<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
MARK (ONE)
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the quarterly period ended June 30, 1999
or
[ ] Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _________________ to __________________
Commission file number 0-26096
THE UNIMARK GROUP, INC.
(Exact name of registrant as specified in its charter)
TEXAS 75-2436543
(State of incorporation or organization) (I.R.S. Employer Identification No.)
UNIMARK HOUSE
124 MCMAKIN ROAD
BARTONVILLE, TEXAS 76226
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (817) 491-2992
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
As of August 14, 1999, the number of shares outstanding of each class
of common stock was:
Common Stock, $.01 par value: 13,938,326 shares
<PAGE> 2
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets,
December 31, 1998 and June 30, 1999................................... 3
Condensed Consolidated Statements of Operations
for the three months and six months ended June 30, 1998 and 1999...... 4
Condensed Consolidated Statements of Cash Flows
for the six months ended June 30, 1998 and 1999....................... 5
Notes to Condensed Consolidated Financial Statements - June 30, 1999..... 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.........................................10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings........................................................17
Item 2. Sale of Unregistered Securities..........................................18
Item 3. Defaults Upon Senior Securities..........................................18
Item 4. Submission of Matters to a Vote of Security Holders......................18
Item 5. Other Information.......................................................19
Item 6. Exhibits and Reports on Form 8-K.........................................19
SIGNATURES.........................................................................19
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE UNIMARK GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1998 1999
----------- -----------
(NOTE 1) (UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ............................................... $ 4,247 $ 5,835
Accounts receivable - trade, net of allowance of $657 in
1998 and $649 in 1999 ................................................. 9,270 11,833
Accounts receivable - other ............................................. 731 747
Inventories ............................................................. 22,320 22,401
Income and value added taxes receivable ................................. 1,560 2,090
Prepaid expenses ........................................................ 1,315 750
----------- -----------
Total current assets .............................................. 39,443 43,656
Property, plant and equipment, net of accumulated depreciation of
$8,000 in 1998 and $9,250 in 1999 ....................................... 41,347 42,603
Deferred income taxes ...................................................... 1,365 1,365
Goodwill, net .............................................................. 6,425 6,334
Identifiable intangible assets ............................................. 1,535 718
Due from related parties ................................................... 1,651 3,024
Other assets ............................................................... 1,747 1,805
----------- -----------
Total assets ...................................................... $ 93,513 $ 99,505
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings ................................................... $ 21,654 $ 26,710
Current portion of long-term debt ....................................... 763 885
Accounts payable - trade ................................................ 5,156 4,449
Accrued liabilities ..................................................... 3,484 5,251
Income taxes payable .................................................... 38 --
Deferred income taxes ................................................... 5,873 6,288
----------- -----------
Total current liabilities ......................................... 36,968 43,583
Long-term debt, less current portion ....................................... 7,833 7,626
Shareholders' equity:
Common stock, $0.01 par value:
Authorized shares - 20,000,000
Issued and outstanding shares - 11,938,326 in
1998 and 13,938,326 in 1999 ......................................... 119 139
Additional paid-in capital .............................................. 58,811 63,766
Accumulated deficit ..................................................... (10,218) (15,609)
----------- -----------
Total shareholders' equity ........................................ 48,712 48,296
----------- -----------
Total liabilities and shareholders' equity ........................ $ 93,513 $ 99,505
=========== ===========
</TABLE>
See accompanying notes.
