forth in the Notice of Meeting to which this Proxy Statement
is attached. The cost of preparing and mailing the Notice of
Meeting, Proxy Statement and form of proxy will be paid by the Company.
This Proxy Statement and the form of proxy were first
mailed to the Company's shareholders on or about May 12, 1997.
In addition to mailing copies of this material to all shareholders,
the Company has requested banks and brokers to forward copies
of such material to persons for whom they hold stock of the
Company and to request authority for execution of the proxies.
The Company will reimburse such banks and brokers for their
out-of-pocket expenses incurred in connection therewith.
To the extent necessary in order to assure sufficient
representation, officers and regular employees of the Company
may, without being additionally compensated therefor, solicit
the return of proxies by mail, telephone, telegram or personal
interview. The Company has retained Corporate Investor
Communications, Inc. to assist in distributing materials and
soliciting proxies for the Meeting at a fee of $2500.
The fee quoted is all inclusive of all reasonable disbursements.
Any shareholder giving the solicited proxy has the
power to revoke it at any time before it is exercised at the
Meeting by filing with the Secretary of the Company a notice
in writing revoking it or by delivering a duly executed
proxy bearing a later date. In addition, the powers of the
proxy holders will be suspended if the person executing the
proxy is present at the Meeting and elects to vote in person.
A shareholder may also strike out the names of the proxy
holders designated by the management of the Company, write
in the name or names of any other person or persons whom a
shareholder wishes to represent him at the Meeting and mail
his proxy directly to such person or persons.
Only shareholders of record of the Company's common
stock at the close of business on April 28,1997 are entitled
to vote at the Meeting. There were 14,206,154 shares of such
stock outstanding on such date, each of which is entitled to
one vote on each of the matters presented to the shareholders
at the Meeting. However, California law permits cumulative
voting in the election of directors under the circumstances
described under "Election of Directors".
The following proposals will be submitted to the
shareholders:
Proposal 1. Election of Directors
The Company's By-Laws provide for a variable number of
directors, the minimum to be seven and the maximum to be eleven,
subject to change from time to time within the aforesaid limits
by the Board of Directors. Accordingly, at the Meeting seven
directors are to be elected, each to hold office until the
next annual meeting or until his successor shall be elected
and qualified.
Management desires the Company to be in a position to
obtain one or more additional directors during 1997. Such
additional directors will be chosen for the contribution
they can make to the progress of the Company based on demonstrated
ability and experience in various fields of business endeavor.
To facilitate obtaining such directors, Management seeks to
create a Board of six directors, leaving one vacancy that may
be filled by the Board of Directors during the year should a
qualified individual become available. The Board may also
amend the Bylaws to change the actual number of directors
from seven to any greater number, up to eleven, which would
make additional vacancies available that may be filled by the
Board of Directors from time to time should additional
qualified individuals become available to serve.
The Board of Directors has therefore nominated only the
six persons named below for election as directors. The persons
named in the enclosed Proxy will vote to elect as directors
such six persons, all of whom were elected as directors of the
Company at the last Annual Meeting of Shareholders.
If other persons are nominated at the meeting, the
Proxies solicited by Management may not be voted for a
greater number of persons than the number of nominees named
in the Proxy Statement.
Unless authority is withheld, the persons named in the
enclosed proxy will vote such proxy for the election of such
six nominees, reserving however full discretion to vote such
proxy for other persons if any nominee will be unable or
unwilling to serve. The Board of Directors has no reason to
believe that any nominee will be unavailable. Any votes
cast may be distributed among the persons voted for in such
proportion as the persons named in the enclosed proxy shall
see fit. The nominees (up to the number to be elected)
receiving the highest number of votes will be declared
elected.
Directors are elected by a plurality of the votes cast
by the shareholders. Therefore, shares not voted, whether
by abstaining or broker non-vote (in instances where brokers
are prohibited from exercising discretionary authority for
beneficial owners who have not returned a proxy) do not
affect the election of directors.
In accordance with the California General Company Law,
no shareholder may cumulate his votes (that is, cast for any
one or more candidates a number of votes greater than the
number of the shareholder's shares) unless such candidate's
name has been placed in nomination prior to the voting and
such shareholder gives notice at the Meeting, prior to the
voting, of intention to cumulate his votes. If such notice
is given, every shareholder may cumulate his votes and hence
each share of stock entitled to vote for directors will
represent seven votes, which may be distributed by the
shareholders as desired among any one or more duly nominated
candidates. In the event of cumulative voting, the Proxy
solicited by the Board of Directors confers discretionary
authority on the proxies to cumulate votes so as to elect
the maximum number of nominees.
