<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 10, 1996
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------
THE UNIMARK GROUP, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
TEXAS 0532 75-2436543
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification No.)
organization)
</TABLE>
124 MCMAKIN ROAD, LEWISVILLE, TEXAS 75067, (817) 491-2992
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
JORN BUDDE
124 MCMAKIN ROAD
LEWISVILLE, TEXAS 75067
(817) 491-2992
(Address, including zip code, and telephone number, including area code, of
agent for service)
Copies to:
<TABLE>
<S> <C>
JAKES JORDAAN, ESQ. LAWRENCE D. LEVIN, ESQ.
JORDAAN, HOWARD & PENNINGTON, PLLC KATTEN MUCHIN & ZAVIS
300 CRESCENT COURT, SUITE 1670 525 WEST MONROE STREET, SUITE 1600
DALLAS, TEXAS 75201 CHICAGO, ILLINOIS 60661
(214) 871-6550 (312) 902-5200
</TABLE>
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of earlier effective
registration statement for the same offering: / /.
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: / /.
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: / /.
---------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
PROPOSED PROPOSED
MAXIMUM MAXIMUM
AMOUNT OFFERING AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF TO BE PRICE PER OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED UNIT PRICE FEE
- -------------------------------------------------------------------------------------------------
Common Stock, $.01 par 2,300,000 $16.125 per
value...................... shares(1) share(2) $37,087,500 $12,789
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes 300,000 shares to be offered upon exercise of the Underwriters'
over-allotment option.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 of Regulation C under the Securities Act of 1933, as
amended.
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
THE UNIMARK GROUP, INC.
CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF
REGULATION S-K
<TABLE>
<CAPTION>
ITEM
NUMBER FORM S-1 ITEM NUMBER AND HEADING LOCATION OR PROSPECTUS CAPTION
- ------ --------------------------------------------------- ---------------------------------
<C> <S> <C> <C>
Forepart of Registration Statement and Outside
1. Front
Cover Page of Prospectus......................... Facing Page; Cross-Reference
Sheet; Outside Front Cover Page
of Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus....................................... Inside Front and Outside Back
Cover Pages of Prospectus
3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges........................ Prospectus Summary; Risk Factors
4. Use of Proceeds.................................... Prospectus Summary; Use of
Proceeds
5. Determination of Offering Price.................... Cover Page; Underwriting
6. Dilution........................................... Not Applicable
7. Selling Security Holders........................... Principal and Selling
Shareholders
8. Plan of Distribution............................... Outside Front Cover Page of
Prospectus; Underwriting
9. Description of Securities to be Registered......... Description of Capital Stock
10. Interests of Named Experts and Counsel............. Not Applicable
11. Information with Respect to the Registrant:
(a) Description of Business....................... Business
(b) Description of Property....................... Business
(c) Legal Proceedings............................. Not Applicable
(d) Market Price of and Dividends on the
Registrant's
Common Equity and Related Stockholder
Matters..................................... Risk Factors; Dividend Policy;
Management; Description of
Capital Stock; Underwriting
(e) Financial Statements.......................... Selected Consolidated Financial
Data; Selected Pro Forma
Financial Information
(f) Selected Financial Data....................... Prospectus Summary; Selected
Consolidated Financial Data;
Selected Pro Forma Financial
Information
(g) Supplementary Financial Information........... Not Applicable
(h) Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................. Management's Discussion and
Analysis of Financial Condition
and Results of Operations
(i) Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure...... Not Applicable
(j) Directors and Executive Officers.............. Management
(k) Executive Compensation........................ Management
(l) Security Ownership of Certain Beneficial
Owners
and Management.............................. Principal and Selling
Shareholders
(m) Certain Relationships and Related
Transactions................................ Management; Certain Transactions
Disclosure of Commission Position on
12. Indemnification for
Securities Act Liabilities....................... Not Applicable
</TABLE>
<PAGE> 3
Information contained herein is subject to completion or amendment. A
Registration Statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may
not be sold nor may offers to buy be accepted prior to the time the
Registration Statement becomes effective. This Prospectus shall not
constitute an offer to sell or the solicitation of an offer
to buy nor shall there be any sale of these securities in any State in
which such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION, DATED MAY 10, 1996
2,000,000 SHARES
THE UNIMARK GROUP, INC.
COMMON STOCK
Of the 2,000,000 shares of Common Stock offered hereby, 1,400,000 are being
sold by The UniMark Group, Inc. (the "Company") and 600,000 shares are being
sold by selling shareholders (the "Selling Shareholders"). The Company will not
receive any proceeds from the sale of shares by the Selling Shareholders. See
"Principal and Selling Shareholders."
The Common Stock is quoted on the Nasdaq National Market under the symbol
"UNMG" and is traded on the Pacific Stock Exchange under the symbol "UMK." The
last reported sale price of the Common Stock on May 9, 1996, as reported by the
Nasdaq National Market, was $16.875 per share. See "Price Range of Common
Stock."
FOR A DISCUSSION OF CERTAIN MATERIAL FACTORS THAT SHOULD BE CONSIDERED IN
CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK, SEE "RISK FACTORS" COMMENCING
ON PAGE 6 HEREOF.
------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS (1) COMPANY (2) SHAREHOLDERS (2)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share....................... $ $ $ $
- ---------------------------------------------------------------------------------------------------
Total (3)....................... $ $ $ $
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
</TABLE>
(1) The Company and the Selling Shareholders have agreed to indemnify the
Underwriters against certain liabilities under the Securities Act of 1933,
as amended. See "Underwriting."
(2) Before deducting offering expenses estimated to be approximately $
payable by the Company.
(3) The Company and certain of the Selling Shareholders have granted to the
Underwriters a 30-day option to purchase up to an additional 277,000 shares
and 23,000 shares, respectively, of Common Stock solely to cover
over-allotments, if any, on the same terms and conditions as the shares
offered hereby. If such option is exercised in full, the total Price to
Public, Underwriting Discounts and Commissions, Proceeds to Company and
Proceeds to Selling Shareholders will be $ , $ ,
$ and $ , respectively. See "Underwriting."
------------------------------
The shares of Common Stock are offered by the several Underwriters named
herein, subject to receipt and acceptance by them and subject to their right to
reject any order in whole or in part. It is expected that delivery of such
shares will be made at the offices of Rodman & Renshaw, Inc., New York, New
York, on or about , 1996.
------------------------------
RODMAN & RENSHAW, INC. RAUSCHER PIERCE REFSNES, INC.
The date of this Prospectus is , 1996.
<PAGE> 4
[GRAPHICS]
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTION WHICH STABILIZE OR MAINTAIN PRICE OF THE COMMON STOCK AT A LEVEL
ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS
MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE OVER-THE-COUNTER MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. IN
CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP MEMBERS
(IF ANY) OR THEIR RESPECTIVE AFFILIATES MAY ENGAGE IN PASSIVE MARKET MAKING
TRANSACTIONS IN THE COMMON STOCK ON NASDAQ IN ACCORDANCE WITH RULE 10B-6A UNDER
THE SECURITIES EXCHANGE ACT OF 1934. SEE "UNDERWRITING."
<PAGE> 5
PROSPECTUS SUMMARY
The following summary should be read in conjunction with, and is qualified
in its entirety by the more detailed information and financial statements
(including the notes thereto) appearing elsewhere in this Prospectus. Unless
otherwise indicated, all share, per share and financial information set forth
herein assumes a public offering price of $16.875 per share and no exercise of
the Underwriters' over-allotment option. Unless the context otherwise requires,
the terms "Company" and "UniMark" refer to The UniMark Group, Inc., and its
consolidated subsidiaries, including UniMark Foods, Inc. ("UniMark Foods"),
UniMark International, Inc. ("UniMark International"), Industrias Citricolas de
Montemorelos, S.A. de C.V. ("ICMOSA"), Grupo Industrial Santa Engracia, S.A. de
C.V. ("GISE"), Simply Fresh Fruit, Inc. ("Simply Fresh") and Les Produits
Deli-Bon Inc. ("Deli-Bon").
THE COMPANY
GENERAL
UniMark is a vertically integrated citrus and tropical fruit growing,
processing, marketing and distribution company with operations in Mexico, the
United States and Canada. The UniMark Group, Inc. was organized in 1992 to
combine the operations of ICMOSA, a Mexican citrus and tropical fruit processor
which commenced operations in 1974, with UniMark Foods, a company that marketed
and distributed ICMOSA's products in the United States. The Company focuses on
niche citrus and tropical fruit products including chilled, frozen and canned
cut fruits and other specialty food ingredients. In addition, as a result of its
recent acquisition of GISE, UniMark is a major Mexican producer of citrus
concentrate, oils and juices. The Company processes and packages its products at
nine plants in Mexico, one in California and one in Quebec, Canada. The
Company's Mexican and California plants are strategically located in major fruit
growing regions. The Company utilizes food brokers and distributors to market
and distribute its cut fruit products under the brand names SUNFRESH(TM), Fruits
of Four Seasons(R) and Kledor(R) and under various private labels, to
supermarket chains, foodservice distributors, wholesale clubs, specialty grocery
stores and industrial users throughout the United States and Canada. Under the
Jalapeno Sam(R) brand name, the Company also produces guacamole for distribution
in the United States. In addition, the Company has developed and utilizes a
unique processing method that separates cold-peeled citrus fruit into individual
juice-containing "cell-sacs." These cell-sac products are sold to food and soft
drink manufacturers in Japan to enhance the flavor and texture of fruit juices
and desserts. Sales to the Company's Japanese consumers are facilitated through
Japanese trading companies. The Company's citrus concentrate and individual
strength citrus juices are sold directly to major juice importers and
distributors in North America, Europe and Japan.
The Company has experienced substantial increases in net sales and income
from operations over the past three fiscal years. UniMark's net sales were
$18,893,000, $25,346,000 and $36,866,000, respectively, in its 1993, 1994 and
1995 fiscal years, representing a compound annual growth rate of 39.7% over such
periods. Furthermore, UniMark's income from operations was $633,000, $1,530,000
and $4,251,000, respectively, in such fiscal years, representing a compound
annual growth rate of 159.1% over such periods.
STRATEGY
UniMark's strategic objective is to become the leading
vertically-integrated grower, processor, marketer and distributor of niche fruit
and other selected agricultural products. To achieve this objective, the key
elements of the Company's operating strategy are as follows: (i) expand vertical
integration of growing, processing, marketing and distribution operations; (ii)
expand fruit growing operations in Mexico; (iii) capitalize on the SUNFRESH(TM)
brand awareness and market penetration; (iv) introduce additional cut fruit
products utilizing a cryogenic individual quick freeze ("IQF") process; (v)
continue expansion of exports to the Japanese market; (vi) continue expansion of
specialty food ingredients; and (vii) expand its position as a leading Mexican
juice exporter to the North American, European and Asian markets. In addition,
UniMark has formulated an acquisition strategy that targets (i) productive
assets in Mexico that can benefit from UniMark's international distribution and
marketing expertise, and (ii) food processing companies that possess favorable
operating or distribution synergies.
3
<PAGE> 6
RECENT ACQUISITIONS
Since January 1, 1996, the Company has completed the following three
strategic acquisitions (the "Acquisitions") which reflect the implementation of
the Company's acquisition strategy:
GISE. In May 1996, the Company acquired all of the outstanding shares of
capital stock of GISE, a major Mexican producer of citrus concentrates, oils and
juices (the "GISE Acquisition") in exchange for 782,614 shares of Common Stock
and up to an additional $8.0 million of contingent consideration if certain
future earnings targets are achieved. GISE's two juice plants are located in Cd.
Victoria, Tamaulipas, Mexico and Poza Rica, Veracruz, Mexico in the heart of
major citrus growing regions. UniMark believes that the GISE Acquisition will
confer operational benefits on both companies resulting from combining fruit
procurement functions. In addition, UniMark believes that GISE should benefit
from UniMark's international distribution and marketing expertise. Further, the
GISE Acquisition significantly increases the Company's production capacity of
citrus oils.
Simply Fresh. In May 1996, the Company acquired all of the outstanding
shares of capital stock of Simply Fresh, a fruit processing and distribution
company located in Los Angeles, California (the "Simply Fresh Acquisition"), in
exchange for $2.5 million in cash, 90,909 shares of Common Stock and $1.0
million in cash payable in consideration for a five-year covenant by Simply
Fresh's principals and their affiliates not to compete in the United States.
Substantially all of Simply Fresh's sales are to the foodservice industry in the
western United States. UniMark believes that the Simply Fresh Acquisition will
afford it with operational synergies resulting from processing some of the fruit
used in Simply Fresh's products at UniMark's Mexican plants and expanded
distribution into the foodservice market. In addition, the Simply Fresh plant is
strategically located to process fruit grown in California and Arizona, two
major citrus growing regions with growing seasons that are generally opposite to
those of Mexico.
Deli-Bon. In January 1996, the Company acquired all of the outstanding
shares of capital stock of Deli-Bon (the "Deli-Bon Acquisition") for $787,000 in
cash, a $49,000 promissory note and 28,510 shares of Common Stock. Deli-Bon
processes primarily fruit salad at its processing plant in Quebec, Canada for
distribution to the retail and foodservice markets of Canada and the
northeastern United States. UniMark believes that it will enjoy significant
synergistic benefits from integrating UniMark and Deli-Bon's fruit procurement,
processing and distribution functions. In addition, the Company believes that
the Deli-Bon plant is strategically located to distribute products to the retail
and foodservice markets in Canada and in the northeastern United States.
The Company was incorporated in January 1992 under the laws of the State of
Texas. The Company's corporate headquarters are located at 124 McMakin Road,
Lewisville, Texas 75067 and its telephone number is (817) 491-2992.
THE OFFERING
Common Stock Offered by the
Company............................. 1,400,000 shares
Common Stock Offered by the Selling
Shareholders...................... 600,000 shares
Common Stock to be Outstanding After
the Offering........................ 8,261,833 shares(1)
Use of Proceeds..................... The Company intends to use the net
proceeds of this offering for capital
expenditures, agricultural development,
repayment of indebtedness, juice plant
acquisition, working capital and other
general corporate purposes, which may
include future acquisitions.
Nasdaq National Market Symbol....... "UNMG"
Pacific Stock Exchange Symbol....... "UMK"(2)
- ---------------
(1) Does not include: (i) 380,000 shares of Common Stock issuable upon exercise
of currently outstanding options granted under the Company's 1994 Employee
Stock Option Plan (the "Employees' Option Plan"); (ii) 67,500 shares of
Common Stock issuable upon exercise of currently outstanding options granted
under the Company's 1994 Stock Option Plan for Directors (the "Directors'
Option Plan"); and (iii) 78,190 shares of Common Stock issuable upon
exercise of currently outstanding warrants granted to underwriters in
connection with the Company's initial public offering.
(2) The Company has filed an application with the Securities and Exchange
Commission to have its Common Stock delisted from the Pacific Stock
Exchange.
4
<PAGE> 7
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table sets forth, for the periods and at the dates indicated,
selected historical and pro forma consolidated financial data of the Company.
The selected consolidated historical financial data has been derived from the
historical consolidated financial statements of the Company and in the case of
the fiscal years ended December 31, 1993, 1994 and 1995 should be read in
conjunction with such financial statements and the notes thereto included
elsewhere in this Prospectus.
The pro forma financial data has been derived from the pro forma condensed
consolidated financial statements of the Company, GISE, Simply Fresh and
Deli-Bon and should be read in conjunction with the pro forma financial
statements and the notes thereto included elsewhere in this Prospectus. The pro
forma results of operations for the year ended December 31, 1995 are not
necessarily indicative of the results of operations that would have been
achieved had the transactions reflected therein been consummated prior to the
periods in which they were completed, or that might be attained in the future.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------
PRO FORMA
1992 1993 1994 1995 1995(1)
------- ------- ------- ------- ---------
<S> <C> <C> <C> <C> <C>
SELECTED CONSOLIDATED STATEMENTS OF INCOME DATA:
Net sales..................................... $14,278 $18,893 $25,346 $36,866 $62,374
Gross profit.................................. 4,603 5,952 7,403 12,674 21,612
Income from operations........................ 737 633 1,530 4,251 8,696
Net income.................................... $ 267 $ 73 $ 1,015 $ 2,947 $ 4,502
======= ======= ======= ======= ========
Earnings per common share:
Primary.................................... $ 0.09 $ 0.02 $ 0.28 $ 0.53 $ 0.69
======= ======= ======= ======= ========
Fully diluted.............................. $ 0.09 $ 0.02 $ 0.28 $ 0.51 $ 0.67
======= ======= ======= ======= ========
Weighted average common and common
equivalent shares outstanding:
Primary.................................... 3,000 3,000 3,642 5,609 6,511
Fully diluted.............................. 3,000 3,000 3,642 5,805 6,707
OTHER CONSOLIDATED FINANCIAL DATA:
Capital expenditures.......................... $ 490 $ 143 $ 1,218 $ 5,209 $ 8,000
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31, 1995
---------------------------------------
PRO FORMA
ACTUAL PRO FORMA(2) AS ADJUSTED(3)
------- ------------ --------------
<S> <C> <C> <C>
SELECTED CONSOLIDATED BALANCE SHEET DATA:
Working capital.......................................... $ 7,481 $ 3,603 $ 25,292
Total assets............................................. 26,498 50,074 68,763
Long-term debt........................................... 699 4,118 4,118
Shareholders' equity..................................... 14,978 24,759 46,448
</TABLE>
- ---------------
(1) Reflects the pro forma condensed consolidated Statements of Income Data of
UniMark as if the Acquisitions had occurred at the beginning of the period
presented, after adjustments of, among other things, depreciation,
amortization, interest and income taxes.
(2) Reflects the pro forma condensed consolidated balance sheet data of the
Company as if the Acquisitions had occurred on December 31, 1995.
(3) Reflects the pro forma balance sheet of UniMark as if the Acquisitions had
occurred on December 31, 1995, as adjusted to reflect the issuance by the
Company of 1,400,000 shares of Common Stock offered by the Company hereby
and the application of the net proceeds therefrom. See "Use of Proceeds" and
"Capitalization."
5
<PAGE> 8
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
The discussion in this Prospectus contains forward-looking statements that
involve risks and uncertainties. The Company's actual results could differ
significantly from those discussed herein. Factors that could cause or
contribute to such differences include, but are not limited to, those discussed
in "Risk Factors," "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Business," as well as those discussed elsewhere
in this Prospectus. Statements contained in this Prospectus that are not
historical facts are forward-looking statements that are subject to the safe
harbor created by the Private Securities Litigation Reform Act of 1995. A number
of important factors could cause the Company's actual results for 1996 and
beyond to differ materially from those expressed in any forward-looking
statements made by, or on behalf of, the Company. These factors include, without
limitation, those listed below in "Risk Factors."
RISK FACTORS
In evaluating an investment in the Common Stock being offered hereby,
investors should consider carefully, among other things, the following risk
factors, as well as the other information contained in this Prospectus.
RISKS RELATED TO THE COMPANY
Growth and Integration of Acquisitions
The expansion of the Company's operations, whether through acquisitions or
internal growth, may place substantial burdens on the Company's management
resources and financial controls. There is no assurance that the increasing
burdens on the Company's managerial resources and financial controls will not
have an adverse effect on the Company's operations. One of the Company's
strategies is to increase its revenues and the markets it serves through the
acquisition of other businesses that complement the Company's fruit processing
capabilities, channels of distribution and marketing expertise. Although the
Company has recently completed three acquisitions, there can be no assurance
that the Company will be able to identify, acquire or profitably manage
additional companies or successfully integrate recent or future acquisitions
into its operations without substantial costs, delays or other problems. In
addition, there can be no assurance that any companies acquired will be
profitable at the time of their acquisition or will achieve sales and
profitability that justify the investment therein. Acquisitions may involve a
number of special risks, including adverse effects on the Company's reported
operating results, diversion of management's attention, dependence on retention
and hiring of key personnel, risks associated with unanticipated problems or
legal liabilities and amortization of acquired intangible assets, some or all of
which could have a material adverse effect on the Company's operations and
financial performance. See "Use of Proceeds" and "Business -- Strategy."
Uncertainty of New Product Development and Market Acceptance of New Products
In addition to its existing product lines, the Company is currently engaged
in various stages of product development. The Company is actively engaged in the
development and commercialization of new products, such as chilled fruit snacks
and IQF citrus and tropical fruit. Continued product development and
commercialization efforts are subject to all of the risks inherent in the
development of new products, including unanticipated development problems, as
well as the possible insufficiency of funds to undertake development and
commercialization that could result in abandonment or substantial change in the
development of a specific product. In addition, demand and market acceptance for
newly developed products are subject to a high level of uncertainty. The Company
has not yet commenced significant marketing activities relating to
commercialization of its new products and has only conducted limited market or
feasibility studies for any of such products. Achieving market acceptance for
the Company's new products will require substantial marketing efforts and the
expenditure of significant funds. The Company's prospects will be significantly
affected by its ability to commercialize its new products. See "Business -- New
Products."
6
<PAGE> 9
Dependence Upon Availability and Price of Fresh Fruit
The Company obtains a substantial amount of its raw materials from
third-party suppliers throughout various growing regions in Mexico, Texas and
California. A crop reduction or failure in any of these fruit growing regions
resulting from factors such as weather, pestilence, disease or other natural
disasters, could increase the cost of the Company's raw materials or otherwise
adversely affect the Company's operations. Competitors may be affected
differently depending upon their ability to obtain adequate supplies from
sources in other geographic areas. If the Company is unable to pass along the
increased raw materials cost, the financial condition and results of operations
of the Company could be materially and adversely affected. See
"Business -- Procurement."
Competition
The food and beverage industry, including each of the markets in which the
Company competes, is highly competitive with respect to price and quality
(including taste, texture, healthfulness and nutritional value). The Company
faces potential competition from numerous, well-established competitors
possessing substantially greater financial, marketing, personnel and other
resources than the Company. In addition, the food and beverage industry is
characterized by frequent introductions of new products, accompanied by
substantial promotional campaigns. In recent years, numerous companies have
introduced products, including products positioned to capitalize on growing
consumer preferences for fresh fruit products. It can be expected that the
Company will be subject to increasing competition from companies whose products
or marketing strategies address these consumer preferences. See
"Business -- Competition."
Dependence on Significant Customers
During 1993, 1994 and 1995, indirect sales to Sam's Wholesale Clubs
accounted for approximately 17.5%, 18.5% and 17.6%, respectively, of the
Company's net sales (without giving pro forma effect to the Acquisitions).
During 1993, 1994 and 1995, sales to the Company's Japanese customers, through
Mitsui Foods, Inc., a Japanese trading company, accounted for approximately
10.7%, 19.5% and 27.5%, respectively, of the Company's net sales (without giving
pro forma effect to the Acquisitions). There can be no assurance that the
Company's principal customers will continue to purchase products from the
Company at current levels, if at all. Consistent with industry practice, the
Company does not operate under a long-term written supply contract with any of
its customers. The Company's business could be materially adversely affected by
the loss of these or any other major customer. See "Business -- Marketing, Sales
and Distribution."
Seasonality and Quarterly Fluctuations
The Company's operations and sales are affected by the growing cycle of the
fruits it processes. Because of seasonal fluctuations, there can be no assurance
that the results of any particular quarter will be indicative of results for the
full year of operations. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
Product Liability and Product Recall
The testing, marketing, distribution and sale of food and beverage products
entails an inherent risk of product liability and product recall. There can be
no assurance that product liability claims will not be asserted against the
Company or that the Company will not be obligated to recall its products.
Although the Company maintains product liability insurance coverage, there can
be no assurance that an adequate level of coverage is presently in place or will
be available in the future. A product recall or a partially or completely
uninsured judgment against the Company could have a material adverse effect on
the Company.
Limited Intellectual Property Protection
The Company regards its trademarks, trade dress, trade secrets and similar
intellectual property as important to its success. The Company has been issued a
registered trademark for its Fruits of Four Seasons(R), Jalapeno Sam(R), Fruit
Made Easy(R) and Kledor(R) trademarks. The Company has filed for trademark
protection
7
<PAGE> 10
for its SUNFRESH(TM) trademark. No assurance can be given that the Company will
be successful in obtaining such trademark protection, that the Company will not
face future legal challenges with respect to its use of such trademarks or that
the trademarks will afford the Company with any competitive advantages.
Government Regulation
The manufacture, processing, packaging, storage, distribution and labeling
of food products is subject to extensive federal, state and foreign laws and
regulations. In the United States, the Company's business is subject to
regulation by the Food and Drug Administration (the "FDA") and the United States
Department of Agriculture. Applicable statutes and regulations governing food
products include "standards of identity" for the content of specific types of
foods, nutritional labeling and serving size requirements and "Good
Manufacturing Practices" with respect to production processes. The Company
believes that its current products satisfy, and its new products will satisfy,
all applicable regulations and that all of the ingredients used in its products
are "Generally Recognized as Safe" by the FDA for the intended purposes for
which they will be used. Failure to comply with applicable laws and regulations
could subject the Company to civil remedies, including fines, injunctions,
recalls or seizures, as well as potential criminal sanctions, which could have a
material adverse effect on the Company.
The operations of UniMark in Mexico are subject to Mexican federal and
state laws and regulations relating to the protection of the environment. The
principal legislation is the federal General Law of Ecological Balance and
Environmental Protection (the "Ecological Law"), which is enforced by the
Ministry of Social Development ("Sedesol"). Under the Ecological Law, rules have
been promulgated concerning water pollution, air pollution, noise pollution and
hazardous substances. Sedesol can bring administrative and criminal proceedings
against companies that violate these environmental laws, and can also close non-
complying facilities. The operations of UniMark in Canada are subject to
Canadian federal and provincial laws and regulations relating to the protection
of the environment including An Act Respecting Occupational Health and Safety
(Quebec), the Canadian Environmental Protection Act (Canada), and the
Environment Quality Act (Quebec). Similarly, the operations of UniMark in the
United States are subject to United States federal and state laws and
regulations relating to the protection of the environment. Although the Company
believes that its facilities currently are in compliance with all applicable
environmental laws, failure to comply with any such laws could have a material
adverse effect on the Company. See "Business -- Government Regulations."
Dependence on Key Management
The Company relies on the business and technical expertise of its executive
officers and certain other key employees, particularly its President and Chief
Executive Officer, Jorn Budde; its Executive Vice President and Chief Operating
Officer, Rafael Vaquero Bazan; and the President and Chief Executive Officer of
GISE, Jose Martinez Brohez. The loss of the services of any one of these
individuals could have a material adverse effect on the Company. The employment
agreements with each of Messrs. Budde and Vaquero have recently expired.
Although the Company's Board of Directors has indicated its intention to enter
into new employment contracts with each of Messrs. Budde and Vaquero, no
assurance can be given that their services or those of Mr. Martinez will be
available in the future. The Company's success will also be dependent on its
ability to attract and retain other qualified personnel. See
"Business -- Employees" and "Management."
Shares Eligible for Future Sale; Potential Adverse Effect on Market Price of
Common Stock
Sales of shares of Common Stock in the public market, including "restricted
shares" first becoming eligible for resale following this offering, could
adversely affect prevailing market prices. As of May 10, 1996, there were
outstanding 6,861,833 shares of Common Stock, 2,541,951 of which shares were
"restricted securities" under applicable securities laws. Additional shares of
Common Stock may become eligible for sale in the public market from time to time
upon exercise of warrants and stock options. See "Description of Capital
Stock -- Shares Eligible for Future Sale."
8
<PAGE> 11
Control by Management
Following the completion of this offering, the current directors and
officers of the Company and their affiliates will own approximately 37.1% of the
outstanding shares of Common Stock. As a result of such persons' Common Stock
ownership, they will have significant influence over all matters requiring
approval by the shareholders of the Company, including the election of
directors. See "Management" and "Principal and Selling Shareholders."
RISKS RELATED TO MEXICAN OPERATIONS
Economic, Political and Social Conditions
Although a majority of the Company's processing operations and
substantially all of its growing operations are located in Mexico, substantially
all of the Company's sales are to customers outside of Mexico, mostly in the
United States, Japan, Canada and Europe.
Due to the location of its growing operations and processing facilities,
the Company may be affected by economic, political and social conditions in
Mexico. For example, the Company's financial condition and results of operations
or the market price of its Common Stock could be adversely affected if the
current Mexican policies encouraging foreign investment and foreign trade by
Mexico were to be reversed. In addition, the attractiveness of the Company's
products to its North American and Japanese customers is affected by U.S.,
Canadian, Japanese and Mexican trade policies, such as trade preferences.
Changes in policies by the U.S., Mexican, Canadian, Japanese, European Economic
Community or other governments resulting in, among other things, increased
duties, higher taxation, currency conversion limitations, limitations on imports
or exports or the expropriation of private enterprises could have a material
adverse effect on the Company's results of operations. Furthermore, Mexico has
experienced political, economic and social uncertainty resulting from the
assassination of two prominent political leaders in 1994 and a peasant uprising
in the southern Mexican state of Chiapas.
Since December 1994, Mexico has experienced an economic crisis
characterized by exchange rate instability and devaluation, increased inflation,
high domestic interest rates, negative economic growth, reduced consumer
purchasing power and high unemployment. Under its current leadership, the
Mexican government has been pursuing economic reform policies, including the
encouragement of foreign trade and investment and an exchange rate policy of
free market flotation. No assurance can be given, however, that the Mexican
government will continue to pursue such policies, that such policies will be
successful if pursued, or that such policies will not be significantly altered.
Exchange Rates and Inflation
While the Company transacts business in U.S. dollars and its revenues are
collected in U.S. dollars, a portion of the Company's costs and expenses are not
denominated in U.S. dollars; substantially all of such non-U.S. dollar
denominated costs and expenses are denominated in Mexican pesos ("pesos"). As a
result, changes in the relationship of the U.S. dollar to the peso could
adversely affect the Company's cost of goods sold, operating expenses and
operating margins. The devaluation of the peso during late 1994 and early 1995
reduced the U.S. dollar cost of the Company's peso expenses. From December 18,
1994 through October 1, 1995, the U.S. dollar appreciated approximately 84% in
value against the peso. In addition, inflation in the peso could affect the
Company's cost of goods sold and operating margins. Mexican inflation, as
measured by the NCPI, the Mexican government's consumer price index, was 8.35%
for the three months ended March 31, 1996, and was 52% for 1995. Inflation in
Mexico may ultimately increase the cost of goods and services purchased in
Mexico with pesos and lead to higher wages and salaries for the Company's
employees. Such increases may adversely affect the Company's operating margins
in the future. The impact of future exchange rate fluctuations and inflation on
the Company's results of operations cannot be accurately predicted.
On October 29, 1995, the Mexican government signed a pact with labor and
business representatives called the Alliance for Economic Recovery (the
"Alliance"). The Alliance defines a macroeconomic policy designed to support
Mexico's economic recovery and promote future growth. By its provisions, the
minimum
9
<PAGE> 12
wage rate increased by 10% effective December 4, 1995. A further 10% rise in the
minimum wage rate became effective on April 1, 1996. Also, over the 14 months
following execution of the Alliance, utility charges will increase an average of
26%. Under the Alliance, the Mexican government will attempt to boost the
economy by providing tax incentives for new business investments, while
utilizing wage and price controls to contain inflation. As part of the Alliance,
the Mexican government has committed to maintaining a free flotation system for
the peso in the international currency markets. The Alliance also calls for
development of social and rural programs. The impact of the Alliance on the
Company or the Mexican economy cannot be accurately predicted.
Although from time to time the Company has engaged in exchange rate hedging
activities, the Company does not have a program for hedging U.S. dollar/peso
revenues or costs. There can be no assurance that any hedging techniques will be
successful and will not result in exchange losses. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
Labor Relations and Labor Cost
In Mexico, labor relations are governed by separate collective labor
agreements between ICMOSA and GISE and the unions representing their employees.
Substantially all of the Company's Mexican employees, whether seasonal or
permanent, are affiliated with labor unions which are generally affiliated with
a national confederation. As is typical in Mexico, wages are renegotiated every
year while other terms are renegotiated every two years. In the event
labor-related work stoppages were to occur or employee wages were renegotiated
on terms adverse to the Company, such events could have an adverse effect on the
Company.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 1,400,000 shares of
Common Stock offered by the Company are estimated to be approximately $21.7
million after deducting underwriting discounts and estimated offering expenses.
The Company will not receive any of the proceeds from the sale of the shares
offered by the Selling Shareholders.
The following table sets forth the anticipated uses of the net proceeds
from this offering:
<TABLE>
<S> <C>
Capital expenditures for fruit processing operations.................... $ 5,000,000
Agricultural development................................................ 3,000,000
Repayment of indebtedness(1)............................................ 3,000,000
Capital expenditures for juice operations............................... 2,500,000
Juice plant acquisition(2).............................................. 2,500,000
Working capital and other general corporate purposes.................... 5,700,000
-----------
Total uses.................................................... $21,700,000
===========
</TABLE>
- ---------------
(1) Of this amount, $2.5 million was used to fund the cash portion of the
consideration paid in connection with the Simply Fresh Acquisition. The
interest rate on this $3.0 million 120-day bank loan is 11.37% per annum and
it matures in September 1996.
(2) Represents the Company's planned exercise of an option to purchase GISE's
leased facility located in Poza Rica, Veracruz, Mexico.
The exact allocation of the proceeds for such purposes and the timing of
such expenditures may vary significantly depending upon numerous factors,
including the success of the Company's products under development. Pending the
application of such proceeds, the Company intends to invest the net proceeds of
this offering in short-term, investment grade securities. The Company estimates
that such proceeds will be sufficient to fund such expenditures and other cash
requirements for at least the next 12 months. However, the time periods during
which the proceeds will be invested in such securities may vary significantly
depending upon a number of factors, and no assurances can be given in this
regard. Although the Company has no present commitments, agreements or
understandings with respect to any acquisitions, the Company may use a portion
of the net proceeds to continue its acquisition strategy. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
10
<PAGE> 13
PRICE RANGE OF COMMON STOCK
The Common Stock is quoted on the Nasdaq National Market under the symbol
"UNMG" and on the Pacific Stock Exchange under the symbol "UMK." Prior to May
22, 1995, the Common Stock was quoted on the Nasdaq Small-Cap Market under the
symbol "UNMG." The following table sets forth, for the periods indicated, the
high and low bid prices of the Common Stock as reported on the Nasdaq Small-Cap
Market and the high and low sale prices as reported on the Nasdaq National
Market after May 22, 1995.
<TABLE>
<CAPTION>
HIGH LOW
---- -----
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1994:
Third Quarter (from August 12, 1994)....................................... $ 3 1/2 $ 2 1/8
Fourth Quarter............................................................. 3 1/4 2 1/8
YEAR ENDED DECEMBER 31, 1995:
First Quarter.............................................................. $ 5 3/4 $ 3 1/8
Second Quarter (through May 22, 1995)...................................... 7 1/4 5 3/8
Second Quarter (May 23 to June 30, 1995)*.................................. 7 1/4 6 5/8
Third Quarter*............................................................. 10 5/8 6 7/8
Fourth Quarter*............................................................ 12 1/4 7 3/4
YEAR ENDED DECEMBER 31, 1996:
First Quarter*............................................................. $16 5/8 $11 7/8
Second Quarter (through May 9, 1996)*...................................... 17 13 3/4
</TABLE>
- ---------------
* Represents high and low sales prices on the Nasdaq National Market.
The quotations in the tables above reflect inter-dealer prices without
retail markups, markdowns or commissions. In addition, for all periods prior to
May 22, 1995, they do not represent actual transactions. On May 9, 1996, the
last reported sale price for the Common Stock on the Nasdaq National Market was
$16.875. As of May 8, 1996, there were 141 shareholders of record of the Common
Stock.
DIVIDEND POLICY
The Company has not paid any cash dividends since its inception and for the
foreseeable future intends to follow a policy of retaining all of its earnings,
if any, to finance the development and continued expansion of its business.
There can be no assurance that dividends will ever be paid by the Company.
Additionally, under the terms of the Company's business loan agreement with Bank
of America, N.A. dated December 18, 1995, the Company may not declare or pay any
dividends on its shares of Common Stock without the prior written consent of
Bank of America, N.A. Any future determination as to payment of dividends will
depend upon the Company's financial condition, results of operations and such
other factors as the Board of Directors deems relevant. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources."
11
<PAGE> 14
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company as of December 31, 1995: (i) on an actual basis; (ii) on a pro forma
basis to reflect the Deli-Bon Acquisition, the GISE Acquisition and the Simply
Fresh Acquisition as if such Acquisitions had been made on December 31, 1995;
and (iii) on a pro forma as adjusted basis to additionally reflect the issuance
of 1,400,000 shares of Common Stock offered by the Company and the application
of the estimated net proceeds therefrom. The following table should be read in
conjunction with the pro forma financial statements and the notes thereto
included elsewhere in this Prospectus and the respective consolidated financial
statements and notes thereto of the Company, GISE, Simply Fresh and Deli-Bon
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AT DECEMBER 31, 1995
--------------------------------
PRO PRO FORMA
ACTUAL FORMA(1) AS ADJUSTED
------- -------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Long-term debt, less current portion............................ $ 699 $ 4,118 $ 4,118
Shareholders' equity:
Common stock, par value $0.01 per share, 20,000,000 shares
authorized and 5,918,050 shares issued and outstanding;
6,820,083 shares issued and outstanding (pro forma); and
8,220,083 shares issued and outstanding (pro forma as
adjusted)(2)............................................... 59 68 82
Additional paid-in capital.................................... 13,035 22,807 44,482
Retained earnings............................................. 1,884 1,884 1,884
------- ------- ---------
Total shareholders' equity............................ 14,978 24,759 46,448
------- ------- ---------
Total capitalization.................................. $15,677 $28,877 $50,566
======= ======= =========
</TABLE>
- ---------------
(1) Reflects the issuance of 28,510 shares of Common Stock in connection with
the Deli-Bon Acquisition; 782,614 shares of Common Stock in connection with
the GISE Acquisition; and 90,909 shares in connection with the Simply Fresh
Acquisition. See "Recent Acquisitions."
(2) Does not include: (i) 380,000 shares of Common Stock issuable upon exercise
of currently outstanding options granted under the Employee Stock Option
Plan; (ii) 67,500 shares of Common Stock issuable upon exercise of
currently outstanding options granted under the Director Stock Option Plan;
and (iii) 78,190 shares of Common Stock issuable upon exercise of currently
outstanding warrants granted to underwriters in connection with the
Company's initial public offering.
12
<PAGE> 15
RECENT ACQUISITIONS
Since January 1, 1996, the Company has completed the following three
acquisitions. For additional information concerning these businesses, see
"Business."
THE GISE ACQUISITION
In May 1996, the Company acquired all of the outstanding shares of capital
stock of GISE, a major Mexican producer of citrus concentrate, oils and juices,
in exchange for 782,614 shares of Common Stock. In addition, UniMark agreed to
pay to the GISE stockholders up to an additional $8.0 million of contingent
consideration if certain future earnings targets are achieved. The stock
purchase agreement with the GISE stockholders (the "GISE Agreement") provides
that if for any of 1996, 1997, 1998 or 1999 (a) GISE's income before interest,
depreciation, amortization, taxes and translation gain/loss ("EBITDA") less Cost
of Capital (as defined below) exceeds (b) the Target Base EBITDA Amounts (as set
forth in the table below) for the corresponding year (as set forth in the table
below), then, UniMark shall pay to the GISE stockholders an amount equal to 3.5
times such excess amount (the "Additional Consideration") up to a cumulative
aggregate amount of $8.0 million:
<TABLE>
<CAPTION>
FISCAL YEAR TARGET BASE
ENDED DECEMBER 31, EBITDA AMOUNTS
------------------ --------------
<S> <C>
1996.......................................................... $3,540,000
1997.......................................................... 5,023,000
1998.......................................................... 7,517,000
1999.......................................................... 9,542,000
</TABLE>
The GISE Agreement provides that "Cost of Capital" for any fiscal year
shall mean an amount equal to 10% of Outstanding Cumulative Capital
Expenditures. "Outstanding Cumulative Capital Expenditures" for a particular
fiscal year is defined as (a) the weighted average amount of all expenditures
made by GISE during the particular fiscal year for assets with an expected life
in excess of one year plus (b) the amount of all expenditures for assets with an
expected life in excess of one year made by GISE after May 9, 1996 but prior to
the beginning of that particular fiscal year. Additional Consideration, if any,
that may be due with respect to any year shall be due and payable on April 1 of
the following year, at UniMark's option in either shares of Common Stock or
cash.
GISE's two juice plants are located in Cd. Victoria, Tamaulipas, Mexico and
Poza Rica, Veracruz, Mexico in the heart of major citrus growing regions.
UniMark believes that the GISE Acquisition will confer operational benefits on
both companies resulting from combining fruit procurement functions. In
addition, UniMark believes that GISE should benefit from UniMark's international
distribution and marketing expertise.
THE SIMPLY FRESH ACQUISITION
In May 1996, the Company acquired all of the outstanding shares of capital
stock of Simply Fresh, a fruit processing and distribution company located in
Los Angeles, California. The purchase price for the shares consisted of $2.5
million in cash, 90,909 shares of Common Stock and $1.0 million in cash payable
in consideration for a five-year covenant by Simply Fresh's principals and their
affiliates not to compete in the United States. In addition, the Company has
agreed to pay Simply Fresh's two stockholders an amount equal to $0.0025 per
pound of fruit processed using certain proprietary technology developed by
Simply Fresh with the amount payable pursuant to this agreement not to exceed
$2.0 million in the aggregate.
Substantially all of Simply Fresh's sales are to the foodservice industry
in the western United States. UniMark believes that the Simply Fresh Acquisition
will afford it with operating synergies resulting from processing some of the
fruit used in Simply Fresh's products at UniMark's Mexican plants and expanded
distribution into the foodservice market. In addition, the Simply Fresh plant is
strategically located to process fruit grown in California and Arizona, two
major citrus growing regions with growing seasons that are generally opposite to
those of Mexico.
13
<PAGE> 16
THE DELI-BON ACQUISITION
In January 1996, the Company acquired all of the outstanding shares of
capital stock of Deli-Bon for $787,000 in cash, a $49,000 promissory note and
28,510 shares of Common Stock.
Deli-Bon, located in Quebec City, Canada, processes and sells fruit salads
principally to the foodservice industry and wholesale clubs in Canada and the
northeastern United States. UniMark believes that it will realize significant
operating synergies from integrating its and Deli-Bon's fruit procurement,
processing and distribution functions. In addition, the Company believes that
the Deli-Bon plant is strategically located to distribute products to the retail
and foodservice markets in Canada and in the northeastern United States.
14
<PAGE> 17
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table sets forth, for the periods and at the dates indicated,
selected historical and pro forma consolidated financial data of the Company.
The selected consolidated historical financial data has been derived from the
historical consolidated financial statements of the Company and in the case of
the fiscal years ended December 31, 1993, 1994 and 1995 should be read in
conjunction with such financial statements and the notes thereto included
elsewhere in this Prospectus.