3
<PAGE> 4
THE UNIMARK GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- --------------------------
1998 1999 1998 1999
----------- ----------- ----------- -----------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Net sales ...................................... $ 25,509 $ 25,392 $ 50,041 $ 46,422
Cost of products sold .......................... 16,904 22,322 33,527 36,582
----------- ----------- ----------- -----------
8,605 3,070 16,514 9,840
Selling, general and administrative expenses ... 5,999 7,021 11,890 13,026
----------- ----------- ----------- -----------
Income (loss) from operations .................. 2,606 (3,951) 4,624 (3,186)
Other income (expense):
Interest expense ........................... (1,234) (486) (2,379) (1,346)
Interest income ............................ 42 25 94 48
Foreign currency transaction loss .......... (256) (303) (8) (608)
Other ...................................... 11 45 60 66
----------- ----------- ----------- -----------
(1,437) (719) (2,233) (1,840)
----------- ----------- ----------- -----------
Income (loss) before income taxes .............. 1,169 (4,670) 2,391 (5,026)
Income tax expense (benefit) ................... 273 (509) 910 365
----------- ----------- ----------- -----------
Net income (loss) .............................. $ 896 $ (4,161) $ 1,481 $ (5,391)
=========== =========== =========== ===========
Basic and diluted income (loss) per share ...... $ 0.10 $ (0.30) $ 0.17 $ (0.42)
=========== =========== =========== ===========
</TABLE>
See accompanying notes.
4
<PAGE> 5
THE UNIMARK GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
--------------------------
1998 1999
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) ............................................... $ 1,481 $ (5,391)
Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities:
Depreciation and amortization .............................. 1,805 2,671
Deferred income taxes ...................................... 501 415
Changes in operating assets and liabilities:
Receivables ............................................. (4,012) (3,109)
Inventories ............................................. (1,385) (81)
Prepaid expenses ........................................ 687 565
Payables and accrued expenses ........................... 2,768 1,022
----------- -----------
Net cash provided by (used in) operating activities ............. 1,845 (3,908)
INVESTING ACTIVITIES
Purchases of property, plant and equipment ...................... (2,056) (3,019)
Increase in identifiable intangible assets ...................... (122) --
Increase in amounts due from related parties .................... (14) (1,373)
Increase in other assets ........................................ (208) (58)
----------- -----------
Net cash used in investing activities ........................... (2,400) (4,450)
FINANCING ACTIVITIES
Net proceeds from issuance of common stock ...................... 35 4,975
Net increase in short-term borrowings ........................... 3,327 5,056
Proceeds from long-term debt .................................... 240 186
Payments of long-term debt ...................................... (1,345) (271)
----------- -----------
Net cash provided by financing activities ....................... 2,257 9,946
----------- -----------
Net increase in cash and cash equivalents ....................... 1,702 1,588
Cash and cash equivalents at beginning of period ................ 1,237 4,247
----------- -----------
Cash and cash equivalents at end of period ...................... $ 2,939 $ 5,835
=========== ===========
</TABLE>
See accompanying notes.
5
<PAGE> 6
THE UNIMARK GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
Description of Business: The UniMark Group, Inc. ("UniMark" or the
"Company") conducts substantially all of its operations through its
wholly-owned operating subsidiaries: UniMark Foods, Inc. ("UniMark Foods"),
UniMark International, Inc. ("UniMark International"), Industrias Citricolas de
Montemorelos, S.A. de C.V. ("ICMOSA"), AgroMark, S.A. de C.V. ("AgroMark"),
UniMark Foods Europe, Ltd. ("UniMark Europe"), Les Produits Deli-Bon Inc.
("Deli-Bon"), Grupo Industrial Santa Engracia, S.A. de C.V. ("GISE") and Simply
Fresh Fruit, Inc. ("Simply Fresh").
The Company is in the business of growing, processing, marketing and
distributing niche citrus and tropical fruits products, including chilled and
canned packaged fruits, citrus juices and oils and other specialty food
ingredients.
Interim Financial Statements: The condensed consolidated financial
statements at June 30, 1999, and for the three and six month periods then ended
are unaudited and reflect all adjustments (consisting only of normal recurring
adjustments) which are, in the opinion of management, necessary for a fair
presentation of the financial position and operating results for the interim
period. These condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto,
together with Management's Discussion and Analysis of Financial Condition and
Results of Operations, contained in the Company's Annual Report on Form 10-K
for the year ended December 31, 1998 filed with the Securities and Exchange
Commission. The results of operations for the three and six months ended June
30, 1999 are not necessarily indicative of future financial results.
Year End Balance Sheet: The condensed consolidated balance sheet at
December 31, 1998 has been derived from the audited consolidated financial
statements at that date but does not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements.