On September 30, 1996 the Company and Exportadora
Cabrera, S.A. de C.V.(hereinafter in this Proxy Statement
referred to as "Exportadora"), its principal shareholder,
executed a Purchase Agreement pursuant to which Exportadora
exchanged $2,003,142 of the Company's indebtedness to
Exportadora for 3,642,076 shares of the Company's common
stock. After consummation of this transaction, Exportadora
owned approximately 51% of the Company's outstanding common
stock. Concurrent with the execution of the Purchase
Agreement, the Company, Exportadora, Michael Farrah, then a
director, his sister, Shannon Farrah, and the trusts of
which they are the sole beneficiaries ("Participants")
entered into a Shareholders' Agreement also dated September
30, 1996. Major provisions of this agreement include
restrictions against the transfer of shares of the Company's
stock by the Participants and 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. See "Principal
Shareholders" herein, for the number of shares owned by the
Participants and for a further description of the
Shareholders' Agreement.
At April 28, 1997 there was one vacancy on the Board of
Directors. Information concerning the present Directors,
who are also the nominees, as of April 28, 1997, is shown
below.
<TABLE>
<CAPTION>
Shares of
Common
Name Director Stock Percentage
Age Since Owned(1)
<S> <C> <S> <C> <C>
Juan Pablo Cabrera 33 Jan.1995(2) 30,770 *
Charles J. Chapman(4) 58 June 1993 4,500(6) *
Alejandro Cabrera
Robles(4)(5) 61 Jan. 1995 7,245,144(3) 51.0%
Martin Goodman(5) 58 June 1993 4,500(7) *
Juan Carlos Rodriguez(4) 34 Jan. 1995 0 *
Alejandro Portilla
Garceran(5) 44 Jan. 1995 0 *
<FN>
All directors as a group (6 persons) 7,287,414 51.2%
* Less than 1%
(1) Includes shares subject to options that are presently
exercisable or become exercisable within 60 days after April
28, 1997.
(2) Mr. Juan Pablo Cabrera was previously a director from
June 1993 to December 19, 1994.
(3) Represents shares owned by Exportadora Cabrera S.A. de
C.V., a Mexican corporation controlled by Mr. Alejandro
Cabrera.
(4) Member of audit committee.
(5) Member of compensation committee.
(6) Includes presently exercisable options to purchase 2500 shares of
common stock
(7) Includes presently exercisable options to purchase 2000 shares of
common stock
</TABLE>
The securities "beneficially owned" by an individual
are determined in accordance with the definition of
"beneficial ownership" set forth in the regulations of the
Securities and Exchange Commission and accordingly, may
include securities owned by or for, among others, the spouse
and/or minor children of the individual and any other
relative who has the same residence as such individual, as
well as other securities as to which the individual has or
shares voting or investment power or which the individual
has the right to acquire under outstanding stock options or
warrants within 60 days after April 28, 1997, the record
date for the meeting.
While certain Directors and executive officers of the
Company are also directors and executive officers of
Exportadora or its subsidiaries other than the Company, all
such persons disclaim beneficial ownership of the shares of
Common Stock of the Company owned by Exportadora.
On April 28, 1997 the persons named under "Principal
Shareholders" owned 10,918,879 of the 14,206,154 shares of
common stock outstanding on such date, being 76.86%. Such
persons will vote their shares, in accordance with the terms
of the Shareholders Agreement, for the election of the above-
named nominees.
INFORMATION CONCERNING THE NOMINEES AND EXECUTIVE OFFICERS
Nominees for Director.
Juan Pablo Cabrera
Juan Pablo Cabrera was a Director of the Company from
June 1993, through December 19, 1994 when he resigned. Mr.
Cabrera was re-elected as a Director of the Company and was
appointed as the Company President and Chief Operating
Officer, effective January 4, 1995. Effective October 1, 1995,
Mr. Cabrera was appointed Chairman of the Board and
Chief Executive Officer. Mr. Cabrera is also an officer of
Rooster Products International, Inc., based in San Antonio,
Texas the U.S. marketing and distribution subsidiary of
Exportadora.