The pro forma financial data has been derived from the pro forma condensed
consolidated financial statements of the Company, GISE, Simply Fresh and
Deli-Bon and should be read in conjunction with the pro forma financial
statements and the notes thereto included elsewhere in this Prospectus. The pro
forma results of operations for the year ended December 31, 1995 are not
necessarily indicative of the results of operations that would have been
achieved had the transactions reflected therein been consummated prior to the
periods in which they were completed, or that might be attained in the future.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------
PRO FORMA
1992 1993 1994 1995 1995(1)
------- ------- ------- ------- ---------
<S> <C> <C> <C> <C> <C>
SELECTED CONSOLIDATED STATEMENTS OF INCOME DATA:
Net sales..................................... $14,278 $18,893 $25,346 $36,866 $62,374
Gross profit.................................. 4,603 5,952 7,403 12,674 21,612
Income from operations........................ 737 633 1,530 4,251 8,696
Net income.................................... $ 267 $ 73 $ 1,015 $ 2,947 $ 4,502
======= ======= ======= ======= ========
Earnings per common share:
Primary.................................... $ 0.09 $ 0.02 $ 0.28 $ 0.53 $ 0.69
======= ======= ======= ======= ========
Fully diluted.............................. $ 0.09 $ 0.02 $ 0.28 $ 0.51 $ 0.67
======= ======= ======= ======= ========
Weighted average common and common
equivalent shares outstanding:
Primary.................................... 3,000 3,000 3,642 5,609 6,511
Fully diluted.............................. 3,000 3,000 3,642 5,805 6,707
OTHER CONSOLIDATED FINANCIAL DATA:
Capital expenditures.......................... $ 490 $ 143 $ 1,218 $ 5,209 $ 8,000
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
-------------------------------------------------
PRO FORMA
1992 1993 1994 1995 1995(2)
------- ------- ------- ------- ---------
<S> <C> <C> <C> <C> <C>
SELECTED CONSOLIDATED BALANCE SHEET DATA:
Working capital (deficiency).................. $ (42) $ (15) $ 3,811 $ 7,481 $ 3,603
Total assets.................................. 2,566 4,007 11,176 26,498 50,074
Long-term debt................................ 369 296 919 699 4,118
Shareholders' equity.......................... 369 459 6,392 14,978 24,759
</TABLE>
- ---------------
(1) Reflects the pro forma condensed consolidated Statements of Income Data of
UniMark as if the Acquisitions had occurred at the beginning of the period
presented, after adjustments of, among other things, depreciation,
amortization, interest and income taxes. For a description of adjustments to
Pro Forma see "Pro Forma Condensed Consolidated Financial Information" on
pages F-2 through F-6.
(2) Reflects the pro forma condensed consolidated balance sheet data of the
Company as if the Acquisitions had occurred on December 31, 1995.
15
<PAGE> 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
The following discussion should be read in conjunction with the
consolidated financial statements and notes thereto and "Selected Consolidated
Financial Data" included elsewhere in this Prospectus. This discussion does not
include the results of operations of Deli-Bon, GISE and Simply Fresh, which were
acquired after December 31, 1995.
CONVERSION FROM MEXICAN GAAP
The Company conducts substantially all of its operations through its
wholly-owned operating subsidiaries: UniMark Foods, UniMark International,
ICMOSA, GISE, Simply Fresh and Deli-Bon. ICMOSA is a Mexican corporation with
its headquarters located in Montemorelos, Nuevo Leon, Mexico, whose principal
activities consist of operating six citrus processing plants and various citrus
groves throughout Mexico. ICMOSA maintains its accounting records in Mexican
pesos and in accordance with Mexican generally accepted accounting principles
("Mexican GAAP") and is subject to Mexican income tax laws. ICMOSA's financial
statements at December 31, 1994 and 1995 and for the years then ended have been
converted to United States generally accepted accounting principles ("U.S.
GAAP") and U.S. dollars. Unless otherwise indicated, all dollar amounts included
herein are set forth in U.S. dollars in accordance with U.S. GAAP. The
functional currency of UniMark and its subsidiaries is the U.S. dollar.
RESULTS OF OPERATIONS
The following table sets forth certain consolidated financial data
expressed as a percentage of net sales for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1993 1994 1995
----- ----- -----
<S> <C> <C> <C>
Net sales................................................... 100.0% 100.0% 100.0%
Cost of products sold....................................... 68.5 70.8 65.6
----- ----- -----
Gross profit................................................ 31.5 29.2 34.4
Selling, general and administrative expenses................ 28.1 23.2 22.9
----- ----- -----
Income from operations...................................... 3.4 6.0 11.5
Other income (expense):
Interest expense.......................................... (2.1) (1.9) (0.9)
Interest income........................................... -- -- 1.3
Other income.............................................. -- 0.3 0.6
----- ----- -----
Income before income taxes.................................. 1.3 4.4 12.5
Income tax expense.......................................... 0.9 0.4 4.5
----- ----- -----
Net income.................................................. 0.4% 4.0% 8.0%
===== ===== =====
</TABLE>
Years Ended December 31, 1994 and 1995
Net sales increased 45.5% from $25.3 million in 1994 to $36.9 million in
1995. This increase was due primarily to a 102.4% increase in export sales to
Japan from $6.0 million in 1994 to $12.1 million in 1995. The increase in sales
to Japan resulted primarily from an expansion of UniMark's Japanese customer
base and product lines. In addition, North American retail sales increased 25.9%
from $10.0 million in 1994 to $12.5 million in 1995 and wholesale club sales
increased 39.2% from $5.1 million in 1994 to $7.1 million in 1995. These
increases resulted from, among other things, increased distribution of existing
products, the success of its red grapefruit products and the introduction of a
one gallon mixed fruit product to the wholesale club market in 1995.
16
<PAGE> 19
Gross profit as a percentage of net sales increased from 29.2% in 1994 to
34.4% in 1995. This increase resulted from reduced processing costs obtained
through greater efficiencies and volume. In addition, prices of certain products
sold to Japan were increased during 1995 and import duties between Mexico and
the U.S. decreased as a result of the North American Free Trade Agreement
("NAFTA").
Selling, general and administrative expenses ("SG&A") as a percentage of
net sales decreased from 23.2% in 1994 to 22.9% in 1995. This reduction is
primarily the result of the increased sales volume in 1995. Actual SG&A expenses
increased $2.5 million from $5.9 million in 1994 to $8.4 million in 1995. This
increase resulted from increased delivery, storage and personnel expenses
required to handle the increased sales volume.
Interest expense decreased from 1.9% of net sales in 1994 to 0.9% in 1995.
Actual interest expense decreased $151,000 from $469,000 in 1994 to $318,000 in
1995. This decrease was primarily the result of lower levels of debt and lower
interest rates in 1995.
Interest income of $470,000 was earned in 1995 primarily from the temporary
cash investment of proceeds from the exercise of warrants and excess cash
balances generated from operations.
Other income, net of other expenses was $69,000 in 1994 and $222,000 in
1995. Included in this net total is a foreign currency transaction loss of
$16,000 in 1994 and a gain of $124,000 in 1995 resulting from the conversion of
ICMOSA's Mexican financial statements to U.S. GAAP.
Net income, as a result of the foregoing, increased 190% from $1.0 million
in 1994 to $2.9 million in 1995.
Years Ended December 31, 1993 and 1994
Net sales increased 34.2% from $18.9 million in 1993 to $25.3 million in
1994. This increase was due in part to a 78.4% increase in export sales to Japan
from $3.4 million in 1993 to $6.0 million in 1994. In addition, the Company
began distributing frozen melon products in May 1994 with sales totaling $2.3
million in 1994. Net sales to wholesale clubs also increased from $4.1 million
in 1993 to $5.1 million in 1994, or 23.1%, due to increased distribution in
existing clubs and new distribution in new clubs.
Gross profit as a percentage of net sales decreased from 31.5% in 1993 to
29.2% in 1994. This decrease resulted from the introduction of frozen products
at a marginal gross profit in 1994. Excluding frozen products sales and profits,
gross profit as a percentage of net sales increased to 32.0% in 1994 as a result
of decreased import duties between Mexico and the U.S. as a result of NAFTA and
a retail price increase implemented in 1994.
Selling, general and administrative expenses ("SG&A") as a percentage of
net sales decreased from 28.1% in 1993 to 23.2% in 1994. This reduction is
primarily the result of the increased sales volume in 1994. Actual SG&A expenses
increased $554,000 from $5.3 million in 1993 to $5.9 million in 1994. This
increase resulted from increased delivery, storage and personnel expenses
required to handle the increased sales volume.
Interest expense decreased from 2.1% of net sales in 1993 to 1.9% of net
sales in 1994. Actual interest expense increased $59,000 from $410,000 in 1993
to $469,000 in 1994. This increase was primarily the result of higher interest
rates in 1994.
Other income, net of other expenses was $11,000 in 1993 and $69,000 in
1994. Included in this net total is a foreign currency transaction loss of
$8,000 in 1993 and $16,000 in 1994 resulting from the conversion of ICMOSA's
Mexican financial statements.
Net income, as a result of the foregoing, increased from $73,000 in 1993 to
$1.0 million in 1994.
STATUTORY EMPLOYEE PROFIT SHARING
All Mexican companies are required to pay their employees, in addition to
their agreed compensation benefits, profit sharing in an aggregate amount equal
to 10% of net income, calculated for employee profit sharing purposes, of the
individual corporation employing such employees. All of UniMark's employees are
17
<PAGE> 20
employed by its subsidiaries, each of which pays profit sharing in accordance
with its respective net income for profit sharing purposes. Tax losses do not
affect employee profit sharing. Statutory employee profit sharing expense is
reflected in the Company's cost of goods sold and selling, general and
administrative expenses, depending upon the function of the employees to whom
profit sharing payments are made. The Company's net income on a consolidated
basis as shown in the Consolidated Financial Statements is not a meaningful
indication of net income of the Company's subsidiaries for profit sharing
purposes or of the amount of employee profit sharing.
EXCHANGE RATE FLUCTUATIONS
The Company procures and hand processes substantially all of its products
in Mexico, through its wholly owned subsidiary ICMOSA, for export to the United
States, Canada and Japan. Generally, the cost of fruit procured in Mexico
reflects the spot market price for citrus in the United States. All of UniMark's
sales are denominated in U.S. dollars. As such, UniMark does not anticipate
sales revenues and raw material expenses to be materially affected by changes in
the valuation of the peso. Labor and certain other production costs are peso
denominated. Consequently, these costs are impacted by fluctuations in the value
of the peso relative to the U.S. dollar.
The Company's consolidated results of operations are affected by changes in
the valuation of the Mexican peso to the extent that ICMOSA has peso denominated
net monetary assets or net monetary liabilities. In periods where the peso has
been devalued in relation to the U.S. dollar, a gain will be recognized to the
extent there are peso denominated net monetary liabilities while a loss will be
recognized to the extent there are peso denominated net monetary assets. In
periods where the peso has gained value, the converse would be recognized.
The Company's consolidated results of operations are also subject to
fluctuations in the value of the peso as they affect the translation to U.S.
dollars of ICMOSA's net deferred tax assets or net deferred tax liabilities.
Since these assets and liabilities are peso denominated, a falling peso results
in a transaction loss to the extent there are net deferred tax assets or a
transaction gain to the extent there are net deferred tax liabilities.
SEASONALITY
A substantial portion of UniMark's exports to Japan is processed and
shipped during the first and fourth quarter each year. In addition, the demand
for UniMark's chilled citrus and tropical fruit products is strongest during the
fall, winter and spring when seasonal fresh products such as mangos, peaches,
plums, and nectarines are not readily available for sales in supermarkets in
North America. Management believes UniMark's quarterly net sales will continue
to be impacted by this pattern of seasonality.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1995, cash and temporary cash investments totaled $6.3
million, an increase of $5.5 million from year end 1994. Operating activities
utilized cash of $1.5 million in 1994 while generating cash of $3.3 million in
1995. Net cash generated by operating activities in 1995, was favorably impacted
by the increase in net income and an increase in the amount payable to Sabritas,
S.A. de C.V., PepsiCo, Inc.'s Mexican snack food division, pursuant an export
trade credit facility (the "Trading Agreement"). Since 1992, UniMark has
partially financed its Mexican exports under the Trading Agreement. The Trading
Agreement provides for 60-day interest free financing up to $3,000,000 for
inventory exports from Mexico. At December 31, 1994, there were no amounts
outstanding pursuant to the Trading Agreement. At year end 1995, $2.6 million
was payable to Sabritas, S.A. de C.V. under the Trading Agreement. The Trading
Agreement can be terminated by either party with 90 days notice.
During 1995, UniMark expended $5.2 million on additional facilities,
equipment and improvements to plant facilities. In October 1995, UniMark
acquired an idle canning plant in the State of Puebla, Mexico for approximately
$1.5 million. Remaining capital outlays in 1995 were for equipment, fixtures and
improvements and additions to plant facilities. During 1994, UniMark expended
$1.2 million on capital equipment and improvements to plant facilities. In
September 1994, UniMark acquired a leasehold interest in an idle citrus
18
<PAGE> 21
processing facility in San Rafael, Veracruz, Mexico and purchased approximately
$700,000 of processing equipment located at the facility. Additional capital
outlays in 1994 were for expansion and improvements to the Mexico plant
facilities in Montemorelos, Nuevo Leon.
Net cash generated by financing activities was $7.4 million in 1995 and
$3.2 million in 1994. Included in financing activities were net proceeds from
the issuance of stock, changes in short-term borrowings and payments of
long-term debt.
Net proceeds from the issuance of shares of Common Stock was $5.2 million
in 1994 and $5.6 million in 1995. In August 1994, UniMark completed an initial
public offering of 550,000 units (the "Units"), each Unit consisting of three
shares of Common Stock and two redeemable common stock purchase warrants (the
"Warrants"). The Warrants were transferable separately from the Common Stock and
entitled the holder to purchase one share of Common Stock at an exercise price
of $4.50 per share. The Units were sold to the public at $12.00 per Unit, with
net proceeds to UniMark of approximately $5.2 million. In connection with the
Company's initial public offering, UniMark issued certain warrants to its
underwriting representatives (the "Representatives' IPO Warrants") to purchase
up to 55,000 Units for $15.00 per Unit. On June 8, 1995, UniMark notified all
registered holders of the Warrants of its intention to redeem all of the
1,100,000 outstanding Warrants by July 21, 1995. During 1995, UniMark issued (i)
1,099,990 shares of Common Stock upon the exercise of a like amount of the
Warrants; (ii) 163,060 shares of Common Stock upon the exercise of 32,612
Representatives' IPO Warrants and the 65,224 underlying Warrants; and (iii)
5,000 shares of Common Stock on the exercise of employee stock options. Net
proceeds to UniMark on the issuance of these 1,268,050 shares of Common Stock in
1995 were $5.6 million.
Cash was utilized to decrease short-term borrowings by $1.5 million in 1994
while cash of $2.3 million was generated in 1995 from an increase in short-term
borrowings. During 1994, short-term debt was reduced in preparation for
consolidating and restructuring existing credit facilities in Mexico and the
United States. During 1995, UniMark established two revolving credit facilities
with Bank of America, N.A. and Rabobank for short-term debt of up to $6.0
million in Mexico and up to $3.0 million in the United States. Borrowings under
the Mexico revolving credit facility are collateralized by accounts receivable
from export sales to Japan while borrowings under the United States revolving
credit facility are collateralized by United States accounts receivable and
finished goods inventories. The Mexico revolving credit facility is reviewed
annually for renewal while the United States revolving credit facility matures
on April 30, 1997. At December 31, 1995, the Mexico revolving credit facility
had an outstanding balance of $1.5 million while the United States revolving
credit facility had an outstanding balance of $2.0 million. The $2.3 million
increase in short-term borrowings in 1995 resulted from the utilization of these
new credit facilities. In May 1996, in connection with the Simply Fresh
Acquisition, the Company borrowed $3.0 million pursuant to a 120-day bank loan
with Confia, S.A., Institucion de Banca Multiple, Abaco Casa de Bolsa, S.A. de
C.V. ("Confia"). This loan is expected to be repaid from the proceeds of this
offering. See "Use of Proceeds." Cash was also used to make regularly scheduled
payments of long-term debt of $511,000 in 1994 and $523,000 in 1995.
The Company's future cash requirements for 1996 and beyond will depend
primarily upon the level of sales expenditures for capital equipment and
improvements, the timing of inventory purchases and new product introductions
and business acquisition opportunities. UniMark believes that anticipated
revenue from operations and existing capital resources will be adequate for its
working capital requirements for at least the next twelve months.
19
<PAGE> 22
BUSINESS
GENERAL
UniMark is a vertically integrated citrus and tropical fruit growing,
processing, marketing and distribution company with operations in Mexico, the
United States and Canada. The UniMark Group, Inc. was organized in 1992 to
combine the operations of ICMOSA, a Mexican citrus and tropical fruit processor
which commenced operations in 1974, with UniMark Foods, a company that marketed
and distributed ICMOSA's products in the United States. The Company focuses on
niche citrus and tropical fruit products including chilled, frozen and canned
cut fruits and other specialty food ingredients. In addition, as a result of its
recent acquisition of GISE, UniMark is a major Mexican producer of citrus
concentrate, oils and juices. The Company processes and packages its products at
nine plants in Mexico, one in California and one in Quebec, Canada. The
Company's Mexican and Californian plants are strategically located in major
fruit growing regions. The Company utilizes food brokers and distributors to
market and distribute its cut fruit products, under the brand names
SUNFRESH(TM), Fruits of Four Seasons(R) and Kledor(R) and under various private
labels to supermarket chains, foodservice distributors, wholesale clubs,
specialty grocery stores and industrial users throughout the United States and
Canada. Under the Jalapeno Sam(R) brand name, the Company also produces
guacamole for distribution in the United States. In addition, the Company has
developed and utilizes a unique processing method that separates cold-peeled
citrus fruit into individual juice-containing "cell-sacs." These cell-sac
products are sold to food and soft drink manufacturers in Japan to enhance the
flavor and texture of fruit juices and desserts. Sales to the Company's Japanese
consumers are facilitated through Japanese trading companies. The Company's
citrus concentrate and single strength citrus juices are sold directly to major
juice importers and distributors in North America, Europe and the Pacific Rim.
The Company has experienced substantial increases in net sales and income
from operations over the past three fiscal years. UniMark's net sales were
$18,893,000, $25,346,000 and $36,866,000, respectively, in its 1993, 1994 and
1995 fiscal years, representing a compound annual growth rate of 39.7% over such
periods. Furthermore, UniMark's income from operations was $633,000, $1,530,000
and $4,251,000, respectively, in such fiscal years, representing a compound
annual growth rate of 159.1% over such periods.
STRATEGY
UniMark's strategic objective is to become the leading
vertically-integrated grower, processor, marketer and distributor of niche fruit
and other selected agricultural products. To achieve this objective, the key
elements of UniMark's operating and acquisition strategies are as follows:
Operating Strategy
- Expand vertical integration of growing, processing, marketing and
distribution operations. UniMark intends to continue its vertical
integration strategy. UniMark believes that by vertically integrating its
growing, processing, marketing and distribution operations, the Company
can effectively control the availability, cost and quality of its
products.
- Expand fruit growing operations in Mexico. To ensure the availability of
the highest quality raw materials, UniMark intends to expand its fruit
growing operations in Mexico, utilizing advanced agricultural practices.
UniMark believes that Mexico's favorable climate and soil conditions,
coupled with competitive labor and land costs, offer significant
opportunities to grow high quality fruits in a cost effective manner.
- Capitalize on brand awareness and market penetration. In the retail
market, UniMark intends to capitalize on the brand awareness and market
penetration attained by its SUNFRESH(TM) brand name products. Utilizing
its "Fruit Made Easy(R)" concept, UniMark plans to expand its line of
specialty chilled, frozen and canned "ready-to-eat" pre-cut fruit that
offers the benefits of healthy, low-fat foods with a multitude of vitamins
to the increasingly health conscious consumer. In the second half of 1996,
UniMark plans to introduce a line of chilled fruit snack products
incorporating citrus cell-sacs as a key
20
<PAGE> 23
ingredient. UniMark has targeted this planned line of fruit snacks toward
North American retail and foodservice customers.
- Introduce additional cut fruit products utilizing a cryogenic individual
quick freeze process. UniMark intends to expand its retail and
foodservice business by introducing products utilizing a cryogenic
individual quick freeze process. UniMark believes that this cryogenic IQF
process allows UniMark to process citrus and tropical fruit at the peak of
the season, to preserve the fresh-like texture and taste of the fruit and
to distribute these products at a later date.
- Continue to expand Japanese exports. In 1995, the Company's Japanese
sales represented approximately 32.9% of total sales, compared with only
17.8% in 1993. As its fastest growing segment, UniMark continues to
diversify and expand its Japanese customer base. The Company believes that
there are significant opportunities in Japan for frozen citrus and
tropical fruit products and specialty food ingredients because such
products do not contain additives or preservatives, a necessary feature
for entry into the Japanese market.
- Expand specialty food ingredients. UniMark believes that significant
market opportunities exist in providing customers with specialty food
ingredient products that can be derived from processing citrus and
tropical fruits. In particular, the Company intends to maximize the
utilization of its raw materials by identifying secondary food ingredient
products, such as citrus oils.
- Expand position as a leading Mexican juice exporter to U.S., European and
Asian markets. With the GISE Acquisition, the Company is a major Mexican
producer of citrus concentrate. The Company's goal is to expand its
position as a leading exporter of high quality Mexican citrus juices to
the U.S., European and Asian markets. Because of the high quality of
Mexican citrus juice, it is often blended with juices from other citrus
producing regions to enhance the quality of these other juices.
Acquisition Strategy
- Acquire productive assets in Mexico that can benefit from UniMark's
international distribution and marketing expertise. Most of UniMark's
processing facilities are strategically located in Mexico's various fruit
growing regions. UniMark plans to expand its growing and processing
operations in Mexico because of Mexico's competitive labor and land costs,
ideal climatic conditions for growing citrus and other fruits and
vegetables, geographic proximity to the United States and the favorable
trade benefits of NAFTA. UniMark believes that present economic conditions
in Mexico, particularly high prevailing interest rates and limited
availability of equity capital, afford the Company with significant
acquisition opportunities. In this regard, the Company's acquisition
strategy targets processing facilities, agricultural opportunities and
other productive assets in Mexico that can benefit from UniMark's
international distribution and marketing expertise.
- Acquire food processing companies that possess favorable operating or
distribution synergies. UniMark's acquisition strategy also targets food
processing companies, such as Simply Fresh and Deli-Bon, that possess
favorable operating or distribution synergies. The Company believes that
by acquiring food processing companies, it can expand its distribution and
utilize its low cost source of Mexican fruit and labor.
RECENT ACQUISITIONS
Since January 1, 1996, the Company has completed the following three
strategic acquisitions (the "Acquisitions") which reflect the implementation of
the Company's acquisition strategy:
GISE. In May 1996, the Company acquired all of the outstanding shares
of capital stock of GISE, a major Mexican producer of citrus concentrates,
oils and juices. GISE's two juice plants are located in Cd. Victoria,
Tamaulipas, Mexico and Poza Rica, Veracruz, Mexico in the heart of major
citrus growing regions. UniMark believes that the GISE Acquisition will
confer operational benefits on both companies resulting from combining
fruit procurement functions. In addition, UniMark believes that GISE should
21
<PAGE> 24
benefit from UniMark's international distribution and marketing expertise.
Further, the GISE Acquisition significantly increases the Company's
production capacity of citrus oils.
Simply Fresh. In May 1996, the Company acquired all of the
outstanding shares of capital stock of Simply Fresh, a fruit processing and
distribution company located in Los Angeles, California. Substantially all
of Simply Fresh's sales are to the foodservice industry in the western
United States. UniMark believes that the Simply Fresh Acquisition will
afford it with operating synergies resulting from processing some of the
fruit used in Simply Fresh's products at UniMark's Mexican plants and
expanded distribution into the foodservice market. In addition, the Simply
Fresh plant is strategically located to process fruit grown in California
and Arizona, two major citrus growing regions with growing seasons that are
generally opposite to those of Mexico.
Deli-Bon. In January 1996, the Company acquired all of the
outstanding shares of capital stock of Deli-Bon. Deli-Bon processes
primarily fruit salad at its processing plant in Quebec, Canada for
distribution to the retail and foodservice markets of Canada and the
northeastern United States. UniMark believes that it will realize
significant operating synergies from integrating its and Deli-Bon's fruit
procurement, processing and distribution functions. In addition, the
Company believes that the Deli-Bon plant is strategically located to
distribute products to the retail and foodservice markets in Canada and in
the northeastern United States.
CURRENT PRODUCTS
The Company's principal products are derived from citrus and tropical
fruits. The Company has focused on applying its knowledge of fruit growing and
processing with its international marketing and distribution capabilities to
develop four key product categories. These categories include cut fruits,
juices, specialty food ingredients and other products. The following is a
description of each of these categories and their specific products:
CUT FRUITS. Under the brand names of SUNFRESH(TM), Fruits of Four
Seasons(R), Kledor(R) and under various private labels, UniMark markets:
Chilled fruit. The chilled fruit line includes mango slices, grapefruit
segments, orange segments, pineapple chunks, sliced papaya, and a
variety of fruit salads. These products are packed for retail, wholesale
club and foodservice customers.
Frozen fruit. Using IQF, the frozen line of fruit includes melon,
mango, orange, grapefruit, papaya and pineapple products packed for
foodservice and industrial customers.
Canned fruit (shelf-stable). The canned fruit line includes orange
segments and grapefruit segments packed for retail, foodservice,
Japanese and industrial customers.
JUICES. The Company, through GISE, markets directly to major industrial
users a full line of citrus juice products including citrus concentrates
and single strength juices:
Citrus concentrate. Citrus juice concentrates are produced from
oranges, grapefruits, tangerines, Persian limes and lemons.
Single strength juices. Citrus juices are produced from oranges,
grapefruits, tangerines, Persian limes and lemons.
SPECIALTY FOOD INGREDIENTS. UniMark believes that significant market
opportunities exist in providing customers with specialty food ingredient
products that can be derived from processing citrus and tropical fruits.
Presently, UniMark's specialty food ingredients include:
Citrus cell-sacs. The Company has developed and utilizes a unique
processing method that separates cold-peeled citrus fruit into
individual juice-containing cell-sacs. These cell-sac products are sold
to food and soft drink manufacturers in Japan to enhance the flavor and
texture of fruit juices and desserts.
22
<PAGE> 25
Citrus oils. Citrus oils are extracted from oranges, grapefruits,
tangerines, Persian limes and lemons. These oils are primarily used
by the Company's customers in perfumes and other scented products.
OTHER. UniMark also produces the following products:
Avocado products. Avocado products, including guacamole and avocado
pulp, are packed for sale to retail, wholesale club and foodservice
customers under the brand name Jalapeno Sam(R).
Cattle feed. The Company recycles citrus byproducts, such as peel
and pulp, as cattle feed.
NEW PRODUCTS
The Company's new product strategy is to apply its processing expertise to
introduce new products as well as extend the line of its existing citrus and
tropical fruit products. UniMark has several major products under development
for projected market introduction during 1996, including:
Additional IQF citrus and tropical fruit. UniMark intends to expand
its retail and foodservice business by introducing additional products
utilizing its IQF process. UniMark believes that this IQF process allows
UniMark to process citrus and other tropical fruit at the peak of the
season while preserving the fresh-like texture and taste of the fruit.
Chilled fruit snacks. In the second half of 1996, UniMark plans to
introduce a line of chilled fruit snacks incorporating cell-sacs as a key
ingredient. UniMark has targeted this planned line of fruit snacks toward
retail and foodservice customers.
UniMark's product development and commercialization efforts are subject to
all of the risks inherent in the development of new products.
MARKETING, SALES AND DISTRIBUTION
Marketing. UniMark's marketing department develops brand strategies for
the Company's existing and new products, including product development, pricing
strategy, consumer and trade promotion, advertising, publicity and package
design. This department's responsibilities include determining the allocation of
resources between consumer and trade spending programs, pricing and
profitability analysis, as well as product and packaging designs. UniMark's
marketing team is led by a senior vice president and two product managers, one
responsible for retail sales and one for the foodservice/wholesale club store
channel.
In the retail market, the Company's primary focus has been on the chilled
fruit category. UniMark intends to capitalize and strengthen the brand awareness
and market penetration attained by its SUNFRESH(TM) brand in the United States,
and the Kledor(R) brand in Canada, and the Jalapeno Sam(R) brand with respect to
Mexican guacamole dip products. Under its "Fruit Made Easy(R)" slogan, UniMark
marketing strategy includes introduction of a comprehensive line of brand name
specialty chilled, frozen and canned "ready-to-eat" pre-cut fruit that offers
the benefits of healthy, low-fat foods with a multitude of vitamins to the
increasingly health conscious consumer. The Company's marketing objectives
include increasing "impulse buying" of its retail products by building greater
product visibility through "eye-catching" package designs, innovative rack
systems and trial package promotions. In addition, the Company utilizes trade
promotions, such as quarterly price allowances, to generate "feature promotion
activity" for its products. The SUNFRESH(TM) product line also receives
substantial advertising support in trade publications and national food shows
throughout the year.
In the foodservice and wholesale club markets, the focus is on securing
market leadership in the chilled fruit category, primarily through private label
programs with major foodservice distributors and a strong branded approach
utilizing the SUNFRESH(TM) and Fruits of Four Seasons(R) labels in the United
States, and Kledor(R) in Canada and the Jalapeno Sam(R) brand in the guacamole
segment. Marketing efforts in these channels are directed toward trade usage
programs and yearly trade rebates.
23
<PAGE> 26
Sales. UniMark's sales organization consists of five sales management
teams primarily focusing on the management of independent food brokers or
international representatives that directly interface with the customer. These
teams are organized into retail, foodservice, wholesale clubs, Deli-Bon sales in
Canada and Japanese exports.
The retail team is led by a senior vice president of sales and consists of
four regional managers, each with geographic responsibility for approximately 25
percent of the United States. The foodservice team is guided by a vice president
of foodservice sales. The Company plans to divide the United States foodservice
market into three regions (west, central, and east), with a regional sales
manager overseeing each region. The wholesale club market has one sales manager
interfacing directly with key wholesale club distributors.
The Company's Canadian sales team operates out of Deli-Bon and is led by
the president of Deli-Bon and two district sales managers. Deli-Bon uses a
system of independent food brokers throughout Canada although its primary focus
is within the Province of Quebec.
The Company's Japanese exports are directed by an export sales manager
located in Mexico City who deals with agents primarily from Japanese trading
companies. In addition, relationships with the Company's Japanese customers are
handled by the Company's senior executives.
Without giving pro forma effect to the Acquisitions, the following table
shows, for the last three years, the amount and percentage of net sales
contributed by the various market segments for the Company's products:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------
1993 1994 1995
----------------- ----------------- -----------------
NET NET NET
SALES PERCENT SALES PERCENT SALES PERCENT
------- ------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Retail sales......................... $ 9,338 49.4% $ 9,961 39.3% $12,537 34.0%
Japan sales.......................... 3,355 17.8 5,985 23.6 12,116 32.9
Wholesale club sales................. 4,121 21.8 5,073 20.0 7,061 19.2
Foodservice sales.................... 1,045 5.5 962 3.8 861 2.3
Industrial and other sales........... 1,034 5.5 3,365 13.3 4,291 11.6
------- ------- ------- ------- ------- -------
Total...................... $18,893 100.0% $25,346 100.0% $36,866 100.0%
======= ===== ======= ===== ======= =====
</TABLE>
Retail sales. UniMark markets its products to more than 200 regional and
national supermarket chains and wholesalers throughout the United States and
Canada. In conjunction with its own national sales force, UniMark utilizes over
50 independent food brokers and distributors to sell its products.
Japanese sales. UniMark exports a line of pasteurized citrus products and
juice-containing citrus cell-sac products to Japan for use in the food and
beverage industries. Although sales to industrial customers in Japan are
facilitated through Japanese trading companies, the Company maintains direct
relationships with its industrial customers. During 1993, 1994 and 1995, sales
to the Company's Japanese customers, through Mitsui Foods, Inc., a Japanese
trading company, accounted for approximately 10.7%, 19.5% and 27.5%,
respectively, of the Company's net sales (without giving pro forma effect to the
Acquisitions). UniMark is continuing to diversify and expand its customer base
in the Japanese market. UniMark believes that a significant market opportunity
exists in Japan for frozen citrus and tropical fruit products because such
products do not contain additives or preservatives. UniMark's sales to the
Japanese market have been its fastest growing market segment.
Wholesale club sales. UniMark indirectly sells products to Sam's Wholesale
Clubs and other wholesale clubs throughout the United States. During 1993, 1994
and 1995, indirect sales to Sam's Wholesale Clubs accounted for approximately
17.5%, 18.5% and 17.6%, respectively, of the Company's net sales.
Foodservice sales. Sales to the United States government, fast food
chains, restaurants, hospitals and other foodservice customers are made either
directly to or through foodservice distributors by the Company's recently
developed foodservice sales force. UniMark intends to expand its foodservice
business by introducing
24
<PAGE> 27
additional products utilizing its IQF process. The Company believes that the
foodservice business segment represents an opportunity for significant future
growth.
Industrial and other sales. Industrial and other sales consist primarily
of IQF melon ball sales to industrial users in the United States for repacking
or further processing. UniMark utilizes an independent food broker to sell its
products to industrial users in the United States.
Distribution. UniMark operates its own trucking fleet to transport
finished cut fruit products from its Mexican processing facilities to its
distribution center in Hidalgo, Texas. From there, deliveries are made to
UniMark's customers by independent trucking companies. In Canada, deliveries are
made to customers by independent trucking companies from Deli-Bon's facilities.
Products exported to Japan are shipped directly from Mexico. GISE transports
finished product by common carrier to North American customers. Products to
overseas customers are shipped directly in containers.
GROWING OPERATIONS
To ensure the availability of the highest quality raw materials, UniMark
intends to expand its fruit growing operations in Mexico, utilizing advanced
agricultural practices. UniMark believes that Mexico's favorable climate and
soil conditions, coupled with competitive labor and land costs, offer
significant opportunities to grow high quality fruits in a cost effective
manner. Presently, a majority of the Company's raw materials are provided by
growers under various arrangements, including operating agreements and
individual fixed price contracts to purchase entire production. The following
table sets forth the Company's various agricultural projects:
<TABLE>
<CAPTION>
PROPERTY
NAME LOCATION ACREAGE CROP INTEREST
- ------------------------------- -------------------- --------- ------------------ ----------
<S> <C> <C> <C> <C>
Loma Bonita II Grove........... Loma Bonita, Oaxaca, 625 acres Pink grapefruit(3) Leased
Mexico
Villa Azueta Grove(1).......... Villa Azueta, 325 acres Pineapple 240 acres
Veracruz, Mexico owned and
85 leased
Victoria Grove................. Cd. Victoria, 240 acres Oranges and Owned
Tamaulipas, Mexico Italian lemons
Loma Bonita I Grove............ Loma Bonita, Oaxaca, 190 acres White grapefruit Leased
Mexico
Azteca Grove(2)................ Montemorelos, Nuevo 144 acres White and Rio Red Leased
Leon, Mexico grapefruit(2)
Las Tunas Grove................ Isla, Veracruz, 120 acres White and pink Leased
Mexico grapefruit
</TABLE>
- ---------------
(1) Villa Azueta is the southern headquarters of UniMark's agricultural
operations. The agricultural headquarters is used for the development of
pineapple seedlings, as well as other agricultural crops. In 1995, the
Company entered into a 10-year lease for this facility and has an option to
purchase the facility for fair market value determined at the time such
option is exercised.
(2) In 1994, ICMOSA entered into a 10-year operating agreement with the owners
of a 144 acre grapefruit grove located near the ICMOSA plant in
Montemorelos. Pursuant to the agreement, ICMOSA operates the grove and
purchases all the grapefruit at a formula price tied to the price of
grapefruit purchased from unrelated third parties. The grove consists of
approximately 13,000 grapefruit trees and incorporates advanced agricultural
technology. Each tree has a watering and feeding system which can also be
utilized as an anti-freeze system utilizing mist generated by three 500
horsepower boilers. Pursuant to the agreement, ICMOSA operates the grove and
purchases all the grapefruit at a formula price tied to the price of
grapefruit purchased from unrelated third parties.
(3) Presently, approximately 240 of the 625 acres consist of a pink grapefruit
grove. The Company intends to plant pineapple on approximately 350 of the
remaining 385 acres of this property.
25
<PAGE> 28
PROCUREMENT
Currently, a substantial quantity of the fruit processed by the Company is
purchased from third parties. However, the Company's Mexican grapefruit growing
operations supply over 80% of the Company's grapefruit demand. In addition, the
Company purchases grapefruit from growers in the Texas Rio Grande Valley for
processing at its ICMOSA plant. For the 1996 growing season, the Company has
entered into operating agreements with Mexican growers of melons to supply the
Company's anticipated demand for melons. Pursuant to these agreements, the
Company supplies the seeds, fertilizer and insecticides and manages the growing
operations. The Company has entered into similar agreements with Mexican growers
of mangos to supply the Company's anticipated demand for mangos. Substantially
all of the oranges and all of the avocados used in the Company's operations are
purchased from third-party growers throughout Mexico. Presently, UniMark
purchases "Grade A" pineapple from growers throughout Mexico. UniMark has
commenced a significant pineapple growing project. Initial production from this
project is scheduled to begin in 1997 and UniMark intends to expand this project
until 2,400 acres are under cultivation. UniMark believes that production from
this project not only will provide UniMark with a high quality supply of
pineapples for processing but also will produce a significant amount of
pineapple for the North American fresh fruit market.
The Company purchases citrus from growers throughout Mexico. GISE's two
juice plants are located in Cd. Victoria, Tamaulipas, Mexico and Poza Rica,
Veracruz, Mexico in the heart of Mexico's two major citrus growing regions. The
State of Veracruz, located along the east coast of Mexico, is Mexico's largest
orange producing state followed by the neighboring states of Tamaulipas and San
Luis Potosi. Citrus from this region is available for processing at GISE's
Veracruz facility early in the season because of this region's southern
location. GISE's Cd. Victoria plant processes fruit grown primarily in the
northeastern region of Mexico. The fruit is transported by common carrier to
GISE's two plants located in Mexico.
PROCESSING
Fruits which will be processed into fruit juice concentrate, fruit juice,
citrus oils and cattle feed, are processed at the Company's Cd. Victoria and
Poza Rica, Mexico facilities. All other products are processed at the Company's
seven remaining facilities in Mexico as well as plants in Los Angeles,
California and Quebec City, Canada, as outlined below.
Cut Fruit. Upon arrival at the Company's Mexican processing plants, the
fruit is inspected and washed. On the production line, the fruit is manually
peeled and cut into various presentations (slices, sections, chunks, balls).
Following this process, some fruits are further processed into juice-containing
cell-sacs. In addition, some processed fruits are frozen utilizing the Company's
IQF process. Other processed fruits are transferred directly into bulk storage
or final product packaging (pails, jars and cans). After further processing, the
juice-containing cell-sacs are canned while the frozen products are packaged in
plastic bags or trays. The ICMOSA plant is the Company's main plant and serves
as the hub for the Company's other Mexican processing plants, which primarily
produce semi-processed product. At the ICMOSA plant, products are labeled and
packaged for final shipment. ICMOSA also delivers bulk raw materials to Deli-Bon
for packing into final presentations. Only limited processing takes place at
Deli-Bon. The Company cans fruit at its ICMOSA and Puebla plants.
Juice. GISE's operations are substantially automated. Once the fruit
arrives at a plant, it is unloaded onto rollers. The fruit is then washed and
inspected. Bruised and damaged fruit is removed by hand and the remaining fruit
is then routed to rollers with short needles which extract the oil from the
peel. Once the oil is removed, the fruit is sorted by size to enter into slicing
and squeezing machines. These machines slice the oranges and squeeze the juice
and pulp completely from the peel. The juice is then separated from the pulp.
Upon further processing, the juice is stored on site until it is shipped
directly to customers.
26
<PAGE> 29
The Company's principal processing facilities are described below:
<TABLE>
<CAPTION>
APPROXIMATE
NUMBER OF
EMPLOYEES (AS OF
APPROXIMATE DECEMBER 31, PROPERTY
NAME LOCATION SQUARE FOOTAGE 1995) INTEREST(1)
- ----------------------- -------------------------------- -------------- ----------------- -----------
<S> <C> <C> <C> <C>
ICMOSA Plant........... Montemorelos, Nuevo Leon, Mexico 80,000(2) 1,100 Owned
Victoria Juice Plant... Cd. Victoria, Tamaulipas, Mexico 65,740 155 Owned
Azteca Plant........... Montemorelos, Nuevo Leon, Mexico 50,000 320 Leased
Puebla Plant........... Tlatlauquipec, Puebla, Mexico 50,000 10(3) Owned
Simply Fresh Plant..... Los Angeles, California 45,000 140 Leased
Zamora Plant........... Zamora, Michoacan, Mexico 41,000 3(4) Leased
IHMSA Plant............ Montemorelos, Nuevo Leon, Mexico 40,000 800 Leased
Isla Plant............. Isla, Veracruz, Mexico 32,000 300 Leased
San Rafael Plant....... San Rafael, Veracruz, Mexico 28,500 400 Leased
Veracruz Juice Plant... Poza Rica, Veracruz, Mexico 22,900 60 Leased
Deli-Bon Plant......... Quebec City, Quebec, Canada 16,800 36 Owned
</TABLE>
- ---------------
(1) The agreements pursuant to which this facility is leased by the Company
grants the Company the option to purchase the facility prior to the
expiration of such agreement at a purchase price equal to the then current
fair market value of the facility.
(2) Presently, the Company is constructing a new storage and repacking facility,
capable of holding up to approximately 10 million pounds of semi-processed
and finished product, next to the ICMOSA plant. Construction of this
facility commenced in February 1996 and is scheduled for completion in
August 1996.
(3) This facility was not in production at December 31, 1995 and commenced
limited operations in February 1996. The Company anticipates that the level
of operations conducted at this facility will increase with the facility
becoming fully operational in 1998. The Company estimates that this facility
has the capacity to employ as many as 1,000 employees when fully
operational.
(4) This facility has not yet commenced production.
RESEARCH AND DEVELOPMENT
The Company's research and development organization provides product,
packaging and process development, analytical and microbiological services, as
well as agricultural research and seed production.
EMPLOYEES
As of March 31, 1996, UniMark employed approximately 3,000 full-time
employees, of whom approximately 2,973 were located in Mexico, 41 were located
in the United States and 36 were located in Canada. In Mexico, labor relations
are governed by separate collective labor agreements between UniMark and the
unions representing the particular group of employees. All of UniMark's
employees in Mexico, whether seasonal or permanent, are affiliated with labor
unions which are generally affiliated with a national confederation. Consistent
with other labor practices in Mexico, wages are negotiated every year while
other terms are negotiated every two years.
In the United States and Canada, UniMark's employees are not covered by
collective bargaining agreements. UniMark believes that its relations with all
of its employees are good.
COMPETITION
The food industry, including each of the markets in which the Company
competes, is highly competitive with respect to price and quality (including
taste, texture, healthfulness and nutritional value). The Company faces direct
competition from citrus processors with respect to its existing product lines
and faces potential competition from numerous, well established competitors
possessing substantially greater financial, marketing, personnel and other
resources than the Company. The Company's fruit juice products compete broadly
with
27
<PAGE> 30
all beverages available to consumers. In addition, the food industry is
characterized by frequent introduction of new products, accompanied by
substantial promotional campaigns. In recent years, numerous companies have
introduced products positioned to capitalize on growing consumer preference for
fresh fruit products. It can be expected that the Company will be subject to
increasing competition from companies whose products or marketing strategies
address these consumer preferences.