Reclassifications: Certain prior year items have been reclassified to
conform to the current period presentation in the accompanying financial
statements.
NOTE 2 - LIQUIDITY AND CAPITAL RESOURCES
In recent years the Company has relied upon both bank borrowings and the
sale of equity securities to finance its working capital and certain of its
capital expenditure needs. The Company has existing loan agreements with its
primary lender to provide short-term dollar denominated debt, under revolving
credit facilities, up to $24.5 million. At December 31, 1998, the Company was
in violation of certain consolidated financial performance covenants and
restrictions under these agreements, which the lender waived as of that date.
In addition the primary lender extended the maturity of the agreements from May
17, 1999 to January 3, 2000.
As of June 30, 1999, the Company is not in compliance with certain
covenants of its loan agreements with its primary lender including covenants
that restrict transactions with affiliates and consolidated financial
performance ratios relative to working capital, total debt and debt service
and, accordingly, is in default of these agreements. The Company is working
closely with the primary lender to resolve these defaults; however, a waiver
has not been received at this time. Under the terms of the agreements, the
primary lender has the right, by written notice, to terminate the agreements
and demand payment of all outstanding principal and accrued interest. The
Company has not received such a notice.
6
<PAGE> 7
Presently the Company is in discussions with other financial institutions
regarding replacement of part, or all, of its existing debt with the primary
lender. Through August 14, 1999, the Company has received an approval from a
Mexican bank to provide a $3.5 million credit line and a proposal from an
asset-based lender to provide up to $30.0 million of short and long-term
financing. Funding of the Mexican bank facility is subject to completion of
loan documentation. The Company has not received a loan commitment from the
asset-based lender at this time. Such loan would be subject to lender credit
committee approval, due diligence, and the completion of loan documentation.
There can be no assurances that the Company will be able to consummate such
lending transaction.
The Company's cash requirements for the remainder of 1999 and beyond will
depend primarily upon the level of sales, expenditures for capital equipment
and improvements, investments in agricultural projects, the timing of inventory
purchases and scheduled reductions of debt. Management believes that it will
not generate sufficient cash flow from operations until the year 2000 to
service its debt obligations and capital expenditures. Current levels of
financing are insufficient to meet the Company's current cash requirements for
the remainder of 1999. The future success of the Company depends on its ability
to obtain replacement credit facilities for some or all of its primary lender
debt, obtain additional debt and raise additional equity through the sale of
unregistered securities. There can be no assurances that the Company's efforts
to raise such additional financing will be successful, and under certain
circumstance, the Company may be required to limit its operations, dispose of
certain assets and take other actions as considered necessary.
NOTE 3 - RELATED PARTY TRANSACTIONS
Effective January 1, 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 is obligated to pay IHMSA
an operating fee sufficient to cover the interest payments on IHMSA's existing
outstanding debt (approximately $4.6 million). The Vaquero family owns
collectively an approximate 8% interest in IHMSA. Certain members of the
Vaquero family are officers, shareholders and directors of the Company. During
the five-year term of the operating agreement, the Company has the right of
first refusal to buy the IHMSA facility at its then fair market value.
The Company subsequently elected to advance funds to IHMSA to retire
certain of its outstanding debt since, under the terms of the operating
agreement, the Company would benefit from the IHMSA debt reduction. At December
31, 1998 amounts due from IHMSA of $1,481,000, which are included in due from
related parties, represent cash advances applied to reduce IHMSA's outstanding
debt. This amount is expected to be applied to the purchase price when, and if,
the Company elects to exercise its purchase option.
Subsequent to December 31, 1998, the Company loaned funds to IHMSA on a
short-term basis at prevailing interest rates. As of June 30, 1999, unpaid
loans amounted to $1.2 million. Subsequent to June 30, 1999, IHMSA repaid all
of the loans to the Company.
NOTE 4 - CAPITAL STOCK
On March 29, 1999, the Company sold 2,000,000 newly issued shares of common
stock at a purchase price of $2.50 per share, for an aggregate purchase price
of $5,000,000 to M & M Nominee L.L.C. ("M & M"). In connection with the
transaction, M & M surrendered options to acquire an additional 2,000,000
shares of common stock at a purchase price of $4.5375 per share issued to them
in July 1998.