Alejandro Cabrera Robles
Alejandro Cabrera Robles has served as a Director of
the Company since January, 1995. Mr. Alejandro Cabrera is
the chairman of Exportadora, a holding company based in
Guadalajara, Mexico, for several manufacturing and distribution
companies. Mr. Alejandro Cabrera has over 36 years of manufacturing,
marketing and distribution experience in Mexico, and currently
serves on the board of directors of several companies in Mexico.
Charles J. Chapman
Charles J. Chapman has served as a Director of the
Company since June, 1993. Mr. Chapman was Executive Vice
President of Tambrands, Inc. from August 1989 to September
1994, and has over 31 years of experience in marketing
retail consumer products. Mr. Chapman is currently the
Chairman and Director of Powell Plant Farms and is also a
director of Welch's Food Company.
Martin Goodman
Martin Goodman is the retired Chairman of Columbia
Manufacturing Corp., a Southern California based
manufacturer of screen doors marketed primarily through
major home center chains throughout the United States. Mr.
Goodman has over 36 years of experience in manufacturing
businesses, and is currently a private investor.
Alejandro Portilla Garceran
Alejandro Portilla Garceran has served as a Director of
the Company since January, 1995. Mr. Portilla is a Managing
Director of Fomento de Capital, an investment banking firm
based in Mexico City, Mexico. Previously Mr. Portilla spent
seven years at Operadora de Bolsa (1984-1991), an investment
banking firm in Mexico City, where his last position was
Managing Director of Mergers and Acquisitions. Mr. Portilla
serves as a director for eight companies in Mexico.
Juan Carlos Rodriguez
Juan Carlos Rodriguez has served as a Director of the
Company since January, 1995. Mr. Rodriguez has been a
director of Exportadora since 1989. In that capacity, he
oversees all its corporate finance activities and legal
affairs.
Executive Officers and Other Significant Employees.
Eric Williams
Mr. Williams (age 34) is a certified public accountant
who held various positions with Arthur Andersen & Co. from
1985 to 1990. In 1993 Mr. Williams became employed by
Rooster Products International, Inc., the United States
marketing and distribution subsidiary of Exportadora. In
1995, the Company formed C&F Alliance LLC ("Alliance") with
Rooster Products. Through Alliance, the Company and Rooster
Products share management and certain sales and marketing
and general administrative expenses. The Company and
Rooster Products each own 50% of Alliance. Mr. Williams was
elected the Chief Financial Officer of Alliance in 1995 and
became the Company's Chief Financial Officer in January
1997.
Richard Crawford
Richard Crawford (age 49) serves as the Sr. Vice
President of Operations for both the Company and Rooster
Products. Mr. Crawford is responsible for the U.S. based
distribution function, as well as all administrative
services. Mr. Crawford has twenty six years of
manufacturing and operations experience.
Mike Barnes
Mike Barnes (age 42) serves as the business unit
manager for the Company. He is directly responsible for the
sales and marketing efforts of the Company. Mr. Barnes has
over 20 years experience in the lighting and ceiling fan
industries.
Family Relationships
Alejandro Cabrera Robles is the father of Juan Pablo
Cabrera. Juan Carlos Rodriguez is the son-in-law of
Alejandro Cabrera Robles and the brother-in-law of Juan
Pablo Cabrera.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934
requires the Company's directors and executive officers and
any persons who own more than ten percent of the Company's
Common Stock to file with the Securities and Exchange
Commission various reports as to ownership of such Common
Stock. Such persons are required by Securities and Exchange
Commission regulations to furnish the Company with copies of
all Section 16(a) forms they file. To the Company's
knowledge, based solely on its review of the copies of such
reports furnished to the Company and written representations
to the Company that no other reports were required, all the
aforesaid Section 16(a) filing requirements were met on a
timely basis during 1996.
Board of Directors and Committee Meetings.