PROPERTIES
In addition to the properties described under "Growing Operations" and
"Processing," the Company maintains corporate headquarters in Lewisville, Texas;
a distribution center in Hidalgo, Texas; a technology development center in Cape
Coral, Florida; and a lodging facility in Cd. Victoria, Tamaulipas, Mexico.
Corporate Headquarters. UniMark leases approximately 13,000 square feet of
office space for its corporate headquarter in Lewisville, Texas (located 20
miles from the Dallas/Fort Worth International Airport) from an entity
controlled by Jorn Budde, the Company's President, Chief Executive Officer and
Chairman of the Board. As of December 31, 1995, UniMark employed 23 people at
this facility.
The Hidalgo Distribution Center. The Company's refrigerated distribution
center in Hidalgo, Texas (on the Texas/Mexico border) consists of approximately
22,000 square feet. As of December 31, 1995, 18 people were employed at this
facility.
The UniMark Tech Center. The Company's tech center is located in Cape
Coral, Florida and consists of approximately 13,000 square feet. A substantial
amount of customized equipment used in the Company's operations are manufactured
at this facility.
The GISE Conference Facility. In connection with the GISE Acquisition in
May 1996, the Company acquired a "hacienda" which has been declared an historic
landmark. This facility is located near GISE's plant in Cd. Victoria,
Tamaulipas, Mexico, occupies approximately 90,000 square feet and is situated on
approximately 10 acres. The Company intends to utilize this facility, in part,
as a conference center.
ENVIRONMENTAL MATTERS
As a result of its agricultural, food and juice processing activities, the
Company is subject to numerous foreign and domestic environmental laws and
regulations.
The operations of UniMark in Mexico are subject to Mexican federal and
state laws and regulations relating to the protection of the environment. The
principal legislation is the federal General Law of Ecological Balance and
Environmental Protection (the "Ecological Law"), which is enforced by the
Ministry of Social Development ("Sedesol"). Under the Ecological Law, rules have
been promulgated concerning water pollution, air pollution, noise pollution and
hazardous substances. Sedesol can bring administrative and criminal proceedings
against companies that violate these environmental laws, and can also close non-
complying facilities. The operations of UniMark in Canada are subject to
Canadian federal and provincial laws and regulations relating to the protection
of the environment including An Act Respecting Occupational Health and Safety
(Quebec), the Canadian Environmental Protection Act (Canada), and the
Environment Quality Act (Quebec). Similarly, the operations of UniMark in the
United States are subject to United States federal and state laws and
regulations relating to the protection of the environment. Although the Company
believes that its facilities currently are in compliance with all applicable
environmental laws, failure to comply with any such laws could have a material
adverse effect on the Company.
GOVERNMENT REGULATION
The manufacture, processing, packing, storage, distribution and labeling of
food and juice products is subject to extensive regulations enforced by, among
others, the FDA and state, local and foreign equivalents thereof and to
inspection by the United States Department of Agriculture and other federal,
state, local and foreign agencies. Applicable statutes and regulations governing
food products include "standards of identity" for the content of specific types
of foods, nutritional labeling and serving size requirements and under "Good
Manufacturing Practices" with respect to production processes. The Company
believes that its products
28
<PAGE> 31
satisfy, and its new products will satisfy, all applicable regulations and that
all of the ingredients used in its products are "Generally Recognized as Safe"
by the FDA for the intended purposes for which they will be used. The Company,
on a daily basis, tests its products at its internal laboratories and, from time
to time, submits samples of its products to independent laboratories for
analysis. Failure to comply with applicable laws and regulations could subject
the Company to civil remedies, including fines, injunctions, recalls or
seizures, as well as potential criminal sanctions, which could have a material
adverse effect on the Company.
PRODUCT LIABILITY AND PRODUCT RECALL
The testing, marketing, distribution and sale of food and beverage products
entails an inherent risk of product liability and product recall. There can be
no assurance that product liability claims will not be asserted against the
Company or that the Company will not be obligated to recall its products.
Although the Company maintains product liability insurance coverage in the
amount of $2,000,000 per occurrence, there can be no assurance that this level
of coverage is adequate. A product recall or a partially or completely uninsured
judgment against the Company could have a material adverse effect on the
Company.
INTELLECTUAL PROPERTY RIGHTS
The Company regards its trademarks, trade dress, trade secrets and similar
intellectual property as important to its success. The Company has been issued a
registered trademark for its Fruits of Four Seasons(R), Jalapeno Sam(R), Fruit
Made Easy(R) and Kledor(R) trademarks. The Company has filed for trademark
protection for its SUNFRESH(TM) trademark. No assurance can be given that the
Company will be successful in obtaining such trademark protection or that the
trademarks will afford the Company with any competitive advantages. In
connection with the Simply Fresh Acquisition, the Company has acquired patent
rights with respect to certain fruit cutting machinery.
LEGAL PROCEEDINGS
From time to time the Company is involved in litigation relating to claims
arising from its operation in the normal course of business or otherwise. As of
the date of this Prospectus, the Company is not a party to any legal
proceedings, the adverse outcome of which individually or in the aggregate, in
the Company's opinion, would have a material adverse effect on the Company's
results of operations or financial condition.
29
<PAGE> 32
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information as of the date of this
Prospectus with respect to the directors, executive officers and key employees
of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------- --- -----------------------------------------------------
<S> <C> <C>
Jorn Budde....................... 52 President, Chief Executive Officer and Chairman of
the Board
Rafael Vaquero Bazan............. 41 Executive Vice President, Chief Operating Officer and
Director of UniMark and President and Chief
Executive Officer of ICMOSA
Jose Martinez Brohez............. 53 President and Chief Executive Officer of GISE(1)
Keith Ford....................... 44 Vice President -- Finance (Chief Accounting Officer),
Secretary and Treasurer
Soren Borre...................... 53 Senior Vice President -- Sales of UniMark Foods
Jeffrey M. King.................. 37 Senior Vice President -- Marketing of UniMark Foods
Eduardo Vaquero Bazan............ 37 Director and Vice President -- Finance and
Administration of ICMOSA
Pedro Vaquero Garcia............. 69 Director (Honorary Chairman)
Fernando Camacho Casas........... 43 Director
Jakes Jordaan.................... 34 Director
Edward Stone..................... 54 Director
</TABLE>
- ---------------
(1) The Company expects Mr. Martinez to be nominated to the Board of Directors
at its next meeting of shareholders.
The business experience, principal occupations and employment of each of
the directors and executive officers of the Company during at least the past
five years, together with their periods of service as directors and executive
officers of the Company, are set forth below.
Jorn Budde is a co-founder of the Company and has been its President,
Chief Executive Officer and Chairman of the Board since its inception in 1992.
From 1987 until 1991, Mr. Budde served as President of UniMark Sales, Inc., a
company founded and wholly-owned by Mr. Budde, that provided international
consulting and marketing services. From 1984 until 1986, Mr. Budde served as
Vice President of Mission Foods, Inc., a subsidiary of Gruma SA, a diversified
international foods conglomerate, with significant Mexican operations. From 1976
until 1984, Mr. Budde served in various executive positions with The Jimmy Dean
Companies, a national meat processing company, most recently as Executive Vice
President and Vice Chairman. Prior to 1976, Mr. Budde served in various
positions with Plumrose, Inc., a subsidiary of The East Asiatic Company of
Copenhagen, Denmark, where he started his business career. Mr. Budde has a
degree in International Business from the Copenhagen School of Commerce.
Rafael Vaquero Bazan has served as Executive Vice President, Chief
Operating Officer and a Director of the Company since 1992. Since 1986, Mr.
Vaquero has served as President and Chief Executive Officer of ICMOSA. He has
also served as general manager and has been in charge of operating the ICMOSA
and Azteca packing plants since 1978 and 1986, respectively. Mr. Vaquero served
as President of Amafac, the Mexican National Fruit Sections Packers Association
from 1989 until 1991. Mr. Vaquero is the former President of the National Citrus
Growers Association in Mexico and a former President of the National Citrus
Packers Association in Mexico. He is also a former member of the Board of
Directors of EMIT, a government sponsored entity involved in developing
technology for the Mexican citrus industry. Mr. Vaquero has a Masters Degree in
Business Administration from the University of Monterrey, Mexico. Mr. Rafael
Vaquero Bazan is the son of Mr. Pedro Vaquero Garcia and the brother of Mr.
Eduardo Vaquero Bazan.
Jose Martinez Brohez. Since 1986, Mr. Martinez has been the President and
Chairman of the Board of GISE. Mr. Martinez is a co-founder and has been a
Director of the Asociacion Nacional De Procesadores De
30
<PAGE> 33
Citricos, the Mexican national association of citrus processors since 1991. He
is also a Board member of the following financial institutions: Banco Nacional
De Mexico (Banamex), Bancomer, S.A. at Cd. Victoria, Tamps.; and Casa De Bolsa
Arka at Monterrey, N.L. Mr. Martinez obtained his Bachelor of Science degree
from Monterey Tech and his Master of Science and Ph.D. and in Agriculture, Range
Management and Animal Science from Texas A&M University.
Keith Ford joined the Company in 1992 as Vice President -- Finance,
Secretary and Treasurer. From 1990 until 1992, Mr. Ford served as internal
comptroller and financial advisor of ERS, Inc., a privately-held multi-store
specialty retail company. From 1987 to 1990, Mr. Ford served as comptroller of
Papertech, Inc., a privately-held paper products importer and distributor. Mr.
Ford has a degree in accounting and is a Certified Public Accountant in the
State of Texas.
Soren Borre joined the Company in 1992 as Vice President -- Sales. From
1989 until 1992, Mr. Borre served as Director of Sales and Marketing for Katrin
Systems, Inc., an international paper products company.
Jeffrey King joined the Company in September 1995 as Vice
President -- Marketing. From January 1994 until joining UniMark, Mr. King served
as Director of Marketing for Mission Foods, Inc., a manufacturer and distributor
of Mexican food products. From 1992 until 1994, Mr. King served as Director of
Marketing for Jimenez Foods, a division of Milnot Company, a consumer foods
product company. From 1990 until 1992, Mr. King served as a Product manager for
Leaf Corporation, a manufacturer of confectionary products. Mr. King has a
Masters of Management degree from the J.L. Kellogg Graduate School of Management
of Northwestern University.
Eduardo Vaquero Bazan has served as a Director of the Company since April
1994 and as Vice President -- Finance and Administration of ICMOSA since January
1995. From 1988 until 1995, Mr. Vaquero was employed by Industrias Horticolas de
Montemorelos, S.A. de C.V, a frozen fruit and vegetable processing plant, most
recently as General Manager and Director. From 1982 to 1988, Mr. Vaquero served
as a Divisional Director of Banca Serfin, S.A., a regional Mexican bank. Mr.
Eduardo Vaquero Bazan is the son of Mr. Pedro Vaquero Garcia and the brother of
Mr. Rafael Vaquero Bazan.
Pedro Vaquero Garcia is a co-founder of ICMOSA and Azteca. Mr. Vaquero has
served as a Director and Honorary Chairman of the Company since 1994. From 1992
until 1995, Mr. Vaquero served as a member of the Congress of the State of Nuevo
Leon, Mexico. Prior to 1992, Mr. Vaquero held several political offices. Mr.
Pedro Vaquero Garcia is the father of Messrs. Eduardo Vaquero Bazan and Rafael
Vaquero Bazan.
Fernando Camacho Casas has served as a Director of the Company since
December 1994. Since September 1992, Mr. Camacho has served as General Director
and co-founder of Operadora Agros, S.A. de C.V., a Mexican venture capital fund
that invests primarily in the Mexican agricultural, horticultural and food
industries. During 1991 and 1992, he served as a representative of the Mexican
Ministry of Commerce in the North American Free Trade Agreement negotiations.
From 1985 to 1990, Mr. Camacho served as an economist for Probursa, S.A., a
large Mexican investment and securities brokerage firm. Mr. Camacho received his
degree in economics from the Autonomous Technological Institute of Mexico.
Jakes Jordaan has served as a Director of the Company since 1994.
Presently, Mr. Jordaan is a member of Jordaan, Howard & Pennington, PLLC,
Dallas, Texas, a law firm specializing in corporate finance, securities and
complex business litigation. From February 1991 until March 1994, Mr. Jordaan
was a member of the law firm of Munsch, Hardt, Kopf, Harr & Dinan, P.C., Dallas,
Texas, most recently as a shareholder. Mr. Jordaan is the past Chairman of the
Securities Section of the Dallas Bar Association and is a member of the Texas
Bar Association and the American Bar Association.
Edward A. Stone has served as a Director of the Company since 1994. Since
1976, Mr. Stone has been President and Chairman of The Dallas Marketing Group,
Inc., a marketing consulting group whose clients include Heinz Pet Products,
StarKist Seafood, American Airlines, and MetroCel Cellular. Prior to founding
his consulting practice, Mr. Stone held a variety of marketing and general
administration positions in the United States and Canada with The Procter &
Gamble Company, the Clorox Company and Frito-Lay.
31
<PAGE> 34
All directors hold office until the next annual meeting of shareholders or
until their successors are elected and qualified. Officers hold their respective
positions until their successors are duly qualified or until they resign or are
removed by the Board of Directors.
THE BOARD OF DIRECTORS
During the fiscal year ended December 31, 1995, there were two meetings of
the Board of Directors and the Board of Directors took action on two occasions
by means of unanimous written consent. Each director attended at least 75% of
the aggregate of (i) the total number of meetings of the Board of Directors held
during the period for which he served as a director and (ii) the total number of
meetings held by all committees of the Board on which he served. The Board has
four committees: Audit, Stock Option Plan, Compensation and Director Option
Plan.
The Audit Committee consists of Messrs. Stone and Jordaan, both
non-management directors. This committee acts as a liaison between the Board of
Directors and the independent auditors. The committee reviews with the
independent auditors the planning and scope of financial statement audits, the
results of those audits and the adequacy of internal accounting controls. It
also monitors other corporate and financial policies. The Audit Committee held
two meetings during the year ended December 31, 1995.
The Stock Option Plan Committee consists of Messrs. Jordaan and Stone, both
non-management directors. This committee is vested with full authority to select
participants, grant options, determine the number of shares subject to each
option, the exercise price of each option and in general, to make, administer
and interpret such regulations as it deems necessary to administer the
Employees' Option Plan. The Stock Option Plan Committee held one meeting during
the year ended December 31, 1995.
The Compensation Committee consists solely of Mr. Stone, a non-management
director. This committee establishes executive compensation policies and makes
recommendations to the Board of Directors.
The Directors' Option Plan Committee administers the Directors' Option
Plan. This committee is currently comprised of Messrs. Jorn Budde and Rafael
Vaquero Bazan.
COMPENSATION OF DIRECTORS
Cash Compensation. No cash compensation has been paid by the Company to
its directors prior to this offering. Directors are reimbursed for their
ordinary and necessary expenses incurred in attending meetings of the Board of
Directors or a committee thereof.
1994 Stock Option Plan for Directors. Effective as of April 15, 1994, the
Directors' Option Plan was approved by the Company's Board of Directors and the
holders of a majority of the outstanding shares of the Company's Common Stock.
A maximum of 100,000 shares of Common Stock (subject to certain
anti-dilution adjustments) may be issued to eligible directors upon the exercise
of options granted under the Directors' Option Plan. Currently, options for
67,500 shares of Common Stock have been granted under the Directors' Option Plan
to Messrs. Stone, Jordaan and Camacho, all of which are currently exercisable.
The average exercise price of such options is $3.90 per share.
Stock options may be granted under the Directors' Option Plan to any
director who is not an employee of the Company and is not a holder of more than
1% of the outstanding shares of the Company's Common Stock or a person who is in
control of such holder ("Eligible Directors").
Eligible Directors automatically receive an initial grant of options to
purchase 20,000 shares of Common Stock upon their appointment to the Board of
Directors, and annual grants of options to purchase 2,500 shares of Common Stock
as of the date following each annual meeting of the Company's shareholders. The
exercise price of options granted under the Directors' Option Plan will be at
least the fair market value of a share of the Common Stock on the date of grant.
Options granted pursuant to the Directors' Option Plan are immediately
exercisable. The expiration date of each option is not more than six years from
the date of grant. Payment for shares purchased upon exercising an option are
made in cash or by certified check, bank draft or money order,
32
<PAGE> 35
or by delivery of previously owned shares of Common Stock held for at least six
months (at their fair market value), or partly in cash and partly in such Common
Stock.
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid by the Company to its
President and Chief Executive Officer for services rendered to the Company in
all capacities during the years ended December 31, 1993, 1994 and 1995. No other
executive officer of the Company had total salary and bonus which exceeded
$100,000 for the Company's fiscal years ended December 31, 1993, 1994 and 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION(1)
-------------------
YEAR SALARY
---- --------
<S> <C> <C>
Jorn Budde.............................................................. 1995 $120,000
President and Chief Executive Officer 1994 $ 96,000
1993 $ 96,000
</TABLE>
- ---------------
(1) The Company's President and Chief Executive Officer receives personal
benefits in addition to salary and cash bonuses. The aggregate amount of
such personal benefits, however, does not exceed the lesser of $50,000 or
10% of the total of his annual salary and bonus.
EMPLOYMENT AGREEMENTS
GISE has entered into an Employment Agreement dated as of May 9, 1996 (the
"Brohez Employment Agreement") with Jose Martinez Brohez, pursuant to which Mr.
Brohez has agreed to remain employed by GISE as its President and Chief
Executive Officer until May 9, 2000. The Brohez Employment Agreement provides
for a base salary of $70,000 per year and contains provisions prohibiting Mr.
Brohez from engaging or investing in any business that competes with GISE or
soliciting any of GISE's employees, during the term of the Brohez Employment
Agreement and for a period of two years thereafter, without the express written
consent of GISE. The Company has no other employment agreements with its key
executive officers.
EMPLOYEE STOCK OPTION PLAN
In 1994, the Board of Directors and the shareholders of the Company
approved the adoption of the Employee's Option Plan. Stock options granted
pursuant to the Employee's Option Plan may either be incentive stock options
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Internal Revenue Code"), or non-qualified stock options. The
number of shares of Common Stock originally reserved for issuance pursuant to
the Plan was 480,000 shares. As of May 1, 1996, options for 380,000 shares of
Common Stock were outstanding under the Employee's Option Plan at an average
exercise price of $4.20 per share.
The Employee's Option Plan is administered by the Compensation Committee of
the Board of Directors. Subject to the provisions of the Employee's Option Plan,
the Compensation Committee has the exclusive power to interpret the Employee's
Option Plan, to grant waivers of restrictions thereunder and to adopt such rules
and regulations as it may deem necessary or appropriate in keeping with the
objectives of the Employee's Option Plan.
Options granted pursuant to the Employee's Option Plan become exercisable
on such date or dates as may be established by the Compensation Committee. The
exercise price of options granted under the Employee's Option Plan may not be an
amount less than the market value of Common Stock at the time of grant. The
exercise price must be paid in full in cash at the time an option is exercised
or, if permitted by the Compensation Committee, by means of tendering previously
owned shares of Common Stock, or partly in cash and partly in Common Stock.
33
<PAGE> 36
In the event of a stock split, stock dividend, combination or
reclassification or certain other corporate transactions, the Compensation
Committee is authorized to make appropriate adjustments to the exercise price
and number of shares subject to options granted under the Employee's Option
Plan. Subject to certain limitations, the Board of Directors is authorized to
amend, modify or terminate the Employee's Option Plan to meet any changes in
legal requirements for any other purpose permitted by law.
INDEMNIFICATION AND LIMITATION ON LIABILITY
The Company's Articles of Incorporation, as amended, and By-laws, as
amended, provide that the Company shall indemnify all directors and officers of
the Company to the fullest extent permitted by the Texas Business Corporation
Act. Under such provisions, any director or officer, who in his capacity as
such, is made or threatened to be made, a party to any suit or proceeding, may
be indemnified if it is determined that such director or officer acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interest of the Company. In addition, the By-laws contain certain provisions
intended to facilitate receipt of such benefits.
As authorized by the Texas Miscellaneous Corporation Laws Act, UniMark's
Articles of Incorporation, as amended, provide that the Company's directors will
have no personal liability to UniMark or its shareholders for monetary damages
for breach or alleged breach of the directors' duty of care. This provision has
no effect on director liability for (i) a breach of the directors' duty of
loyalty to the Company or its shareholders, (ii) acts or omissions not in good
faith that constitute a breach of duty of a director or involving intentional
misconduct or knowing violations of law, (iii) approval of any transaction from
which a director derives an improper personal benefit, or (iv) an act or
omission for which the liability of a director is expressly provided by an
applicable statute. In addition, the Company's Articles of Incorporation, as
amended, provide that any additional liabilities permitted to be eliminated by
subsequent legislation will automatically be eliminated without further
shareholder vote, unless additional shareholder approval is required by such
legislation.
The principal effect of the limitation of liability provision is that a
shareholder is unable to prosecute an action for monetary damages against a
director of the Company unless the shareholder can demonstrate one of the
specified bases for liability.
This provision does not eliminate a director's duty of care. However, the
inclusion of this provision in the Company's Articles of Incorporation, as
amended, may discourage or deter shareholders or management from bringing a
lawsuit against directors for a breach of their fiduciary duties, even though
such an action, if successful, might otherwise have benefitted the Company and
its shareholders. This provision should not affect the availability of equitable
remedies such as an injunction or rescission based upon a director's breach of
the duty of care. Furthermore, it does not eliminate or limit director liability
arising in connection with causes of action brought under the federal securities
laws.
CERTAIN TRANSACTIONS
Effective January 2, 1995, the Company entered into a five-year operating
agreement with Industrias Horticolas de Montemorelos, S.A. de C.V. ("IHMSA") to
operate a freezing plant located in Montemorelos, Nuevo Leon, Mexico. Pursuant
to the terms of the operating agreement, the Company has agreed to pay IHMSA an
operating fee sufficient to cover the interest payments on IHMSA's outstanding
debt. This debt is denominated in U.S. dollars and has an outstanding principal
amount of approximately $4,600,000. Interest on this debt is charged at variable
rates ranging from 9.8% to 15.5%. The Company is responsible for all raw
material and operating costs and the sale of the finished goods produced at the
IHMSA plant. Payments made pursuant to the operating agreement were $347,090
during the year ended December 31, 1995. During the term of the operating
agreement, the Company has a right of first refusal to buy the IHMSA facility at
its fair market value as determined at the time the right of first refusal is
exercised. The family of Messrs. Rafael Vaquero Bazan, Eduardo Vaquero Bazan and
Pedro Vaquero Garcia owns an approximate 8% interest in IHMSA. The Company
believes that said arrangement is no less favorable to the Company than would be
available from unrelated third parties.
34
<PAGE> 37
Effective July 1, 1995, the Company entered into a ten-year operating
agreement with Azteca to operate a processing plant in Montemorelos, Nuevo Leon,
Mexico. The operating agreement provides for payments in the amount of interest
of approximately $220,000 on Azteca's existing debt and asset and property
taxes. During the six-month period ended December 31, 1995, payments made
pursuant to the operating agreement were approximately $25,000. During the term
of the operating agreement, the Company has a right of first refusal to buy the
Azteca facility at its then fair market value. Prior to July 1, 1995, Azteca
co-packed chilled grapefruit sections and mango slices for the Company. During
the six-month period ended June 30, 1995, Azteca co-packed approximately $1.4
million of fruit for the Company. During the year ended December 31, 1995, the
aggregate amount of payments made to Azteca was $143,095. The Company believes
that said arrangements are no less favorable to the Company than would be
available from unrelated third parties. At December 31, 1995 Azteca owned an
approximate 9.2% interest in the Company. The Vaquero family owns collectively
an approximate 14.3% interest in Azteca.
In November 1995, the Company entered into a lease agreement with Loma
Bonita Partners, a Texas general partnership, for approximately 200 hectares
(approximately 494 acres) of land located in Loma Bonita, Veracruz, Mexico for
the development of citrus groves. The lease commenced in December 1995 and
expires in ten years. Messrs. Jorn Budde and Rafael Vaquero are the two general
partners of Loma Bonita Partners. Rent expense on this lease was $5,670 for the
month of December 1995. The Company believes that said lease agreement is on
terms no less favorable to the Company than would be available from unrelated
third parties.
The Company operates a 144 acre grapefruit grove located close to the
ICMOSA plant in Montemorelos, Mexico pursuant to a ten year operating agreement
that expires in 2000. Pursuant to the agreement, the Company operates the grove
and purchases all the grapefruit produced at a formula price tied to purchases
from unrelated third parties. During 1995, the Company purchased approximately
$156,000 of grapefruit pursuant to this agreement. The grove is owned by a
partnership that consists primarily of shareholders of Azteca. The Vaquero
family collectively owns an approximate 14.3% interest in this partnership. The
Company believes that said arrangement is on terms no less favorable to the
Company than would be available from unrelated third parties.
The Company leases its corporate office facility from an entity controlled
by Mr. Budde. Rent expense on this lease was approximately $36,000 for the year
ended December 31, 1995. The Company believes that said arrangement is on terms
no less favorable to the Company than would be available from unrelated third
parties.
During 1995, the Company paid Jordaan, Howard and Pennington, PLLC an
amount of $106,145 for legal services rendered. Mr. Jordaan, a director of the
Company, is a member of Jordaan, Howard & Pennington, PLLC. The Company believes
that said arrangement is on terms no less favorable to the Company than would be
available from unrelated third parties.
FUTURE TRANSACTIONS
Although the Company intends that the terms of any future transactions and
agreements between the Company and its directors, officers, principal
shareholders or other affiliates will be no less favorable than could be
obtained from unaffiliated third parties, no assurances can be given in this
regard. Any such future transactions that are material to the Company and are
not in the ordinary course of business will be approved by a majority of the
Company's independent and disinterested directors.
35
<PAGE> 38
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth certain information as of May 10, 1996, and
as adjusted to reflect the sale of 1,400,000 shares of Common Stock by the
Company and 600,000 shares by the Selling Shareholders in this offering,
regarding the beneficial ownership of the Common Stock by: (i) all persons known
by the Company to own beneficially more than 5% of the Common Stock; (ii) each
director of the Company; (iii) the chief executive officer of the Company; (iv)
all directors and executive officers of the Company as a group; and (v) the
Selling Shareholders. All information with respect to ownership by the Selling
Shareholders has been furnished by the Selling Shareholders.
<TABLE>
<CAPTION>
PERCENT OF
OUTSTANDING STOCK
OWNED(1)
AMOUNT AND NATURE --------------------
NAME AND ADDRESS OF BENEFICIAL SHARES BEING SHARES OWNED BEFORE AFTER
OF BENEFICIAL OWNERS(1) OWNERSHIP OFFERED(2) AFTER OFFERING OFFERING OFFERING
- ------------------------------------- ----------------- ------------ -------------- -------- --------
<S> <C> <C> <C> <C> <C>
Rafael Vaquero Bazan(3).............. 802,503 26,812 656,106 11.70% 7.94%
Jorn Budde........................... 619,865 72,277 547,588 9.03 6.63
Pedro Vaquero Garcia(3).............. 549,849 0 430,264 8.01 5.21
Empacadora de Naranjas Azteca S.A.
("Azteca")......................... 545,971 119,585 426,386 7.96 5.16
Kennedy Capital Management,
Inc.(4)............................ 516,000 0 516,000 7.52 6.25
Operadora Agros, S.A. de C.V......... 391,565 100,000 291,565 5.71 3.53
Fernando Camacho Casas(5)............ 414,065 0 314,065 6.03 3.80
Dr. David Madero Gonzalez............ 465,689 0 465,689 6.79 5.64
Enrique Portilla..................... 418,065 26,500 291,565 6.09 3.53
Jose Martinez Brohez................. 34,736 0 34,736 * *
Eduardo Vaquero Bazan................ 54,981 12,000 42,981 * *
Jakes Jordaan(6)..................... 47,800 0 47,800 * *
Edward Stone(6)...................... 25,000 0 25,000 * *
Hector Garza Moreno.................. 32,069 32,069 0 * 0
Angelina Welsh....................... 66,351 30,000 36,351 * *
Fernando Cantu....................... 111,400 30,000 81,400 1.62 *
Guillermo Paras G. .................. 27,865 16,000 11,865 * *
Empacadora Frutas de Mexico, S.A. de
C.V. .............................. 28,284 14,000 14,284 * *
Gustavo Menchaca R. ................. 12,632 12,632 0 * 0
Lilia Welsh.......................... 24,784 12,284 12,500 * *
Ignacio Landa A. .................... 10,046 10,046 0 * 0
Esperanza Mora....................... 20,453 10,000 10,453 * *
Pedro Garza Cantu.................... 27,657 7,657 20,000 * *
Rodolfo De La Garza.................. 18,641 9,000 9,641 * *
Alicia Gonzales De A. ............... 8,663 8,663 0 * 0
Juan Cardena S. ..................... 7,987 7,987 0 * 0
Beatriz Paras........................ 46,223 5,000 41,223 * *
Miguel Albuerne Foz. ................ 4,942 4,942 0 * 0
Sergio Guerra........................ 4,177 4,177 0 * 0
Armando Trevino...................... 9,877 3,955 5,922 * *
Carlos Cardenas...................... 7,453 3,250 4,203 * *
Armando Guerra....................... 6,180 3,180 3,000 * *
Sara Welsh........................... 12,946 2,500 10,446 * *
Ricardo Albuerne W. ................. 2,419 2,419 0 * 0
Miguel Albuerne W. .................. 2,419 2,419 0 * 0
Dolores Garcia M. ................... 2,213 2,213 0 * 0
Gerardo Trevino G. .................. 8,433 8,433 0 * 0
All directors and executive officers
as a group (10 persons)(7)......... 2,083,092 230,674 1,852,418 30.36% 22.42%
</TABLE>
- ---------------
* Less than 1%.
(footnotes on following page)
36
<PAGE> 39
(1) The address for Messrs. Jorn Budde, Rafael Vaquero Bazan, and Pedro Vaquero
Garcia is 124 McMakin Road, Lewisville, Texas 75067. The address for Mr.
Fernando Camacho Casas and Mr. Enrique Portilla is Descartes No. 54, 1er
Piso, Col. Anzures 11590 Mexico, D.F. The address for Mr. Jose Martinez
Brohez is Carrera Torres TE. 226. C.P., Cd. Victoria, TAM. 8700 Mexico. The
address for Azteca is Carr Gral Terain #102 Apartado 76 Montemorelos, Nuevo
Leon Mexico. The address for Kennedy Capital Management, Inc. is 425 N. New
Ballas Road, Suite 181, St. Louis, Mo. 63141-6821.
(2) Messrs. Budde and Vaquero have granted to the Underwriters an over-allotment
option to purchase up to 16,000 and 7,000 shares of Common Stock,
respectively. If the over-allotment option is exercised in full, these
persons will beneficially own 531,588 (6.21%) and 649,106 (7.58%) shares of
Common Stock, respectively.
(3) Includes 545,971 shares of Common Stock held by Azteca.
(4) Except to the extent that the information is believed to be otherwise known
by the Company, the information given is as of or about February 15, 1996,
as reported by Kennedy Capital Management, Inc. in its Schedule 13G filed
with the Securities and Exchange Commission. The address for Dr. David
Modero Gonzalez is Calle Cristal vm 22 Penthous Frace. Valle del Camp estre
Montenez, Nuevo Leon, Mexico.
(5) Includes 391,565 shares of Common Stock held by Operadora Agros, S.A. de
C.V, a Mexican entity ("Agros"), of which Mr. Camacho is a managing
director, and 22,500 shares of Common Stock underlying presently exercisable
stock options. Mr. Camacho disclaims beneficial ownership of the Agros'
shares.
(6) Includes 22,500 shares of Common Stock underlying presently exercisable
stock options.
(7) For purposes of the group total, the 545,971 shares held by Azteca
attributed to both Mr. Rafael Vaquero Bazan and Mr. Pedro Vaquero Garcia are
included only once.
DESCRIPTION OF CAPITAL STOCK
The following description of the Company's capital stock and selected
provisions of its Articles of Incorporation and By-laws, as amended is a summary
and is qualified in its entirety by the Company's Articles of Incorporation and
By-laws as amended, copies of which have been filed with the Securities and
Exchange Commission (the "Commission") as exhibits to the Registration Statement
of which this Prospectus is a part.
COMMON STOCK
The Company is authorized to issue 20,000,000 shares of Common Stock, $.01
par value. Holders of Common Stock are entitled to one vote for each share held
in the election of directors and on all other matters submitted to a vote of
shareholders. Cumulative voting of shares of Common Stock is prohibited.
Accordingly, holders of a majority of the shares of Common Stock entitled to
vote in any election of directors may elect all of the directors standing for
election.
Holders of Common Stock are entitled to receive ratably such dividends, if
any, as may be declared by the Board of Directors out of funds legally available
therefor. See "Dividend Policy." Upon the liquidation, dissolution or winding up
of the Company, the holders of Common Stock are entitled to receive ratably the
net assets of the Company available after payment of all debts and other
liabilities. Holders of Common Stock have no preemptive, subscription,
redemption or conversion rights. The outstanding shares of Common Stock are, and
the shares offered by the Company in this offering will be, when issued and paid
for, fully paid and nonassessable.
UNDERWRITERS' WARRANTS
In August 1994, UniMark completed an initial public offering (the "IPO") of
550,000 units (the "Units"), each Unit consisting of three shares of Common
Stock and two redeemable common stock purchase warrants (the "Warrants"). In
connection with the IPO, UniMark issued certain warrants to its underwriting
representatives (the "Underwriters' IPO Warrants") to purchase up to 55,000
Units for $15.00 per Unit. The Underwriters IPO Warrants are exercisable until
August 11, 1999. The Underwriters Warrants have certain demand and incidental
registration rights. Presently, Underwriters IPO Warrants covering an aggregate
of 78,190 shares of Common Stock are outstanding.
37
<PAGE> 40
SHAREHOLDER ACTION
Pursuant to the Company's Articles of Incorporation, as amended, with
respect to any action required of or by the holders of the Company's Common
Stock, the affirmative vote of the holders of a majority of the issued and
outstanding shares of Common Stock entitled to vote thereon is sufficient to
authorize, affirm, ratify or consent to such act or action, except as otherwise
provided by law.
Under the Texas Business Corporation Act, shareholders may take certain
actions without the holding of a meeting by a written consent or consents signed
by the holders of a majority of the outstanding shares of the capital stock of
the Company entitled to vote thereon. Prompt notice of the taking of any action
without a meeting by less than unanimous consent of the shareholders is required
to be given to those shareholders who do not consent in writing to the action.
The purposes of this provision are to facilitate action by shareholders and to
reduce the corporate expense associated with annual and special meetings of
shareholders. Pursuant to the rules and regulations of the Commission, if
shareholder action is taken by written consent, the Company will be required to
send each shareholder entitled to vote on the applicable matter, but whose
consent was not solicited, an information statement containing information
substantially similar to that which would have been contained in a proxy
statement.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock and Warrants is
Harris Trust and Savings Bank, N.A., Chicago, Illinois.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have 8,261,833 shares of
Common Stock outstanding. All of the 1,400,000 shares sold by the Company in
this offering will be freely transferable without further restriction or
registration under the Securities Act, except for any shares purchased by an
"affiliate" of the Company (as defined under the Securities Act). Of these
8,261,833 shares of Common Stock, 2,541,951 shares are "restricted securities"
under applicable securities laws. Additional shares of Common Stock may become
eligible for sale in the public market from time to time upon exercise of
warrants and stock options.
Holders of restricted securities must comply with the requirements of Rule
144 in order to sell their shares in the open market. In general, under Rule 144
as currently in effect, any affiliate of the Company and any person (or persons
whose sales are aggregated) who has beneficially owned his or her restricted
shares for at least two years, would be entitled to sell in the open market
within any three-month period a number of shares that does not exceed the
greater of: (i) 1% of the then outstanding shares of the Company's Common Stock
(approximately 82,600 shares immediately after this offering); or (ii) the
average weekly trading volume reported on the Nasdaq National Market System
during the four calendar weeks preceding such sale. Sales under Rule 144 are
also subject to certain limitations on manner of sale, notice requirements, and
availability of current public information about the Company. Nonaffiliates who
have held their restricted shares for three years are entitled to sell their
shares under Rule 144 without regard to any of the above limitations, provided
they have not been affiliates of the Company for the three months preceding such
sale. As of May 1, 1996, options to acquire a total of 380,000 shares and 67,500
shares are outstanding under the Employees' Option Plan and the Directors'
Option Plan, respectively. An additional 87,000 shares and 32,500 shares are
available for future option grants under the Employees' Option Plan and the
Directors' Option Plan, respectively. See "Management -- Compensation of
Directors -- Employee Stock Option Plan."
The Company can make no prediction as to the effect, if any, that sales of
shares of Common Stock or the availability of shares for sale will have on the
market price of Common Stock. Nevertheless, sales of significant amounts of
Common Stock could adversely affect the prevailing market price of Common Stock,
as well as impair the ability of the Company to raise capital through the
issuance of additional equity securities.
38
<PAGE> 41
UNDERWRITING
The Underwriters below, for whom Rodman & Renshaw, Inc. ("Rodman") and
Rauscher Pierce Refsnes, Inc. ("Rauscher") are acting as representatives (the
"Representatives"), have severally agreed, subject to the terms and conditions
contained in the Underwriting Agreement, to purchase from the Company and the
Selling Shareholders the number of shares of Common Stock set forth below
opposite their respective names.
<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
----------- ----------------
<S> <C>
Rodman & Renshaw, Inc.......................................
Rauscher Pierce Refsnes, Inc................................
---------
Total............................................. 2,000,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters thereunder are subject to approval of certain legal matters by
counsel and to various other considerations. The nature of the Underwriters'
obligations is such that they are committed to purchase and pay for all of the
above shares of Common Stock if any are purchased.
The Underwriters, through the Representatives, have advised the Company
that they propose to offer the Common Stock initially at the public offering
price set forth on the cover page of this Prospectus; that the Underwriters may
allow to selected dealers a concession of $ per share, and that such
dealers may reallow a concession of $ per share to certain other dealers.
After the public offering, the offering price and other selling terms may be
changed by the Underwriters. The Common Stock is included for quotation on the
Nasdaq National Market.
The Company and certain of the Selling Shareholders have granted to the
Underwriters a 30-day over-allotment option to purchase up to an aggregate of
300,000 additional shares of Common Stock, exercisable at the public offering
price less the underwriting discount. If the Underwriters exercise such
over-allotment option, then each of the Underwriters will have a firm
commitment, subject to certain conditions, to purchase approximately the same
percentage thereof as the number of shares of Common Stock to be purchased by it
as shown in the above table bears to the 2,000,000 shares of Common Stock
offered hereby. The Underwriters may exercise such option only to cover
over-allotments made in connection with the sale of the shares of Common Stock
offered hereby.
The officers, directors, principal shareholders and Selling Shareholders of
the Company have agreed that they will not sell or dispose of any shares of
Common Stock of the Company for a period of 180 days after the later of the date
on which the Registration Statement is declared effective by the Commission or
the first date on which the shares are bona fide offered to the public, without
the prior written consent of the Representatives.
The Company and the Selling Shareholders have agreed to indemnify the
Underwriters against certain liabilities, losses and expenses, including
liabilities under the Securities Act, or to contribute to payments that the
Underwriters may be required to make in respect thereof.
In connection with the offering made hereby, certain Underwriters and
selling group members (if any) or their respective affiliates who are qualified
registered market makers on the Nasdaq National Market may engage in passive
market making transactions in the Common Stock on the Nasdaq National Market in
accordance with Rule 10b-6A under the Exchange Act, during a specified period
before commencement of offers or sales of the Common Stock. The passive market
making transactions must comply with applicable volume and price limits and be
identified as such. In general, a passive market maker may display its bid at a
price not in excess of the highest independent bid for such security; if all
independent bids are lowered below the passive market maker's bid, however, such
bid must then be lowered when certain purchase limits are exceeded.
39
<PAGE> 42
The Company has obtained a $3.0 million, 120-day bank loan, ($2.5 million
of which was used in connection with the Simply Fresh Acquisition) from Confia,
S.A., Institucion de Banca Multiple, Abaco Casa de Bolsa, S.A. de C.V., a wholly
owned subsidiary of Abaco Grupo Financiero, S.A. de C.V. ("AGF"). AGF owns a
majority of the outstanding stock of Rodman & Renshaw Capital Group, Inc.
("RRCG"). Rodman & Renshaw, Inc. is a wholly owned subsidiary of RRCG.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Jordaan, Howard & Pennington, PLLC, Dallas, Texas.
Members of Jordaan, Howard & Pennington, PLLC beneficially own 149,500 shares of
Common Stock, including 49,500 shares of Common Stock beneficially owned by Mr.
Jordaan, a member of the Company's Board of Directors. Certain legal matters in
connection with the sale of the Common Stock offered hereby will be passed on
for the Underwriters by Katten Muchin & Zavis, a partnership including
professional corporations, Chicago, Illinois.
EXPERTS
The consolidated financial statements of The UniMark Group, Inc. at
December 31, 1994 and 1995, and for the each of the three years in the period
ended December 31, 1995, and the financial statements of Simply Fresh Fruit,
Inc. at December 31, 1995 and for the year then ended, appearing in this
Prospectus and Registration Statement have been audited by Ernst & Young LLP,
independent auditors, as set forth in their reports thereon appearing elsewhere
herein and in the Registration Statement, and are included in reliance upon such
reports given upon the authority of such firm as experts in accounting and
auditing.
The financial statements of Les Produits Deli-Bon Inc. at January 31, 1995
and January 2, 1996, and for the twelve months ended January 31, 1995 and the
eleven months ended January 2, 1996, appearing in this Prospectus and
Registration Statement have been audited by Laberge Lafleur, independent
auditors, as set forth in their report thereon appearing elsewhere herein and in
the Registration Statement, and are included in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing.
The financial statements of Grupo Industrial Santa Engracia, S.A. de C.V.
at December 31, 1995, and for the year then ended, have been audited by Mancera,
S.C. Ernst & Young, independent auditors, and at December 31, 1994, and for each
of the two years in the period ended December 31, 1994, by Garza, Jasso, y
Asociados, independent auditors, as set forth in their respective reports
thereon appearing elsewhere herein and in the Registration Statement, and are
included in reliance upon such reports given upon the authority of such firms as
experts in accounting and auditing.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and, in accordance therewith, files reports
and other information with the Commission. Such reports and other information
can be inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
its following regional offices: Suite 1400, 500 West Madison Street, Chicago,
Illinois 60621-2511, and 7 World Trade Center, New York, New York 10048. Also,
copies of such material can be obtained at prescribed rates from the Public
Reference Selection of the Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549.
No person has been authorized to give any information or to make any
representations in connection with the offering described herein other than
those contained in this Prospectus and, if given or made, such information or
representations must not be relied upon as having been authorized by the
Company. This Prospectus does not constitute an offer of any securities other
than those to which it relates or an offer to sell or a solicitation of an offer
to buy by anyone in any jurisdiction in which such offer or solicitation of an
offer to buy by anyone in any jurisdiction in which such offer or solicitation
is not qualified to do so or to any person to whom it is not lawful to make such
offer or solicitation in such jurisdiction.
40
<PAGE> 43
The Company has filed with the Commission a Registration Statement on Form
S-1 (as amended from time to time and together with all exhibits thereto, the
"Registration Statement") under the Securities Act with respect to the shares of
Common Stock offered hereby. This Prospectus which constitutes a part of the
Registration Statement and does not contain all the information set forth in the
Registration Statement, certain parts of which have been omitted as permitted by
the rules of the Commission. Statements contained in this Prospectus as to the
contents of any contract or other document referred to herein are not
necessarily complete and, where such contract or other document is an exhibit to
the Registration Statement, each such statement is qualified in all respects by
the provisions of such exhibit, to which reference is hereby made for a full
statement of the provisions thereof. For further information pertaining to the
Company and the shares of Common Stock offered hereby, reference is made to the
Registration Statement.