7
<PAGE> 8
NOTE 5 - EARNINGS (LOSS) PER SHARE
The following table sets forth the computation of basic and diluted
earnings (loss) per share:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------- -------------------------
1998 1999 1998 1999
----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
NUMERATOR
Net income (loss) ................................... $ 896 $ (4,161) $ 1,481 $ (5,391)
DENOMINATOR
Denominator for basic earnings per share -
weighted average shares outstanding ............... 8,623 13,938 8,611 12,977
Effect of dilutive securities:
Employee and director stock options ............... 76 -- 60 --
Warrants .......................................... 2 -- 1 --
----------- ----------- ----------- -----------
Dilutive potential common shares .................... 78 -- 61 --
----------- ----------- ----------- -----------
Denominator for diluted earnings per share -
weighted average shares outstanding adjusted for
assumed conversions ............................... 8,701 13,938 8,672 12,977
=========== =========== =========== ===========
Basic and diluted earnings (loss) per share ......... $ 0.10 $ (0.30) $ 0.17 $ (0.42)
=========== =========== =========== ===========
</TABLE>
At June 30, 1998 and June 30, 1999 the Company had options and warrants
outstanding of 314,000 and 497,000, respectively, that were not included in per
share calculations because their effect would have been anti-dilutive.
NOTE 6 - INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1998 1999
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Finished goods:
Cut fruits ............. $ 12,212 $ 10,071
Juice and oils ......... 1,663 4,650
----------- -----------
13,875 14,721
Pineapple orchards ......... 2,964 2,184
Raw materials and supplies . 4,376 4,506
Advances to suppliers ...... 1,105 990
----------- -----------
Total ........... $ 22,320 $ 22,401
=========== ===========
</TABLE>
8
<PAGE> 9
NOTE 7 - SEGMENT INFORMATION
The Company has two reportable segments: packaged fruit and juice and oil.
<TABLE>
<CAPTION>
PACKAGED JUICE
FRUIT & OIL TOTAL
----------- ----------- -----------
<S> <C> <C> <C>
THREE MONTHS ENDED JUNE 30, 1998
Revenues from external customers .. $ 18,603 $ 6,906 $ 25,509
Inter-segment revenues ............ 131 -- 131
Segment profit .................... 582 1,097 1,679
THREE MONTHS ENDED JUNE 30, 1999
Revenues from external customers .. $ 22,077 $ 3,315 $ 25,392
Inter-segment revenues ............ 156 -- 156
Segment loss ...................... (3,133) (945) (4,078)
SIX MONTHS ENDED JUNE 30, 1998
Revenues from external customers .. $ 35,827 $ 14,214 $ 50,041
Inter-segment revenues ............ 143 -- 143
Segment profit .................... 920 2,438 3,358
SIX MONTHS ENDED JUNE 30, 1999
Revenues from external customers .. $ 40,991 $ 5,431 $ 46,422
Inter-segment revenues ............ 301 -- 301
Segment loss ...................... (2,854) (1,115) (3,969)
</TABLE>
The following are reconciliations of reportable segment profit or loss to
the Company's consolidated totals.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- --------------------------
1998 1999 1998 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Total profit (loss) for reportable segments ... $ 1,679 $ (4,078) $ 3,358 $ (3,969)
Amortization of subsidiary acquisition
costs recognized in consolidation ........... (92) (92) (185) (185)
Unallocated corporate general and
administrative expenses .................... (418) (500) (782) (872)
----------- ----------- ----------- -----------
Income (loss) before income taxes ............. $ 1,169 $ (4,670) $ 2,391 $ (5,026)
=========== =========== =========== ===========
</TABLE>
9
<PAGE> 10
PART I. - ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
The discussion in this Quarterly Report on Form 10-Q contains
forward-looking statements that involve risks and uncertainties. Actual
consolidated results of The UniMark Group, Inc. ("UniMark" or the "Company")
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 "Management's Discussion and Analysis of Financial Condition and
Results of Operations". Statements contained in this report 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 1999
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: growth and integration of new businesses; uncertainty of
new product development and market acceptance of new products; dependence upon
availability and price of fresh fruit; competition; dependence upon significant
customers; seasonality and quarterly fluctuations; risk related to product
liability and recall; limited intellectual property protection; government
regulation; dependence on key management; economic, political and social
conditions in Mexico; exchange rate fluctuations and inflation; and labor
relations and costs. These factors are listed under "Risk Factors" in the
Company's prospectus dated June 14, 1996.