During 1996, the Company's Board of Directors held
eight meetings and took one action by Unanimous Written
Consent. The Board of Directors has a Compensation
Committee (consisting of Messrs. Alejandro Cabrera Robles,
Alejandro Portilla and Martin Goodman) which makes
recommendations concerning salaries and incentive
compensation for employees and administers the Company's
stock option plans, and an Audit Committee (consisting of
Messrs. Charles Chapman, Juan Carlos Rodriguez and Alejandro
Cabrera Robles). The duties and responsibilities of the
Audit Committee include (a) recommending to the full Board
the appointment of the Company's auditors and any
termination of engagement, (b) reviewing the plan and scope
of audits, (c) reviewing the Company's significant
accounting policies and internal controls, (d) having
general responsibility for all related auditing matters, and
(e) reporting its recommendations and findings to the full
Board of Directors. During the year ended December 31,
1996, the Compensation Committee met once and the Audit
Committee met three times. The Board of Directors does not
have a Nominating Committee. All Directors attended at
least 75% of the aggregate number of meetings of the Board
and of the Committees on which such Directors served.
All Directors hold office until the next Annual Meeting
of Shareholders of the Company and the election and
qualification of their successors. Officers are elected
annually by, and serve at the discretion of, the Board of
Directors.
Director's Fees
The Company does not pay director's fees; however,
directors are eligible to participate in the Company's stock
option plans. During 1996 no options were granted to
directors. Directors are reimbursed for their reasonable
out-of-pocket travel expenses.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors
(the "Committee") has furnished the following report on
executive compensation:
Compensation Philosophy
Under the Committee's supervision, the Company seeks to
structure executive compensation consistent with the
Company's overall business strategy, philosophy and
objectives. As presently in effect, compensation is based
on two fundamental concepts: (1) "compensation for
performance" to reward executives for long-term strategic
management and (2) "compensation for achieving year-to-year
personal and corporate goals". The Company believes these
two concepts are essential to attracting, motivating and
retaining key executives and are critical to the long-term
success of the Company. The first of these two concepts is
achieved through direct, regular compensation to the
Company's key executives. The second is achieved through a
combination of executive bonuses coordinated with year-to-
year personal and corporate goals and the Company's stock
option plans.
Compensation Program
The Company's Executives are employed by the Alliance,
described under "Executive Officers and Other Significant
Employees" and therefore none are directly compensated by
M.G. Products, Inc.
The Company's Chief Executive Officer has, through the
end of the Company's 1996 fiscal and calendar year, been
compensated based upon oral agreements, terminable at will.
Effective October 1, 1995, Juan Pablo Cabrera was appointed
by the Company's Board of Directors as the Company's
Chairman of the Board and Chief Executive Officer. Mr.
Cabrera voluntarily suspended his previously approved
$200,000 annual direct compensation in similar fashion as
the Company's former Chief Executive Officer due to the
Company's poor performance and then current and anticipated
cash shortfalls. Effective upon the Company achieving three
consecutive months of operating profits, it is anticipated
that Mr. Cabrera will receive direct compensation to be
shared through the Company's cost sharing arrangement with
Rooster Products. Mr. Cabrera's actual direct compensation
will be determined at that time. Additional direct
compensation in the form of bonus compensation may be
granted to Mr. Cabrera for 1997. It is not anticipated that
Mr. Cabrera will participate in the grant of any stock
options. Mr. Cabrera will continue to serve in the above
referenced capacities without written agreement and
continued employment will be terminable at will through
1997.
The Company's former Chief Financial Officer, Ishmael
D. Garcia has, through the end of the Company's 1996 fiscal
and calendar year, been compensated based upon oral
agreements, terminable at will. He was hired April 10,
1995, and resigned as Chief Financial Officer on December
31, 1996. His total compensation in 1996 was less than
$100,000. Bonuses of $6,250 were earned and paid to Mr.
Garcia during 1996. Mr. Garcia also received 30,000 stock
option grants under the Company's stock option plans during
1995, 7,500 of which vested in 1996. Mr. Garcia remains a
vice-president of the Alliance. As of January 13, 1997,
Eric Williams was elected the new Chief Financial Officer of
the Company. Mr. Williams is compensated upon oral
agreements, terminable at will.
The other members of senior management, as shared
through the Company's cost sharing arrangement with Rooster
Products, are also eligible for incentive compensation.
Individual awards are determined by Mr. Juan Pablo Cabrera.
The decisions made by Mr. Cabrera are subjective, reflecting
his assessment of the individual's performance and relative
contribution to the Company's overall performance.
Generally, these awards have ranged between 4% and 8% of the
base compensation for eligible participants during 1996.
The other members of senior management also received stock
option awards in 1995 to align their interests with those of
the shareholders.
The foregoing report has been approved by all members of the
Committee.