The Registration Statement may be inspected, without charge, and copies may
be obtained, at prescribed rates, at the public reference facilities of the
Commission maintained at Room 1024, 450 Fifth Street, N.W., Washington, D.C.
20549, and at the Commission's regional offices at 7 World Trade Center, New
York, New York 10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of the Registration Statement may also be obtained by mail at
prescribed rates, from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549.
41
<PAGE> 44
THE UNIMARK GROUP, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
THE UNIMARK GROUP, INC.; LES PRODUITS DELI-BON INC.; GRUPO INDUSTRIAL SANTA ENGRACIA,
S.A. DE
C.V. AND SIMPLY FRESH FRUIT, INC.
Introduction to Pro Forma Condensed Consolidated Financial Information.............. F-2
Pro Forma Condensed Consolidated Balance Sheet as of December 31, 1995
(Unaudited)...................................................................... F-3
Pro Forma Condensed Consolidated Statement of Income for the Year Ended December 31,
1995 (Unaudited)................................................................. F-4
Notes to Pro Forma Condensed Consolidated Financial Information (Unaudited)......... F-5
HISTORICAL FINANCIAL INFORMATION
THE UNIMARK GROUP, INC.
Report of Independent Auditors...................................................... F-7
Consolidated Balance Sheets as of December 31, 1994 and 1995........................ F-8
Consolidated Statements of Income for the Years Ended December 31, 1993, 1994 and
1995............................................................................. F-9
Consolidated Statements of Shareholders' Equity for the Years Ended December 31,
1993, 1994 and 1995.............................................................. F-10
Consolidated Statements of Cash Flows for the Years Ended December 31, 1993, 1994
and 1995......................................................................... F-11
Notes to Consolidated Financial Statements.......................................... F-12
LES PRODUITS DELI-BON INC.
Auditors' Report.................................................................... F-22
Balance Sheet as of January 31, 1995 and January 2, 1996............................ F-23
Statement of Earnings for the Year Ended January 31, 1995 and the Eleven Months
Ended January 2, 1996............................................................ F-24
Statement of Retained Earnings for the Year Ended January 31, 1995 and the Eleven
Months Ended January 2, 1996..................................................... F-25
Statement of Changes in Financial Position for the Year Ended January 31, 1995 and
the Eleven Months Ended January 2, 1996.......................................... F-26
Notes to Financial Statements....................................................... F-27
GRUPO INDUSTRIAL SANTA ENGRACIA, S.A. DE C.V.
Reports of Independent Auditors..................................................... F-30
Balance Sheets as of December 31, 1994 and 1995..................................... F-32
Statements of Operations for the Years Ended December 31, 1993, 1994 and 1995....... F-33
Statements of Stockholders' Equity for the Years Ended December 31, 1993, 1994 and
1995............................................................................. F-34
Statements of Cash Flows for the Years Ended December 31, 1993, 1994 and 1995....... F-35
Notes to Financial Statements....................................................... F-36
SIMPLY FRESH FRUIT, INC.
Report of Independent Auditors...................................................... F-43
Balance Sheet as of December 31, 1995............................................... F-44
Statement of Income and Retained Earnings for the Year Ended December 31, 1995...... F-45
Statement of Cash Flows for the Year Ended December 31, 1995........................ F-46
Notes to Financial Statements....................................................... F-47
</TABLE>
F-1
<PAGE> 45
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
(UNAUDITED)
On January 3, 1996, the Company acquired all the outstanding shares of
capital stock of Les Produits Deli-Bon Inc. ("Deli-Bon"), a Quebec corporation,
which is a processor of fruit and primarily targets the foodservice industry.
Total consideration for the purchase of the shares included approximately: (i)
$787,000 in cash; (ii) a $49,000 six-month promissory note and (iii) 28,510
shares of Common Stock.
On May 9, 1996, the Company acquired all the outstanding shares of capital
stock of Grupo Industrial Santa Engracia, S.A. de C.V., a Mexican company
("GISE"), which is a processor of citrus concentrate, oils and juices. Total
consideration for the purchase of the shares included 782,614 shares of Common
Stock and contingent consideration of up to an additional $8.0 million of Common
Stock or cash if certain future earnings targets are achieved.
Also on May 9, 1996, the Company acquired all the outstanding shares of
capital stock of Simply Fresh Fruit, Inc., a California corporation ("Simply
Fresh"), which is a processor of fruit and primarily targets the foodservice
industry. Total consideration for the purchase of the shares included
approximately: (i) $2,500,000 in cash; (ii) 90,909 shares of Common Stock and
(iii) $1 million in cash payable in consideration for a five-year covenant not
to compete.
The unaudited pro forma condensed consolidated balance sheet of the
Company, GISE, Simply Fresh and Deli-Bon, as of December 31, 1995, reflects
these acquisitions as if they had occurred on December 31, 1995.
The unaudited pro forma condensed consolidated statement of income for the
year ended December 31, 1995 reflects these acquisitions as if they had occurred
on January 1, 1995.
Historically, Simply Fresh has purchased fresh fruit on the open market for
processing at their facility in Los Angeles, California. UniMark intends to
provide Simply Fresh with fresh fruit processed at its facilities in Mexico at a
significant cost savings to Simply Fresh. UniMark is exercising its plan to
initially provide pineapple and melons to Simply Fresh this season. Accordingly,
a reduction in Simply Fresh's cost of products sold equal to the estimated cost
savings (Simply Fresh's actual cost minus UniMark's cost delivered to Los
Angeles) of UniMark providing 50% of the pineapple and melons processed by
Simply Fresh during 1995 has been reflected as an adjustment in the unaudited
pro forma condensed consolidated statement of income.
The unaudited pro forma condensed consolidated balance sheet and statement
of income should be read in conjunction with the separate historical financial
statements of the Company, GISE, Simply Fresh and Deli-Bon, and related notes
appearing elsewhere in this Prospectus. The pro forma financial information is
not necessarily indicative of the results that would have been reported had such
events actually occurred on the dates specified, nor is it necessarily
indicative of the future results of the combined Company.
F-2
<PAGE> 46
THE UNIMARK GROUP, INC.; GRUPO INDUSTRIAL SANTA ENGRACIA, S.A. DE C.V.;
SIMPLY FRESH FRUIT, INC. AND LES PRODUITS DELI-BON INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
DECEMBER 31, 1995
ASSETS
<TABLE>
<CAPTION>
PRO FORMA
SIMPLY ADJUSTMENTS PRO FORMA
UNIMARK GISE FRESH DELI-BON (NOTE 2) BALANCE
------- ------ ------ -------- ----------- ---------
(IN THOUSANDS OF U.S. DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents.......... $ 6,286 $ 320 $ 4 $ 150 $(3,287)(a) $ 6,473
3,000 (b)
Receivables........................ 4,574 1,474 786 257 -- 7,091
Inventories........................ 6,182 2,252 159 86 -- 8,679
Taxes receivable................... 824 402 -- -- -- 1,226
Deferred income taxes.............. 81 -- 11 -- -- 92
Prepaid expenses................... 300 68 30 11 -- 409
------- ------ ------ ------ ------- -------
Total current assets................. 18,247 4,516 990 504 (287) 23,970
Marketable securities................ -- -- 87 -- -- 87
Property, plant and equipment........ 7,689 3,761 422 526 4,676 (c) 17,074
Deferred income taxes................ 338 573 14 -- -- 925
Goodwill............................. -- -- -- -- 5,901 (d) 5,901
Covenant not to compete.............. -- -- -- -- 1,002 (e) 1,002
Other assets......................... 224 -- 154 -- (19)(f) 359
------- ------ ------ ------ ------- -------
$26,498 $8,850 $1,667 $1,030 $11,273 $49,318
======= ====== ====== ====== ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings.............. $ 3,545 $1,953 $ -- $ -- $ 49 (g) $ 8,547
3,000 (b)
Current portion of long-term
debt............................ 183 222 127 56 163 (h) 751
Accounts payable................... 4,356 1,497 839 329 -- 7,021
Accrued expenses................... 943 314 108 -- -- 1,365
Income taxes payable............... 13 -- -- 3 -- 16
Deferred income taxes.............. 1,726 926 -- -- 15 (i) 2,667
------- ------ ------ ------ ------- -------
Total current liabilities............ 10,766 4,912 1,074 388 3,227 20,367
Long-term debt, less current
portion............................ 699 2,263 226 91 839 (j) 4,118
Deferred income taxes................ 55 -- -- 19 -- 74
Shareholders' equity:
Common stock....................... 59 1,779 22 375 (2,167)(k) 68
Additional paid-in capital......... 13,035 -- -- -- 9,772 (1) 22,807
Retained earnings.................. 1,884 (104) 345 157 (398)(m) 1,884
------- ------ ------ ------ ------- -------
Total shareholders' equity........... 14,978 1,675 367 532 7,207 24,759
------- ------ ------ ------ ------- -------
$26,498 $8,850 $1,667 $1,030 $11,273 $49,318
======= ====== ====== ====== ======= =======
</TABLE>
See accompanying notes to unaudited pro forma condensed consolidated financial
information.
F-3
<PAGE> 47
THE UNIMARK GROUP, INC.; GRUPO INDUSTRIAL SANTA ENGRACIA, S.A. DE C.V.;
SIMPLY FRESH FRUIT, INC. AND LES PRODUITS DELI-BON INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
PRO FORMA
SIMPLY ADJUSTMENTS PRO FORMA
UNIMARK GISE FRESH DELI-BON (NOTE 3) BALANCE
------- ------- ------ -------- ----------- ---------
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
Net sales........................ $36,866 $13,915 $8,918 $2,675 $ -- $62,374
Cost of products sold............ 24,192 7,776 6,990 2,019 (547)(a) 40,762
332(b)
------- ------- ------ ------ ----- -------
12,674 6,139 1,928 656 215 21,612
Selling, general and
administrative expenses........ 8,423 1,987 1,813 587 (327)(c) 12,916
355(d)
78(b)
------- ------- ------ ------ ----- -------
Income from operations........... 4,251 4,152 115 69 109 8,696
Other income (expense):
Interest expense............... (318) (922) (33) (12) (198)(e) (1,483)
Interest income................ 470 201 9 -- -- 680
Foreign currency transaction
gain (loss)................. 124 (868) -- -- -- (744)
Other.......................... 98 -- 8 -- -- 106
------- ------- ------ ------ ----- -------
374 (1,589) (16) (12) (198) (1,441)
------- ------- ------ ------ ----- -------
Income before income taxes....... 4,625 2,563 99 57 (89) 7,255
Income tax expense............... 1,678 1,009 29 13 24(f) 2,753
------- ------- ------ ------ ----- -------
Net income....................... $ 2,947 $ 1,554 $ 70 $ 44 $(113) $ 4,502
======= ======= ====== ====== ===== =======
Earnings per share:
Primary........................ $ 0.53 $ 0.69
======= =======
Fully diluted.................. $ 0.51 $ 0.67
======= =======
</TABLE>
See accompanying notes to unaudited pro forma condensed consolidated financial
information.
F-4
<PAGE> 48
THE UNIMARK GROUP, INC.; GRUPO INDUSTRIAL SANTA ENGRACIA, S.A. DE C.V.;
SIMPLY FRESH FRUIT, INC. AND LES PRODUITS DELI-BON INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
(UNAUDITED)
NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION
Deli-Bon
The accompanying historical financial statements of Deli-Bon were prepared in
accordance with the accounting principles generally accepted in Canada and are
presented in Canadian dollars. No material variations exist between these
principles and those generally accepted in the United States.
Deli-Bon amounts presented in the pro forma condensed consolidated balance sheet
consist of the historical balance sheet of Deli-Bon as of January 2, 1996, which
were converted into U.S. dollars at the exchange rate at the date of cash
transfers of $.7493. Deferred grants appearing in the Deli-Bon balance sheet
have been reclassified into property, plant and equipment.
Deli-Bon amounts presented in the pro forma condensed consolidated
statement of income consist of the historical statement of earnings of Deli-Bon
for the eleven months ended January 2, 1996, plus results of operations for the
one month ended January 31, 1995, to reflect a comparative twelve months of
operations. This result was converted into U.S. dollars at the average exchange
rate for the year of $.7285.
GISE
The accompanying historical financial statements of GISE were prepared in
accordance with U.S. generally accepted accounting principles and are presented
in pesos. GISE amounts presented in the pro forma condensed consolidated balance
sheet consist of the GISE historical balance sheet amounts which were converted
into U.S. dollars at the year end exchange rate of 7.7396 pesos. GISE amounts
presented in the pro forma condensed consolidated statement of income consist of
the GISE historical statement of income amounts, which were converted into U.S.
dollars at the average exchange rate for the year of 6.4647 pesos.
NOTE 2 -- PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET ADJUSTMENTS
(a) To record the aggregate cash portion of the consideration paid in
connection with the Simply Fresh Acquisition of $2,500,000 and the Deli-Bon
Acquisition of $787,000.
(b) To record a $3,000,000, 120-day bank loan bearing interest at 11.37%
per annum, $2,500,000 of which was used to fund the cash portion of the
consideration paid in connection with the Simply Fresh Acquisition.
(c) To increase property, plant and equipment to their fair values at the
dates of acquisition, the GISE Acquisition, $4,275,000, and the Deli-Bon
Acquisition, $401,000.
(d) To record aggregate goodwill resulting from the GISE Acquisition of
$2,450,000, the Simply Fresh Acquisition of $3,183,000, and the Deli-Bon
Acquisition of $268,000.
(e) To record the aggregate present value discounted at 9% of the
consideration to be paid in connection with non-compete agreements executed in
connection with the Simply Fresh Acquisition, $803,000, and the Deli-Bon
Acquisition, $199,000.
(f) To record the aggregate reduction in other assets resulting from
acquisition costs incurred prior to December 31, 1995.
(g) To record a $49,000 short-term note payable bearing interest at 9%
issued to a former shareholder of Deli-Bon in connection with the Deli-Bon
Acquisition.
F-5
<PAGE> 49
(h) To record the current portion of amounts payable under non-compete
agreements executed in connection with the Simply Fresh Acquisition, $133,000,
and the Deli-Bon Acquisition, $30,000. (See Note (e) above).
(i) To record deferred income taxes resulting from the Deli-Bon
Acquisition.
(j) To record the non-current portion of amounts payable under non-compete
agreements executed in connection with the Simply Fresh Acquisition, $670,000,
and the Deli-Bon Acquisition, $169,000. (See Note (e) above).
(k) To eliminate the capital accounts of GISE, $1,779,000, Simply Fresh,
$22,000, and Deli-Bon, $375,000, offset by the recording of the par value of
$.01 per share in connection with shares issued to GISE, 782,614 shares, Simply
Fresh, 90,909 shares and Deli-Bon, 28,510 shares.
(l) To record the additional paid-in capital resulting from the excess of
the value of Common Stock issued in connection with the Acquisitions over the
par value of such shares.
(m) To eliminate the retained earnings of GISE, Simply Fresh and Deli-Bon
resulting from their acquisitions.
NOTE 3 -- PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME ADJUSTMENTS
(a) To record the reduction in Simply Fresh's cost of products sold equal
to the estimated cost savings (Simply Fresh's actual cost minus UniMark's cost
delivered to Los Angeles) of UniMark providing 50% of the pineapple and melons
processed by Simply Fresh during 1995.
(b) To record increased depreciation expense over estimated useful lives
ranging from 3-25 years as a result of the increased carrying value of fixed
assets of GISE and Deli-Bon. (See Note 2(c)).
(c) To reflect the elimination of excess compensation in the amount of
$108,000 attributable to the reduction in salary of a former shareholder of
Simply Fresh and the elimination of $219,000 in fees paid to a company owned by
the former Chairman of the Board of Simply Fresh in connection with procurement
of fruit, which fees will no longer be paid following the Simply Fresh
Acquisition.
(d) To record the amortization of goodwill over 40 years for GISE and
Simply Fresh, and 20 years for Deli-Bon amounting to an aggregate of $154,000,
and the amortization of non-compete agreements over their five-year terms
amounting to an aggregate of $201,000.
(e) To record (i) interest expense amounting to $2,000 on a $49,000
short-term note payable issued to a former shareholder of Deli-Bon in connection
with the Deli-Bon Acquisition; (ii) interest expense amounting to $114,000 on a
$3,000,000, 120-day bank loan, $2.5 million of which was used to fund the cash
portion of the consideration paid in connection with the Simply Fresh
Acquisition; and (iii) accretion amounting to $201,000 on non-compete agreements
executed in connection with the Simply Fresh Acquisition and the Deli-Bon
Acquisition. (See Notes 2(g) and (b) above).
(f) To record the increase in income tax expense incurred as a result of
the pro forma adjustments after consideration of non-deductible goodwill
amounting to $154,000.
F-6
<PAGE> 50
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
The UniMark Group, Inc.
We have audited the accompanying consolidated balance sheets of the UniMark
Group, Inc. (the Company) as of December 31, 1994 and 1995, and the related
consolidated statements of income, shareholders' equity, and cash flows for each
of the three years in the period ended December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
The UniMark Group, Inc. at December 31, 1994 and 1995, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1995, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Dallas, Texas
February 26, 1996, except for
Note 13, as to which
the date is May 9, 1996
F-7
<PAGE> 51
THE UNIMARK GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE AMOUNTS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1994 1995
------- -------
<S> <C> <C>
Current assets:
Cash and cash equivalents.............................................. $ 803 $ 6,286
Accounts receivable -- trade, net of allowance of $50 in 1994 and $70
in 1995............................................................. 3,255 4,298
Accounts receivable -- other........................................... 107 134
Receivables from related parties (Note 6).............................. 289 90
Due from shareholders (Note 6)......................................... 73 52
Inventories (Note 2)................................................... 2,902 6,182
Income and value added taxes receivable................................ 80 824
Deferred income taxes (Note 8)......................................... 27 81
Prepaid expenses....................................................... 108 300
------- -------
Total current assets........................................... 7,644 18,247
Property, plant and equipment, net (Notes 3 and 5)....................... 2,911 7,689
Deferred income taxes (Note 8)........................................... 458 338
Other assets............................................................. 163 224
------- -------
Total assets................................................... $11,176 $26,498
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings (Note 4)......................................... $ 1,240 $ 3,545
Current portion of long-term debt...................................... 486 183
Accounts payable -- trade.............................................. 940 4,356
Payable to related parties............................................. 289 --
Accrued expenses....................................................... 455 943
Income taxes payable................................................... 125 13
Deferred income taxes (Note 8)......................................... 298 1,726
------- -------
Total current liabilities...................................... 3,833 10,766
Long-term debt, less current portion (Note 5)............................ 919 699
Deferred income taxes (Note 8)........................................... 32 55
Commitments (Note 7)
Shareholders' equity (Notes 9, 10 and 11)
Common stock, $0.01 par value:
Authorized shares -- 20,000,000
Issued and outstanding shares -- 4,650,000 in 1994 and 5,918,050 in
1995............................................................... 47 59
Additional paid-in capital............................................. 7,408 13,035
Retained earnings (Note 11)............................................ (1,063) 1,884
------- -------
Total shareholders' equity..................................... 6,392 14,978
------- -------
Total liabilities and shareholders' equity..................... $11,176 $26,498
======= =======
</TABLE>
See accompanying notes.
F-8
<PAGE> 52
THE UNIMARK GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1993 1994 1995
------- ------- -------
(IN THOUSANDS, EXCEPT FOR
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net sales (Note 12)........................................... $18,893 $25,346 $36,866
Cost of products sold (Note 6)................................ 12,941 17,943 24,192
------- ------- -------
5,952 7,403 12,674
Selling, general and administrative expenses.................. 5,319 5,873 8,423
------- ------- -------
Income from operations........................................ 633 1,530 4,251
Other income (expense):
Interest expense............................................ (410) (469) (318)
Interest income............................................. -- -- 470
Foreign currency transaction gain (loss).................... (8) (16) 124
Other income................................................ 19 85 98
------- ------- -------
(399) (400) 374
------- ------- -------
Income before income taxes.................................... 234 1,130 4,625
Income tax expense (Note 8)................................... 161 115 1,678
------- ------- -------
Net income.................................................... $ 73 $ 1,015 $ 2,947
======= ======= =======
Earnings per share:
Primary..................................................... $ 0.02 $ 0.28 $ 0.53
======= ======= =======
Fully diluted............................................... $ 0.02 $ 0.28 $ 0.51
======= ======= =======
</TABLE>
See accompanying notes.
F-9
<PAGE> 53
THE UNIMARK GROUP, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED
SHARES STOCK CAPITAL EARNINGS TOTAL
---------- ------ ---------- -------- -------
(IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1993............. 3,000,000 $ 30 $ 2,192 $ (2,151) $ 71
Net income........................... -- -- -- 73 73
---------- ----- --------- -------- -------
Balance at January 1, 1994............. 3,000,000 30 2,192 (2,078) 144
Shares issued for cash in initial
public offering, net of offering
expenses
(Note 10)......................... 1,650,000 17 5,216 -- 5,233
Net income........................... -- -- -- 1,015 1,015
---------- ----- --------- -------- -------
Balance at December 31, 1994........... 4,650,000 47 7,408 (1,063) 6,392
Exercise of warrants and options, net
of offering expenses
(Notes 9 and 10).................. 1,268,050 12 5,627 -- 5,639
Net income........................... -- -- -- 2,947 2,947
---------- ----- --------- -------- -------
Balance at December 31, 1995........... 5,918,050 $ 59 $ 13,035 $ 1,884 $14,978
========== ===== ======== ======== =======
</TABLE>
See accompanying notes.
F-10
<PAGE> 54
THE UNIMARK GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1993 1994 1995
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income.................................................... $ 73 $ 1,015 $ 2,947
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
Depreciation and amortization............................... 218 252 495
Deferred income taxes....................................... 141 (325) 1,406
Changes in operating assets and liabilities:
Receivables.............................................. (599) (1,577) (1,615)
Inventories.............................................. (1,734) 668 (3,280)
Prepaid expenses......................................... 36 (81) (192)
Accounts payable and accrued expenses.................... 993 (1,559) 3,615
Income taxes payable..................................... (22) 132 (112)
------- ------- -------
Net cash (used in) provided by operating activities........... (894) (1,475) 3,264
INVESTING ACTIVITIES
Net decrease in amounts due from shareholders................. (53) 71 21
Purchases of property, plant, and equipment................... (143) (1,218) (5,209)
Other......................................................... (17) (72) (14)
------- ------- -------
Net cash used in investing activities......................... (213) (1,219) (5,202)
FINANCING ACTIVITIES
Net proceeds from exercise of warrants and options............ -- 5,233 5,639
Net (decrease) increase in short-term borrowings.............. 1,119 (1,535) 2,305
Proceeds from long-term debt.................................. 635 -- --
Payments of long-term debt.................................... (434) (511) (523)
------- ------- -------
Net cash provided by financing activities..................... 1,320 3,187 7,421
------- ------- -------
Net increase in cash and cash equivalents..................... 213 493 5,483
Cash and cash equivalents at beginning of period.............. 97 310 803
------- ------- -------
Cash and cash equivalents at end of period.................... $ 310 $ 803 $ 6,286
======= ======= =======
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid............................................... $ 362 $ 473 $ 289
======= ======= =======
Income taxes paid........................................... $ 107 $ 74 $ 521
======= ======= =======
</TABLE>
See accompanying notes.
F-11
<PAGE> 55
THE UNIMARK GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES
Description of Business: The UniMark Group, Inc. ("the Company") was
incorporated in the state of Texas on January 3, 1992. During the period from
January 3, 1992 (inception) through December 31, 1992, 3,000,000 shares of the
Company's common stock were exchanged for the issued and outstanding common
shares of UniMark Foods, Inc., which was owned by the same shareholders as the
Company. Since the companies were under common control, the transaction was
accounted for using historical costs. Additionally, 800 shares of common stock
of UniMark International, Inc. were acquired for $800 during that same period,
giving the Company an 80% interest which was increased to a 100% interest with
the acquisition of the remaining 200 shares during 1994. On August 11, 1994,
1,300,950 shares of the Company's common stock were exchanged for all of the
issued and outstanding common shares of Industrias Citricolas de Montemorelos,
S.A. de C.V. ("ICMOSA"), a Mexican corporation. The transaction was accounted
for in a manner similar to a pooling-of-interests using historical costs and,
accordingly, the accompanying financial statements include the accounts and
operations of ICMOSA for all periods prior to the stock exchange. The Company is
in the principal business of growing, processing, marketing and distributing
niche citrus and tropical fruit products, including chilled and canned cut
fruits and other specialty food ingredients.
Principles of Consolidation: The consolidated financial statements include
the accounts of The UniMark Group, Inc. and its subsidiaries, all of which are
wholly owned. All significant intercompany accounts and transactions have been
eliminated.
Foreign Operations: A significant portion of the Company's operations are
located in Mexico and a significant portion of the Company's fruit is procured
in Mexico. In addition, substantially all of ICMOSA's employees are affiliated
with labor unions. As is typical in Mexico, wages are renegotiated every year
while other terms are negotiated every two years. Recently, Mexico has faced
turbulent political and economic times. Should political unrest spread or
political leadership or other causes vastly change economic conditions in
Mexico, the Company's operations could be adversely affected.
Use of Estimates: The preparation of the financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
Cash Equivalents: The Company considers all highly liquid investments with
original maturities of three months or less when purchased to be cash
equivalents.
Concentration of Credit Risk: The Company manufactures and sells niche
citrus and tropical fruit products and other specialty food ingredients to
customers in the foodservice and retail industries in the United States, Canada
and Japan. The Company performs periodic credit evaluations of its customers'
financial condition and generally does not require collateral. Trade receivables
generally are due within 30 days. Credit losses have been within management's
expectations. A significant portion of sales is made to two customers. One
customer accounted for 10.7%, 19.5% and 27.5% and another customer accounted for
17.5%, 18.5% and 17.6% of the Company's net sales during the years ended
December 31, 1993, 1994 and 1995, respectively.
Inventories: Inventories held in the United States are carried at the lower
of cost or market using the first-in, first-out method. Mexican inventories are
valued at the lower of cost or market using average historical cost.
F-12
<PAGE> 56
THE UNIMARK GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Property, Plant and Equipment: Property, plant and equipment are stated at
cost. Depreciation is computed by the straight-line method over the following
lives:
<TABLE>
<S> <C>
Building............................................................... 20 years
Machinery and equipment................................................ 5-12.5 years
Transportation equipment............................................... 5-7 years
Computer equipment..................................................... 4-7 years
Office equipment....................................................... 5-10 years
Automobiles............................................................ 3 years
</TABLE>
Foreign Currency Transactions: The functional currency of the Company and
its subsidiaries is the United States dollar. Transactions in foreign currency
are recorded at the prevailing exchange rate on the day of the related
transaction. Assets and liabilities denominated in foreign currency are
remeasured to dollars at the prevailing exchange rate as of the balance sheet
date. Exchange rate differences are reflected in the current year's operations.
Income Taxes: Deferred tax assets and liabilities are determined based on
differences between financial reporting and tax bases of assets and liabilities
and are measured using the enacted tax rates and laws that will be in effect
when the differences are expected to reverse.
Earnings Per Share: Earnings per share are calculated based on the weighted
average number of common and common equivalent shares outstanding during each
period. The modified treasury stock method is utilized to measure the dilutive
effect of options and warrants.
In 1993 and 1994, outstanding stock options and warrants were antidilutive
and the weighted average numbers of common shares used in this calculation were
3,000,000 and 3,642,000, respectively. In 1995, the weighted average number of
common and common equivalent shares used in the primary and fully diluted
calculations were 5,609,000 and 5,805,000, respectively. For purposes of the
1995 net income per share computation, net income was adjusted for the pro forma
reduction of interest expense, net of income taxes, resulting from the assumed
use of warrant and option proceeds to reduce outstanding debt.
Part of the proceeds from the Company's initial public offering were
applied to retire $1,535,000 of short-term debt. Had the retirement taken place
at the beginning of 1994, net income per common share for 1994 would have been
$0.27, based upon a weighted average number of shares of common stock
outstanding of 3,938,000.
NOTE 2 -- INVENTORIES
Inventories consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------
1994 1995
-------------- --------------
(IN THOUSANDS)
<S> <C> <C>
Finished goods........................................... $2,129 $4,594
Raw materials and supplies............................... 773 1,588
------ ------
Total.......................................... $2,902 $6,182
====== ======
</TABLE>
F-13
<PAGE> 57
THE UNIMARK GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 3 -- PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, at cost, consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1994 1995
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Land........................................................ $ 108 $ 256
Construction in progress.................................... -- 2,243
Buildings and improvements.................................. 1,682 2,621
Machinery and equipment..................................... 2,245 4,018
------ ------
4,035 9,138
Accumulated depreciation.................................... 1,124 1,449
------ ------
Total............................................. $2,911 $7,689
====== ======
</TABLE>
Depreciation expense was $204,000, $196,000 and $431,000 for the years
ended December 31, 1993, 1994 and 1995, respectively.
NOTE 4 -- SHORT-TERM BORROWINGS
ICMOSA has a revolving line-of-credit arrangement with a bank for
short-term dollar denominated debt in Mexico of up to $6,000,000 collateralized
by accounts receivable from export sales to Japan. This line of credit
commitment, which had an outstanding balance of $1,545,000 at December 31, 1995,
has no scheduled maturity but is reviewed annually for renewal.
The Company also has a line-of-credit arrangement with a bank for
short-term debt in the United States ("U.S.") of up to $3,000,000 collateralized
by U.S. accounts receivable and finished goods inventories. This line of credit,
which had an outstanding balance of $2,000,000 at December 31, 1995, matures on
April 30, 1997. The U.S. line of credit requires, among other things, the
maintenance of certain financial covenants and ratios; the timely presentation
of financial information; and restricts the payment of dividends.
The weighted average interest rate on short-term borrowings as of December
31, 1995 was 8.4%.
F-14
<PAGE> 58
THE UNIMARK GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 5 -- LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1994 1995
------ ----
(IN THOUSANDS)
<S> <C> <C>
Note payable to individual, collateralized by a second lien on land
and building and improvements in the United States; principal and
interest at 10% payable in monthly installments of $2,816; unpaid
principal and interest due May 16, 2000............................ $ 141 $120
Note payable to bank; collateralized by land and building and
improvements in Mexico; principal and interest at 9.5%; unpaid
principal due February 28, 1996.................................... 472 120
Note payable to bank; collateralized by land and building and
improvements in Mexico; principal and interest at 13.25% to 15.5%;
unpaid principal due May 17, 2005.................................. 635 635
Other notes payable.................................................. 157 7
------ ----
1,405 882
Less current portion................................................. 486 183
------ ----
$ 919 $699
====== ====
</TABLE>
Certain of the loan contracts establish restrictions and obligations with
respect to the application of funds to the contracted purpose of the loan, and
require maintenance of insurance of the assets and timely presentation of
financial information.
All long-term debt at December 31, 1995 is U.S. dollar denominated.
Maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
1996........................................................... $183
1997........................................................... 98
1998........................................................... 98
1999........................................................... 101
2000........................................................... 84
Thereafter..................................................... 318
----
$882
====
</TABLE>
NOTE 6 -- RELATED PARTY TRANSACTIONS
Effective January 2, 1995, the Company entered into a five year operating
agreement with Industrias Horticolas de Montemorelos, S.A. de C.V. ("IHMSA") to
operate a freezing plant located in Montemorelos, Nuevo Leon, Mexico. Pursuant
to the terms of the operating agreement, the Company has agreed to pay IHMSA an
operating fee sufficient to cover the interest payments on IHMSA's existing
outstanding debt. This debt is denominated in U.S. dollars and has an
outstanding principal amount of approximately $4,600,000. Interest on this debt
is charged at variable rates ranging from 9.8% to 15.5%.
The Company is responsible for all raw material and operating costs and the
sale of the finished goods produced at the IHMSA plant. Payments made pursuant
to the operating agreement were $347,090 during the year ended December 31,
1995. The Vaquero family owns collectively an approximate 8% interest in IHMSA.
F-15
<PAGE> 59
THE UNIMARK GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Certain members of the Vaquero family are officers, shareholders and directors
of the Company. During the term of the operating agreement, the Company has the
right of first refusal to buy the IHMSA facility at its then fair market value.
Effective July 1, 1995, the Company entered into a ten year operating
agreement with Empacadora de Naranjas Azteca, S.A. de C.V. ("Azteca"), to
operate a processing plant in Montemorelos, Nuevo Leon, Mexico. The operating
agreement provides for payments in the amount of (i) interest on existing debt
of approximately $220,000 with credit institutions, (ii) asset tax and (iii)
annual property tax. Prior to this time, Azteca "co-packed" chilled grapefruit
sections and mango slices for the Company. During the six-month period ended
June 30, 1995, Azteca co-packed approximately $1.4 million of fruit for the
Company. At December 31, 1995 Azteca owns an approximate 9.2% interest in the
Company. The Vaquero family owns collectively an approximate 14.3% interest in
Azteca. Payments made pursuant to the operating agreement were $143,095 during
the year ended December 31, 1995. During the term of the operating agreement,
the Company has the right of first refusal to buy the Azteca facility at its
then fair market value.
The Company purchased certain of its products and services directly from
Azteca and other entities affiliated with its shareholders. The receivable from
related parties at December 31, 1995 is for goods purchased by the Company on
behalf of IHMSA.
Transactions with related parties are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1993 1994 1995
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Sales............................................ $ -- $ 304 $ 379
====== ====== ======
Purchases........................................ $4,260 $4,704 $2,016
====== ====== ======
</TABLE>
In November, 1995, the Company entered into a lease agreement with Loma
Bonita Partners, a Texas general partnership, for approximately 200 hectares
(494 acres) of land located in Loma Bonita, Veracruz, Mexico for the development
of citrus groves. The lease commenced in December, 1995 and expires in ten
years. Loma Bonita Partners is owned equally by two officers, who are also
directors and shareholders of the Company. The Company believes that said lease
agreement is on terms no less favorable to the Company than would be available
from unrelated third parties. Rent expense on this lease was $5,670 for the year
ended December 31, 1995.
Receivable and payable balances with related parties are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1994
--------------
(IN THOUSANDS)
<S> <C>
Accounts receivable:
Empacadora de Naranjas Azteca, S.A. de C.V. (Azteca)................... $175
Industrias Horticolas de Montemorelos, S.A. de C.V. (IHMSA)............ 114
------
$289
======
Accounts payable:
Sr. Alberto Trevino Paras.............................................. $ --
Empacadora de Naranjas Azteca, S.A. de C.V. (Azteca)................... 211
Industrias Horticolas de Montemorelos, S.A. de C.V. (IHMSA)............ 78
------
$289
======
</TABLE>
F-16
<PAGE> 60
THE UNIMARK GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The balance due from shareholders at December 31, 1995 represents unsecured
advances and unsecured notes receivable made to shareholders. These advances and
notes receivable are payable on demand, and bear interest at 0% and 10%,
respectively.
The Company operates a 144 acre grapefruit grove located close to the
ICMOSA plant in Montemorelos pursuant to a ten year operating agreement that
expires in 2000. Per the agreement, the Company operates the grove and purchases
all the grapefruit produced at a formula price tied to purchases from unrelated
third parties. The grove is owned by a partnership that consists primarily of
shareholders of Azteca. The Vaquero family owns a 14.3% interest in this
partnership. The Company believes that said arrangement is on terms no less
favorable to the Company than would be available from unrelated third parties.
The Company leases its corporate office facility from a company owned by
the Company's president, who is also a shareholder of the Company. Rent expense
on this lease was $43,904, $36,000 and $36,000 for the years ended December 31,
1993, 1994 and 1995, respectively.
During 1994 and 1995, the Company paid Jordaan, Howard and Pennington, PLLC
an amount of $84,546 and $106,145, respectively, for legal services rendered.
Mr. Jordaan, a director of the Company, is a member of Jordaan, Howard &
Pennington, PLLC.
NOTE 7 -- LEASES
The Company leases buildings, two plant facilities, certain equipment and
citrus groves under operating leases. The Isla plant lease is for a period of
ten years, expiring in 2005, and contains a purchase option through July 1, 1998
for $850,000. The San Rafael plant lease is for a period of nine years, expiring
in 2003, and contains the right of first refusal to purchase the facility at its
then fair market value. The Company has under lease approximately 926 acres of
citrus groves in Mexico for periods of ten to fifteen years expiring in 2005 and
2010.
As described in Note 6, the Company leases its corporate office facility
and a 494 acre citrus grove from related parties. The related party building
lease expires in 1996, but its term may be renewed for a five-year period. The
related party 494 acre citrus grove lease expires in 2005.
Future minimum payments under noncancelable operating leases with initial
terms of one year or more at December 31, 1995, consist of the following:
<TABLE>
<CAPTION>
RELATED
PARTIES OTHER TOTAL
------- ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
1996................................................. $ 93 $ 253 $ 346
1997................................................. 78 197 275
1998................................................. 78 182 260
1999................................................. 78 177 255
2000................................................. 78 177 255
Thereafter........................................... 384 1,097 1,481
---- ------ ------
$ 789 $2,083 $2,872
==== ====== ======
</TABLE>
Rent expense was $84,000, $120,000 and $270,000 for the years ended
December 31, 1993, 1994 and 1995, respectively.
F-17
<PAGE> 61
THE UNIMARK GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 8 -- INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets and liabilities as of December 31, 1995 are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1994 1995
------ ------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Foreign net operating loss carryforwards......................... $ 288 $ --
Inventories...................................................... 131 140
Asset tax credit................................................. 260 111
Advances from customers.......................................... 220 --
Other............................................................ 123 168
------ ------
Total deferred tax assets.......................................... 1,022 419
Valuation allowance for deferred tax assets........................ 211 --
------ ------
Deferred tax assets................................................ $ 811 $ 419
====== ======
Deferred tax liabilities:
Depreciation..................................................... $ 32 $ 40
Inventories...................................................... 559 1,726
Other............................................................ 65 15
------ ------
Deferred tax liabilities........................................... $ 656 $1,781
====== ======
</TABLE>
The valuation allowance of $211,000 established at December 31, 1994 was
eliminated during 1995.
Income before income taxes relating to operations in the United States and
Mexico is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1993 1994 1995
---- ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
United States.............................................. $148 $ 656 $ 364
Mexico..................................................... 86 474 4,261
---- ------ ------
$234 $1,130 $4,625
==== ====== ======
</TABLE>
The components of the provision for income taxes include the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1993 1994 1995
---- ----- ------
(IN THOUSANDS)
<S> <C> <C> <C>
U.S. federal -- current.................................... $ 72 $ 180 $ 198
U.S. state -- current...................................... 13 25 31
U.S. deferred.............................................. (27) 36 (32)
---- ----- ------
58 241 197
Mexico -- current.......................................... -- -- 43
Mexico -- deferred......................................... 103 (126) 1,438
---- ----- ------
103 (126) 1,481
---- ----- ------
$161 $ 115 $1,678
==== ===== ======
</TABLE>
F-18
<PAGE> 62
THE UNIMARK GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Principal reconciling items from income tax computed at the U.S. statutory rate
of 34% are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1993 1994 1995
---- ----- ------
(IN THOUSANDS)
<S> <C> <C> <C>
Provision at 34% statutory rate.............................. $ 79 $ 384 $1,573
State income tax (net of federal benefit).................... 8 16 21
Effect of foreign rates...................................... -- (287) 273
Other........................................................ 74 2 22
Decrease in valuation allowance.............................. -- -- (211)
---- ----- ------
$161 $ 115 $1,678
==== ===== ======
</TABLE>
The Mexican subsidiary has an asset tax credit of $111,000, available to
offset Mexican income tax, which will begin to expire in 1999.
NOTE 9 -- STOCK OPTIONS
In 1994, the Company adopted an employee stock option plan and an outside
director stock option plan ("the Plans"). The Plans authorize the Board of
Directors to grant options to employees and consultants of the Company and to
outside directors of the Company to purchase up to 480,000 shares of common
stock under the employee stock option plan and 100,000 shares for the outside
directors stock option plan. The terms and the vesting period of any option
granted under the Plans is fixed by the Board of Directors at the time the
option is granted, provided that the exercise period may not be greater than 10
years from the date of grant. The exercise price of any option granted under the
employee stock option plan shall not be less than 100% and 85% of the fair
market value of the stock on the date of the grant for Incentive Stock Options
and Nonstatutory Stock Options, as defined, respectively. The exercise price of
any option granted under the outside directors stock option plan shall not be
less than 100% of the fair market value of the stock on the date of the grant.
The Company reserved 480,000 and 100,000 shares for issuance pursuant to the
employee stock option plan and the outside directors stock option plan,
respectively.
<TABLE>
<CAPTION>
EMPLOYEE STOCK OUTSIDE DIRECTORS STOCK
OPTION PLAN OPTION PLAN
------------------------- -------------------------
NUMBER OF OPTION PRICE NUMBER OF OPTION PRICE
SHARES PER SHARE SHARES PER SHARE
--------- ------------ --------- ------------
<S> <C> <C> <C> <C>
Options issued during 1994...................... 220,000 $ 3.50 40,000 $ 3.50
------- ------
Options outstanding at December 31, 1994........ 220,000 3.50 40,000 3.50
Options issued.................................. 81,000 3.50 -- --
Options issued.................................. 50,000 4.88 -- --
Options issued.................................. -- -- 7,500 7.13
Options issued.................................. 32,000 7.00 -- --
Options exercised............................... (5,000) 3.50 -- --
------- ------
Options outstanding at December 31, 1995........ 378,000 47,500
======= ======
</TABLE>
At December 31, 1995, 50,000 options at $3.50 per share were exercisable
under the employee stock option plan with an additional 95,750 options at
$3.50-$7.00 per share becoming exercisable as of January 2, 1996. All options
granted under the outside directors stock option plan were immediately
exercisable.
The Company accounts for stock-based compensation plans utilizing the
provisions of Accounting Principles Board ("APB") Opinion No. 25, "Accounting
for Stock Issued to Employees." In October 1995, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards ("SFAS") No.
123, "Accounting for Stock-Based Compensation." The Company is not required to
adopt the provisions
F-19
<PAGE> 63
THE UNIMARK GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
of SFAS No. 123 until 1996. Under SFAS 123, companies are allowed to continue to
apply the provisions of APB Opinion No. 25 to their stock-based employee
compensation arrangements. As such, the Company will only be required to
supplement its financial statements with additional disclosures in 1996.
NOTE 10 -- WARRANTS
On August 11, 1994, the Company completed an initial public offering of
550,000 units consisting of a total of 1,650,000 shares of its common stock and
1,100,000 Redeemable Common Stock Purchase Warrants ("the Warrants"). The
Warrants were transferable separately from the common stock and entitled the
holder to purchase one share of the Company's common stock at an exercise price
of $4.50 per share at any time until the fifth anniversary of the offering.
Commencing February 11, 1995, the Company could redeem some or all of the
Warrants at a call price of $0.05 per Warrant upon 30 days prior notice when the
closing bid quotation of the common stock had equaled or exceeded $6.75 for ten
consecutive trading days. The Company reserved 1,100,000 shares for issuance
upon the exercise of the Warrants.