CONVERSION TO U.S. GAAP
The Company conducts substantially all of its operations through its wholly
owned operating subsidiaries. ICMOSA is a Mexican corporation with its
headquarters located in Montemorelos, Nuevo Leon, Mexico, whose principal
activities consist of operating five citrus processing plants and various
citrus groves throughout Mexico. GISE is a Mexican corporation with its
headquarters located in Victoria, Tamaulipas, Mexico, whose principal
activities consist of operating three citrus juice and oil processing plants.
ICMOSA and GISE maintain their accounting records in Mexican pesos and in
accordance with Mexican generally accepted accounting principles and are
subject to Mexican income tax laws. ICMOSA's and GISE's financial statements
have been converted to United States generally accepted accounting principles
("U.S. GAAP") and U.S. dollars. Deli-Bon maintains its accounting records in
Canadian dollars and in accordance with Canadian generally accepted accounting
principles and is subject to Canadian income tax laws. UniMark Europe maintains
its accounting records in British pounds sterling and in accordance with United
Kingdom generally accepted accounting principles and is subject to United
Kingdom income tax laws.
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.
10
<PAGE> 11
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>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
--------------------------- ---------------------------
1998 1999 1998 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales ..................................... 100.0% 100.0% 100.0% 100.0%
Cost of products sold ......................... 66.3 87.9 67.0 78.8
----------- ----------- ----------- -----------
Gross profit .................................. 33.7 12.1 33.0 21.2
Selling, general and administrative expenses .. 23.5 27.7 23.8 28.1
----------- ----------- ----------- -----------
Income (loss) from operations ................. 10.2 (15.6) 9.2 (6.9)
Other income (expense):
Interest expense .......................... (4.8) (1.9) (4.8) (2.9)
Interest income ........................... 0.2 0.1 0.2 0.1
Foreign currency transaction loss ......... (1.0) (1.2) -- (1.3)
Other ..................................... -- 0.2 0.2 0.1
----------- ----------- ----------- -----------
(5.6) (2.8) (4.4) (4.0)
----------- ----------- ----------- -----------
Income (loss) before income taxes ............. 4.6 (18.4) 4.8 (10.9)
Income tax expense (benefit) .................. 1.1 (2.0) 1.8 0.7
----------- ----------- ----------- -----------
Net income (loss) ............................. 3.5% (16.4)% 3.0% (11.6)%
=========== =========== =========== ===========
</TABLE>
Three Months Ended June 30, 1998 and 1999
Net sales consist of sales of packaged fruit and citrus juice and oils.
Packaged fruit sales increased 18.8% from $18.6 million in 1998 to $22.1
million in 1999. This increase was primarily due to a 226% increase in sales to
Japan from $1.0 million in 1998 to $3.4 million in 1999, and a 19% increase in
retail sales from $8.1 million in 1998 to $9.6 million in 1999. The increase in
retail sales was primarily due to greater distribution and positive market
acceptance of the Company's newly introduced canned and fresh cut product
lines.
Citrus juice and oil sales decreased 52.2% from $6.9 million in 1998 to
$3.3 million in 1999. This decrease in juice and oil sales was largely the
result of lower juice processing volume due to unfavorable raw material costs
and a general decline in the market price of frozen concentrate orange juice.