Alejandro Cabrera Robles
Martin Goodman
Alejandro Portilla Garceran
The following table sets forth, for each of the last
three fiscal years, the annual and long-term compensation
for the Chief Executive Officers of the Company in all
capacities in which they served. No other Executive Officer
of the Company had salary and bonus in excess of $100,000
during such period.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long- Term Compensation
Annual Compensation Awards Payouts
Other All
Annual Restricted Securities Other
Compen- Stock Underlying LTIP Comp-
Salary Bonus sation Award(s) Options/SARs Payouts sation
Name and Year ($) ($) ($) ($) (#) ($)
Principal
Position
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CEO,
President
Juan Pablo
Cabrera 1996 0 0 0 0 0 0 0
Juan Pablo
Cabrera 1995 0 0 0 0 0 0 0
Patrick
Farrah 1994 100K 0 0 0 0 0 0
</TABLE>
Options/SAR Grants in Last Fiscal Year
There were no options granted to the Officers
identified above during the fiscal year ended December 31,
1996.
Aggregated Options/SAR Exercises in Last Fiscal Year and
Fiscal Year-End Option/SAR Values
There were no option or SAR exercises by the Officers
identified above during the fiscal year ended December 31,
1996 and no options or SARs outstanding at December 31, 1996
to the Officers identified in the preceding table.
Long-Term Incentive Plan--Awards in the Last Fiscal Year
There were no long-term incentive plan awards to the
Officers identified in the preceding table during the fiscal
year ended December 31, 1996.
<TABLE>
<CAPTION>
COMPARISON OF TOTAL RETURN TO SHAREHOLDERS
The following chart compares the value of $100 invested
in the Company's common stock from June 22, 1993 through
December 31, 1996 with a similar investment in the Standard
& Poors 500 Stock Index and with the Electrical Equipment
sub-index. The Company's index is calculated using the
closing price on June 22, 1993; the Standard & Poors 500
Index is calculated using the price on June 22, 1993 and the
sub-index is calculated using the closing price on June 23,
1993. The cumulative return model assumes the reinvestment
of dividends.
Base Period
December 31,
June 22, 1993 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C>
M G Products, Inc. 100.00 55.07 14.49 2.17 2.90
S&P 500 Index 100.0 106.03 107.40 147.80 181.74
Electrical Equipment 100.00 107.26 108.51 152.28 209.13
</TABLE>
Certain relationships and Related Transactions
During 1995, Exportadora advanced approximately
$674,000 (loans primarily based in pesos - approximate
value at exchange dates) to the Company and its Mexican
subsidiaries, which the Company has repaid in full by
converting to shares of the Company's common stock.
Interest expense incurred on these loans in 1996 was
$77,188. The interest rate in 1996 for these loans ranged
from 14% to 48%.
During 1996 the Company provided warehousing, marketing
and distribution services for S.A.F. Products ("SAF"), a
manufacturer of lighting products owned and operated by
Shannon A. Farrah, under a consignment agreement. Ms. Farrah
is the sister of Michael Farrah, a former director of the
Company, and is the beneficiary of both the Shannon A.
Farrah Irrevocable Trust and the 1996 Shannon Ann Farrah
Trust, each a shareholder of the Company holding in excess
of 5% of its issued and outstanding shares. This agreement
was terminated in August of 1996, at which time a subsidiary
of the Company purchased substantially all of the assets of
SAF for $60,000. During 1996, the Company did not sell any
raw material inventory to SAF, compared to $8,300 in 1995.
During 1996 and 1995, the Company contracted with SAF to
manufacture some of the Company's lighting fixtures at a
cost of approximately $58,000 and $529,500, respectively.
At December 31, 1996, the Company owed SAF $250,000 in
connection with the contract manufacturing work, compared
with $396,200 during 1995.
In 1996, the Company directly received several short-
term noninterest-bearing working capital advances from
Rooster Products totaling $140,000, compared with $60,000 in
1995. No amounts were outstanding and payable as of
December 31, 1996. In addition, the Company sold $909,000
($1,074,000 in 1995) of its products to Rooster Products for
resale to Rooster Products' customers. Rooster Products
owes the Company $348,000 ($250,000 in 1995) as of December
31, 1996 pursuant to these sales of product.
The Company also purchased goods and services from
several subsidiaries of Exportadora totaling approximately
$2,140,000 during 1996, compared to $416,000 in 1995. The
balance owed to these subsidiaries at December 31, 1996 is
approximately $548,000, compared with $177,000 in 1995.