On June 8, 1995 the Company notified all registered holders of the Warrants
of its intention to redeem all of the outstanding Warrants by July 21, 1995. The
Company issued 1,099,990 shares of common stock on the exercise of a like amount
of the Warrants with gross proceeds to the Company of $4,949,955.
In conjunction with the initial public offering on August 11, 1994, the
Company issued warrants to its underwriting representatives ("the
Representatives' Warrants") to purchase up to 55,000 units consisting of a total
of 165,000 shares of its common stock and 110,000 Redeemable Common Stock
Purchase Warrants. The Representatives' Warrants are exercisable for a period of
five years from the offering date at a price per unit of $15.00. The Company
reserved 275,000 shares for issuance upon the exercise of the Representatives'
Warrants and the underlying Redeemable Common Stock Purchase Warrants. During
1995, the Company issued 163,060 shares of common stock on the exercise of
32,612 Representatives' Warrants and the 65,224 underlying Redeemable Common
Stock Purchase Warrants with gross proceeds to the Company of $782,688.
NOTE 11 -- RESTRICTIONS ON RETAINED EARNINGS
Under Mexican Commercial Law, 5% of each year's Mexican income must be
allocated to a legal reserve until such reserve reaches 20% of ICMOSA's capital
stock amount. ICMOSA's capital stock amount is $2,151,000 at December 31, 1995.
This reserve cannot be distributed to the shareholders except in the form of
stock dividends.
Under the terms of the U.S. line of credit agreement with a bank, the
Company may not declare or pay any dividends on its shares without the bank's
prior written consent.
F-20
<PAGE> 64
THE UNIMARK GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 12 -- SEGMENT AND GEOGRAPHIC INFORMATION
The Company's operations involve a single industry segment -- the growing,
processing, marketing and distributing of niche citrus and tropical fruit
products, including chilled and canned cut fruits and other specialty food
ingredients. Financial information, summarized by geographic location, is as
follows:
<TABLE>
<CAPTION>
UNITED
STATES MEXICO ELIMINATIONS CONSOLIDATED
------- ------- ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Year ended December 31, 1993:
Sales to unaffiliated customers................... $14,741 $ 4,152 $ -- $ 18,893
Transfers between geographic areas................ -- 5,728 (5,728) --
------- ------- -------- -------
Total revenue..................................... $14,741 $ 9,880 $ (5,728) $ 18,893
======= ======= ======== =======
Operating profit.................................. $ 148 $ 124 $ (38) $ 234
======= ======= ======== =======
Identifiable assets............................... $ 3,305 $ 6,100 $ (54) $ 9,351
======= ======= ======== =======
Year ended December 31, 1994:
Sales to unaffiliated customers................... $19,101 $ 6,245 $ -- $ 25,346
Transfers between geographic areas................ -- 7,574 (7,574) --
======= ======= ======== =======
Total revenue..................................... $19,101 $13,819 $ (7,574) $ 25,346
======= ======= ======== =======
Operating profit.................................. $ 656 $ 497 $ (23) $ 1,130
======= ======= ======== =======
Identifiable assets............................... $ 4,976 $ 6,277 $ (77) $ 11,176
======= ======= ======== =======
Year ended December 31, 1995:
Sales to unaffiliated customers................... $23,898 $12,968 $ -- $ 36,866
Transfers between geographic areas................ -- 12,937 (12,937) --
======= ======= ======== =======
Total revenue..................................... $23,898 $25,905 $(12,937) $ 36,866
======= ======= ======== =======
Operating profit.................................. $ 364 $ 4,410 $ (149) $ 4,625
======= ======= ======== =======
Identifiable assets............................... $ 9,679 $17,165 $ (226) $ 26,618
======= ======= ======== =======
</TABLE>
NOTE 13 -- SUBSEQUENT EVENTS
On January 3, 1996, the Company acquired all the outstanding shares of
stock of Les Produits Deli-Bon Inc., a Quebec corporation that principally
processes and sells fruit salads to the food service industry in Canada. Total
consideration given for the purchase of the shares included approximately (i)
$787,000 in cash, (ii) a $49,000 six-month promissory note and (iii) 28,510
shares of common stock.
Effective March 1, 1996, the Company assumed occupancy of a second,
newly-constructed office building at its corporate headquarters and entered into
a new lease agreement with a related party that replaced the former lease
originally scheduled to expire in August 1996. The initial lease term is for
five years with monthly rental payments of $9,225. The Company may renew the
lease for an additional five year term with monthly rental payments of $10,690.
The Company is responsible for all maintenance, utilities, insurance and taxes
per the terms of the lease agreement.
On May 9, 1996 the Company acquired all of the outstanding shares of common
stock of Grupo Industrial Santa Engracia, S.A. de C.V., a major Mexican producer
of citrus concentrate, oils and juices, in exchange for 782,614 shares of the
Company's common stock.
Additionally, on May 9, 1996, the Company acquired all of the outstanding
shares of common stock of Simply Fresh Fruit, Inc. (Simply Fresh), a fruit
processing and distribution company located in Los Angeles, California in
exchange for $2.5 million cash, 90,909 shares of the Company's common stock and
$1.0 million in cash payable in consideration for a five-year covenant by Simply
Fresh's principals and their affiliates not to compete in the United States.
F-21
<PAGE> 65
<TABLE>
<S> <C>
LABERGE LAFLEUR Place de la Cite, tour Belle Cour
S.E.N.C. de comptables agrees 2600, boul. Laurier, bureau 2960
Sainte-Foy (Quebec)
GIV 4M6
Telephone: (418) 659-7265
Telecopieur: (418) 659-5937
</TABLE>
AUDITORS' REPORT
To the shareholder of
Les Produits Deli-Bon Inc.
We have audited the balance sheet of Les Produits Deli-Bon Inc. as at
January 2, 1996 and January 31, 1995 and the statements of earnings, retained
earnings and changes in financial position for the period of eleven months ended
January 2, 1996 and for the year ended January 31, 1995. These financial
statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the company as at January 2, 1996 and
January 31, 1995 and the results of its operations and the changes in its
financial position for the period of eleven months ended January 2, 1996 and for
the year ended January 31, 1995 in accordance with generally accepted accounting
principles.
LABERGE LAFLEUR
Chartered Accountants
Sainte-Foy (Quebec)
Canada
January 22, 1996
F-22
<PAGE> 66
LES PRODUITS DELI-BON INC.
BALANCE SHEET
<TABLE>
<CAPTION>
JANUARY 31, JANUARY 2,
1995 1996
----------- -----------
(THOUSANDS OF
CANADIAN DOLLARS)
<S> <C> <C>
ASSETS
Current Assets
Cash.............................................................. $Cdn 68 $Cdn --
Deposits in trust................................................. 10 --
Term deposits..................................................... 100 200
Accounts receivable (Note 2)...................................... 294 343
Income taxes recoverable.......................................... 36 --
Inventories (Note 2).............................................. 292 115
Prepaid expenses.................................................. 11 15
--------- ---------
811 673
Fixed Assets (Notes 3 and 4)........................................ 645 907
--------- ---------
$Cdn1,456 $Cdn1,580
========= =========
LIABILITIES
Current Liabilities
Excess of cheques drawn over bank balance......................... $Cdn -- $Cdn 45
Accounts payable and accrued liabilities.......................... 322 280
Income taxes payable.............................................. -- 4
Balance of purchase price of a building........................... -- 115
Current portion of long-term debt................................. 46 75
--------- ---------
368 519
Long-Term Debt (Note 4)............................................. 61 121
Deferred Grants..................................................... 133 205
Deferred Income Taxes............................................... 21 25
--------- ---------
583 870
--------- ---------
SHAREHOLDER'S EQUITY
Capital Stock (Note 5).............................................. 1 501
Retained Earnings................................................... 872 209
--------- ---------
873 710
--------- ---------
$Cdn1,456 $Cdn1,580
========= =========
</TABLE>
F-23
<PAGE> 67
LES PRODUITS DELI-BON INC.
STATEMENT OF EARNINGS
<TABLE>
<CAPTION>
YEAR
ENDED ELEVEN MONTHS
JANUARY 31, ENDED
1995 JANUARY 2, 1996
----------- ---------------
(THOUSANDS OF
CANADIAN DOLLARS)
<S> <C> <C>
Sales............................................................. $Cdn 4,057 $Cdn 3,437
Cost of Sales..................................................... 3,013 2,553
----------- ------------
Gross Profit...................................................... 1,044 884
----------- ------------
Expenses
Selling......................................................... 518 424
Administrative.................................................. 373 267
Financial....................................................... 17 23
----------- ------------
908 714
----------- ------------
136 170
Other Revenue..................................................... 6 8
----------- ------------
142 178
----------- ------------
Provision for Income Taxes
Current......................................................... 36 36
Deferred........................................................ (14) 5
----------- ------------
22 41
----------- ------------
Net Earnings...................................................... $Cdn 120 $Cdn 137
=========== ============
Expenses Include the Following:
Depreciation --
Fixed assets................................................. $Cdn 92 $Cdn 94
Deferred grants.............................................. (19) (25)
Interest on long-term debt...................................... 15 15
</TABLE>
F-24
<PAGE> 68
LES PRODUITS DELI-BON INC.
STATEMENT OF RETAINED EARNINGS
<TABLE>
<CAPTION>
YEAR ELEVEN MONTHS
ENDED ENDED
JANUARY 31, JANUARY 2,
1995 1996
----------- ------------
(THOUSANDS OF
CANADIAN DOLLARS)
<S> <C> <C>
Balance -- Beginning of Year....................................... $Cdn 852 $Cdn 872
Net earnings..................................................... 120 137
-------- ---------
972 1,009
-------- ---------
Increase of paid-up capital...................................... -- (500)
Dividends........................................................ (100) (300)
-------- ---------
(100) (800)
-------- ---------
Balance -- End of Year............................................. $Cdn 872 $Cdn 209
======== =========
</TABLE>
F-25
<PAGE> 69
LES PRODUITS DELI-BON INC.
STATEMENT OF CHANGES IN FINANCIAL POSITION
<TABLE>
<CAPTION>
YEAR ELEVEN MONTHS
ENDED ENDED JANUARY 2,
JANUARY 31, 1996
----------- ---------------
(THOUSANDS OF
CANADIAN DOLLARS)
<S> <C> <C>
Operating Activities
Net earnings..................................................... $Cdn 120 $Cdn 137
Items not affecting cash resources --
Loss on sale of fixed assets.................................. 48 --
Depreciation.................................................. 73 69
Deferred income taxes......................................... (14) 5
-------- --------
Funds generated from operations.................................. 227 211
Changes in funds other than cash resources --
Accounts receivable........................................... (89) (48)
Income taxes recoverable...................................... 20 176
Inventories................................................... 169 (4)
Prepaid expenses.............................................. (2) (42)
Accounts payable and accrued liabilities...................... 100 40
-------- --------
425 333
-------- --------
Investment Activities
Purchase of fixed assets......................................... (158) (357)
Grants received.................................................. 62 98
-------- --------
(96) (259)
-------- --------
Financial Activities
Additional long-term debt........................................ -- 150
Repayments of long-term debt..................................... (64) (62)
Balance of purchase price of a building.......................... -- 115
Advances from a director......................................... (21) --
-------- --------
(85) 203
-------- --------
Dividends.......................................................... (100) (300)
-------- --------
Change in Cash Resources........................................... 144 (23)
Cash Resources -- Beginning of Year................................ 34 178
-------- --------
Cash Resources -- End of Year...................................... $Cdn 178 $Cdn 155
======== ========
Cash Resources Include:
Cash............................................................. $Cdn 68 $Cdn --
Deposits in trust................................................ 10 --
Term deposits.................................................... 100 200
Excess of cheques drawn over bank balance........................ -- (45)
-------- --------
$Cdn 178 $Cdn 155
======== ========
</TABLE>
F-26
<PAGE> 70
LES PRODUITS DELI-BON INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 2, 1996
1. ACCOUNTING POLICIES
Currency -- All amounts are presented in Canadian dollars ($Cdn).
Inventories --
Inventories are valued at the lower of cost using the first-in
first-out method, and market value. Market value is defined as net
realizable value.
Fixed assets and depreciation --
Fixed assets are recorded at cost and depreciation is calculated using
the declining-balance method at the following rates:
<TABLE>
<S> <C>
Building...................................................... 5%
Pavement...................................................... 8%
Machinery and equipment....................................... 20%
Office furniture.............................................. 20%
Computers..................................................... 30%
Vehicle....................................................... 20% and 30%
Laboratory equipment.......................................... 20%
Research and development equipment............................ 20%
</TABLE>
These rates are reduced by half for acquisitions made during the year.
Deferred grants --
Grants and investment tax credits related to fixed assets are recorded
as deferred grants during the year they are received. Depreciation is
calculated using the declining-balance method at the same rate as the
concerned fixed assets.
Income taxes --
The company follows the deferral method of income tax allocation.
Income taxes are provided at current rates for all items included in the
statement of earnings regardless of the period when such items are reported
for income tax purposes. The principal item which results in timing
difference for financial and tax reporting purposes is depreciation. No
adjustment is made to deferred income taxes for subsequent changes in
income tax rates.
2. SECURITIES FOR BANK LOAN
Accounts receivable and inventories have been pledged as security for the
bank loan.
F-27
<PAGE> 71
LES PRODUITS DELI-BON INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
3. FIXED ASSETS
<TABLE>
<CAPTION>
JANUARY
31,
1995 JANUARY 2, 1996
------- -------------------------------------
NET ACCUMULATED NET
VALUE COST DEPRECIATION VALUE
------- --------- ----------- -------
(THOUSANDS OF CANADIAN DOLLARS)
<S> <C> <C> <C> <C>
Land................................. $Cdn 22 $Cdn 33 $Cdn -- $Cdn 33
Building............................. 263 475 121 354
Pavement............................. 2 3 1 2
Machinery and equipment.............. 235 743 327 416
Office furnitures.................... 17 43 27 16
Computers............................ 20 62 46 16
Vehicle.............................. 21 90 73 17
Laboratory equipment................. 6 21 16 5
Research and development equipment... 59 98 50 48
------- --------- ------- -------
$Cdn645 $Cdn1,568 $Cdn661 $Cdn907
======= ========= ======= =======
</TABLE>
4. LONG-TERM DEBT
<TABLE>
<CAPTION>
JANUARY 2, JANUARY 31,
1996 1995
---------- -----------
(THOUSANDS OF CANADIAN
DOLLARS)
<S> <C> <C>
Loans --
11.45%, guaranteed by an immovable hypothec on land and
building, payable by monthly capital instalments of
$Cdn2,085 plus interest, maturing in 1997................ $Cdn 44 $Cdn 67
Prime rate plus 0.75%, guaranteed by a movable hypothec on
machinery and equipment, payable by monthly capital
instalments of $Cdn3,125 plus interest, maturing in
1999..................................................... 131 --
Prime rate plus 1%, guaranteed by movable hypothec on
machinery and equipment, payable by monthly capital
instalments of $Cdn1,042 plus interest, maturing in
1998..................................................... 21 32
Loans reimbursed during the year............................ -- 8
------- -------
196 107
Current portion of long-term debt............................. 75 46
------- -------
$Cdn121 $Cdn 61
======= =======
</TABLE>
During the next four years, capital repayments on long-term debt will be as
follows:
<TABLE>
<CAPTION>
(THOUSANDS OF
CANADIAN
YEAR ENDING DOLLARS)
JANUARY 2,
- -----------
<S> <C> <C>
1997............................................ $Cdn75
1998............................................ 65
1999............................................ 37
2000............................................ 19
</TABLE>
F-28
<PAGE> 72
LES PRODUITS DELI-BON INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
5. CAPITAL STOCK
Authorized --
Unlimited number of shares of the following classes:
Common shares A, voting 10 votes per share and participating,
without par value
B, non-voting, dividend of 7%, non-preferred and non-cumulative,
redeemable at $100, without par value
C, non-voting, dividend of 8%, non-preferred and non-cumulative,
redeemable at their par value of $0.01 plus a premium of $9.99 per
share
<TABLE>
<CAPTION>
JANUARY 31, JANUARY 2,
1995 1996
----------- -----------
<S> <C> <C>
Issued and fully paid --
5,000 common shares A........................... $Cdn100 $Cdn500,100
213 class B shares............................ 21 21
47,860 class C shares............................ 379 379
-------- -----------
$Cdn500 $Cdn500,500
======== ===========
</TABLE>
During the year, the company has increased its paid-up capital on common
shares A by $500,000.
The company has also changed the characteristics of the common shares A to
be without par value and of the class B shares to be redeemable at $100, without
par value.
F-29
<PAGE> 73
REPORT OF INDEPENDENT AUDITORS
To the Stockholders of
Grupo Industrial Santa Engracia, S.A. de C.V.
We have audited the accompanying balance sheet of Grupo Industrial Santa
Engracia, S.A. de C.V., as of December 31, 1995, and the related statements of
operations, stockholders' equity and cash flow for the year then ended. The
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on the financial statements based on our
audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Grupo Industrial Santa
Engracia, S.A. de C.V. at December 31, 1995, and the results of its operations
and its cash flow for the year then ended in accordance with accounting
principles generally accepted in the United States of America.
MANCERA, S. C.
ERNST & YOUNG
San Pedro Garza Garcia, N. L., Mexico
April 23, 1996, except for Note 8,
as to which the date is
May 9, 1996
F-30
<PAGE> 74
REPORT OF INDEPENDENT AUDITORS
To the Stockholders of
Grupo Industrial Santa Engracia, S.A. de C.V.
We have audited the accompanying balance sheet of Grupo Industrial Santa
Engracia, S.A. de C.V., as of December 31, 1994, and the related statements of
operations, stockholders' equity and cash flow for each of the two years in the
period ended December 31, 1994. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Grupo Industrial Santa
Engracia, S.A. de C.V. at December 31, 1994, and the results of its operations
and its cash flow for each of the two years in the period ended December 31,
1994 in accordance with accounting principles generally accepted in the United
States of America.
GARZA, JASSO Y ASOCIADOS
Leon, Gto., Mexico
June 24, 1995
F-31
<PAGE> 75
GRUPO INDUSTRIAL SANTA ENGRACIA, S.A. DE C.V.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1994 1995
--------- ---------
(THOUSANDS OF PESOS)
<S> <C> <C>
ASSETS
Current assets:
Cash................................................................ Ps 1,682 Ps 2,473
--------- ---------
Accounts receivable:
Clients (Note 3)................................................. 9,309 11,259
Sundry accounts receivable....................................... 160 150
Taxes to be recovered............................................ 358 3,111
--------- ---------
9,827 14,520
--------- ---------
Inventories (Note 1):
Finished goods................................................... 4,290 13,045
Raw materials and supplies....................................... 408 36
Packing.......................................................... -- 445
Tools............................................................ 439 803
Advances to suppliers............................................ 747 3,099
--------- ---------
5,884 17,428
--------- ---------
Prepaid expenses.................................................... 184 529
--------- ---------
Total current assets.................................................. 17,577 34,950
Property, plant and equipment (Note 2)................................ 13,740 29,107
Deferred income tax (Note 6).......................................... 4,567 4,436
Other assets.......................................................... 96 --
--------- ---------
Total assets.......................................................... Ps 35,980 Ps 68,493
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt (Note 4).......................... Ps 465 Ps 1,721
Short-term bank loans (Note 4)...................................... 12,988 15,115
Accounts payable:
Suppliers (Note 3)............................................... 881 11,577
Accrued taxes and expenses....................................... 839 1,715
Asset tax........................................................... 48 43
Employees' profit sharing........................................... -- 571
Deferred income tax (Note 6)........................................ 1,343 7,168
--------- ---------
Total current liabilities............................................. 16,564 37,910
Long-term debt less current portion (Note 4).......................... 16,494 17,518
Seniority premiums (Note 1)........................................... -- 100
--------- ---------
Total liabilities..................................................... 33,058 55,528
--------- ---------
Stockholders' equity (Note 7):
Capital stock; 1 Ps par value; 13,770,000 shares authorized, issued
and outstanding.................................................. 13,770 13,770
Accumulated deficit................................................. (10,848) (805)
--------- ---------
Total stockholders' equity.......................................... 2,922 12,965
--------- ---------
Total liabilities and stockholders' equity............................ Ps 35,980 Ps 68,493
========= =========
</TABLE>
See accompanying notes.
F-32
<PAGE> 76
GRUPO INDUSTRIAL SANTA ENGRACIA, S.A. DE C.V.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------
1993 1994 1995
--------- --------- ---------
(THOUSANDS OF PESOS)
<S> <C> <C> <C>
Net sales............................................... Ps 21,944 Ps 31,940 Ps 89,959
Cost of products sold................................... 15,595 21,761 50,268
--------- --------- ---------
Gross profit............................................ 6,349 10,179 39,691
--------- --------- ---------
Administrative expenses................................. 1,810 2,845 4,088
Selling expenses........................................ 1,189 2,881 8,757
--------- --------- ---------
2,999 5,726 12,845
--------- --------- ---------
Operating profit........................................ 3,350 4,453 26,846
--------- --------- ---------
Financing cost:
Exchange loss (Note 1)................................ (81) (5,293) (5,610)
Interest earned....................................... 86 136 1,297
Interest paid......................................... (2,748) (3,578) (5,963)
--------- --------- ---------
(2,743) (8,735) (10,276)
--------- --------- ---------
Income (loss) before income tax, profit sharing and
asset tax provision................................... 607 (4,282) 16,570
--------- --------- ---------
Income tax (benefit) (Note 6)
Deferred.............................................. 367 (1,462) 4,346
Employees' profit sharing
For the year.......................................... -- -- 571
Deferred.............................................. -- (398) 1,610
Asset tax (Note 5)...................................... 239 421 --
--------- --------- ---------
606 (1,439) 6,527
--------- --------- ---------
Net income (loss)....................................... Ps 1 Ps (2,843) Ps 10,043
========= ========= =========
</TABLE>
See accompanying notes.
F-33
<PAGE> 77
GRUPO INDUSTRIAL SANTA ENGRACIA, S.A. DE C.V.
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CAPITAL ACCUMULATED
CAPITAL STOCK STOCK DEFICIT
------------------ ---------- -----------
(NUMBER OF SHARES) (THOUSANDS OF PESOS)
<S> <C> <C> <C>
Balance at December 31, 1992......................... 13,770,000 Ps 13,770 Ps (8,006)
Net loss for 1993.................................... -- -- 1
---------- ---------- ---------
Balance at December 31, 1993......................... 13,770,000 13,770 (8,005)
Net loss for 1994.................................... -- -- (2,843)
---------- ---------- ---------
Balance at December 31, 1994......................... 13,770,000 13,770 (10,848)
Net income for 1995.................................. -- -- 10,043
---------- ---------- ---------
Balance at December 31, 1995......................... 13,770,000 Ps 13,770 Ps (805)
========== ========== =========
</TABLE>
See accompanying notes.
F-34
<PAGE> 78
GRUPO INDUSTRIAL SANTA ENGRACIA, S.A. DE C.V.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1993 1994 1995
-------- --------- ---------
(THOUSANDS OF PESOS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)............................................ Ps 1 Ps (2,843) Ps 10,043
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation............................................... 652 701 821
Amortization............................................... 89 89 89
Seniority premiums......................................... -- -- 100
Deferred income tax........................................ (110) (1,860) 5,956
Changes in operating assets and liabilities:
Receivables............................................. (636) (7,988) (4,693)
Inventories............................................. (3,018) (359) (11,544)
Prepaid expenses........................................ 4 49 (345)
Other assets............................................ (96) -- 96
Accounts payable........................................ (138) 435 12,138
-------- --------- ---------
Net cash generated by (used in) operating activities......... (3,252) (11,776) 12,661
-------- --------- ---------
INVESTING ACTIVITIES
Purchases of property, plant and equipment................... (1,201) (88) (16,277)
-------- --------- ---------
FINANCING ACTIVITIES
Increase in short-term bank loans............................ 622 415 3,383
Increase in long-term debt................................... 3,942 12,680 1,024
-------- --------- ---------
Net cash provided by financing activities.................... 4,564 13,095 4,407
-------- --------- ---------
Net increase in cash and cash equivalents.................... 111 1,231 791
Cash and cash equivalents at beginning of
the year................................................... 340 451 1,682
-------- --------- ---------
Cash and cash equivalents at the end of the year............. Ps 451 Ps 1,682 Ps 2,473
======== ========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest....................................... Ps 2,636 Ps 3,620 Ps 5,868
Cash paid for income taxes................................... Ps 504 Ps 558 Ps 515
</TABLE>
See accompanying notes.
F-35
<PAGE> 79
GRUPO INDUSTRIAL SANTA ENGRACIA, S.A. DE C.V.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
(THOUSANDS OF PESOS)
1. ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
Grupo Industrial Santa Engracia, S.A. de C.V. is a Mexican company based in
Cd. Victoria, Tamaulipas. The Company is engaged in the processing of fruit,
mainly citrus, to make natural juice, concentrated juice and citrus oils.
Since the raw materials are of natural origin, their price and availability
depend on circumstances that are out of the Company's control, so that the cycle
and volume of operations is variable.
The Company was constituted on August 2, 1988, and began operations in
December 1989.
BASIS OF FINANCIAL STATEMENTS
The Company's accounting records are maintained in Mexican pesos and in
accordance with accounting principles generally accepted in Mexico. The
accompanying financial statements were prepared in conformity with accounting
principles generally accepted in the United States of America and were obtained
from the accounting records after giving effect to the following:
-- Canceling the effects of inflation on fixed assets.
-- Recording deferred income taxes.
USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with original
maturities of 90 days or less when purchased to be cash equivalents.
CONCENTRATION OF CREDIT RISK
The Company provides credit to its customers in the normal course of
business. The Company performs ongoing credit evaluations of its customers and
maintains allowances for possible credit losses, which, when realized, have been
within the range of management's expectations. A significant portion of sales is
made to two customers. One customer accounted for 34.8% and another customer
accounted for 10.1% of the Company's net sales during the year ended December
31, 1995.
INVENTORIES
Inventories are valued at the lower of cost or market. Cost is calculated
at average historical cost.
F-36
<PAGE> 80
GRUPO INDUSTRIAL SANTA ENGRACIA, S.A. DE C.V.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost. Depreciation is calculated
by the straight-line method, at the rates indicated below:
<TABLE>
<S> <C>
Buildings................................................................... 4.00%
Machinery and equipment..................................................... 4.25%
Transportation equipment.................................................... 12.00%
Computer equipment.......................................................... 7.00%
Office equipment............................................................ 7.00%
Installation expenses....................................................... 10.00%
</TABLE>
TERMINATION PAYMENTS
Termination payments due to workers under the terms of Mexican Labor Law
are charged to the results of operations in the year in which the decision to
dismiss the employee is made.
SENIORITY PREMIUMS
Seniority premiums are recognized as a cost during the years of service of
the personnel. This cost should be determined using independent actuarial
computations and applying the projected unitary credit method; however, at
December 31, 1995 the Company's Management estimated this liability on a
different base, determining and recording an amount of Ps 100. This figure was
considered to be sufficient at that date to meet the requirement, and Management
intends to obtain an actuarial study in 1996.
No actuarial study was performed in 1994, and no accrual recorded. It is
the Company's opinion that, had such a study been performed, the amount which
would have been recorded would not have materially affected the accompanying
financial statements for 1994.
TRANSACTIONS IN FOREIGN CURRENCY
Transactions in foreign currency are recorded at the prevailing exchange
rate on the day of the related transaction. Assets and liabilities denominated
in foreign currency are translated into Mexican pesos at the prevailing exchange
rate as of the balance sheet date. Exchange rate differences are reflected in
the current year's operations.
F-37
<PAGE> 81
GRUPO INDUSTRIAL SANTA ENGRACIA, S.A. DE C.V.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
2. PROPERTY, PLANT AND EQUIPMENT
This heading included the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1994 1995
-------- --------
(THOUSANDS OF PESOS)
<S> <C> <C>
Land........................................................... Ps 79 Ps 679
Buildings...................................................... 2,980 12,497
Machinery and equipment........................................ 11,915 16,404
Computer equipment............................................. 219 323
Office equipment............................................... 338 1,330
Transportation equipment....................................... 613 1,133
Installation expenses.......................................... 1,181 1,181
-------- --------
17,325 33,547
Less:
Accumulated depreciation....................................... 3,585 4,440
-------- --------
Ps13,740 Ps29,107
======== ========
</TABLE>
Depreciation expensed during the years ended December 31, 1993, 1994 and
1995 totaled Ps 652, Ps 701 and Ps 821, respectively.
3. BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Transactions with related parties were as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1993 1994 1995
----- ------- -------
(THOUSANDS OF PESOS)
<S> <C> <C> <C>
Sales..................................................... Ps112 Ps 193 Ps 135
===== ======= =======
Purchases................................................. Ps843 Ps1,383 Ps6,122
===== ======= =======
</TABLE>
The following balances with related parties were recorded under clients and
suppliers:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1994 1995
---- ----
(THOUSANDS OF
PESOS)
<S> <C> <C>
Accounts Receivable:
Clients
Empacadora Santa Engracia, S.A. de C.V.......................... Ps26 Ps36
Jugos y Bedidas de Victoria, S.A. de C.V........................ 65 --
---- ----
Ps91 Ps36
==== ====
Accounts Payable:
Suppliers
Gertrudis Collado Martinez...................................... Ps-- Ps 1
Jorge Martinez Brohez........................................... (10) (14)
Jose Maria Martinez Brohez...................................... -- (5)
Citrocel, S.A. de C.V........................................... 30 65
---- ----
Ps20 Ps47
==== ====
</TABLE>
F-38
<PAGE> 82
GRUPO INDUSTRIAL SANTA ENGRACIA, S.A. DE C.V.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
4. BANK LOANS
At December 31, 1994 and 1995, the Company had the following outstanding
bank loans:
<TABLE>
<CAPTION>
1994 1995
-------- -----------------------
SHORT-TERM LONG-TERM
---------- ---------
(THOUSANDS OF PESOS)
<S> <C> <C> <C>
BANAMEX, S.A.
Plant and equipment loan of Ps 7,740, due December
31, 2001, accruing interest at an annual rate of
LIBOR plus 8%...................................... Ps 4,995 Ps 1,161 Ps 6,579
Plant and equipment loan of Ps 11,499, due November
25, 2004, accruing interest at an annual rate of
18.5% secured by a mortgage........................ 11,499 560 10,939
-------- -------- --------
Ps16,494 Ps 1,721 Ps17,518
======== ======== ========
</TABLE>
The Company also has short-term loans with certain banks, at interest rates
of between Libor plus 3.5%, and 18.5%. The loans mature between February and
October 1996.
The exchange rates used to translate amounts in U.S. dollars into Mexican
pesos at December 31, 1993, 1994 and 1995 were Ps 3.1099, Ps 4.9950 and Ps
7.7396, respectively.
Aggregate maturities of long-term debt for the next five years (in
thousands) are as follows:
<TABLE>
<S> <C>
1996............................................ Ps --
1997............................................ 1,833
1998............................................ 1,969
1999............................................ 2,132
2000............................................ 2,715
Thereafter...................................... 8,869
--------
Ps17,518
========
</TABLE>
Based upon interest rates and current market conditions, management
believes the fair value of notes payable approximates their carrying value at
December 31, 1995.
5. INCOME TAX AND ASSET TAX
For the year ended December 31, 1995 the Company had a tax loss for income
tax purposes.
Tax loss carry forwards (in thousands) are as follows:
<TABLE>
<CAPTION>
AMOUNT YEAR OF
TAX LOSS YEAR (RESTATED VALUED) EXPIRATION
- ------------- ----------------- ----------
<S> <C> <C> <C>
1991.................................................. Ps 1,196 2001
1992.................................................. 7,040 2002
1993.................................................. 2,421 2003
1994.................................................. 4,015 2004
--------
Ps14,672
========
</TABLE>
A 1.8% asset tax is levied on the average value of most assets net of
certain liabilities. The asset tax represents a minimum tax and is paid only to
the extent that it exceeds income tax for the year. Any asset tax
F-39
<PAGE> 83
GRUPO INDUSTRIAL SANTA ENGRACIA, S.A. DE C.V.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
paid can be credited against the total amount of income tax payable in excess of
the asset tax in the succeeding ten years.
During 1995, for tax purposes, the Company depreciated the investments in
fixed assets made in that year on an accelerated basis at rates of 74% and 85%
of their original cost in accordance with the terms of Mexican Income Tax Law.
As a consequence of this accelerated depreciation, the Company obtained an
additional benefit in accordance with Asset Tax Law in regard to the Company's
right to off-set the asset tax for the year against 34% of the difference
between the accelerated depreciation of new investments in 1995 and the tax
depreciation in accordance with normal tax rates.
The balance between the asset tax for the year and the total of the benefit
mentioned in the prior paragraph amounts to Ps 3,319, and it can be off-set
against asset tax for subsequent years.
Both the tax loss carry forwards and the benefit amortizable against asset
tax were included as deferred asset tax, as described in Note 6.
6. DEFERRED TAXES
In the preparation of these financial statements, the Company adopted the
provisions of Statement of Financial Accounting Standards No. 109 (SFAS No.
109), "Accounting for Income Taxes." Under SFAS No. 109, the liability method is
used in accounting for income taxes. Accordingly, deferred tax assets and
liabilities are determined based on differences between financial reporting and
tax bases of assets and liabilities, and are determined using the enacted tax
laws and rates that will be in effect when the differences are expected to
reverse.
The Company also has permanent differences between its accounting and
taxable income, mainly related to the inflationary component and nondeductible
expenses, as well as differences between book and inflation-adjusted tax
depreciation.
F-40
<PAGE> 84
GRUPO INDUSTRIAL SANTA ENGRACIA, S.A. DE C.V.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The temporary differences between the tax bases of assets and liabilities
and their financial reporting amounts that give rise to the deferred tax asset
and liability are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1994 1995
-------- ---------
(THOUSANDS OF PESOS)
<S> <C> <C>
Income Tax
Assets:
Short-term
Tax loss carryforwards................................................ Ps 489 Ps --
Accrued taxes and expenses............................................ -- 157
------- --------
489 157
------- --------
Long-term
Tax loss carryforwards................................................ 4,708 4,989
Asset tax............................................................. 1,242 1,710
Benefit to apply to asset tax......................................... -- 3,319
------- --------
5,950 10,018
------- --------
Total assets.................................................. Ps6,439 Ps10,175
======= ========
Liabilities
Short term
Inventories........................................................... Ps1,746 Ps 5,687
------- --------
Long-term
Fixed assets.......................................................... 1,143 5,284
------- --------
Total liabilities............................................. Ps2,889 Ps10,971
======= ========
Employees' Profit
Sharing
Assets:
Short-term
Suppliers............................................................. Ps 6 Ps 25
Bank loans............................................................ 557 40
Accrued taxes and expenses............................................ -- 46
------- --------
Total assets.................................................. Ps 563 Ps 111
======= ========
Liabilities
Short-term
Inventories........................................................... Ps 514 Ps 1,673
Clients............................................................... 135 76
------- --------
649 1,749
------- --------
Long-term
Fixed assets.......................................................... 240 298
------- --------
Total liabilities............................................. Ps 889 Ps 2,047
======= ========
</TABLE>
F-41
<PAGE> 85
GRUPO INDUSTRIAL SANTA ENGRACIA, S.A. DE C.V.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The components of the provision for income taxes include the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1993 1994 1995
----- -------- -------
(THOUSANDS OF PESOS)
<S> <C> <C> <C>
Current
Federal................................................ Ps239 Ps421 Ps571
Deferred:
Federal................................................ 367 (1,860) 5,956
----- -------- -------
Total.......................................... Ps606 Ps(1,439) Ps6,527
===== ======== =======
</TABLE>
The Company's provision for income taxes reconciles to the amount computed
by applying the statutory Mexican rate of 34% to income before income taxes as
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1993 1994 1995
-------- -------- --------
(THOUSANDS OF PESOS)
<S> <C> <C> <C>
Expense computed at statutory rate................... Ps 206 Ps(1,456) Ps 5,634
Employees' profit sharing............................ -- (398) 2,181
Asset tax............................................ 239 421 --
Utilization of loss or credit carryforwards.......... (1,173) (1,612) (3,578)
Non deductible items and permanent differences....... 1,334 1,606 2,290
-------- -------- --------
Ps 606 Ps(1,439) Ps 6,527
======== ======== ========
</TABLE>
7. RESTRICTIONS ON RETAINED EARNINGS
Under Mexican Commercial Law, 5% of each year's income must be allocated to
a legal reserve until such reserve reaches 20% of the capital stock (Ps2,754).
This reserve can only be distributed to the shareholders in the form of stock
dividends.
8. SUBSEQUENT EVENTS
During the period of January 1 to April 30, 1996, the Company contracted
loans with Rabobank Curacao and Arka Securities Inc. for Ps13,909 to use as
working capital.
On May 9, 1996, all of the outstanding shares of the Company's common stock
were acquired by The UniMark Group, Inc.
F-42
<PAGE> 86
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Simply Fresh Fruit, Inc.
We have audited the accompanying balance sheet of Simply Fresh Fruit, Inc.,
as of December 31, 1995, and the related statements of income and retained
earnings and cash flows for the year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Simply Fresh Fruit, Inc., at
December 31, 1995 and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Dallas, Texas
April 29, 1996, except for Note 9,
as to which the date is
May 9, 1996
F-43
<PAGE> 87
SIMPLY FRESH FRUIT, INC.
BALANCE SHEET
DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE AMOUNTS)
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash......................................................................... $ 4
Accounts receivable, net of allowance for doubtful accounts of $21........... 773
Accounts receivable -- employees............................................. 13
Inventory.................................................................... 159
Prepaid expenses............................................................. 15
Income taxes recoverable..................................................... 15
Deferred income tax.......................................................... 11
------
Total current assets........................................................... 990
Marketable securities, at cost, which approximates fair value.................. 87
Property, plant and equipment, net............................................. 422
Patent license, net of amortization of $79..................................... 85
Deferred income tax............................................................ 14
Other assets................................................................... 68
------
Total assets................................................................... $1,666
======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable............................................................. $ 530
Accounts payable -- related parties.......................................... 256
Accrued expenses............................................................. 108
Accrued expenses -- related parties.......................................... 54
Notes payable, current portion............................................... 126
------
Total current liabilities...................................................... 1,074
Notes payable, less current portion............................................ 225
Commitments
Shareholders' equity:
Capital stock, $1.00 par value:
Authorized shares -- 200,000
Issued and outstanding shares -- 10,000................................... 22
Retained earnings............................................................ 345
------
Total shareholders' equity..................................................... 367
------
Total liabilities and shareholders' equity..................................... $1,666
======
</TABLE>
See accompanying notes
F-44
<PAGE> 88
SIMPLY FRESH FRUIT, INC.
STATEMENT OF INCOME AND RETAINED EARNINGS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Net sales...................................................................... $8,918
Cost of products sold.......................................................... 6,990
------
Gross profit................................................................... 1,928
Selling, general and administrative expenses................................... 1,813
------
Income from operations......................................................... 115
Other income (expense):
Gain on sale of assets....................................................... 8
Interest income.............................................................. 9
Interest expense............................................................. (33)
------
Income before income taxes..................................................... 99
Income tax expense (benefit):
Current...................................................................... 31
Deferred..................................................................... (2)
------
29
------
Net income..................................................................... 70
Retained earnings, beginning of year........................................... 275
------
Retained earnings, end of year................................................. $ 345
======
</TABLE>
See accompanying notes.
F-45
<PAGE> 89
SIMPLY FRESH FRUIT, INC.
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
OPERATING ACTIVITIES
Net income..................................................................... $ 70
Adjustments to reconcile net income to net cash used in operating activities:
Gain on sales of assets...................................................... (8)
Amortization................................................................. 33
Depreciation................................................................. 119
Deferred income taxes........................................................ (2)
Changes in operating assets and liabilities:
Increase in accounts receivable........................................... (101)
Increase in accounts receivable -- employees.............................. (11)
Increase in inventory..................................................... (5)
Increase in income taxes recoverable...................................... (29)
Decrease in prepaid expenses.............................................. 9
Decrease in other assets.................................................. 9
Decrease in accounts payable.............................................. (75)
Decrease in accrued expenses.............................................. (25)
-----
Net cash used in operating activities.......................................... (16)
INVESTING ACTIVITIES
Decrease in deposits........................................................... 5
Purchases of property, plant, and equipment.................................... (13)
Proceeds from sales of fixed assets............................................ 11
Increase in other assets....................................................... (45)
Net purchases of marketable securities......................................... (30)
-----
Net cash used in investing activities.......................................... (72)
-----
FINANCING ACTIVITIES
Net borrowings -- notes payable................................................ 86
-----
Net decrease in cash and cash equivalents...................................... (2)
Cash and cash equivalents at beginning of year................................. 6
-----
Cash and cash equivalents at end of year....................................... $ 4
=====
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid.................................................................. $ 33
=====
Income taxes paid.............................................................. $ 43
=====
</TABLE>
See accompanying notes.
F-46
<PAGE> 90
SIMPLY FRESH FRUIT, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. ORGANIZATION
The Company was incorporated in the state of California in January 1983.
The Company is located in Los Angeles, and is a wholesale processor, packager
and seller of fresh fruit and a fresh fruit mix.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with original
maturities of 90 days or less when purchased to be cash equivalents.
Concentration of Credit Risk
The Company manufactures and sells citrus products and certain food
products to customers in the foodservice and retail industries in the United
States. The Company performs periodic credit evaluations of its customers'
financial condition and generally does not require collateral. Trade receivables
generally are due within 30 days. Credit losses have been within management's
expectations. A significant portion of sales is made to two customers. One
customer accounted for 10.4% and another customer accounted for 19.2% of the
Company's net sales during the year ended December 31, 1995.
Inventory
Inventory is stated at the lower of cost or market determined on a
first-in, first-out basis.
Property, Plant and Equipment
Property, plant, and equipment are stated at cost. Depreciation expense is
calculated using straight-line and declining balance methods over lives ranging
from five to ten years and includes depreciation on assets under capital lease.
Patent License
The patent license is being amortized over its expected useful life of five
years using the straight-line method.
Income Taxes
The Company utilizes the liability method of accounting for income taxes as
set forth in Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes." Under this method, deferred tax assets and liabilities are
determined based on differences between the financial reporting and tax bases of
assets and liabilities and are measured using the enacted tax rates and laws
that will be in effect when the differences are expected to reverse.
F-47
<PAGE> 91
SIMPLY FRESH FRUIT, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Fair Value of Financial Instruments
Management estimates the fair value of notes payable to approximate their
carrying value at December 31, 1995 based upon current market interest rates in
relation to the stated and imputed interest rates and the relative liquidity of
each instrument.