The Company believes that the prices and terms for
goods and services paid to these related entities are
competitive with unrelated suppliers.
Under California law, contracts or transactions between
a corporation and one or more of its directors or between a
corporation and any other entity in which one or more
directors are directors or have a financial interest, are
not void or voidable because of such interest or because
such director is present at a meeting of the Board which
authorizes or approves the contract or transaction,
provided that certain conditions such as obtaining the
required approval and fulfilling the requirements of good
faith and full disclosure are met. Under California law
either (a) the shareholders or the Board of Directors must
approve any such contract or transaction in good faith after
full disclosure of the material facts (and, in the case of
Board approval other than for a common directorship,
California law requires that the contract or transaction
must also be "just and reasonable" to the corporation), or
(b) the contract or transaction must have been in the case
of a common directorship "just and reasonable" as to the
corporation at the time it was approved. California law
explicitly places the burden of proof of the just and
reasonable nature of the contract or transaction on the
interested director. Under California law, if Board
approval is sought, the contract or transaction must be
approved by a majority vote of a quorum of the directors,
without counting the vote of any interested directors
(except that interested directors may be counted for
purposes of establishing a quorum). All of the above
mentioned transactions were so approved.
<TABLE>
<CAPTION>
PRINCIPAL SHAREHOLDERS
The following table sets forth as of April 28, 1997
information with respect to the beneficial ownership of the
Company's Common Stock by each person known by the Company
to beneficially own more than 5% of the outstanding shares.
Common Stock
Beneficially
Name and Address Owned (1) (2)
of Beneficial Owner (2) Shares Percent
<S> <C> <C>
Exportadora Cabrera S.A. de C.V.(3). . . . . . 7,275,914 51.2%
Paraiso 1750 Col. Del Fresno
Guadalajara, Jalisco CP 44900 Mexico
Michael Farrah .. . . . . . . . . . . . . . . . 883,557 6.2%
Barry R. Shreiar, trustee
4590 MacArthur Boulevard, Suite 390
Newport Beach, California 92660
Shannon Ann Farrah Irrevocable Trust(4) . . . . 879,547 6.2%
c/o Edward Kliem, Trustee
21671 Branta Circle
Huntington Beach, California 92646
The 1996 Michael P. Farrah Trust . . . . . . . 939,930 6.6%
Barry R. Shreiar, trustee
4590 MacArthur Boulevard, Suite 390
Newport Beach, California 92660
The 1996 Shannon Ann Farrah Trust . . .. . . . 939,931 6.6%
Barry R. Shreiar, trustee
4590 MacArthur Boulevard, Suite 390
Newport Beach, California 92660
<FN>
(1) Unless otherwise indicated in notes (3) and (4) and in
the last paragraph under this heading, each person has sole
voting and investment power with respect to all such shares.
(2) The securities "beneficially owned" by an individual
are determined in accordance with the definition of
"beneficial ownership" set forth in the regulations of the
Securities and Exchange Commission and accordingly, may
include securities owned by or for, among others, the spouse
and/or minor children of the individual and any other
relative who has the same residence as such individual, as
well as other securities as to which the individual has or
shares voting or investment power or which the individual
has the right to acquire under outstanding stock options or
warrants within 60 days after April 28, 1997. Beneficial
ownership may be disclaimed as to certain of the securities.
(3) Includes 30,770 shares owned by Juan Pablo Cabrera, the
Company's Chairman of the Board and Chief Executive Officer,
as to which Exportadora Cabrera disclaims beneficial
ownership.
(4) Includes 100,000 shares owned by Shannon Farrah, as to
which the trustee disclaims beneficial ownership.
On September 30, 1996, the Company and Exportadora
executed a Purchase Agreement pursuant to which Exportadora
exchanged $2,003,142 of the Company's indebtedness to
Exportadora for 3,642,076 shares of the Company's common
stock. This indebtedness included accounts payable to
Exportadora and certain of its subsidiaries, and notes
payable and accrued interest to Exportadora. After
consummation of this transaction, Exportadora owned
approximately 51% of the Company's outstanding common stock.