3. INVENTORY
A summary of inventory at December 31, 1995 is as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Bulk fruit...................................................... $ 46
Packaging....................................................... 76
Labels.......................................................... 26
Finished goods.................................................. 11
----
$159
====
</TABLE>
4. PROPERTY, PLANT AND EQUIPMENT
The major classes of property, plant and equipment at December 31, 1995 are
as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Factory and processing equipment............................... $235
Delivery equipment............................................. 54
Automobiles.................................................... 93
Office equipment............................................... 32
Leasehold improvements......................................... 309
Property under capital lease................................... 51
----
774
Less: Accumulated depreciation................................. 352
----
$422
====
</TABLE>
5. NOTES PAYABLE
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Note payable in sixty equal monthly installments of $3,333 beginning August 1,
1993. Amounts recorded in the financial statements have been discounted at
8%. ......................................................................... $ 92
Notes payable to a bank; secured by receivables, inventory, equipment, and
improvements and guaranteed by the Company's Chairman of the Board and its
President. Principal payments of $6,250 are due monthly plus interest at
1 1/2% over the lender's premium rate........................................ 220
Capital lease on industrial equipment, payable in 60 equal payments of $1,031
including interest at 8% per annum........................................... 36
Other.......................................................................... 3
----
351
Less current portion........................................................... 126
----
$225
====
</TABLE>
F-48
<PAGE> 92
SIMPLY FRESH FRUIT, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Aggregate maturities of notes payable for the next four years are as
follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
1996........................................................... $127
1997........................................................... 121
1998........................................................... 101
1999........................................................... 2
----
$351
====
</TABLE>
6. COMMITMENTS
The Company leases its building under an operating lease. The lease is for
a period of ten years, expiring in 2004, and contains a purchase option between
August 15, 1996 and August 14, 1997 for $4,500,000 or between August 15, 1997
and August 14, 1998 for $4,750,000.
Future minimum payments under this noncancelable operating lease at
December 31, 1995 were:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
1996........................................................... $101
1997........................................................... 108
1998........................................................... 110
1999........................................................... 110
2000........................................................... 117
Thereafter..................................................... 400
----
$946
====
</TABLE>
Rent expense was $100,800 for the year ended December 31, 1995.
7. INCOME TAXES
For the year ended December 31, 1995, the components of the provision
(benefit) for income taxes include the following:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Current:
Federal...................................................... $ 21
State........................................................ 10
---
31
Deferred:
Federal...................................................... (2)
---
Total.......................................................... $ 29
===
</TABLE>
The Company's provision for income taxes reconciles to the amount computed
by applying the applicable statutory U.S. federal rate of 26% to income before
income taxes as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Expense computed at statutory rate............................. $ 26
State taxes, net of federal benefit............................ 7
Other.......................................................... (4)
---
Provision for income taxes..................................... $ 29
===
</TABLE>
F-49
<PAGE> 93
SIMPLY FRESH FRUIT, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Deferred tax assets and liabilities at December 31, 1995 are comprised of
the following:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Deferred tax assets:
Reserve for bad debts........................................ $ 7
Franchise taxes.............................................. 4
Deferred wages............................................... 26
---
Total deferred tax assets...................................... 37
Deferred tax liability -- depreciation......................... 12
---
Net deferred tax asset......................................... $ 25
===
</TABLE>
8. RELATED PARTY TRANSACTIONS
During 1995, the Company paid approximately $85,000 for raw material
(fruit) purchases to entities in which the Chairman of the Board had an
interest.
During 1995, the Company paid approximately $1.7 million in labor costs to
P&C Services, an entity which provides all of the hourly skilled labor to the
Company. This entity is owned by the President, General Manager, Production
Manager and Fruit Procurement Manager of the Company, each of whom own a 25%
interest. At December 31, 1995, $10,186 was owed to this entity by the Company
and was included in accounts payable-related parties.
Selling, general and administrative expenses includes commissions and
brokerage fees of $203,526 due to an entity owned by the Company's Chairman of
the Board for assistance in procuring raw fruit for the Company's use. At
December 31, 1995, approximately $246,000 related to these current year and
prior year activities was included in accounts payable -- related parties.
During 1995, the Company paid approximately $52,000 in health insurance
premiums to a company owned by the Chairman of the Board, for the costs of
providing health insurance benefits to the Company's salaried employees. At
December 31, 1995, approximately $54,000 in health insurance premiums payable to
this related entity was included in accrued expenses -- related parties.
9. SUBSEQUENT EVENT
On May 9, 1996 all of the shares of the Company's outstanding common stock
were acquired by the UniMark Group, Inc.
F-50
<PAGE> 94
- ---------------------------------------------------
- ---------------------------------------------------
NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THIS OFFERING OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL OR SOLICITATION OF ANY OFFER TO BUY BY ANY ONE IN ANY JURISDICTION IN
WHICH SUCH OFFER TO SELL OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE
PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO, OR TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................. 3
Cautionary Statement Regarding
Forward-Looking Statements........ 6
Risk Factors........................ 6
Use of Proceeds..................... 10
Price Range of Common Stock......... 11
Dividend Policy..................... 11
Capitalization...................... 12
Recent Acquisitions................. 13
Selected Consolidated Financial
Data.............................. 15
Management's Discussion and Analysis
of Financial Condition and Results
of Operations..................... 16
Business............................ 20
Management.......................... 30
Certain Transactions................ 34
Principal and Selling
Shareholders...................... 36
Description of Capital Stock........ 37
Underwriting........................ 39
Legal Matters....................... 40
Experts............................. 40
Available Information............... 40
Index to Financial Statements....... F-1
</TABLE>
- ---------------------------------------------------
- ---------------------------------------------------
- ---------------------------------------------------
- ---------------------------------------------------
THE UNIMARK GROUP, INC.
2,000,000 SHARES
COMMON STOCK
--------------------
PROSPECTUS
--------------------
RODMAN & RENSHAW, INC.
RAUSCHER PIERCE REFSNES, INC.
, 1996
- ---------------------------------------------------
- ---------------------------------------------------
<PAGE> 95
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses to be incurred in connection
with this Registration Statement, all of which will be borne by the Company. All
of such expenses are estimated, other than the filing fees payable to the
Commission and the NASD.
<TABLE>
<CAPTION>
AMOUNT
--------
<S> <C>
SEC Registration Fee.............................................................. $ 12,789
NASD Filing Fee................................................................... 3,725
Printing and Engraving Expenses................................................... *
Legal Fees and Expenses........................................................... *
Blue Sky Fees and Expenses........................................................ *
Accounting Fees and Expenses...................................................... *
Miscellaneous..................................................................... *
--------
Total................................................................... $400,000
========
</TABLE>
- ---------------
* To be completed by Amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article 2.02-1 of the Texas Business Corporation Act permits a corporation
to indemnify a person who was or is a director, officer, employee, or agent of a
corporation or who serves at the corporation's request as a director, officer,
partner, proprietor, trustee, employee, or agent of another corporation,
partnership, trust, joint venture, or other enterprise (an "outside
enterprise"), who was, is, or is threatened to be named a defendant in a legal
proceeding by virtue of such person's position in the corporation or in an
outside enterprise, but only if the person acted in good faith and reasonably
believed, in the case of conduct in the person's official capacity, that the
conduct was in or, in the case of all other conduct, that the conduct was not
opposed to the corporation's best interest, and, in the case of a criminal
proceeding, the person had no reasonable cause to believe the conduct was
unlawful. A person may be indemnified within the above limitations against
judgments, fines, settlements, and reasonable expenses actually incurred.
Generally, an officer, director, agent, or employee of a corporation or a person
who serves at the corporation's request as an officer, director, agent, or
employee of an outside enterprise may not be indemnified, however, against
judgments, fines, and settlements incurred in a proceeding in which the person
is found liable to the corporation or is found to have improperly received a
personal benefit and may not be indemnified for expenses unless, and only to the
extent that, in view of all the circumstances, the person is fairly and
reasonably entitled to indemnification for such expenses. A corporation must
indemnify a director, officer, employee, or agent against reasonable expenses
incurred in connection with a proceeding in which the person is a party because
of the person's corporate position, if the person was successful, on the merits
or otherwise, in the defense of the proceeding. Under certain circumstances, a
corporation may also advance expenses to such person.
Article 2.02-1 of the Texas Business Corporation Act also permits a
corporation to purchase and maintain insurance or to make other arrangements on
behalf of any of the above persons against any liability asserted against and
incurred by the person in such capacity, or arising out of the person's status
as such a person, whether or not the corporation would have the powers to
indemnify the person against the liability under applicable law.
The Company's Articles of Incorporation, as amended, provide that the
Company's directors will have no personal liability to the Company or its
shareholders for monetary damages for breach or alleged breach of the directors'
duty of care. This provision has no effect on director liability for (i) a
breach of the directors' duty of loyalty to the Company or its shareholders,
(ii) acts or omissions not in good faith that constitute a breach of duty of a
director or involving intentional misconduct or knowing violations of law, (iii)
approval of any
II-1
<PAGE> 96
transaction from which a director derives an improper personal benefit, or (iv)
an act or omission for which the liability of a director is expressly provided
by an applicable statute. In addition, the Company's Articles of Incorporation,
as amended, provide that any additional liabilities permitted to be eliminated
by subsequent legislation will automatically be eliminated without further
shareholder vote, unless additional shareholder approval is required by such
legislation. Article VI of the Company's Bylaws also provides that the Company
will indemnify its directors, officers, employees and agents to the fullest
extent permitted by the Texas Business Corporation Act. The Company is generally
required to indemnify its directors, officers, employees, and agents against all
judgments, fines, settlements, legal fees, and other expenses incurred in
connection with pending or threatened legal proceedings because of the person's
position with the Company or another entity that the person serves at the
Company's request, subject to certain conditions, and to advance funds to enable
them to defend against such proceedings. In addition, the Bylaws contain certain
provisions intended to facilitate receipt of such benefits.
The Underwriting Agreement entered into by the Company and the
Representatives in connection with this offering provides that the
Representatives will indemnify the directors and officers of the Company against
certain liabilities including liabilities under the Securities Act.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
In May 1996, in connection with the GISE Acquisition, UniMark issued
782,614 shares of Common Stock to the holders of the outstanding shares of
capital stock of GISE.
In May 1996, in connection with the Simply Fresh Acquisition, UniMark
issued 90,909 shares of Common Stock to the holders of the outstanding shares of
capital stock of Simply Fresh.
In January 1996, in connection with the Deli-Bon Acquisition, UniMark
issued 28,510 shares of Common Stock to Gestion Michel Baribeau, Inc.
Effective upon the Company's initial public offering in August 1994,
holders of all the outstanding shares of capital stock of ICMOSA (the "ICMOSA
Holders") exchanged all outstanding shares of ICMOSA stock for shares of
UniMark's Common Stock (the "ICMOSA Exchange"). In connection with the ICMOSA
Exchange, UniMark issued 1,300,950 shares of Common Stock to the ICMOSA Holders,
representing approximately 43.4 percent of UniMark's Common Stock outstanding
immediately prior to the offering or approximately 28 percent of UniMark's
Common Stock outstanding immediately after the offering. All of the ICMOSA
Holders are Mexican nationals and none are citizens or residents of the United
States. As part of the ICMOSA Exchange, each ICMOSA Holder has agreed not to
sell any shares of UniMark Common Stock in the United States without the consent
of UniMark for a period of two years.
Exemption from registration with respect to the above-described sales was
claimed under Section 4(2) of the Securities Act regarding transactions by an
issuer not involving any public offering, under Rules 506 promulgated under the
Securities Act and Regulation S under the Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------ -------
<C> <C> <S>
1.0 -- Form of Underwriting Agreement(7)
3.1 -- Articles of Incorporation of The UniMark Group, Inc., as amended(1)
3.2 -- Amended and Restated Bylaws of The UniMark Group, Inc.(1)
3.3 -- Articles of Exchange of The UniMark Group, Inc.(1)
4.1 -- Specimen Stock Certificate(1)
4.4 -- Form of Underwriters' Warrant and Registration Agreement(1)
5.1 -- Opinion of Jordaan, Howard & Pennington, PLLC as to the validity of the issuance of
the securities registered hereby (including consent)(7)
10.1 -- The UniMark Group, Inc. 1994 Employee Stock Option Plan(1)
10.2 -- The UniMark Group, Inc. 1994 Stock Option Plan for Directors(1)
</TABLE>
II-2
<PAGE> 97
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------ -------
<C> <C> <S>
10.3 -- Stock Exchange Agreement between The UniMark Group, Inc. and the stockholders of
Industria Citricolas de Montemorelos, S.A. de C.V.(1)
10.4 -- Citrus Grove Lease Agreement(1)
10.6 -- License Agreement between Pacific Rim Marketing, Ltd. and The UniMark Group, Inc.
dated effective April 14, 1994(1)
10.7 -- Loan Agreement between The UniMark Group, Inc. et al and Southwest Bank dated
September 4, 1994(1)
10.8 -- Assumption Agreement between the UniMark Foods, Inc., Jorn Budde and Texas Commerce
Bank -- Rio Grande dated May 17, 1991, with related documents.(1)
10.10 -- Lease Agreement between UniMark Foods, Inc. and Jorn and Doreen Budde dated
September 1, 1991(1)
10.11 -- Lease Agreement between UniMark Foods, Inc. and Terry Speer dated July 1, 1991(1)
10.12 -- Loan Agreement between The UniMark Group, Inc., et al and Southwest Bank dated
April 30, 1994(1)
10.13 -- Asset Operating Agreement between the Registrant and Industrias Horticolas de
Montemorelos, S.A. de C.V.(2)
10.14 -- Lease agreement among Hector Gerardo Castagne Maitret, Carlos Courturier Arellano,
Mauro Alberto Salazar Rangel, Miguel Angel Salazar Rangel, Alejandrina Trevino
Garcia, Gerardo Trevino Garcia, Jorge Maitret and Industrias Citricolas de
Montemorelos, S.A. de C.V.(2)
10.15 -- Contract of Purchase and Sale between Empacadora Tropifrescos, Sociedad Anonima de
Capital Variable and Industrias Citricolas de Montemorelos, S.A. de C.V.(2)
10.16 -- Lease Agreement between Industrias Citricolas de Montemorelos, S.A. de C.V. and
Valpak, S.A. de C.V. dated July 1, 1995(3)
10.17 -- Asset Operating Agreement between Industrial Citricolas de Montemorelos, S.A. de
C.V. and Empacadora de Naranjas Azteca, S.A. de C.V. dated July 1, 1995(3)
10.18 -- Contract for Operation, Administration, and Purchase and Sale of Fruit between
Industrial Citricolas de Montemorelos, S.A. de C.V. and Mr. Jorge Croda Manica
("Las Tunas") dated July 1, 1995(3)
10.19 -- Lease Contract between Industrial Citricolas de Montemorelos, S.A. de C.V. and Mr.
Mauro Alberto Salazar Rangel and Mr. Miguel Angel Salazar Rangel ("Huerta Loma
Bonita") dated 1995(3)
10.20 -- Unilateral Recognition of Indebtedness and Granting of Revolving Collateral between
Industrial Citricolas de Montemorelos, S.A. de C.V. and Rabobank Curacao N.V. dated
September 20, 1995(3)
10.21 -- Amended and Restated Stock Purchase Agreement among The UniMark Group, Inc.,
9029-4315 Quebec Inc., Michel Baribeau and Gestion Michel Baribeau Inc. dated
January 3, 1996(4)
10.22 -- Business Loan Agreement between Bank of America and UniMark Foods, Inc. dated
December 18, 1995(3)
10.23 -- Lease Agreement between Loma Bonita Partners and UniMark Foods, Inc. dated November
28, 1995(3)
10.24 -- Lease Agreement between The UniMark Group, Inc. and Grosnez Partners dated January
1, 1996(3)
10.25 -- Rural Property Sublease Agreement between Industrial Citricolas de Montemorelos,
S.A. de C.V. and Lorenzo Uruiza Lopez dated October 23, 1995(3)
10.26 -- Purchase Agreement between Industrial Citricolas de Montemorelos, S.A. de C.V. and
Jose Enrique Alfonso Perez Rodriquez dated October 23, 1995(3)
10.27 -- Stock Purchase Agreement between The UniMark Group, Inc. and the stockholders of
Grupo Industrial Santa Engracia dated April 30, 1996(6)
10.28 -- Stock Purchase Agreement between The UniMark Group, Inc., UniMark Foods, Inc., Sam
Perricone Children's Trust -- 1972, Sam Perricone and Mark Strongin dated May 9,
1996(6)
</TABLE>
II-3
<PAGE> 98
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------ -------
<C> <C> <S>
10.29 -- Employment Agreement by and between Grupo Industrial Santa Engracia, S.A. de C.V.
and Ing Jose Ma Martinez Brokez dated as of May 9, 1996.(7)
11 -- Statement regarding computation of per share earnings(5)
21 -- Subsidiaries of the Registrant(7)
23.1 -- Consent of Ernst & Young LLP(7)
23.2 -- Consent of Laberge Lafleur(7)
23.3 -- Consent of Mancera, S.C. Ernst & Young(7)
23.4 -- Consent of Garza, Jasso y Asociados(7)
23.5 -- Consent of Jordaan, Howard & Pennington contained in its opinion filed as Exhibit
5.1 hereto
24 -- Power of Attorney (See signature page)
27 -- Financial Data Schedule(7)
</TABLE>
- ---------------
(1) Previously filed as the same numbered Exhibit to the Registrant's
Registration Statement on Form SB-2, as amended, SEC Registration No.
33-78352-D.
(2) Previously filed as an Exhibit to the Registrant's Annual Report on Form
10-KSB for the fiscal year ended December 31, 1994.
(3) Previously filed as an Exhibit to the Registrant's Quarterly Report on Form
10-QSB for the fiscal quarter ended September 30, 1995.
(4) Previously filed as an Exhibit to the Registrant's Current Report on Form
8-K dated January 16, 1995.
(5) Previously filed as an Exhibit to the Registrant's Annual Report on Form
10-KSB for the fiscal year ended December 31, 1995.
(6) Previously filed as an Exhibit to the Registrant's Current Report on Form
8-K dated May 10, 1996.
(7) Filed herewith.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes it will:
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions,
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as a part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of the
registration statement as of the time it was declared effective. For the
purpose of determining any liability under the Securities Act of 1933, each
post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
II-4
<PAGE> 99
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1933, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Bartonville, State of Texas, on May 9, 1996:
The UniMark Group, Inc.
(Registrant)
<TABLE>
<S> <C> <C> <C>
By: /s/ JORN BUDDE By: /s/ KEITH FORD
----------------------------------------- -----------------------------------------
Jorn Budde Keith Ford
President and Chief Executive Officer Vice President -- Finance, Secretary and
(Principal Executive Officer) Treasurer (Principal Financial and
Accounting Officer)
</TABLE>
POWER OF ATTORNEY
Each of the undersigned hereby appoints Jorn Budde and Keith Ford, and each
of them acting individually, as his true and lawful attorneys-in-fact and
agents, with full power of substitution, for and in their name, place and stead
of the undersigned, in any and all capacities to sign and file with the
Securities and Exchange Commission under the Securities Act of 1933, as amended,
any and all amendments and exhibits to this Registration Statement and any and
all applications, instruments and other documents to be filed with the
Securities and Exchange Commission pertaining to the registration of the
securities covered hereby or the transactions contemplated herein. In accordance
with the requirements of the Securities Exchange Act of 1933, this registration
statement was signed below by the following persons on behalf of the registrant
and in the capacities and on the dates stated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- --------------------------------- ------------
<C> <S> <C>
/s/ JORN BUDDE President, Chief Executive May 9, 1996
- --------------------------------------------- Officer and Director
Jorn Budde
/s/ RAFAEL VAQUERO BAZAN Chief Operating Officer and May 9, 1996
- --------------------------------------------- Director
Rafael Vaquero Bazan
/s/ EDWARD A. STONE Director May 9, 1996
- ---------------------------------------------
Edward A. Stone
/s/ EDUARDO VAQUERO BAZAN Director May 9, 1996
- ---------------------------------------------
Eduardo Vaquero Bazan
/s/ PEDRO VAQUERO GARCIA Director (Honorary Chairman) May 9, 1996
- ---------------------------------------------
Pedro Vaquero Garcia
/s/ FERNANDO CAMACHO CASAS Director May 9, 1996
- ---------------------------------------------
Fernando Camacho Casas
/s/ JAKES JORDAAN Director May 9, 1996
- ---------------------------------------------
Jakes Jordaan
</TABLE>
II-5
<PAGE> 100
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------ -----------------------------------------------------------------------------------
<C> <C> <S>
1.0 -- Form of Underwriting Agreement
5.1 -- Opinion of Jordaan, Howard & Pennington, PLLC as to the validity of the issuance of
the securities registered hereby (including consent)
10.29 -- Employment Agreement by and between Grupo Industrial Santa Engracia, S.A. de C.V.
and Ing Jose Ma Martinez Brokez dated as of May 9, 1996.
21 -- Subsidiaries of the Registrant
23.1 -- Consent of Ernst & Young LLP
23.2 -- Consent of Laberge Lafleur
23.3 -- Consent of Mancera, S.C. Ernst & Young
23.4 -- Consent of Garza, Jasso y Asociados
27 -- Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 1
DRAFT
2,000,000 SHARES
THE UNIMARK GROUP, INC.
COMMON STOCK
UNDERWRITING AGREEMENT
_______________________
________________, 1996
Rodman & Renshaw, Inc.
One Liberty Plaza
165 Broadway
New York, New York 10006
Rauscher Pierce Refsnes, Inc.
2711 N. Haskell Avenue
Dallas, TX 75204
On behalf of the Several
Underwriters named in
Schedule I attached hereto.
Ladies and Gentlemen:
The Unimark Group, Inc., a Texas corporation (the "Company") and the
shareholders of the Company named in Schedule II attached hereto (the "Selling
Shareholders"), propose to sell to you and the other underwriters named in
Schedule I attached hereto (the "Underwriters"), for whom you are acting as the
Representatives, an aggregate of 2,000,000 shares (the "Firm Shares") of the
Company's Common Stock, $.01 par value per share (the "Common Stock") of which
1,400,000 shares (the "Company Shares") are to be issued and sold by the
Company and 600,000 shares (the "Selling Shareholder Shares") are to be sold by
the Selling Shareholders. In addition, (i) the Company proposes to grant to
the Underwriters an option to purchase up to an additional 277,000 shares (the
"Company Option Shares") and (ii) certain Selling Shareholders as set forth on
Schedule II, (the "Certain Selling Shareholders") propose to grant an option to
purchase 23,000 shares (the "Selling Shareholder Option Shares" and together
with the Company Option Shares, the "Option Shares"), of Common Stock for the
purpose of covering over-allotments in connection with the sale of the Firm
Shares. The Firm Shares and the Option Shares are together called the
"Shares."
1. Sale and Purchase of the Shares. On the basis of the
representations, warranties and agreements contained in, and subject to the
terms and conditions of, this Agreement:
(a) The Company agrees to issue and sell the Company
Shares and the Selling Shareholders agree to sell the Selling
Shareholder Shares to the several Underwriters, and each of the
Underwriters agrees, severally and not jointly, to purchase at the
purchase price per share
<PAGE> 2
of Common Stock of $________ (the "Initial Price"), the aggregate
number of Firm Shares set forth opposite such Underwriter's name in
Schedule I attached hereto. The Underwriters agree to offer the Firm
Shares to the public as set forth in the Prospectus.
(b) The Company grants to the several Underwriters an
option to purchase all or any part of the Company Option Shares, and
the Certain Selling Shareholders grant to the several Underwriters an
option to purchase all or any part of the Selling Shareholder Option
Shares, at the Initial Price. The number of Option Shares to be
purchased by each Underwriter shall be the same percentage (adjusted
by the Representatives to eliminate fractions) of the total number of
Option Shares to be purchased by the Underwriters as such Underwriter
is purchasing of the Firm Shares. Such option may be exercised only
to cover over-allotments in the sales of the Firm Shares by the
Underwriters and may be exercised in whole or in part at any time on
or before 12:00 noon, New York City time, on the business day before
the Firm Shares Closing Date (as defined below), and from time to time
thereafter within 30 days after the date of this Agreement, upon
written or telegraphic notice, or verbal or telephonic notice
confirmed by written or telegraphic notice, by the Representatives to
the Company or the Certain Selling Shareholders no later than 12:00
noon, New York City time, on the business day before the Firm Shares
Closing Date or at least two business days before any Option Shares
Closing Date (as defined below), as the case may be, setting forth the
number of Option Shares to be purchased and the time and date (if
other than the Firm Shares Closing Date) of such purchase.
2. Delivery and Payment. Delivery by the Company and the Selling
Shareholders of the Firm Shares to the Representatives for the respective
accounts of the Underwriters, and payment of the purchase price by certified or
official bank check or checks payable in New York Clearing House (next day)
funds to the Company and the Selling Shareholders, shall take place at the
offices of Rodman & Renshaw, Inc., at One Liberty Plaza, 165 Broadway, New
York, New York, 10006, at 10:00 a.m., New York City time, on the [THIRD]
business day following the date on which the public offering of the Shares
commences (unless such date is postponed in accordance with the provisions of
Section 10(b)), or at such time and place on such other date, not later than 10
business days after the date of this Agreement, as shall be agreed upon by the
Company, the Selling Shareholders and the Representatives (such time and date
of delivery and payment are called the "Firm Shares Closing Date"). The public
offering of the Shares shall be deemed to have commenced at the time, which is
the earlier of (a) the time, after the Registration Statement (as defined in
Section 4 below) becomes effective, of the release by you for publication of
the first newspaper advertisement which is subsequently published relating to
the Shares or (b) the time, after the Registration Statement becomes effective,
when the Shares are first released by you for offering by the Underwriters or
dealers by letter or telegram.
In the event the option with respect to the Option Shares is
exercised, delivery by the Company of the Company Option Shares or the Certain
Selling Shareholders of the Selling Shareholder Option Shares, to the
Representatives for the respective accounts of the Underwriters and payment of
the purchase price by certified or official bank check or checks payable in New
York Clearing House (next day) funds to the Company or the Certain Selling
Shareholders, as the case may be, shall take place at the offices of Rodman &
Renshaw, Inc. specified above at the time and on the date (which may be the
same date as, but in no event shall be earlier than, the Firm Shares Closing
Date) specified in the notice referred to in Section 1(b) (such time and date
of delivery and payment is called the "Option Shares Closing Date"). The Firm
Shares Closing Date and the Option Shares Closing Dates are called,
individually, a "Closing Date" and, together, the "Closing Dates."
2
<PAGE> 3
Certificates evidencing the Shares shall be registered in such names
and shall be in such denominations as the Representatives shall request at
least two full business days before the Firm Shares Closing Date or the Option
Shares Closing Date, as the case may be, and shall be made available to the
Representatives for checking and packaging, at such place as is designated by
the Representatives, on the full business day before the Firm Shares Closing
Date or the Option Shares Closing Date, as the case may be.
3. Public Offering. The Company and the Selling Shareholders
understand that the Underwriters propose to make a public offering of the
Shares, as set forth in and pursuant to the Prospectus (as defined in Section 4
below), as soon after the effective date of the Registration Statement and the
date of this Agreement, as the Representatives deem advisable. The Company and
the Selling Shareholders hereby confirm that the Underwriters and dealers have
been authorized to distribute or cause to be distributed each Preliminary
Prospectus and are authorized to distribute the Prospectus (as from time to
time amended or supplemented if the Company furnishes amendments or supplements
thereto to the Underwriters).
4. Representations and Warranties of the Company and the Selling
Shareholders.
(a) The Company represents and warrants to, and agrees
with, the several Underwriters that:
(i) The Company has filed with the Securities and
Exchange Commission (the "Commission") a registration
statement, and may have filed one or more amendments thereto,
on Form S-1 (Registration No. 333-________), including in such
registration statement and each such amendment a related
preliminary prospectus (a "Preliminary Prospectus"), for the
registration of the Shares and the Option Shares, in
conformity with the requirements of the Securities Act of
1933, as amended (the "Act"). In addition, the Company has
filed or will promptly file a further amendment to such
registration statement, in the form heretofore delivered to
you. As used in this Agreement, the term "Registration
Statement" means such registration statement, as amended, on
file with the Commission at the time such registration
statement becomes effective (including the prospectus,
financial statements, exhibits, and all other documents filed
as a part thereof or incorporated by reference directly or
indirectly therein (such incorporated documents being herein
collectively "Incorporated Documents")), provided that such
Registration Statement, at the time it becomes effective, may
omit such information as is permitted to be omitted from the
Registration Statement when it becomes effective pursuant to
Rule 430A of the General Rules and Regulations promulgated
under the Act (the "Regulations"), which information ("Rule
430 Information") shall be deemed to be included in such
Registration Statement when a final prospectus is filed with
the Commission in accordance with Rules 430A and 424(b)(1) or
(4) of the Regulations; the term "Preliminary Prospectus"
means each prospectus included in the Registration Statement,
or any amendments thereto, before it becomes effective under
the Act, the form of prospectus omitting Rule 430A Information
included in the Registration Statement when it becomes
effective, if applicable (the "Rule 430A Prospectus"), and any
prospectus filed by the Company with your consent pursuant to
Rule 424(a) of the Regulations; and the term "Prospectus"
means the final prospectus included as part of the
Registration Statement, except that if the prospectus relating
to the
3
<PAGE> 4
securities covered by the Registration Statement in the form
first filed on behalf of the Company with the Commission
pursuant to Rule 424(b) of the Regulations shall differ from
such final prospectus, the term "Prospectus" shall mean the
prospectus as filed pursuant to Rule 424(b) from and after the
date on which it shall have first been used.
(ii) When the Registration Statement becomes
effective, and at all times subsequent thereto to and
including the Closing Dates, and during such longer period as
the Prospectus may be required to be delivered in connection
with sales by the Underwriters or a dealer, the Registration
Statement (and any post-effective amendment thereto) and the
Prospectus (as amended or as supplemented if the Company shall
have filed with the Commission any amendment or supplement to
the Registration Statement or the Prospectus) will contain all
statements which are required to be stated therein in
accordance with the Act and the Regulations, will comply with
the Act and the Regulations, and will not contain any untrue
statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the
statements therein not misleading, and no event will have
occurred which should have been set forth in an amendment or
supplement to the Registration Statement or the Prospectus
which has not then been set forth in such an amendment or
supplement; if a Rule 430A Prospectus is included in the
Registration Statement at the time it becomes effective, the
Prospectus filed pursuant to Rules 430A and 424(b)(1) or (4)
will contain all Rule 430A Information; and each Preliminary
Prospectus, as of the date filed with the Commission, did not
include any untrue statement of a material fact or omit to
state any material fact required to be stated therein or
necessary to make the statements therein not misleading;
except that no representation or warranty is made in this
Section 4(a)(ii) with respect to statements or omissions made
in reliance upon and in conformity with written information
furnished to the Company as stated in Section 7(b) with
respect to any Underwriter by or on behalf of such Underwriter
through the Representatives expressly for inclusion in any
Preliminary Prospectus, the Registration Statement, or the
Prospectus, or any amendment or supplement thereto. Each of
the Incorporated documents complies in all material respects
with the requirements of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and the rules and regulations
thereunder.
(iii) Neither the Commission nor the "blue sky" or
securities authority of any jurisdiction has issued an order
(a "Stop Order") suspending the effectiveness of the
Registration Statement, preventing or suspending the use of
any Preliminary Prospectus, the Prospectus, the Registration
Statement, or any amendment or supplement thereto, refusing to
permit the effectiveness of the Registration Statement, or
suspending the registration or qualification of the Firm
Shares or the Option Shares nor has any of such authorities
instituted or threatened to institute any proceedings with
respect to a Stop Order.
(iv) Any contract, agreement, instrument, lease,
or license required to be described in the Registration
Statement or the Prospectus has been properly described
therein. Any contract agreement, instrument, lease, or
license required to be filed as an exhibit to the Registration
Statement has been filed with the Commission as an exhibit to
or has been incorporated as an exhibit by reference into the
Registration Statement.
4
<PAGE> 5
(v) The Company has no subsidiaries and does not
control, directly or indirectly, any corporation, partnership,
joint venture, association or other business organization,
except for Simply Fresh Fruit, Inc., a California corporation
("Simply Fresh"), Unimark Foods, Inc., a Texas corporation
("UFI"), Unimark International, Inc., a Texas corporation
("UII" and together with UFI, the "Texas Subsidiaries"),
Industrias Citricolas De Montemorelos, S.A. De C.V., a Mexican
entity ("ICMOSA"), Grupo Industries Santa Engracia, a Mexican
entity ("GISE", and together with ICMOSA the "Mexican
Subsidiaries") Les Produits Deli-Bon, Inc., a company
organized under the laws of Canada, ("Deli-Bon") (each such
corporation singly a "Subsidiary" and collectively the
"Subsidiaries"). Each of the Company and each Subsidiary is a
corporation duly organized, validly existing, and in good
standing under the laws of the jurisdiction in which it is
chartered, with full corporate power and authority, and all
necessary consents, authorizations, approvals, orders,
licenses, certificates, and permits of and from, and
declarations and filings with, all federal, state, local, and
other governmental authorities and all courts and other
tribunals, to own, lease, license, and use its properties and
assets and to carry on its business as now being conducted and
in the manner described in the Prospectus. Each of the
Company and each Subsidiary has been duly qualified to do
business and is in good standing in each jurisdiction in which
its respective ownership, leasing, licensing, or character,
location or use of property and assets or the conduct of its
respective business makes such qualification necessary.
(vi) The authorized capital stock of the Company
consists of 20,000,000 shares of Common Stock, of which
8,261,828 shares are outstanding. Each outstanding share of
Common Stock has been duly and validly authorized and issued,
fully paid, and non-assessable, without any personal liability
attaching to the ownership thereof and has not been issued and
is not owned or held in violation of any preemptive rights of
shareholders. The Company owns all of the shares of capital
stock of the Subsidiaries, free and clear of all liens,
claims, security interests, restrictions, shareholders'
agreements, voting trusts and any other encumbrances
whatsoever. There is no commitment, plan, preemptive right or
arrangement to issue, and no outstanding option, warrant, or
other right calling for the issuance of, shares of capital
stock of the Company or any of the Subsidiaries or any
security or other instrument which by its terms is convertible
into, exercisable for, or exchangeable for capital stock of
the Company or any of the Subsidiaries, except as described in
the Prospectus. There is outstanding no security or other
instrument which by its terms is convertible into or
exchangeable for capital stock of the Company or any of the
Subsidiaries, except as described in the Prospectus.
(vii) The consolidated financial statements of the
Company and the Subsidiaries, together with the related notes
thereto, included in the Registration Statement and the
Prospectus fairly present with respect to their respective
financial position, the results of operations, and the other
information purported to be shown therein at the respective
dates and for the respective periods to which they apply.
Such financial statements have been prepared in accordance
with generally accepted accounting principles (except to the
extent that certain footnote disclosures regarding any stub
period may have been omitted in accordance with the applicable
rules of the Commission under the Exchange Act) consistently
applied throughout the periods involved, are correct and
5
<PAGE> 6
complete, and are in accordance with the books and records of
the Company and the Subsidiaries. The pro forma financial
statements and other pro forma financial information
(including the notes thereto) included in the Registration
Statement and the Prospectus (A) present fairly in all
material respects the information shown therein, (B) have been
prepared in all material respects in accordance with
applicable requirements of Rule 11-02 of Regulation S-X
promulgated under the Exchange Act, and (C) have been properly
computed on the basis described therein. The assumptions used
in the preparation of the pro forma financial statements and
other pro forma financial information included in the
Registration Statement and the Prospectus are reasonable and
the adjustments used therein are appropriate to give effect to
the transactions or circumstances referred to therein. The
accountants whose reports on the audited financial statements
are filed with the Commission as a part of the Registration
Statement are, and during the periods covered by their
report(s) included in the Registration Statement and the
Prospectus were, independent certified public accountants with
respect to the Company within the meaning of the Act and the
Regulations. No other financial statements are required by
Form S-1 or otherwise to be included in the Registration
Statement or the Prospectus. There has at no time been a
material adverse change in the financial condition, results of
operations, business, properties, assets, liabilities, or
future prospects of the Company or any of the Subsidiaries
from the latest information set forth in the Registration
Statement or the Prospectus, except as may be properly
described in the Prospectus.
(viii) There is no litigation, arbitration, claim,
governmental or other proceeding (formal or informal), or
investigation before any court or before any public body or
board pending, or to the knowledge of the Company, threatened,
with respect to the Company or any of the Subsidiaries, or any
of their respective operations, businesses, properties or
assets, except as may be properly described in the Prospectus
or such as individually or in the aggregate do not now have
and will not in the future have a material adverse effect upon
the operations, businesses, properties, assets or financial
condition of the Company and the Subsidiaries. Neither the
Company nor any of the Subsidiaries is involved in any labor
dispute, nor is such dispute threatened, which dispute would
have a material adverse effect upon the operations, business,
properties, assets or financial condition of the Company.
Neither the Company nor any of the Subsidiaries is in
violation of, or in default with respect to, any law, rule,
regulation, order, judgment, or decree; nor is the Company or
any of the Subsidiaries required to take any action in order
to avoid any such violation or default. The Company and the
Subsidiaries (A) are in compliance with any and all applicable
foreign, federal, state and local laws and regulations
relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes,
pollutants or contaminants ("Environmental Laws"), (B) have
received all permits, licenses or other approvals required of
them under applicable Environmental Laws to conduct their
respective businesses and (C) are in compliance with all terms
and conditions of any such permit, license or approval, except
where such noncompliance with Environmental Laws, failure to
receive required permits, licenses or other approvals or
failure to comply with the terms and conditions of such
permits, licenses or approvals would not, individually or in
the aggregate, have a material adverse effect upon the
financial condition, assets, operations or prospects of the
Company and the Subsidiaries, taken as a whole.
6
<PAGE> 7
(ix) The Company and each of the Subsidiaries has
good and marketable title in fee simple absolute to all real
properties and good title to all other properties and assets
which the Prospectus indicates are owned by it, and has valid
and enforceable leasehold interests in each of such items free
and clear of all liens, security interests, pledges, charges,
encumbrances, and mortgages (except as may be properly
described in the Prospectus). No real property owned, leased,
licensed or used by the Company or any of the Subsidiaries
lies in an area which is, or to the knowledge of the Company
will be, subject to zoning, use or building code restrictions
which would prohibit, and no state of facts relating to the
actions or inaction of another person or entity or his or its
ownership, leasing, licensing or use of any real or personal
property exists or will exist which would prevent, the
continued effective ownership, leasing, licensing or use of
such real property in the business of the Company or any of
the Subsidiaries as presently conducted or as the Prospectus
indicates it contemplates conducting (except as may be
properly described in the Prospectus).
(x) The Company and each of the Subsidiaries, and
to the knowledge of the Company, any other party, is not now
or is not expected by the Company to be in violation or breach
of, or in default with respect to, complying with any term,
obligation or provision of any contract, agreement,
instrument, lease, license, indenture, mortgage, deed of
trust, note, arrangement or understanding which is material to
the Company or any of the Subsidiaries or by which any of its
properties or businesses may be bound or affected, and no
event has occurred which with notice or lapse of time or both
would constitute such a default, and each such contract,
agreement, instrument, lease, license, indenture, mortgage,
deed of trust, note, arrangement or understanding is in full
force and is the legal, valid and binding obligation of the
parties thereto and is enforceable as to them in accordance
with its terms. The Company and each of the Subsidiaries
enjoy peaceful and undisturbed possession under all leases and
licenses under which it is operating. Neither the Company nor
any of the Subsidiaries is a party to or bound by any
contract, agreement, instrument, lease, license, indenture,
mortgage, deed of trust, note, arrangement or understanding,
or subject to any charter or other restriction, which has had
or may in the future have a material adverse effect on the
financial condition, results of operations, businesses,
properties, assets, liabilities or future prospects of the
Company and the Subsidiaries. Neither the Company nor any of
the Subsidiaries is in violation of breach of, or in default
with respect to, any term of its certificate of incorporation
(or other charter document) or by-laws or of any franchise,
license, permit, judgment, decree, order, statute, rule or
regulation.
(xi) The Company and the Subsidiaries have filed
all federal, state, local and foreign tax returns which are
required to be filed through the date hereof, or have received
extensions thereof, and have paid all taxes shown on such
returns and all assessments received by it to the extent that
the same are material and have become due.
(xii) Any patents, patent applications, trademarks,
trademark applications, trade names, service marks,
copyrights, copyright applications, franchises, and other
intangible properties and assets listed in the Registration
Statement (all of the foregoing being collectively herein
called "Intangibles") that the Company and the Subsidiaries
own, possess or have pending, or under which they are
licensed, are in good standing
7
<PAGE> 8
and uncontested. There is no right under any Intangible
necessary to the business of the Company or the Subsidiaries
as presently conducted or as the Prospectus indicates the
Company contemplates conducting (except as may be so described
in the Prospectus). Neither the Company nor any of the
Subsidiaries has infringed, is infringing, or has received any
notice of infringement with respect to asserted Intangibles of
others. To the knowledge of the Company, there is no
infringement by others of Intangibles of the Company. To the
knowledge of the Company, there is no Intangible of others
which has had or may in the future have a materially adverse
effect on the financial condition, results of operations,
business, properties, assets, liabilities or future prospects
of the Company and the Subsidiaries.
(xiii) Neither the Company nor any Subsidiary,
director, officer, agent, employee or other person associated
with or acting on behalf of the Company and the Subsidiaries
has, directly or indirectly: used any corporate funds for
unlawful contributions, gifts, entertainment, or other
unlawful expenses relating to political activity; made any
unlawful payment to foreign or domestic government officials
or employees or to foreign or domestic political parties or
campaigns from corporate funds; violated any provision of the
Foreign Corrupt Practices Act of 1977, as amended; or made any
bribe, rebate, payoff, influence payment, kickback, or other
unlawful payment. No transaction has occurred between or
among the Company, the Subsidiaries, or the Selling
Shareholders and any of its or their officers or directors or
any affiliates or affiliates of any such officer or director,
except as described in the Prospectus.
(xiv) The Company has all requisite power and
authority to execute, deliver and perform this Agreement. All
necessary corporate proceedings of the Company have been duly
taken to authorize the execution, delivery and performance of
this Agreement. This Agreement has been duly authorized,
executed, and delivered by the Company, is the legal, valid
and binding obligation of the Company, and is enforceable as
to the Company in accordance with its terms. No consent,
authorization, approval, order, license, certificate or permit
of or from, or declaration or filing with, any federal, state,
local or other governmental authority or any court or other
tribunal is required by the Company or the Subsidiaries for
the execution, delivery or performance by the Company of this
Agreement (except filings under the Act which have been or
will be made before the applicable Closing Date and such
consents consisting only of consents under "blue sky" or
securities laws which have been obtained at or prior to the
date of this Agreement). No consent of any party to any
contract, agreement, instrument, lease, license, indenture,
mortgage, deed of trust, note, arrangement or understanding to
which the Company or the Subsidiaries are a party, or to which
any of their respective properties or assets are subject, is
required for the execution, delivery or performance of this
Agreement, and the execution, delivery and performance of this
Agreement, will not violate, result in a breach of, conflict
with, accelerate the due date of any payments under, or (with
or without the giving of notice or the passage of time or
both) entitle any party to terminate or call a default under
any such contract, agreement, instrument, lease, license,
indenture, mortgage, deed of trust, note, arrangement or
understanding, or violate or result in a breach of any term of
the certificate of incorporation (or other charter document)
or by-laws of the Company or any of the Subsidiaries, or
violate, result in a breach of, or conflict with any law,
rule, regulation, order, judgment or
8
<PAGE> 9
decree binding on the Company or any of the Subsidiaries or to
which any of their operations, business, properties or assets
are subject.
(xv) The Company Shares and the Option Shares are
validly authorized. The Firm Shares, when issued and
delivered in accordance with this Agreement, and the Option
Shares, when delivered in accordance with this Agreement, will
be duly and validly issued, fully paid, and non-assessable,
without any personal liability attaching to the ownership
thereof, and will not be issued in violation of any preemptive
rights of shareholders, optionholders, warrantholders and any
other persons and the Underwriters will receive good title to
the Company Shares and Option Shares purchased by them,
respectively, free and clear of all liens, security interests,
pledges, charges, encumbrances, shareholders' agreements and
voting trusts.