Concurrent with the execution of the Purchase Agreement, the
Company and each of the persons named in the preceding table
(the "Participants") entered into a Shareholders' Agreement
also dated September 30, 1996. Major provisions of this
agreement include restrictions against the transfer of
shares of the Company's stock by the Participants and 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 Exportadora Group, which consists of Exportadora
and Mr. Juan Pablo Cabrera, the Company's Chairman of the
Board and Chief Executive Officer, owns 7,275,914 shares,
being 51.2% of the 14,206,154 shares of common stock
outstanding on April 28, 1997; the Farrah Group, consisting
of the other shareholders named in the preceding table, owns
3,642,965 shares of common stock, being 25.64% of such
shares.
</TABLE>
PROPOSAL 2: AMENDMENT OF ARTICLES OF
INCORPORATION TO INCREASE THE NUMBER OF
AUTHORIZED SHARES OF COMMON STOCK
On January 23, 1996, the Company's Board of Directors
unanimously voted to recommend to the shareholders that the
Company's Articles of Incorporation be amended to increase
the number of authorized shares of common stock from
15,000,000 shares to 50,000,000 shares. At the Meeting, the
shareholders will be asked to approve such amendment of the
Articles of Incorporation.
The presently authorized Capital Stock of the Company
consists of 15,000,000 shares of common stock (the "Common
Stock"). At April 28, 1997, of the 15,000,000 authorized
shares of Common Stock, 14,206,154 were outstanding and
637,000 were reserved for issuance on exercise of options
heretofore granted, or which may in the future be granted
under the Company's Stock Option Plans.
The 156,846 remaining authorized shares of Common Stock
are not reserved for issuance for any specific purposes.
The additional shares of Common Stock will have all the
rights and privileges which the presently outstanding shares
of Common Stock possess. No holder of Common Stock of the
Company has any pre-emptive rights. Shareholders have no
dissenters' rights of appraisal in connection with the vote
of shareholders to be taken with respect to the proposed
amendment to the Company's Articles of Incorporation.
If Proposal 2 is approved, the presently authorized
156,846 shares of Common Stock that are not reserved for
issuance for any specific purpose will be increased by
35,000,000 shares to 35,156,846 shares. The purpose of this
increase is to provide additional shares of Common Stock
which will be available for issuance, without further
shareholder approval, at such time or times and for such
proper corporate purposes as the Board of Directors may in
the future deem advisable. Such shares may be issued if and
when the financial needs of the Company require the
obtaining of funds through the sale of Common Stock, or if
it should be decided to make a distribution payable in
Common Stock, or for use in connection with the possible
acquisition of other businesses should the opportunity
arise.
With the exception of the 637,000 shares reserved for
issuance, the Board of Directors is not presently
considering the issuance of any additional shares for any
purposes.
Each holder of outstanding shares of Common Stock of
the Company of record at the close of business on April 28,
1997 is entitled to one vote per share with respect to this
proposed amendment. The affirmative vote of the holders of
a majority of the shares of Common Stock outstanding and
entitled to vote at the meeting is required for the approval
of the proposed amendment. Shares not voted, whether by
abstaining or broker non-vote (in instances where brokers
are prohibited from exercising discretionary authority for
beneficial owners who have not returned a proxy) have the
effect of votes against the proposal.
The Participants shown under "Principal Shareholders"
have informed the Company that they intend to vote their
shares in favor of the amendment to the Articles of
Incorporation.
The Board of Directors unanimously recommend that you
VOTE FOR APPROVAL OF THE ABOVE-DISCUSSED AMENDMENT TO THE
ARTICLES OF INCORPORATION.
1998 SHAREHOLDER PROPOSALS
In order for shareholder proposals for the 1998 Annual
Meeting to be eligible for inclusion in the Company's Proxy
Statement and form of proxy relating to that meeting, they
must be received by the Company at its principal office
prior to February 1, 1998.
INDEPENDENT AUDITORS
The independent accounting firm of Ernst & Young LLP
acted as the Company's auditors for the fiscal year ended
December 31, 1996. The Board of Directors has selected
Ernst & Young LLP to act as the Company's auditors for the
1997 fiscal year. It is anticipated that representatives of
Ernst & Young will be presented at the Meeting to make a
statement if they so desire and respond to appropriate
questions presented at the Meeting.
GENERAL
Management knows of no other business to be presented
to the Meeting. However, if any other matters properly come
before the Meeting, it is the intention of the persons named
in the accompanying proxy to vote pursuant to the proxies in
accordance with their judgment in such matters.
A complete list of the shareholders entitled to vote at
the Meeting will be available and open to the examination of
any shareholder at the Meeting and also during the usual
hours for business for ten business days prior to the
Meeting, at the Company's principal office, 8154 Bracken
Creek, San Antonio, Texas 78266-2143.
ANNUAL REPORT AND FORM 10-K
Financial statements for the year ended December 31,
1996 are not made a part of this Proxy Statement for the
reason that such statements are not deemed material for the
exercise of prudent judgment on the matters to come before
the Meeting. However, financial statements are included in
the annual report for the year ended December 31, 1996,
included with this Proxy Statement. The annual report is
not to be regarded as proxy soliciting material or as a
communication by means of which any solicitation is made.
SHAREHOLDERS AND INTERESTED INVESTORS MAY OBTAIN
WITHOUT CHARGE COPIES OF THE COMPANY'S FORM 10-K FOR 1996,
INCLUDING FINANCIAL STATEMENTS AND SCHEDULES, BY WRITING TO
MR. ERIC WILLIAMS, CHIEF FINANCIAL OFFICER, M.G. PRODUCTS,
INC. 8154 BRACKEN CREEK, SAN ANTONIO, TEXAS 78266-2143.
EXHIBITS TO FORM 10-K WILL ALSO BE FURNISHED UPON REQUEST
FOR THE COST OF REPRODUCTION.
It is important that all proxies be forwarded promptly
in order that a quorum may be present at the Meeting.
If you do not contemplate attending the Meeting in
person, we respectfully request you to sign, date and return
the accompanying proxy at your earliest convenience.
By order of the Board of Directors
Juan Pablo Cabrera
Chief Executive Officer
and Chairman of the Board
DEFINITIVE PROXY
M.G. PRODUCTS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, a shareholder of M.G. Products, Inc. a California
corporation, hereby appoints Juan Pablo Cabrera and Eric Williams, and each
of them (to act by a majority of those present) , the attorneys and
proxies of the undersigned, with power of substitution, to attend the
Annual Meeting of Shareholders of said Company to be held at 8154 Bracken
Creek, San Antonio, texas 78266-2143 at 10:00 A.M. on June 19, 1997, and at
any adjournment or adjournments thereof, and to vote the number of shares
the undersigned would be entitled to vote if personally present.
This proxy will be voted as you specify on the reverse. UNLESS
OTHERWISE MARKED, THIS PROXY WILL BE VOTED FOR THE ELECTION OF SOME OR ALL
OF THE PERSONS NAMED IN THE ACCOMPANYING PROXY STATEMENT WHICH WERE
NOMINATED BY THE BOARD OF DIRECTORS FOR ELECTION AS DIRECTORS OF M.G.
PRODUCTS, INC. AND FOR APPROVAL OF PROPOSAL 2.
In the election of directors said proxies shall have discretion and
authority to distribute the votes represented by this proxy in such
proportions as they shall see fit among the nominees named in the Proxy
Statement. If any such nominee is unable or unwilling to serve or is
otherwise unavailable, said proxies shall have discretion and authority to
vote in accordance with their judgment for other nominees or to distribute
such votes in such proportions as they shall see fit among all nominees.
(Continued, and to be marked, dated and signed on the other side.)
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FOLD AND DETACH HERE
Please mark
your votes as
indicated in
this example.
The Board of Directors favors a vote FOR Proposals 1 and 2 which are
discussed in the accompanying Proxy Statement dated May 12, 1997.
WITHHELD
FOR FOR ALL
PROPOSAL 1. ELECTION OF DIRECTORS:
Nominees: Juan Pablo Cabrera Martin Goodman
Charles Chapman Juan Carlos Rodriguez
Alejandro Cabrera Robles Alejandro Portilla Garceran
WITHHELD FOR: (Write that nominee's name in the space provided below)
PROPOSAL 2. TO APPROVE AN AMENDMENT TO THE CORPORATION'S ARTICLES OF
INCORPORATION INCREASING THE NUMBER OF AUTHORIZED SHARES OF
COMMON STOCK FROM 15,000,000 TO 50,000,000 SHARES.
FOR AGAINST ABSTAIN
PROPOSAL 3. UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING
PLACE "X" HERE IF YOU PLAN TO ATTEND THE MEETING IN PERSON
Signature(s):
Date , 1997
NOTE: Please sign as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such.
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FOLD AND DETACH HERE