(xvi) The Common Stock, the Firm Shares and the
Option Shares conform to all statements relating thereto
contained in the Registration Statement or the Prospectus.
(xvii) Subsequent to the respective dates as of
which information is given in the Registration Statement and
the Prospectus, and except as may otherwise be properly
described therein, there has not been any material adverse
change in the assets or properties, business or results of
operations or financial condition of the Company or the
Subsidiaries, whether or not arising from transactions in the
ordinary course of business; neither the Company nor the
Subsidiaries has sustained any material loss or interference
with its business or properties from fire, explosion,
earthquake, flood or other calamity, whether or not covered by
insurance; since the date of the latest balance sheet included
in the Registration Statement and the Prospectus, except as
reflected therein, neither the Company nor the Subsidiaries
has undertaken any liability or obligation, direct or
contingent, except for liabilities or obligations undertaken
in the ordinary course of business; and neither the Company
nor the Subsidiaries has (A) issued any securities or incurred
any liability or obligation, primary or contingent, for
borrowed money, (B) entered into any transaction not in the
ordinary course of business, or (C) declared or paid any
dividend or made any distribution on any of its capital stock
or redeemed, purchased or otherwise acquired or agreed to
redeem, purchase or otherwise acquire any shares of its
capital stock.
(xviii) Neither the Company nor any of its officers,
directors or affiliates (as defined in the Regulations), has
taken or will take, directly or indirectly, prior to the
termination of the underwriting syndicate contemplated by this
Agreement, any action designed to stabilize or manipulate the
price of any security of the Company, or which has caused or
resulted in, or which might in the future reasonably be
expected to cause or result in, stabilization or manipulation
of the price of any security of the Company, to facilitate the
sale or resale of any of the Firm Shares or the Option Shares.
(xix) The Company has obtained from each of its
executive officers and directors and the Selling Shareholders,
its, his or her enforceable written agreement, in form and
substance satisfactory to counsel for the Underwriters, that
for a period of 180 days from the date on which the public
offering of the Shares commences they will not, without your
prior written consent, offer, pledge, sell, contract to sell,
grant any option
9
<PAGE> 10
to purchase, encumber, hypothecate or, otherwise dispose of,
directly or indirectly, any shares of Common Stock or other
securities of the Company (or any security or other instrument
which by its terms is convertible into, exercisable for, or
exchangeable for shares of Common Stock or other securities of
the Company, including, without limitation, any shares of
Common Stock issuable under any employee stock options),
beneficially owned by them, except with respect to Shares
being sold in connection herewith.
(xx) The Company is not, and does not intend to
conduct its business in a manner in which it would be, an
"investment company" as defined in Section 3(a) of the
Investment Company Act of 1940 (the "Investment Company Act").
(xxi) No person or entity has the right to require
registration of shares of Common Stock or other securities of
the Company because of the filing or effectiveness of the
Registration Statement, except such person or entities from
whom written waivers of such rights have been received prior
to the date hereof.
(xxii) Except as may be set forth in the Prospectus,
the Company has not incurred any liability for a fee,
commission or other compensation on account of the employment
of a broker or finder in connection with the transactions
contemplated by this Agreement.
(xxiii) No transaction has occurred between or among
the Company, the Subsidiaries, and any of their officers or
directors or any affiliates of any such officer or director,
that is required to be described in and is not described in
the Registration Statement and the Prospectus.
(xxiv) The Common Stock, including the Shares, are
authorized for quotation on the NASDAQ National Market.
(xxv) Neither the Company, the Subsidiaries, nor
any of their affiliates is presently doing business with the
government of Cuba or with any person or affiliate located in
Cuba. If, at any time after the date that the Registration
Statement is declared effective with the Commission or with
the Florida Department of Banking and Finance (the "Florida
Department"), whichever date is later, and prior to the end of
the period referred to in the first clause of Section 4(a)(ii)
hereof, the Company commences engaging in business with the
government of Cuba or with any person or affiliate located in
Cuba, the Company will so inform the Florida Department within
ninety days after such commencement of business in Cuba, and
during the period referred to in Section 4(a)(ii) hereof will
inform the Florida Department within ninety days after any
change occurs with respect to previously reported information.
(b) The Selling Shareholders severally and not jointly,
represent and warrant to, and agree with, the several Underwriters
that:
(i) Such Selling Shareholder has deposited in
custody, under a Custody Agreement (the "Custody Agreement")
with Harris Trust and Savings bank, N.A.,
10
<PAGE> 11
Chicago, Illinois as custodian (the "Custodian"), certificates
in negotiable form for the Selling Shareholder Shares to be
sold hereunder by such Selling Shareholder, for the purpose of
further delivery pursuant to this Agreement. Such Selling
Shareholder agrees that the Selling Shareholder Shares to be
sold by such Selling Shareholder on deposit with the Custodian
are subject to the interests of the Company and the
Underwriters, that the arrangements made for such custody are
to that extent irrevocable, and that the obligations of such
Selling Shareholder hereunder and under the Custody Agreement
shall not be terminated except as provided in this Agreement
or the Custody Agreement by any act of such Selling
Shareholder, by operation of law, whether by the death or
incapacity of such Selling Shareholder, or by the occurrence
of any other event. If such Selling Shareholder should die or
become incapacitated, or if any other event should occur
before the delivery of the Selling Shareholder Shares
hereunder, the documents evidencing the Selling Shareholder
Shares then on deposit with the Custodian shall be delivered
by the Custodian in accordance with the terms and conditions
of this Agreement as if such death, incapacity or other event
had not occurred, regardless of whether or not the Custodian
shall have received notice thereof.
(ii) Such Selling Shareholder has all requisite
power and authority to execute, deliver, and perform this
Agreement, the Power of Attorney and the Custody Agreement.
This Agreement, the Power of Attorney and the Custody
Agreement have been duly executed and delivered by or on
behalf of such Selling Shareholder, is the legal, valid and
binding obligation of such Selling Shareholder, and is
enforceable as to such Selling Shareholder in accordance with
its terms. No consent, authorization, approval, order,
license, certificate, or permit of or from, or declaration or
filing with, any federal, state, local or other governmental
authority or any court or other tribunal is required by such
Selling Shareholder for the execution, delivery or performance
of this Agreement, the Power of Attorney or the Custody
Agreement (except filings under the Act which have been made
before the applicable Closing Date and such consents
consisting only of consents under "blue sky" or securities
laws which have been obtained at or prior to the date of this
Agreement) by such Selling Shareholder. No consent of any
party to any contract, agreement, instrument, lease, license,
indenture, mortgage, deed of trust, note, arrangement or
understanding to which such Selling Shareholder is a party, or
to which any of such Selling Shareholder's properties or
assets are subject, is required for the execution, delivery or
performance of this Agreement, the Power of Attorney or the
Custody Agreement; and the execution, delivery and performance
of this Agreement, the Power of Attorney and the Custody
Agreement will not violate, result in a breach of, conflict
with, or (with or without the giving of notice of the passage
of time or both) entitle any party to terminate or call a
default under any such contract, agreement, instrument, lease,
license, indenture, mortgage, deed of trust, note, arrangement
or understanding, or violate, result in a breach of, or
conflict with, any law, rule, regulation, order, judgment or
decree binding on such Selling Shareholder.
(iii) Such Selling Shareholder has good title to
the Selling Shareholder Shares to be sold by such Selling
Shareholder pursuant to this Agreement, free and clear of all
liens, security interests, pledges, charges, encumbrances,
shareholders' agreements and voting trusts subject, in the
case of each Selling Shareholder to the rights of Harris Trust
and Savings bank, N.A., Chicago, Illinois as Custodian and
when delivered in
11
<PAGE> 12
accordance with this Agreement, the Underwriters will receive
good title to the Selling Shareholder Shares purchased by
them, respectively, from such Selling Shareholder, free and
clear of all liens, security interests, pledges, charges,
encumbrances, shareholders' agreements and voting trusts.
(iv) There is no litigation, arbitration, claim,
governmental or other proceeding (formal or informal), or
investigation pending or threatened (or any basis therefor
known to such Selling Shareholder) with respect to such
Selling Shareholder or his, her or its assets that would have
an adverse effect on such Selling Shareholder's ability to
perform his, her or its obligations under this Agreement, the
Custody Agreement or the Power of Attorney. Such Selling
Shareholder is not in violation of, or in default with respect
to, any law, rule, regulation, order, judgment, or decree that
would have an adverse effect on such Selling Shareholder's
ability to perform his, her or its obligations under this
Agreement, the Custody Agreement or the Power of Attorney; nor
is such Selling Shareholder required to take any action in
order to avoid such a violation or default.
(v) Neither such Selling Shareholder nor any of
such Selling Shareholder's affiliates (as defined in the
Regulations) has taken or will take, directly or indirectly,
prior to the termination of the underwriting syndicate
contemplated by this Agreement, any action designed to
stabilize or manipulate the price of any security of the
Company, or which has caused or resulted in, or which might in
the future reasonably be expected to cause or result in,
stabilization or manipulation of the price of any security of
the Company, to facilitate the sale or resale of any of such
Selling Shareholder Shares.
(vi) All information furnished or to be furnished
to the Company by or on behalf of such Selling Shareholder for
use in connection with the preparation of the Registration
Statement and the Prospectus is true in all respects and does
not and will not include any untrue statement of a material
fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not
misleading.
(vii) Except as may be set forth in the Prospectus,
such Selling Shareholder has not incurred any liability for a
fee, commission or other compensation on account of the
employment of a broker or finder in connection with the
transactions contemplated by this Agreement.
(viii) Such Selling Shareholder has no knowledge
that, and does not believe that, any representation or
warranty of the Company in Section 4(a) is incorrect.
(ix) The Selling Shareholder Shares to be sold by
such Selling Shareholder pursuant to this Agreement are duly
and validly authorized and issued, fully paid and
non-assessable, and have not been issued and are not owned or
held in violation of any preemptive right of shareholders,
optionholders, warrantholders or other persons.
(x) No transaction has occurred between such
Selling Shareholder and the Company that is required to be
described in the Registration Statement or the Prospectus and
is not otherwise described in the Registration Statement or
the Prospectus.
12
<PAGE> 13
(xi) Such Selling Shareholder has not, directly or
indirectly: used any corporate funds for unlawful
contributions, gifts, entertainment, or other unlawful
expenses relating to political activity; made any unlawful
payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or
campaigns from corporate funds; violated any provision of the
Foreign Corrupt Practices Act of 1977, as amended; or made any
bribe, rebate, payoff, influence payment, kickback, or other
unlawful payment.
5 . Conditions of the Underwriters' Obligations. The obligations of
the Underwriters under this Agreement are several and not joint. The
respective obligations of the Underwriters to purchase the Shares are subject
to each of the following terms and conditions:
(a) (i) The Registration Statement shall have become effective
not later than 5:00 P.M., New York time, on the date of this
Agreement, or at such later time or on such later date as you may
agree to in writing; (ii) at or prior to the Closing Date, no stop
order suspending the effectiveness of the Registration Statement shall
have been issued and no proceeding for that purpose shall have been
initiated or shall be threatened or contemplated by the Commission;
(iii) any request for additional information on the part of the
Commission shall have been complied with to the satisfaction of the
Commission and counsel for the Underwriters; (iv) the National
Association of Securities Dealers, Inc. (the "NASD"), upon review of
the terms of the public offering of Shares, shall not have objected to
such offering, such terms, or the Underwriters' participation therein;
(v) after the date hereof no amendment or supplement shall have been
filed to the Registration Statement or the Prospectus without your
prior consent; and (vi) you shall have been notified by 5:00 P.M., New
York time, on the third business day after the date hereof, that, if
Rule 430A under the Act is used, the Prospectus has been filed with
the Commission pursuant to Rule 424(b) under the Act within the
applicable time period.
(b) You shall not have advised the Company that the
Registration Statement or the Prospectus or any amendment thereof or
supplement thereto contains an untrue statement of a fact which is
material, or omits to state a fact which is material and is required
to be stated therein or is necessary to make the statements therein,
in light of the circumstances under which they were made, not
misleading.
(c) Between the time of the execution and delivery of
this Agreement and the Closing Date, there shall be no litigation
instituted against the Company, the Subsidiaries, or any of their
respective officers or directors, and between such dates there shall
be no proceeding instituted or threatened against the Company or the
Subsidiaries or any of their respective officers or directors before
or by any Federal, state, county or local commission, regulatory body,
administrative agency or other governmental body, domestic or foreign,
in which litigation or proceeding an unfavorable ruling, decision or
finding would materially adversely affect the Company or the
Subsidiaries or any of their respective businesses, business
prospects, condition (financial or otherwise), results of operations
or assets.
(d) The representations and warranties of the Company and
the Selling Shareholders contained in this Agreement and in the
certificates delivered pursuant to Sections 5(e) and 5(k) shall be
true and correct when made and on and as of each Closing Date as if
made on such date and the Company and the Selling Shareholders shall
have performed all covenants and agreements
13
<PAGE> 14
and satisfied all the conditions contained in this Agreement required
to be performed or satisfied by it or them at or before such Closing
Date.
(e) The Company shall have furnished to the
Representatives a certificate of the Company, signed by Jorn Budde,
President and Chief Executive Officer, and Keith Ford, Vice
President-Finance, Treasurer and Secretary, dated the Closing Date to
the effect that each has carefully examined the Registration
Statement, the Prospectus (and any supplements thereto) and this
Agreement, and, after due inquiry, that:
(i) As of the Closing Date the statements made in
the Registration Statement and the Prospectus are true and
correct and the Registration Statement and the Prospectus do
not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(ii) No order suspending the effectiveness of the
Registration Statement or the qualification or registration of
the Securities under the securities or Blue Sky laws of any
jurisdiction is in effect and no proceeding for such purpose
is pending before or, to the knowledge of such officers,
threatened or contemplated by the Commission or the
authorities of any such jurisdiction; and any request for
additional information with respect to the Registration
Statement or the Prospectus on the part of the staff of the
Commission or any such authorities brought to the attention of
such officers has been complied with to the satisfaction of
the staff of the Commission of such authorities.
(iii) Since the respective dates as of which
information is given in the Registration Statement and the
Prospectus, (x) there has not been any change in the capital
stock or long-term debt of the Company or any of the
Subsidiaries, except as set forth in or contemplated by the
Registration Statement and the Prospectus, (y) there has not
been any material adverse change in the general affairs,
business, prospects, properties, management, results of
operating or condition (financial or otherwise) of the Company
or any of the Subsidiaries, whether or not arising from
transactions in the ordinary course of business, in each case,
other than as set forth in or contemplated by the Registration
Statement and the Prospectus, and (z) neither the Company nor
any of the Subsidiaries has sustained any material
interference with its business or properties from fire,
explosion, flood or other casualty, whether or not covered by
insurance, or from any labor dispute or any court or
legislative or other governmental action, order or decree,
which is not set forth in the Registration Statement and the
Prospectus.
(iv) Since the respective dates as of which
information is given in the Registration Statement and the
Prospectus, there has been no litigation instituted against
the Company or any of the Subsidiaries, any of their
respective officers or directors, or (to the best knowledge of
such officers) any affiliate or promoter of the Company or any
of the Subsidiaries, and since such dates there has been no
proceeding instituted or, to the best knowledge of such
officers, threatened against the Company or any of the
Subsidiaries, any of their respective officers or directors,
or (to the best knowledge of such officers) any affiliate or
promoter of the Company or any of the Subsidiaries, before any
federal, state or county court, commission, regulatory body,
administrative agency
14
<PAGE> 15
or other governmental body, domestic or foreign, in which
litigation or proceeding an unfavorable ruling, decision or
finding could have a material adverse effect.
(v) Each of the representations and warranties of
the Company in this Agreement is true and correct in all
material respects on and as of the Closing Date with the same
effect as if made on and as of the Closing Date.
(vi) Each of the covenants required in this
Agreement to be performed by the Company and the Subsidiaries
on or prior to the Closing Date has been duly, timely and
fully performed, and each condition required herein to be
complied with by the Company, on or prior to the Closing Date
has been duly, timely and fully complied with.
(f) The Representatives shall have received on each
Closing Date certificates, addressed to the Representatives and dated
such Closing Date, of each of the Selling Shareholders to the effect
that the representations and warranties of each such Selling
Shareholder is true and correct on and as of such Closing Date and
such Selling Shareholder has performed all covenants and agreements
and satisfied all conditions contained in this Agreement required to
be performed or satisfied by such Selling Shareholder at or prior to
such Closing Date.
(g) The Representatives shall have received at the time
this Agreement is executed and on each Closing Date a signed letter
from each of Ernst & Young LLP and Mancera, S.C., addressed to the
Representatives and dated, respectively, the date of this Agreement
and each such Closing Date, in form and scope reasonably satisfactory
to the Representatives, with reproduced copies or signed counterparts
thereof for each of the Underwriters confirming that they are
independent accountants within the meaning of the Act and the
Regulations, that the response to Item 10 of the Registration
Statement is correct in so far as it relates to them and stating in
effect that:
(i) in their opinion the audited financial
statements and financial statement schedules included in the
Registration Statement and the Prospectus and reported on by
them comply as to form in all material respects with the
applicable accounting requirements of the Act, the Exchange
Act and the related published rules and regulations
thereunder;
(ii) on the basis of a reading of the minutes of
the meetings of the shareholders, directors and committees of
the Company and the Subsidiaries; performing the procedures
specified by the American Institute of Certified Public
Accountants for a review of interim financial information as
described in SAS No. 71, Interim Financial Information, on the
unaudited interim financial statements of the Company and the
Subsidiaries included in the Registration Statement and the
Prospectus and reading the unaudited interim financial; data
for the period from the date of the latest balance sheet
included in the Registration Statement and the Prospectus to
the date of the latest available interim financial data; and
inquiries of certain officials of the Company who have
responsibility for financial and accounting matters of the
Company and the Subsidiaries as to transactions and events
subsequent to the date of the latest audited
15
<PAGE> 16
financial statements, except as disclosed in the Registration
Statement and the Prospectus, nothing came to their attention
which caused them to believe that:
(A) the amounts in "Summary
Consolidated Financial Data," included in the
Registration Statement and the Prospectus do not
agree with the corresponding amounts in the
audited financial statements from which such
amounts were derived; or
(B) the unaudited financial
statements included in the Registration
Statement do not comply in form in all material
respects with the applicable accounting
requirements of the Act and the related
published Rules and Regulations or are not in
conformity with generally accepted accounting
principles applied on a basis substantially
consistent with that of the audited financial
statements included in the Registration
Statement; or
(C) with respect to the Company and
the Subsidiaries, there were, at a specified
date not more than five business days prior to
the date of the letter, any decreases in net
sales, income before income taxes and net income
or any increases in long-term debt of the
Company and the Subsidiaries or any decreases in
the capital stock, working capital or the
stockholders' equity in the Company and the
Subsidiaries, as compared with the amounts shown
on the December 31, 1995 audited Balance Sheets
included in the Registration Statement or the
audited Statement of Operations, for such year;
and
(iii) they have performed certain other procedures
as a result of which they determined that information of an
accounting, financial or statistical nature (which is limited
to accounting, financial or statistical information derived
from the general accounting records of the Company and the
Subsidiaries) set forth in the Registration Statement and the
Prospectus and reasonably specified by the Representative
agrees with the accounting records of the Company and the
Subsidiaries.
References to the Registration Statement and the Prospectus in this
paragraph (e) are to such documents as amended and supplemented at the date of
such letter.
(h) The Representatives shall have received on each
Closing Date the following legal opinions (in English) addressed to
the Representatives and dated such Closing Date, with reproduced
copies or signed counterparts thereof for each of the Underwriters as
follows:
(i) An opinion of Jordaan, Howard & Pennington,
PLLC, counsel for the Company and the Texas Subsidiaries, with
respect to the Company and the Texas Subsidiaries and limited
to matters of Texas law and the laws of the United States, in
the form of Exhibit A, hereto .
(ii) An opinion of Margain - Rojas - Gonzalez -
Vargas, S.C., counsel for the Mexican Subsidiaries, with
respect to the Mexican Subsidiaries and limited to matters of
Mexican law, in the form of Exhibit B, hereto.
16
<PAGE> 17
(iii) An opinion of ____________, counsel for
Deli-Bon, with respect to Deli-Bon and limited to matters of
Canadian law, in the form of Exhibit C, hereto.
(iv) An opinion of ____________, counsel for
Simply Fresh, with respect to Simply Fresh and limited to
matters of California law and the laws of the United States,
in the form of Exhibit D, hereto.
In rendering their opinion as aforesaid, such counsel may rely, as to
matters of fact, to the extent such counsel deems proper, on certificates of
responsible officers of the Company or of such Subsidiary, provided that
executed copies of such certificates are provided to the Representatives.
(i) The Representatives shall have received on the Firm
Shares Closing Date from Jordaan, Howard & Pennington, PLLC, counsel
to the Selling Shareholders, an opinion, addressed to the
Representatives, and dated such Closing Date, to the effect that:
(i) Each of the Selling Shareholders has record
ownership of the Selling Shareholder Shares and all requisite
power and authority to execute, deliver and perform this
Agreement, the Custody Agreement and the Power of Attorney and
to issue and sell the Selling Shareholder Shares. Each of the
Agreement, the Custody Agreement and the Power of Attorney has
been duly authorized, executed and delivered by the Selling
Shareholders, is the legal, valid and binding obligation of
each of the Selling Shareholders and (subject to applicable
bankruptcy, insolvency, and other laws affecting the
enforceability of creditors' rights generally) is enforceable
as to each of the Selling Shareholders in accordance with its
terms. No consent, authorization, approval, order, license,
certificate or permit of or from, or declaration or filing
with, any federal, state, local, foreign or other governmental
authority or any court or other tribunal is required by any of
the Selling Shareholders, for the execution, delivery or
performance by any of the Selling Shareholders of this
Agreement, the Custody Agreement or the Power of Attorney
(except filings under the Act which have been made prior to
the Closing Date and consents consisting only of consents
under "blue sky" or securities laws). To the knowledge of
such counsel, no consent of any party to any contract,
agreement, instrument, lease, license, indenture, mortgage,
deed of trust, note, arrangement or understanding to which
each of the Selling Shareholders is a party, or to which any
of their respective properties or assets are subject, is
required for the execution, delivery or performance of this
Agreement, the Custody Agreement or the Power of Attorney; and
the execution, delivery and performance of this Agreement, the
Custody Agreement and the Power of Attorney will not violate,
result in breach of, conflict with, or (with or without the
giving of notice or the passage of time or both) entitle any
party to terminate or call a default under any such contract,
agreement, instrument, lease, license, indenture, mortgage,
deed of trust, note, arrangement or understanding, in each
case known to such counsel, or violate, result in a breach of
any term of the certificate of incorporation (or other charter
documents) or by-laws of any Selling Shareholder, or violate,
result in a breach of, or conflict with any law, rule
regulation, order, judgment, or decree binding on any of the
Selling Shareholders or to which any of their respective
operations, businesses, properties or assets are subject.
17
<PAGE> 18
(ii) Such opinion delivered on the Firm Shares
Closing Date shall also state that each Selling Shareholder
Share, to be delivered on that date is duly and validly
issued, fully paid, and non-assessable, with no personal
liability attaching to the ownership thereof, and is not
issued in violation of any preemptive rights of shareholders,
and the Underwriters have received good title to the Selling
Shareholder Shares purchased by them, respectively, from each
of the Selling Shareholders, as applicable, for the
consideration contemplated herein and in good faith and
without notice of any adverse claim within the meaning of the
Uniform Commercial Code, free and clear of any liens, security
interests, pledges, charges, encumbrances, shareholders'
agreements, voting trusts and other claims.
(j) All proceedings taken in connection with the sale of
the Firm Shares and the Option Shares as herein contemplated shall be
satisfactory in form and substance to the Representatives and their
counsel, and the Underwriters shall have received from Katten Muchin &
Zavis, a favorable opinion, addressed to the Representatives and dated
such Closing Date, with respect to the Shares, the Registration
Statement and the Prospectus, and such other related matters, as the
Representatives may reasonably request, and the Company and the
Selling Shareholders shall have furnished to Katten Muchin & Zavis,
such documents as they may reasonably request for the purpose of
enabling them to pass upon such matters.
(k) The Company and the Subsidiaries shall have furnished
the Representatives with such other information, certificates and
documents as the Representatives may reasonably request.
6. Covenants of the Company and the Selling Shareholders.
(a) The Company covenants and agrees as follows:
(i) The Company shall use its best efforts to
cause the Registration Statement to become effective as
promptly as possible. If the Registration Statement has
become or becomes effective with a form of prospectus omitting
Rule 430A information, or filing of the Prospectus is
otherwise required under Rule 424(b), the Company will file
the Prospectus, properly completed, pursuant to Rule 424(b)
within the time period prescribed and will provide evidence
satisfactory to you of such timely filing. The Company shall
notify you immediately, and confirm such notice in writing,
(A) when the Registration Statement and any post-effective
amendment thereto become effective, (B) of the receipt of any
comments from the Commission or the "blue sky" or securities
authority of any jurisdiction regarding the Registration
Statement, any post-effective amendment thereto, the
Prospectus, or any amendment or supplement thereto, and (C) of
the receipt of any notification with respect to a Stop Order.
The Company shall not file any amendment to the Registration
Statement or supplement to the Prospectus unless the Company
has furnished the Representatives a copy for their review
prior to filing and shall not file any such proposed amendment
or supplement to which the Representatives reasonably object.
The Company shall use its best efforts to prevent the issuance
of any Stop Order and, if issued, to obtain as soon as
possible the withdrawal thereof.
18
<PAGE> 19
(ii) During the time when a prospectus relating to
the Shares is required to be delivered hereunder or under the
Act or the Regulations, the Company shall comply so far as it
is able with all requirements imposed upon it by the Act, as
now existing and as hereafter amended, and by the Regulations,
as from time to time in force, so far as necessary to permit
the continuance of sales of or dealings in the Shares in
accordance with the provisions hereof and the Prospectus. If,
at any time when a prospectus relating to the Shares is
required to be delivered under the Act and the Regulations,
any event as a result of which the Prospectus as then amended
or supplemented would include any untrue statement of a
material fact or omit to state any material fact necessary to
make the statements therein in the light of the circumstances
under which they were made not misleading, or if it shall be
necessary to amend or supplement the Prospectus to comply with
the Act or the Regulations, the Company promptly shall prepare
and file with the Commission, subject to the third sentence of
paragraph (i) of this Section 6(a), an amendment or supplement
which shall correct such statement or omission or an amendment
which shall effect such compliance.
(iii) The Company shall make generally available to
its security holders and to the Representatives as soon as
practicable, but not later than 45 days after the end of the
12-month period beginning at the end of the fiscal quarter of
the Company during which the Effective Date occurs (or 90 days
if such 12-month period coincides with the Company's fiscal
year), an earnings statement (which need not be audited) of
the Company, covering such 12-month period, which shall
satisfy the provisions of Section 11(a) of the Act or Rule 158
of the Regulations.
(iv) The Company shall furnish the Representatives
and counsel for the Underwriters, without charge, signed
copies of the Registration Statement (including all exhibits
thereto, Incorporated Documents and amendments thereto) and to
each other Underwriter a copy of the Registration Statement
(without exhibits thereto or Incorporated Documents) and all
amendments thereof and, so long as delivery of a prospectus by
an Underwriter or dealer may be required by the Act or the
Regulations, as many copies of any Preliminary Prospectus and
the Prospectus and any amendments thereof and supplements
thereto as the Representatives may reasonably request.
(v) The Company shall cooperate with the
Representatives and their counsel in endeavoring to qualify
the Shares for offer and sale under the laws of such
jurisdictions as the Representatives may designate and shall
maintain such qualifications in effect so long as required for
the distribution of the Shares; provided, however, that the
Company shall not be required in connection therewith, as a
condition thereof, to qualify as a foreign corporation or to
execute a general consent to service of process in any
jurisdiction or subject itself to taxation as doing business
in any jurisdiction.
(vi) For a period of five years after the date of
this Agreement, the Company shall supply to each of the
Representatives, and to each other Underwriter who may so
request in writing, copies of such financial statements and
other periodic and special reports as the Company may from
time to time distribute generally to the holders of any class
of its capital stock and to furnish to each of the
Representatives a copy of each annual, quarterly or other
report it shall be required to file with the Commission.
19
<PAGE> 20
(vii) Without the prior written consent of the
Representatives, for a period of 180 days from the date on
which a public offering of the Shares commences, the Company
shall not issue, sell or register with the Commission or
otherwise dispose of, directly or indirectly, any securities
of the Company (or any securities convertible into or
exercisable or exchangeable for securities of the Company),
except for the issuance of the Shares pursuant to the
Registration Statement.
(viii) On or before completion of this offering, the
Company shall make all filings required under applicable
securities laws and by the NASDAQ National Market.
(ix) Prior to each Closing Date and for a period
of 25 days thereafter, you shall be given reasonable written
prior notice of any press release or other direct or indirect
communication and of any press conference with respect to the
Company, the financial conditions, results of operations
business, properties, assets, liabilities of the Company, or
this offering.
(x) The Company will apply the net proceeds from
the Offering received by it in the manner set forth under the
caption "Use of Proceeds" in the Prospectus.
(b) The Company agrees to pay, or reimburse if paid by the
Representatives, whether or not the transactions contemplated hereby
are consummated or this Agreement is terminated, all costs and
expenses relating to the registration and public offering of the
Shares including those relating to: (i) the preparation, printing,
filing and distribution of the Registration Statement including all
exhibits thereto, each Preliminary Prospectus, the Prospectus, all
amendments and supplements to the Registration Statement and the
Prospectus, and any documents required to be delivered with any
Preliminary Prospectus or the Prospectus, and the printing, filing and
distribution of the Agreement Among Underwriters, this Agreement and
related documents; (ii) the preparation and delivery of certificates
for the Shares to the Underwriters; (iii) the registration or
qualification of the Shares for offer and sale under the securities or
Blue Sky laws of the various jurisdictions referred to in Section
6(a)(v), including the fees and disbursements of counsel for the
Underwriters in connection with such registration and qualification
and the preparation, printing, distribution and shipment of
preliminary and supplementary Blue Sky memoranda; (iv) the furnishing
(including costs of shipping and mailing) to the Representatives and
to the Underwriters of copies of each Preliminary Prospectus, the
Prospectus and all amendments or supplements to the Prospectus, and of
the several documents required by this Section to be so furnished, as
may be reasonably requested for use in connection with the offering
and sale of the Shares by the Underwriters or by dealers to whom
Shares may be sold; (v) the filing fees of the NASD in connection with
its review of the terms of the public offering; (vi) the furnishing
(including costs of shipping and mailing) to the Representatives and
to the Underwriters of copies of all reports and information required
by Section 6(a)(vi); (vii) inclusion of the Shares for quotation on
the NASDAQ National Market System; and (viii) all transfer taxes, if
any, with respect to the sale and delivery of the Shares by the
Company and the Selling Shareholders to the Underwriters. Except as
otherwise contemplated by Section 9 hereof, the Underwriters will pay
their own counsel fees and expenses to the extent not otherwise
covered by clause (iii) above, and their own travel and travel-related
expenses in connection with the distribution of the Shares. Without
limiting the Company's obligations set forth above, each of the
Selling Shareholders agrees to pay all of the other costs and expenses
incident to the
20
<PAGE> 21
performance of its obligations under this Agreement and the sale of
the Selling Shareholder Shares by them hereunder.
7. Indemnification.
(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter
within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act against any and all losses, claims, damages and
liabilities, joint or several (including any reasonable investigation,
legal and other expenses incurred in connection with, and any amount
paid in settlement of, any action, suit or proceeding or any claim
asserted), to which they, or any of them, may become subject under the
Act, the Exchange Act or other Federal or state law or regulation, at
common law or otherwise, insofar as such losses, claims, damages or
liabilities arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact contained in any
Preliminary Prospectus, the Registration Statement or other Prospectus
or any amendment thereof or supplement thereto, or arise out of or are
based upon any omission or alleged omission to state therein such fact
required to be stated therein or necessary to make such statements
therein not misleading. The Selling Shareholders agree, jointly and
severally, to indemnify each Underwriter and each person, if any, who
controls any Underwriter within the meaning of Section 15 of the Act
or Section 20 of the Exchange Act, against any and all losses, claims,
damages and liabilities, joint or several (including any reasonable
investigation, legal and other expenses incurred in connection with,
and any amount paid in settlement of, any action, suit or proceeding
or any claim asserted), to which they, or any of them, may become
subject under the Act, the Exchange Act or other Federal or state law
or regulation, at common law or otherwise, insofar as such losses,
claims, damages or liabilities arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact with
respect to such Selling Shareholders contained in any Preliminary
Prospectus, the Registration Statement or the Prospectus or any
amendment thereof or supplement thereto (which amendments or
supplements are furnished to such Selling Shareholders), or which
arise out of or are based upon any omission or alleged omission to
state therein such fact required to be stated therein or necessary to
make such statements therein not misleading, but only with reference
to information relating to such Selling Shareholders furnished in
writing to the Company by or on behalf of such Selling Shareholders
expressly for use in connection with the preparation of the
Registration Statement and Prospectus or any amendment thereof or
supplement thereto. Such indemnity shall not inure to the benefit of
any Underwriter (or any person controlling such Underwriter) on
account of any losses, claims, damages or liabilities arising from the
sale of the Shares to any person by such Underwriter if such untrue
statement or omission or alleged untrue statement or omission was made
in such Preliminary Prospectus, the Registration Statement or the
Prospectus, or such amendment or supplement, in reliance upon and in
conformity with information furnished in writing to the Company by the
Representatives on behalf of any Underwriter specifically for use
therein. The obligations of each of the Selling Shareholders,
pursuant to this Section 7(a) and Section 8, shall be limited to an
amount not exceeding the product of the Per Share Price to Public of
the Shares as set forth on the cover page of the Prospectus and the
number of Selling Shareholder Shares being sold by each of them. In
no event shall the indemnification agreement contained in this Section
7(a) inure to the benefit of any Underwriter on account of any losses,
claims, damages, liabilities or actions arising from the sale of the
Shares upon the public offering to any person by such Underwriter if
such losses, claims, damages, liabilities or actions arise out of, or
are based upon, a statement or omission or alleged
21
<PAGE> 22
omission in a Preliminary Prospectus and if, in respect to such
statement, omission or alleged omission, the Prospectus differs in a
material respect from such Preliminary Prospectus and a copy of the
Prospectus has not been sent or given to such person at or prior to
the confirmation of such sale to such person. This indemnity
agreement will be in addition to any liability which the Company and
the Selling Shareholders may otherwise have.
(b) Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Company, each person, if any, who
controls the Company within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act, each director of the Company, and each
officer of the Company who signs the Registration Statement and each
Selling Shareholder, to the same extent as the foregoing indemnity
from the Company and the Selling Shareholders to each Underwriter, but
only insofar as such losses, claims, damages or liabilities arise out
of or are based upon any untrue statement or omission or alleged
untrue statement or omission which was made in any Preliminary
Prospectus, any Rule 430A Prospectus, the Registration Statement or
the Prospectus, or any amendment thereof or supplement thereto, which
were made in reliance upon and in conformity with information
furnished in writing to the Company by the Representatives on behalf
of any Underwriter for specific use therein; provided, however, that
the obligation of each Underwriter to indemnify the Company (including
any controlling person, director or officer thereof) and the Selling
Shareholders shall be limited to the net proceeds received by the
Company and the Selling Shareholders, respectively, from such
Underwriter. For all purposes of this Agreement, the amounts of the
selling concession and reallowance set forth in the Prospectus
constitute the only information furnished in writing by or on behalf
of any Underwriter expressly for inclusion in any Preliminary
Prospectus, any Rule 430A Prospectus, the Registration Statement or
the Prospectus or any amendment or supplement thereto.
(c) Any party that proposes to assert the right to be
indemnified under this Section 7 will, promptly after receipt of
notice of commencement of any action, suit or proceeding against such
party in respect of which a claim is to be made against an
indemnifying party or parties under this Section, notify each such
indemnifying party of the commencement of such action, suit or
proceeding, enclosing a copy of all papers served. No indemnification
provided for in Section 7(a) or 7(b) shall be available to any party
who shall fail to give notice as provided in this Section 7(c) if the
party to whom notice was not given was unaware of the proceeding to
which such notice would have related and was prejudiced by the failure
to give such notice but the omission so to notify such indemnifying
party of any such action, suit or proceeding shall not relieve it from
any liability that it may have to any indemnified party for
contribution or otherwise than under this Section. In case any such
action, suit or proceeding shall be brought against any indemnified
party and it shall notify the indemnifying party of the commencement
thereof, the indemnifying party shall be entitled to participate in,
and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof,
with counsel reasonably satisfactory to such indemnified party, and
after notice from the indemnifying party to such indemnified party of
its election so to assume the defense thereof and the approval by the
indemnified party of such counsel, the indemnifying party shall not be
liable to such indemnified party for any legal or other expenses,
except as provided below and except for the reasonable costs of
investigation subsequently incurred by such indemnified party in
connection with the defense thereof. The indemnified party shall have
the right to employ its counsel in any such action, but the fees and
expenses of such counsel shall be at the expense of such indemnified
party unless (i) the employment of counsel by such indemnified party
has been
22
<PAGE> 23
authorized in writing by the indemnifying parties, (ii) the
indemnified party shall have reasonably concluded that there may be a
conflict of interest between the indemnifying parties and the
indemnified party in the conduct of the defense of such action (in
which case the indemnifying parties shall not have the right to direct
the defense of such action on behalf of the indemnified party), or
(iii) the indemnifying parties shall not have employed counsel to
assume the defense of such action within a reasonable time after
notice of the commencement thereof, in each of which cases the
reasonable fees and expenses of counsel shall be at the expense of the
indemnifying parties. An indemnifying party shall not be liable for
any settlement of any action, suit, proceeding or claim effected
without its written consent.
8. Contribution. In order to provide for just and equitable
contribution in circumstances in which the indemnification provided for in
Sections 7(a) and (b) is due in accordance with its terms but for any reason is
held to be unavailable from the Company, the Selling Shareholders or the
Underwriters, the Company, the Selling Shareholders and the Underwriters shall
contribute to the aggregate losses, claims, damages and liabilities (including
any investigation, legal and other expenses reasonably incurred in connection
with, and any amount paid in settlement of, any action, suit or proceeding or
any claims asserted, but after deducting any contribution received by the
Company from persons other than the Underwriters, such as the Selling
Shareholders, persons who control the Company within the meaning of the Act,
officers of the Company who signed the Registration Statement and directors of
the Company, who may also be liable for contribution) to which the Company and
the Selling Shareholders and one or more of the Underwriters may be subject in
such proportion as is appropriate to reflect the relative benefits received by
the Company and the Selling Shareholders on the one hand and the Underwriters
on the other from the offering of the Shares or, if such allocation is not
permitted by applicable law or indemnification is not available as a result of
the indemnifying party not having received notice as provided in Section 7
hereof, in such proportion as is appropriate to reflect not only the relative
benefits referred to above but also the relative fault of the Company and the
Selling Shareholders on the one hand and the Underwriters on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative benefits received by the Company, the
Selling Shareholders and the Underwriters shall be deemed to be in the same
proportion as (x) the total proceeds from the Offering (net of underwriting
discounts but before deducting expenses) received by the Company or the Selling
Shareholders from the sale of the Shares, as set forth in the table on the
cover page of the Prospectus (but not taking into account the use of the
proceeds of such sale of Shares by the Company), bear to (y) the underwriting
discount received by the Underwriters, as set forth in the table on the cover
page of the Prospectus. The relative fault of the Company, the Selling
Shareholders and the Underwriters shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
related to information supplied by the Company, the Selling Shareholders or the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The Company,
the Selling Shareholders and the Underwriters agree that it would not be just
and equitable if contribution pursuant to this Section 8 were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of
the equitable considerations referred to above. Notwithstanding the provisions
of this Section 8, (i) in no case shall any Underwriter (except as may be
provided in the Agreement Among Underwriters) be liable or responsible for any
amount in excess of the underwriting discount applicable to the Shares purchase
by such Underwriter hereunder, (ii) in no case shall any of the Selling
Shareholders be liable or responsible for any amount in excess of the product
of the Per Share Price to Public of the Shares as set forth on the cover page
of the Prospectus and the number of Shares being sold
23
<PAGE> 24
by each of them subject to the limitation expressed in Section 7(a), and (iii)
the Company shall be liable and responsible for any amount in excess of the
underwriting discount and the amount referred to in clause (ii); provided,
however (i) that no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. For purpose of
this Section 8, each person, if any, who controls an Underwriter within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act shall
have the same rights to contribution as such Underwriter, and each person, if
any, who controls the Company within the meaning of the Section 15 of the Act
or Section 20(a) of the Exchange Act, each officer of the Company who shall
have signed the Registration Statement and each director of the Company shall
have the same rights to contribution as the Company, subject in each case to
clauses (i), (ii) and (iii) in the immediately preceding sentence of this
Section 8. Any party entitled to contribution will, promptly after receipt of
notice of commencement of any action, suit or proceeding against such party in
respect of which a claim for contribution may be made against another party or
parties under this Section, notify such party or parties from whom contribution
may be sought, but the omissions so to notify such party or parties from whom
contribution may be sought shall not relieve the party or parties from whom
contribution may be sought from any other obligation it or they may have
hereunder or otherwise than under this Section. No party shall be liable for
contribution with respect to any action, suit, proceeding or claim settled
without its written consent. The Underwriters' obligations to contribute
pursuant to this Section 8 are several in proportion to their respective
underwriting commitments and not joint.
9. Termination. This Agreement may be terminated with respect to
the Shares to be purchased on any Closing Date by the Representatives by
notifying the Company at any time prior to the purchase of the Shares:
(a) in the absolute discretion of the Representatives at
or before any Closing Date: (i) if on or prior to such date, any
domestic or international event or act or occurrence has materially
disrupted, or in the opinion of the Representatives will in the future
materially disrupt, the securities markets; (ii) if there has occurred
any new outbreak or material escalation of hostilities or other
calamity or crisis the effect of which on the financial markets of the
United States is such as to make it, in the judgment of the
Representatives, inadvisable to proceed with the Offering; (iii) if
there shall be such a material adverse change in general financial,
political or economic conditions or the effect of international
conditions on the financial markets in the United States such as to
make it, in the judgment of the Representatives, inadvisable or
impracticable to market the Shares; (iv) if trading in the Shares has
been suspended by the Commission or trading generally on the New York
Stock Exchange, Inc., the American Stock Exchange, Inc. or the NASDAQ
National Market has been suspended or limited, or minimum or maximum
ranges for prices for securities shall have been fixed, or maximum
ranges for prices for securities have been required, by said exchanges
or by order of the Commission, the NASD, or any other governmental or
regulatory authority; or (v) if a banking moratorium has been declared
by any state or federal authority, or
(b) at or before any Closing Date, if any of the
conditions specified in Section 5 shall not have been fulfilled when
and as required by this Agreement.
If this Agreement is terminated pursuant to any of its provisions,
neither the Company nor any of the Selling Shareholders shall be under any
liability to any Underwriter, and no Underwriter shall be
24
<PAGE> 25
under any liability to the Company or any the Selling Shareholders, except that
(y) if this Agreement is terminated by the Representatives or the Underwriters
because of any failure, refusal or inability on the part of the Company or the
Selling Shareholders or all of them to comply with the terms or to fulfill any
of the conditions of this Agreement, the Company and each of the Selling
Shareholders will reimburse the Underwriters for all out-of-pocket expenses
(including the fees and disbursements of their counsel) incurred by them in
connection with the proposed purchase and sale of the Shares or in
contemplation of performing their obligations hereunder and (z) no Underwriter
who shall have failed or refused to purchase the Shares agreed to be purchased
by it under this Agreement, without some reason sufficient hereunder to justify
cancellation or termination of its obligations under this Agreement, shall be
relieved of liability to the Company and any the Selling Shareholders or to the
other Underwriters for damages occasioned by its failure or refusal.
10. Substitution of Underwriters. If one or more of the
Underwriters shall fail (other than for a reason sufficient to justify the
cancellation or termination of this Agreement under Section 9) to purchase on
any Closing Date the Shares agreed to be purchased on such Closing Date by such
Underwriter or Underwriters, the Representatives may find one or more
substitute underwriters to purchase such Shares or make such other arrangements
as the Representatives may deem advisable or one or more of the remaining
Underwriters may agree to purchase such Shares in such proportions as may be
approved by the Representatives, in each case upon the terms set forth in this
Agreement. If no such arrangements have been made by the close of business on
the business day following such Closing Date:
(a) if the number of Shares to be purchased by the
defaulting Underwriters on such Closing Date shall not exceed 10% of
the Shares that all the Underwriters are obligated to purchase on such
Closing Date, then each of the nondefaulting Underwriters shall be
obligated to purchase such Shares on the terms herein set forth in
proportion to their respective obligations hereunder; provided, that
in no event shall the maximum number of Shares that any Underwriter
has agreed to purchase pursuant to Section 1 be increased pursuant to
this Section 10 by more than one-ninth of such number of Shares
without the written consent of such Underwriter, or
(b) if the number of Shares to be purchased by the
defaulting Underwriters on such Closing Date shall exceed 10% of the
Shares that all the Underwriters are obligated to purchase on such
Closing Date, then the Company shall be entitled to an additional
business day within which it may, but is not obligated to, find one or
more substitute underwriters reasonably satisfactory to the
Representatives to purchase such Shares upon the terms set forth in
this Agreement.
In any such case, either the Representatives or the Company shall have
the right to postpone the applicable Closing Date for a period of not more than
five business days in order that necessary changes and arrangements (including
any necessary amendments or supplements to the Registration Statement or
Prospectus) may be effected by the Representatives and the Company. If the
number of Shares to be purchased on such Closing Date by such defaulting
Underwriter or Underwriters shall exceed 10% of the Shares that all the
Underwriters are obligated to purchase on such Closing Date, and none of the
nondefaulting Underwriters or the Company shall make arrangements pursuant to
this Section within the period stated for the purchase of the Shares that the
defaulting Underwriters agreed to purchase, this Agreement shall terminate with
respect to the Shares to be purchased on such Closing Date without liability on
the part of any nondefaulting Underwriter to the Company and the Selling
Shareholders and without liability on the part of the Company and the Selling
Shareholders, except in both cases as
25
<PAGE> 26
provided in Sections 6(b), 7, 8 and 9. The provisions of this Section shall
not in any way affect the liability of any defaulting Underwriter to the
Company or the Selling Shareholders or the nondefaulting Underwriters arising
out of such default. A substitute underwriter hereunder shall become an
Underwriter for all purposes of this Agreement.
11. Miscellaneous. The respective agreements, representations,
warranties, indemnities and other statements of the Company or its officers, of
the Selling Shareholders and of the Underwriters set forth in or made pursuant
to this Agreement shall remain in full force and effect, regardless of any
investigation made by or on behalf of any Underwriter or the Company or any of
the Selling Shareholders or any of the officers, directors or controlling
persons referred to in Sections 7 and 8 hereof, and shall survive deliver of
and payment for the Shares. The provisions of Sections 6(b), 7, 8 and 9 shall
survive the termination or cancellation of this Agreement.
This Agreement has been and is made for the benefit of the
Underwriters, the Company and the Selling Shareholders and their respective
successors and assigns and, to the extent expressed herein, for the benefit of
person controlling any of the Underwriters, or the Company, and directors and
officers of the Company, and their respective successors and assigns, and no
other person shall acquire or have any right under or by virtue of this
Agreement. The term "successors and assigns" shall not include any purchaser
of Shares from any Underwriter merely because of such purchase.
All notices and communications hereunder shall be in writing and
mailed or delivered, or by telefax or telegraph if subsequently confirmed by
letter, (a) if to the Representatives, to them in care of Rodman & Renshaw,
Inc., One Liberty Plaza, 165 Broadway, New York, New York 10006, Attention:
Julia Heckman, Managing Director, telecopy: (212) 416-7439, with a copy to
Katten Muchin & Zavis, 525 West Monroe Street, Suite 1600, Chicago, Illinois
60661, Attention: Lawrence D. Levin, telecopy: (312) 902-1061, (b) if to the
Company, to the Company's agent for service as such agent's address appears on
the cover page of the Registration Statement, and (c) if to any of the Selling
Shareholders, to such Selling Shareholder in care of the Company.
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York without regard to principles of conflict of
laws.
This Agreement may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
All pronouns and any variations thereof shall be deemed to refer to
the masculine, feminine, or neuter, singular or plural, as the identity of the
person or persons or entity or entities require.
All section headings herein are for convenience of reference only and
are not part of this Agreement, and no construction or inference shall be
derived therefrom.
26
<PAGE> 27
Please confirm that the foregoing correctly sets forth the agreement
among us.
Very truly yours,
THE UNIMARK GROUP, INC.
By:
------------------------------------
Name:
Title:
THE SELLING SHAREHOLDERS
By:
------------------------------------
Jorn Budde, Attorney-in-Fact for
the Selling Shareholders named in
Schedule II hereto
Confirmed on behalf of itself
and as the Representatives of
the several Underwriters named
in Schedule I annexed hereto:
RODMAN & RENSHAW, INC.
By:
-----------------------------
Name:
Title:
RAUSCHER PIERCE REFSNES, INC.
By:
-----------------------------
Name:
Title:
27
<PAGE> 28
SCHEDULE I
<TABLE>
<CAPTION>
Number of Firm
Shares to be
Name of Underwriter Purchased
- ------------------- ---------------
<S> <C>
Rodman & Renshaw, Inc.
Rauscher Pierce Refsnes, Inc.
---------
Total 2,000,000
=========
</TABLE>
<PAGE> 29
SCHEDULE II
<TABLE>
<CAPTION>
Name of Selling Shareholder Number of Shares to be sold Option Shares
- --------------------------- --------------------------- -------------
<S> <C> <C>
Jorn Budde
Rafael Vaquero Bazan
[LIST OTHERS]
-------
Total 600,000
=======
</TABLE>
<PAGE> 30
EXHIBIT A
[Legal opinion of Jordaan, Howard & Pennington, PLLC]
(i) Each of the Company and the Texas
Subsidiaries is a corporation duly organized, validly
existing, and in good standing under the laws of the State of
Texas with full corporate power and authority to own, lease,
license and use its properties and assets and to conduct its
business in the manner described in the Prospectus. To the
knowledge of such counsel, the Company has all necessary
consents, authorizations, approvals, orders, certificates and
permits of and from, and declarations and filings with, all
federal, state, local and other governmental authorities and
all courts and other tribunals, to own, lease, license and use
its properties and assets and to conduct its business in the
manner described in the Prospectus. Each of the Company and
the Texas Subsidiaries is duly qualified to do business and is
in good standing, in each state where the failure to be so
qualified could have a material adverse effect on the
operating condition (financial and otherwise) or business of
the Company. The Company has no subsidiaries and does not
control, directly or indirectly, any corporation, partnership,
joint venture, association or other business organization,
except for the Subsidiaries as defined in Section 4(a)(v) of
this Agreement.
(ii) The Company has authorized, issued and
outstanding capital stock as set forth under the caption
"Capitalization" in the Prospectus. The certificates
evidencing the shares are in due and proper legal form. Each
outstanding share of Common Stock has been duly and validly
authorized and issued, fully paid, and non-assessable, without
any personal liability attaching to the ownership thereof, and
has not been issued and is not owned or held in violation of
any preemptive right of shareholders. The Company owns all of
the shares of capital stock of the Subsidiaries, free and
clear of all liens, claims, security interests, restrictions,
shareholders' agreements, voting trusts and any other
encumbrances whatsoever. To the knowledge of such counsel,
there is no commitment, plan, or arrangement to issue, and no
outstanding option, warrant, or other right calling for the
issuance of, any share of capital stock of the Company or any
of the Subsidiaries or any security or other instrument which
by its terms is convertible into, exercisable for, or
exchangeable for capital stock of the Company or any of the
Subsidiaries, except as properly described in the Prospectus.
To the knowledge of such counsel, there is outstanding no
security or other instrument which by its terms is convertible
into, exercisable for or exchangeable for capital stock of the
Company or any of the Subsidiaries, except as may be properly
described in the Prospectus.
(iii) There is no litigation, arbitration, claim,
governmental or other proceeding (formal or informal), or
investigation before any court or before any public body or
board pending, or to the knowledge of such counsel, threatened
with respect to the Company, the Subsidiaries, the Selling
Shareholders or any of their respective operations,
businesses, properties, assets, or financial condition except
as properly described in the Prospectus or such as
individually or in the aggregate do not now have and are not
in the future reasonably foreseeable to have a material
adverse effect upon the operations, business, properties,
assets, or financial condition of the Company and the
Subsidiaries. To the knowledge of such counsel, neither the
Company nor the
A-1
<PAGE> 31
Subsidiaries is involved in any labor dispute, nor is such
dispute threatened, which dispute would have a material
adverse effect upon the operations, business, properties,
assets or financial condition of the Company and the
Subsidiaries. Neither the Company nor any of the Texas
Subsidiaries are in violation of, or in default with respect
to, any law, rule, regulation, order, judgment, or decree,
except as may be properly described in the Prospectus or such
as in the aggregate do not now have and will not in the future
have a material adverse effect upon the operations, business,
properties, assets, or financial condition of the Company or
the Subsidiaries; nor is the Company or any of the Texas
Subsidiaries required to take any action in order to avoid any
such violation or default.
(iv) To the knowledge of such counsel, neither the
Company the Subsidiaries nor any other party is now or is
expected by the Company to be in violation or breach of, or in
default with respect to, complying with any term, obligation
or provision of any contract, agreement, instrument, lease,
license, indenture, mortgage, deed of trust, note, arrangement
or understanding which is material to the Company or any of
the Subsidiaries or by which any of their respective
properties or businesses may be bound or affected and no event
has occurred which with notice or lapse of time or both would
constitute such a default.
(v) Neither the Company nor any of the Texas
Subsidiaries is in violation or breach of, or in default with
respect to, any term of its certificate of incorporation (or
other charter document) or by-laws.
(vi) Each of the Company and the Texas
Subsidiaries has all requisite power and authority to execute,
deliver and perform this Agreement and to issue and sell the
Shares. All necessary corporate proceedings of the Company
and the Subsidiaries have been taken to authorize the
execution, delivery and performance by the Company of this
Agreement. This Agreement has been duly authorized, executed
and delivered by each of the Company and the Subsidiaries, is
the legal, valid and binding obligation of each of the Company
and of the Texas Subsidiaries and (subject to applicable
bankruptcy, insolvency, and other laws affecting the
enforceability of creditors' rights generally) is enforceable
as to the Company in accordance with its terms. No consent,
authorization, approval, order, license, certificate or permit
of or from, or declaration or filing with, any federal state,
local or other governmental authority or any court or other
tribunal is required by the Company or the Texas Subsidiaries
for the execution, delivery or performance by the Company or
the Texas Subsidiaries of this Agreement (except filings under
the Act which have been made prior to the Closing Date and
consents consisting only of consents under "blue sky" or
securities laws). To the knowledge of such counsel, no
consent of any party to any contract, agreement, instrument,
lease, license, indenture, mortgage, deed of trust, note,
arrangement or understanding to which the Company, the
Subsidiaries or the Selling Shareholder are a party, or to
which any of their respective properties or assets are
subject, is required for the execution, delivery or
performance of this Agreement; and the execution, delivery and
performance of this Agreement will not violate, result in a
breach of, conflict with, or (with or without the giving of
notice or the passage of time or both) entitle any party to
terminate or call a default under any such contract,
agreement, instrument, lease, license, indenture, mortgage,
deed of trust, note, arrangement or understanding, in each
case known to such counsel, or violate or
A-2
<PAGE> 32
result in a breach of any term of the certificate of
incorporation (or other charter document) or by- laws of the
Company, or violate, result in a breach of, or conflict with
any law, rule, regulation, order, judgement, or decree binding
on the Company, or any of the Subsidiaries or to which any of
their respective operations, businesses, properties or assets
are subject.
(vii) The Firm Shares and the Option Shares are
duly and validly authorized. Each Share, as the case may be,
delivered on the Closing Dates is duly and validly issued,
fully paid, and non- assessable, with no personal liability
attaching to the ownership thereof, and is not issued in
violation of any preemptive rights of shareholders, and the
Underwriters have received good title to the Shares purchased
by them, respectively, from the Company and the Selling
Shareholder, as applicable, for the consideration contemplated
herein and in good faith and without notice of any adverse
claim within the meaning of the Uniform Commercial Code, free
and clear of any liens, security interests, pledges, charges,
encumbrances, stockholders' agreements, voting trusts and
other claims. The Common Stock, the Firm Shares and the
Option Shares conform to all statements relating thereto
contained in the Registration Statement or the Prospectus and
are approved for listing on the Nasdaq National Market.
(viii) To the knowledge of such counsel, any
contract, agreement, instrument, lease or license required to
be described in the Registration Statement or the Prospectus
has been properly described therein. To the knowledge of such
counsel, any contract, agreement, instrument, lease or license
required to be filed as an exhibit to the Registration
Statement has been filed with the Commission as an exhibit to
or has been incorporated as an exhibit by reference into the
Registration Statement.
(ix) Insofar as statements in the Prospectus
purport to summarize the status of litigation or the
provisions of laws, rules, regulations, orders, judgments,
decrees, contracts, agreements, instruments, leases or
licenses, such statements have been prepared or reviewed by
such counsel and to the knowledge of such counsel, accurately
reflect the status of such litigation and provisions purported
to be summarized and are correct in all material respects.
(x) The Company is not required and will not be
required as a result of this offering, to be registered as an
"investment company" under the Investment Company Act of 1940,
as amended.
(xi) To the knowledge of such counsel, no person
or entity has the right to require registration of shares of
Common Stock or other securities of the Company because of the
filing or effectiveness of the Registration Statement except
such persons or entities from whom written waivers of such
rights have been received prior to the Closing Date.
(xii) The Registration Statement has become
effective under the Act. No Stop Order has been issued and no
proceedings for that purpose has been instituted or are
threatened, pending, or to such counsel's knowledge,
contemplated.
A-3
<PAGE> 33
(xiii) The Registration Statement, any Rule 430A
Prospectus, and the Prospectus, and any amendment or
supplement thereto (other than financial statements and other
financial data and schedules which are or should be contained
in any thereof, as to which such counsel need express no
opinion), comply as to form in all material respects with the
requirements of the Act and the Regulations. To the knowledge
of such counsel, the conditions for the use of Form S-1 have
been satisfied with respect to the Registration Statement.
(xiv) To the knowledge of such counsel, since the
effective date of the Registration Statement, no event has
occurred which should have been set forth in an amendment or
supplement to the Registration Statement or the Prospectus
which has not been set forth in such an amendment or
supplement.
(xv) The agreement of each officer and director of
the Company and the Selling Shareholders, stating that for a
period of 180 days from the date on which the public offering
of the Shares commences, such party will not, without the
Representatives' prior written consent, offer, pledge, sell,
contract to sell, grant any option for the sale of, or
otherwise dispose of, directly or indirectly, any shares of
Common Stock (or any other securities of the Company or any
security or other instrument which by its terms is convertible
into, exercisable for, or exchangeable for shares of Common
Stock or other securities of the Company, including, without
limitation, any shares of Common Stock issuable under any
employee stock options), beneficially owned by such party, has
been duly and validly authorized, executed and delivered by
such party and constitutes the legal, valid and binding
obligation of such party enforceable against such party in
accordance with its terms.
In addition, counsel has participated in the preparation of the
Registration Statement and the Prospectus and in conferences with officers and
other representative of the Company, representatives of the Representatives and
representatives of the independent accountants of the Company, at which
conferences the contents of the Registration Statement and the Prospectus and
related matters were discussed and, although such counsel has not independently
verified and is not passing upon and does not assume any responsibility for the
accuracy, completeness or fairness of the statements contained in the
Registration Statement and the Prospectus (except as specified in the foregoing
opinion), on the basis of the foregoing and relying as to materiality upon the
representations of executive officers of the Company after conferring with such
executive officers, no facts have come to the attention of such counsel which
lead such counsel to believe that the Registration Statement at the time it
became effective and at each Closing Date contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, or that the
Prospectus, except for the financial statements and other financial and
statistical data included therein as to which counsel need express no opinion,
as amended or supplemented on the date thereof and at each Closing Date
contained any untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading (it being
understood that such counsel need express no comment with respect to the
financial statements and schedules and other financial or statistical data
included in the Registration Statement or Prospectus).
A-4
<PAGE> 34
EXHIBIT B
[Legal opinion of Margain - Rojas - Gonzalez - Vargas, S.C.]
(i) Each Mexican Subsidiary is a corporation duly
organized, validly existing, and in good standing under the
laws of the State of its incorporation, with full corporate
power and authority to own, lease, license and use its
properties and assets and to conduct its business in the
manner described in the Prospectus. To the knowledge of such
counsel, each of the Mexican Subsidiaries has all necessary
consents, authorizations, approvals, orders, certificates and
permits of and from, and declarations and filings with, all
federal, state, local and other governmental authorities and
all courts and other tribunals, to own, lease, license and use
its properties and assets and to conduct its business in the
manner described in the Prospectus. Each Mexican Subsidiary
is duly qualified to do business and is in good standing, in
each state where the failure to be so qualified could have a
material adverse effect on the operating condition (financial
and otherwise) or business of such Mexican Subsidiary or the
Company.
(ii) There is no litigation, arbitration, claim,
governmental or other proceeding (formal or informal), or
investigation before any court or before any public body or
board pending or to the knowledge of such counsel, threatened
with respect to the Mexican Subsidiaries or any of their
respective operations, businesses, properties, assets, or
financial condition except as properly described in the
Prospectus or such as individually or in the aggregate do not
now have and are not in the future reasonably foreseeable to
have a material adverse effect upon the operations, business,
properties, assets, or financial condition of the Mexican
Subsidiaries. Neither of the Mexican Subsidiaries is in
violation of, or in default with respect to, any law, rule,
regulation, order, judgment, or decree, except as may be
properly described in the Prospectus or such as in the
aggregate do not now have and will not in the future have a
material adverse effect upon the operations, business,
properties, assets, or financial condition of the Mexican
Subsidiaries; nor is either of the Mexican Subsidiaries
required to take any action in order to avoid any such
violation or default.
(iii) To the knowledge of such counsel, the Mexican
Subsidiaries are not now nor is either of them expected by the
Company to be in violation or breach of, or in default with
respect to, complying with any term, obligation or provision
of any contract, agreement, instrument, lease, license,
indenture, mortgage, deed of trust, note, arrangement or
understanding which is material to the Mexican Subsidiaries or
by which any of their respective properties or businesses may
be bound or affected and no event has occurred which with
notice or lapse of time or both would constitute such a
default.
(iv) Neither of the Mexican Subsidiaries is in
violation or breach of, or in default with respect to, any
term of its certificate of incorporation (or other charter
documents)
(v) No consent, authorization, approval, order,
license, certificate or permit of or from, or declaration or
filing with, any federal state, local or other governmental
authority or any court or other tribunal is required by the
Mexican Subsidiaries for the execution, delivery or
performance of this Agreement (except filings under the Act
which have been made prior to the Closing Date and consents
consisting only of consents under
B-1
<PAGE> 35
"blue sky" or securities laws). To the knowledge of such
counsel, no consent of any party to any contract, agreement,
instrument, lease, license, indenture, mortgage, deed of trust,
note, arrangement or understanding to which the Mexican
Subsidiaries are a party, or to which any of their respective
properties or assets are subject, is required for the
execution, delivery or performance of this Agreement; and the
execution, delivery and performance of this Agreement will not
violate, result in a breach of, conflict with, or (with or
without the giving of notice or the passage of time or both)
entitle any party to terminate or call a default under any such
contract, agreement, instrument, lease, license, indenture,
mortgage, deed of trust, note, arrangement or understanding, in
each case known to such counsel, or violate or result in a
breach of any term of the certificate of incorporation (or
other charter document) or by-laws or violate, result in a
breach of, or conflict with any law, rule, regulation, order,
judgement, or decree binding on either of the Mexican
Subsidiaries or to which any of their respective operations,
businesses, properties or assets are subject.
(vi) To the knowledge of such counsel, any contract,
agreement, instrument, lease or license required to be
described in the Registration Statement or the Prospectus has
been properly described therein.
(vii) Insofar as statements in the Prospectus purport
to summarize the status of litigation or the provisions of
laws, rules, regulations, orders, judgments, decrees,
contracts, agreements, instruments, leases or licenses, such
statements have been prepared or reviewed by such counsel and
to the knowledge of such counsel, accurately reflect the
status of such litigation and provisions purported to be
summarized and are correct in all material respects.
B-2
<PAGE> 36
EXHIBIT C
[Legal opinion of ________________ [DELI-BON COUNSEL]]
(i) Deli-Bon is a corporation duly organized, validly
existing, and in good standing under the laws of the State of
its incorporation, with full corporate power and authority to
own, lease, license and use its properties and assets and to
conduct its business in the manner described in the
Prospectus. To the knowledge of such counsel, Deli-Bon has
all necessary consents, authorizations, approvals, orders,
certificates and permits of and from, and declarations and
filings with, all federal, state, local and other governmental
authorities and all courts and other tribunals, to own, lease,
license and use its properties and assets and to conduct its
business in the manner described in the Prospectus. Deli-Bon
is duly qualified to do business and is in good standing, in
each state where the failure to be so qualified could have a
material adverse effect on the operating condition (financial
and otherwise) or business of Deli-Bon or the Company.
(ii) There is no litigation, arbitration, claim,
governmental or other proceeding (formal or informal), or
investigation before any court or before any public body or
board pending or to the knowledge of such counsel, threatened
with respect to Deli-Bon or its operations, businesses,
properties, assets, or financial condition except as properly
described in the Prospectus or such as individually or in the
aggregate do not now have and are not in the future reasonably
foreseeable to have a material adverse effect upon the
operations, business, properties, assets, or financial
condition of Deli-Bon. Deli-Bon is not in violation of, or in
default with respect to, any law, rule, regulation, order,
judgment, or decree, except as is properly described in the
Prospectus or such as in the aggregate do not now have and
will not in the future have a material adverse effect upon the
operations, business, properties, assets, or financial
condition of the Company; nor is Deli-Bon required to take any
action in order to avoid any such violation or default.
(iii) To the knowledge of such counsel, Deli-Bon is
not now nor is it expected by the Company to be in violation
or breach of, or in default with respect to, complying with
any term, obligation or provision of any contract, agreement,
instrument, lease, license, indenture, mortgage, deed of
trust, note, arrangement or understanding which is material to
Deli-Bon or by which any of its properties or businesses may
be bound or affected and no event has occurred which with
notice or lapse of time or both would constitute such a
default.
(iv) Deli-Bon is not in violation or breach of, or in
default with respect to, any term of its certificate of
incorporation (or other charter documents)
(v) No consent, authorization, approval, order,
license, certificate or permit of or from, or declaration or
filing with, any federal state, local or other governmental
authority or any court or other tribunal is required by
Deli-Bon for the execution, delivery or performance of this
Agreement (except filings under the Act which have been made
prior to the Closing Date and consents consisting only of
consents under "blue sky" or securities laws). To the
knowledge of such counsel, no consent of any party to any
contract, agreement, instrument, lease, license, indenture,
mortgage, deed of trust, note, arrangement or understanding to
which Deli-Bon is a party, or to which any of its
C-1
<PAGE> 37
respective properties or assets are subject, is required for
the execution, delivery or performance of this Agreement; and
the execution, delivery and performance of this Agreement will
not violate, result in a breach of, conflict with, or (with or
without the giving of notice or the passage of time or both)
entitle any party to terminate or call a default under any
such contract, agreement, instrument, lease, license,
indenture, mortgage, deed of trust, note, arrangement or
understanding, in each case known to such counsel, or violate
or result in a breach of any term of the certificate of
incorporation (or other charter document) or by-laws or
violate, result in a breach of, or conflict with any law,
rule, regulation, order, judgement, or decree binding on
Deli-Bon or to which any of its operations, businesses,
properties or assets are subject.
(vi) To the knowledge of such counsel, any contract,
agreement, instrument, lease or license required to be
described in the Registration Statement or the Prospectus has
been properly described therein.
(vii) Insofar as statements in the Prospectus purport
to summarize the status of litigation or the provisions of
laws, rules, regulations, orders, judgments, decrees,
contracts, agreements, instruments, leases or licenses, such
statements have been prepared or reviewed by such counsel and
to the knowledge of such counsel, accurately reflect the
status of such litigation and provisions purported to be
summarized and are correct in all material respects.
C-2
<PAGE> 38
EXHIBIT D
[Legal opinion of ________________ [SIMPLY FRESH COUNSEL]]
(i) Simply Fresh is a corporation duly organized,
validly existing, and in good standing under the laws of the
State of its incorporation, with full corporate power and
authority to own, lease, license and use its properties and
assets and to conduct its business in the manner described in
the Prospectus. To the knowledge of such counsel, Simply
Fresh has all necessary consents, authorizations, approvals,
orders, certificates and permits of and from, and declarations
and filings with, all federal, state, local and other
governmental authorities and all courts and other tribunals,
to own, lease, license and use its properties and assets and
to conduct its business in the manner described in the
Prospectus. Simply Fresh is duly qualified to do business and
is in good standing, in each state where the failure to be so
qualified could have a material adverse effect on the
operating condition (financial and otherwise) or business of
Simply Fresh or the Company.
(ii) There is no litigation, arbitration, claim,
governmental or other proceeding (formal or informal), or
investigation before any court or before any public body or
board pending or to the knowledge of such counsel, threatened
with respect to Simply Fresh or its operations, businesses,
properties, assets, or financial condition except as properly
described in the Prospectus or such as individually or in the
aggregate do not now have and are not in the future reasonably
foreseeable to have a material adverse effect upon the
operations, business, properties, assets, or financial
condition of Simply Fresh. Simply Fresh is not in violation
of, or in default with respect to, any law, rule, regulation,
order, judgment, or decree, except as is properly described in
the Prospectus or such as in the aggregate do not now have and
will not in the future have a material adverse effect upon the
operations, business, properties, assets, or financial
condition of the Company; nor is Simply Fresh required to take
any action in order to avoid any such violation or default.
(iii) To the knowledge of such counsel, Simply Fresh
is not now nor is it expected by the Company to be in
violation or breach of, or in default with respect to,
complying with any term, obligation or provision of any
contract, agreement, instrument, lease, license, indenture,
mortgage, deed of trust, note, arrangement or understanding
which is material to Simply Fresh or by which any of its
properties or businesses may be bound or affected and no event
has occurred which with notice or lapse of time or both would
constitute such a default.
(iv) Simply Fresh is not in violation or breach of,
or in default with respect to, any term of its certificate of
incorporation (or other charter documents)
(v) No consent, authorization, approval, order,
license, certificate or permit of or from, or declaration or
filing with, any federal state, local or other governmental
authority or any court or other tribunal is required by Simply
Fresh for the execution, delivery or performance of this
Agreement (except filings under the Act which have been made
prior to the Closing Date and consents consisting only of
consents under "blue sky" or securities laws). To the
knowledge of such counsel, no consent of any party to any
D-1
<PAGE> 39
contract, agreement, instrument, lease, license, indenture,
mortgage, deed of trust, note, arrangement or understanding to
which Simply Fresh is a party, or to which any of its
respective properties or assets are subject, is required for
the execution, delivery or performance of this Agreement; and
the execution, delivery and performance of this Agreement will
not violate, result in a breach of, conflict with, or (with or
without the giving of notice or the passage of time or both)
entitle any party to terminate or call a default under any
such contract, agreement, instrument, lease, license,
indenture, mortgage, deed of trust, note, arrangement or
understanding, in each case known to such counsel, or violate
or result in a breach of any term of the certificate of
incorporation (or other charter document) or by-laws or
violate, result in a breach of, or conflict with any law,
rule, regulation, order, judgement, or decree binding on
Simply Fresh or to which any of its operations, businesses,
properties or assets are subject.
(vi) To the knowledge of such counsel, any contract,
agreement, instrument, lease or license required to be
described in the Registration Statement or the Prospectus has
been properly described therein.
(vii) Insofar as statements in the Prospectus purport
to summarize the status of litigation or the provisions of
laws, rules, regulations, orders, judgments, decrees,
contracts, agreements, instruments, leases or licenses, such
statements have been prepared or reviewed by such counsel and
to the knowledge of such counsel, accurately reflect the
status of such litigation and provisions purported to be
summarized and are correct in all material respects.
D-2
<PAGE> 1
Exhibit 5.1
May 10, 1996
The UniMark Group, Inc.
P.O. Box 229
Argyle, Texas 76226
RE: Registration Statement on Form S-1
Gentlemen:
We have acted as counsel to The UniMark Group, Inc., a Texas
corporation (the "Company"), in connection with the registration under the
Securities Act of 1933, as amended (the "Securities Act"), of 2,300,000
shares (the "Shares") of common stock $.01 par value (the "Common Stock") of
the Company to be offered to the public by the Company.
A registration statement on Form S-1 (SEC File No. 333- ) is being
filed with the Securities and Exchange Commission on May 10, 1996 (the
"Registration Statement"). In connection with rendering this opinion we have
examined executed copies of the Registration Statement. We have also examined
and relied upon the original, or copies certified to our satisfaction, of (i)
the Articles of Incorporation, as amended, and the Bylaws of the Company, (ii)
minutes and records of the corporate proceedings of the Company with respect to
the issuance of the Shares and related matters, and (iii) such other agreements
and instruments relating to the Company as we deemed necessary or appropriate
for the purposes of the opinion expressed herein. In rendering such opinion, we
have made such further investigation and inquiries relevant to the transactions
contemplated by the Registration Statement as we have deemed necessary to the
opinion expressed herein, and have relied, to the extent we deemed reasonable,
on certificates and certain other information provided to us by officers of the
Company and public officials as to matters of fact of which the maker of such
certificate or the person providing such other information had knowledge.
Furthermore, in rendering our opinion, we have assumed that the signatures on
all documents examined by us are genuine, that all documents and corporate
record books submitted to us as original are accurate and
<PAGE> 2
The UniMark Group, Inc.
May 10, 1996
Page 2
complete, and that all documents submitted to us copies are true, correct and
complete copies of the originals thereof.
In issuing the opinion hereinafter expressed, we do not purport to be
experts in the laws of any jurisdiction other than the State of Texas and the
United States of America.
Based upon the foregoing we are of the opinion that the Shares to be
issued by the Company in the Offering as described in the Registration Statement
have been duly and validly authorized for issuance and sale and the Shares, when
issued by the Company, will be validly issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. Consent is also given to the references to this firm
under the Caption "Legal Matters" in the prospectus included in the
Registration Statement as having passed upon certain legal matters in
connection with the Shares. In giving this consent, we do not thereby admit
that we come within the category of persons whose consent is required under
Section 7 of the Securities Act of rules and regulations of the Securities and
Exchange Commission promulgated thereunder.
Sincerely,
JORDAAN, HOWARD & PENNINGTON, PLLC
By:_______________________________
Jakes Jordaan
<PAGE> 1
EXHIBIT 10.29
EMPLOYMENT AGREEMENT
This Employment Agreement is entered into as of May 9, 1996, by and
among Grupo Industrial Santa Engracia S.A. DE C.V. (the "Company"), and Ing.
Jose Ma. Martinez Brohez, an individual (the "Executive").
WHEREAS, the Company wishes to continue to employ Executive and
Executive wishes to continue in the employ of the Company for the period and on
the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing promises and the
covenants, conditions, representations and warranties contained herein, the
parties hereto agree as follows:
1. Employment. Executive shall continue to perform services for
the Company in the position of President and Chief Executive Officer, and
Executive shall perform such duties and responsibilities as may be assigned
from time to time by the Company's Board of Directors (the "Board") consistent
with Executive's position. During the term of his employment with the Company,
Executive will devote his best efforts and substantially all of his business
time and attention (except for vacation periods as set forth below and
reasonable periods of illness or other incapacities permitted by the Company's
general employment policies) to the business of the Company. During the Term
(as defined below), exclusive authority regarding the hiring and firing of any
of the Company's officers or employees shall vest in Executive.
2. Term of Agreement. The term of this Agreement shall commence
as of the effective date of this Agreement (the "Effective Date"), and shall
continue for a period of 48 months (the "Term") unless Executive's services are
terminated pursuant to the provisions of Section 7 hereof. At the end of the
Term, if Executive is still employed by the Company pursuant to this Agreement,
the term of this Agreement may be extended by mutual written consent of the
parties hereto, and all of the terms and conditions of this Agreement shall
thereafter apply during such extended term.
3. Location of Services. Executive's services under this
Agreement shall be performed primarily at the facilities of the Company located
in Victoia, Tamaulipas, Mexico.
4. Standard Terms; Proprietary Information. The employment
relationship between the parties shall also be governed by the general
employment policies and practices of the Company, including those relating to
protection of confidential information and assignment of inventions, except
that when the terms of this Agreement differ from or are in conflict with the
Company's general employment policies or practices, this Agreement shall
control.
5. Compensation.
5.1 Base Compensation. Effective as of the Effective
Date, the Company shall pay to Executive base compensation at the annualized
rate of seventy two thousand dollars ($72,000) through the end the Company's
fiscal year ending December 31, 1996, less taxes and other usual deductions.
Executive's base compensation shall be reviewed by the Board annually, and the
Board may, but is not required to, increase such base compensation. Executive's
base compensation shall
<PAGE> 2
be payable in installments consistent with the Company's normal payroll
practices for its executive employees.
6. Benefits.
6.1 General. Except as otherwise expressly provided in
this Section 6, for as long as Executive is employed by the Company, Executive
shall be entitled to all fringe benefits that the Company may make available
from time to time for all executive Executives. Without limitation, such fringe
benefits shall include those available, if any, under any health and benefits
package, life insurance and disability programs, and participation in any plan
or program designed for all executive employees by the Company. Executive shall
be entitled to paid vacation in accordance with the Company's standard
employment policies and practices for executive employees, as the same may be
in effect from time to time. In addition, Executive shall be entitled to take
all Company holidays as the same may be designated by the Company from time to
time for all employees. Executive shall receive such additional fringe
benefits, if any, as the Board shall determine in its sole discretion from time
to time.
6.2 Business Expenses. The Company shall reimburse
Executive for all ordinary and necessary expenses incurred by Executive,
including disbursements, in the performance of Executive's duties for the
Company upon presentation within the time period specified by the Company of an
itemized statement of all expenses incurred showing the date, nature,
recipient, purpose and amount of each item, subject to prior approval of the
Company as required of executive employees.
6.3 Termination of Benefits. All unvested benefits
provided under this Section 6 shall terminate concurrently with termination of
Executive's employment hereunder for any reason whatsoever. Nothing herein
shall vest any rights in any profit sharing or bonus plans, general expense or
automotive reimbursements, and similar fringe benefits that the Company may
provide, if any, beyond the date on which Executive's employment is terminated
for any reason.
7. Termination of Employment.
7.1 Termination For Cause. Notwithstanding any other
provision of this Agreement, Executive's employment with the Company may be
terminated for cause at any time by the Company, upon reasonable notice to
Executive. For the purposes of this Agreement, "cause" means (a) any act by
Executive that is materially injurious to GISE and which if the subject of a
criminal proceeding could result in a criminal conviction or (b) the failure by
Executive to substantially perform his duties hereunder, which duties are
within the control of Executive and after notification Executive fails to
reasonably and prospectively cure such violation.
7.2 Termination Without Cause. The Company may terminate
Executive's employment under this Agreement without cause at any time upon
written notice to Executive.
7.3 Termination for Death or Disability. Employment
hereunder shall automatically terminate upon Executive's death or disability.
Disability, for purposes of this
2
<PAGE> 3
Agreement, shall mean a physical or mental disability that interferes with
Executive's ability to perform duties pursuant to this Agreement for a
continuous period of six (6) months or more.
8. Post-Termination Compensation.
8.1 Termination By the Company for Cause. Notwithstanding
any other provision of this Agreement to the contrary, if Executive's
employment is terminated for cause pursuant to Section 7.1, the Company shall
make no further salary payments except those earned prior to the date of
termination and shall make no further bonus payments.
8.2 Termination By the Company Without Cause. If the
Company terminates this Agreement without cause as defined in Section 7.2
hereof, then the Company shall pay Executive severance equal to Executive's
base compensation as determined pursuant to Section 5.1 for twenty four (24)
months.
8.3 Termination By Executive's Death or Disability. If
employment shall terminate by reason of Executive's death or disability, the
Company shall pay Executive or Executive's estate severance equal to twelve
(12) months' base compensation, payable in a lump sum. The Company shall make
no further bonus payments.
9. Noncompetition. Until two (2) years after termination of
Executive's employment with the Company, Executive shall not (a) either
directly or indirectly, carry on, engage in or have any interest in any
business that competes with the Company, excepting ownership by Executive of no
more than one percent (1%) of the publicly traded common stock of any
corporation, (b) without the express written consent of the Company, accept
employment with, or in any other manner agree to provide, for compensation,
services for any other person or entity that competes directly or indirectly
with the Company, or (c) materially disrupt, damage, impair or interfere with
the business of the Company, whether by way of interfering with or soliciting
its employees, disrupting its relationship with customers, agents,
representatives or vendors, or otherwise.
10. Arbitration. The parties hereto agree that any dispute
pertaining to this Agreement and the transactions contemplated hereby must be
submitted to the International Chamber of Commerce's International Court of
Arbitration in Paris, France for binding arbitration, to the exclusion of
courts of law.
11. Power and Authority. Each party executing this Agreement
hereby covenants, represents and warrants that he or she has full power and
authority to execute this Agreement, that no other consents or approvals of any
other third parties are required or necessary for this Agreement to be so
binding (except as otherwise herein expressly stated) and that this Agreement
shall be fully enforceable in accordance with its terms.
12. Heirs, Administrators and Successors. Except as otherwise
provided herein, this Agreement shall inure to the benefit of and be binding
upon, the heirs, administrators and successors of each of the parties hereto.
3
<PAGE> 4
13. Nonassignability. The Company may assign the benefit of this
Agreement to any successor in interest that results from a merger,
reorganization or acquisition. Otherwise, no party to this Agreement may assign
any right hereunder or delegate any duty hereunder without the written consent
of the other party affected by such assignment or delegation.
14. No Oral Modification. This Agreement may only be changed or
modified and any provisions hereof may only be waived in or by a writing signed
by a party against whom enforcement of any waiver, change or modification is
sought.
15. Governing Law. This Agreement shall be deemed to be a contract
made under, and shall be construed in accordance with, the laws of the State of
Texas.
16. Severability. If any portion of this Agreement shall be held
illegal, unenforceable, void or voidable by any court, each of the remaining
terms hereof shall nevertheless remain in full force and effect as a separate
contract.
17. Right of Setoff. Whenever the Company owes Executive any
amounts of money by virtue of this Agreement or otherwise, the Company shall be
entitled to setoff against any such sums due to Executive the amount of any
claims that the Company has against Executive. This right to setoff shall also
apply to amounts due on the date of termination.
18. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
19. Entire Agreement. This Agreement constitutes the entire
agreement and understanding of the parties pertaining to the matters set forth
herein, and all prior agreements, understandings or representations are hereby
terminated and canceled in their entirely and are of no further force and
effect.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
COMPANY:
INDUSTRIAL SANTA ENGRACIA S.A. DE C.V.
By: /s/ [ILLEGIBLE]
-----------------------------------
Title: Secretary
--------------------------------
EXECUTIVE:
/s/ ING. JOSE MA. MARTINEZ BROHEZ
--------------------------------------
Ing. Jose Ma. Martinez Brohez
4
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE UNIMARK GROUP, INC.
1. Unimark Foods, Inc., a Texas corporation
2. Unimark International, Inc., a Texas corporation
3. Industrias Citricolas de Montemorelos, S.A. de C.V., a company organized
under the laws of Mexico
4. Grupo Industrial Santa Engracia, S.A. de C.V., a company organized under
the laws of Mexico
5. Les Produits Deli-Bon Inc., a Canadian corporation
6. Simply Fresh, Inc., a California corporation
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our reports dated February 26, 1996, except for Note 13 as to which
the date is May 9, 1996, with respect to the financial statements of The UniMark
Group, Inc. and April 29, 1996, except for Note 9 as to which the date is May 9,
1996, with respect to the financial statements of Simply Fresh Fruit, Inc., in
the Registration Statement (Form S-1) and related Prospectus of The UniMark
Group, Inc. for the registration of 2,000,000 shares of its common stock.
ERNST & YOUNG LLP
Dallas, Texas
May 9, 1996
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated January 22, 1996, with respect to the financial
statements of Les Produits Deli-Bon Inc. in the Registration Statement (Form
S-1) and related Prospectus of The UniMark Group, Inc. for the registration of
2,000,000 shares of its common stock.
LABERGE LAFLEUR
Sainte-Foy (Quebec)
Canada
May 9, 1996
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated April 23, 1996, except for Note 8 as to which the
date is May 9, 1996, with respect to the financial statements of Grupo
Industrial Santa Engracia, S.A. de C.V. in the Registration Statement (Form S-1)
and related Prospectus of The UniMark Group, Inc. for the registration of
2,000,000 shares of its common stock.
MANCERA, S.C.
ERNST & YOUNG
San Pedro Garza Garcia, N.L., Mexico
May 9, 1996
<PAGE> 1
EXHIBIT 23.4
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated June 24, 1995, with respect to the financial
statements of Grupo Industrial Santa Engracia, S.A. de C.V. in the Registration
Statement (Form S-1) and related Prospectus of The UniMark Group, Inc. for the
registration of 2,000,000 shares of its common stock.
GARZA, JASSO Y ASOCIADOS
Leon, Gto.
Mexico
May 9, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 6,286
<SECURITIES> 0
<RECEIVABLES> 4,298
<ALLOWANCES> 70
<INVENTORY> 6,182
<CURRENT-ASSETS> 18,247
<PP&E> 9,138
<DEPRECIATION> 1,449
<TOTAL-ASSETS> 26,498
<CURRENT-LIABILITIES> 10,766
<BONDS> 699
<COMMON> 59
0
0
<OTHER-SE> 14,919
<TOTAL-LIABILITY-AND-EQUITY> 26,498
<SALES> 36,866
<TOTAL-REVENUES> 36,866
<CGS> 24,192
<TOTAL-COSTS> 24,192
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 318
<INCOME-PRETAX> 4,625
<INCOME-TAX> 1,678
<INCOME-CONTINUING> 2,947
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,947
<EPS-PRIMARY> 0.53
<EPS-DILUTED> 0.51
</TABLE>