As a result of the foregoing, net sales for 1999 remained constant with
1998 due to the increase in packaged fruit sales being offset by the decline in
citrus juice and oil sales
Gross profit on packaged fruit sales decreased from 37.2% in 1998 to 16.5%
in 1999. This decrease was primarily the result of the increased business to
Japan which had to be processed towards the end of the orange season at
significantly higher costs than projected, higher fruit costs in the Company's
California operations due to the prior freeze damage sustained in the
California citrus groves and lower than expected pineapple production from the
Company's pineapple project.
Citrus juice and oil sales resulted in a gross profit of 24.4% in 1998 and
a loss of 16.9% in 1999. This decrease was caused by unfavorable raw material
costs as a result of a smaller orange crop in Mexico this growing season
compounded by a decline in market prices for frozen concentrate orange juice.
Overall, gross profit as a percentage of net sales decreased from 33.7% in
1998 to 12.1% in 1999.
11
<PAGE> 12
Selling, general and administrative expenses ("SG&A") increased from $ 6.0
million in 1998 (23.5% of net sales) to $7.0 million in 1999 (27.7% of net
sales). This increase in SG&A is primarily due to the following three factors.
First, juice and oil sales were substantially lower in 1999 than in 1998. These
sales do not require significant sales and marketing expenses as compared to
packaged fruit sales, which increased by $ 3.5 million in the 1999 period over
the 1998 period. Second, in connection with the Company's strategic decision to
build on its "Sunfresh(R)" brand name, deferred costs associated with the
"Flavor Fresh(TM)" brand name became of limited value. Accordingly, at June 30,
1999 the Company wrote off these deferred costs which amounted to $ .6 million.
Third, in management's efforts to improve its business processes and internal
controls, the Company has incurred increased professional fees.
Interest expense decreased from 4.8% of net sales in 1998 to 1.9% in 1999.
Actual interest expense decreased from $1.2 million in 1998 to $.5 million in
1999. This decrease was primarily the result of decreased levels of debt, the
netting of interest accrued from the related party loans discussed in Note 3
and the capitalization of interest costs associated with the Company's lemon
project of $.3 million. See "Liquidity and Capital Resources."
Foreign currency transaction losses of $.3 million in 1998 and $.3 million
in 1999 resulted from the conversion of the Company's foreign subsidiaries'
financial statements to U.S. GAAP.
Income tax benefit of $.5 million was recorded in 1999 on a loss before
income taxes of $4.7 million due primarily to permanent differences between
book income, or loss, reported in Mexico (as stated in U.S. dollars and U.S.
GAAP) and Mexican taxable income, or loss, calculated in Mexican pesos
according to Mexican income tax laws. In addition, the Company has provided a
valuation allowance for net operating losses generated in the U.S., thus no
income tax benefits from U.S. operating losses are recognized.
As a result of the foregoing, the Company reported net income of $.9
million in 1998 and a net loss of $4.2 million in 1999.
Six Months Ended June 30, 1998 and 1999
Net sales consist of sales of packaged fruit and citrus juice and oils.
Packaged fruit sales increased 14.4% from $35.8 million in 1998 to $41.0
million in 1999. This increase was primarily due to a 135% increase in sales to
Japan from $2.6 million in 1998 to $6.1 million in 1999, and a 16.5% increase
in retail sales from $16.2 million in 1998 to $18.8 million in 1999. The
increase in retail sales was primarily due to greater distribution and positive
market acceptance of the Company's newly introduced canned and fresh cut
product lines.
Citrus juice and oil sales decreased 61.8% from $14.2 million in 1998 to
$5.4 million in 1999. This decrease in juice and oil sales was largely the
result of lower juice processing volume due to unfavorable raw material costs
compounded by a general decline in the market price of frozen concentrate
orange juice.
As a result of the foregoing, net sales decreased 7.2% from $50.0 million
in 1998 to $46.4 million in 1999 resulting from increased packaged fruit sales
being more than offset by the decline in citrus juice and oil sales.
Gross profit on packaged fruit sales decreased from 35.8% in 1998 to 24.0%
in 1999. This decrease was primarily the result of the increased business to
Japan which had to be processed towards the end of the orange season at
significantly higher costs than projected, higher fruit costs for the Company's
California operations due to the prior freeze damage sustained in the
California citrus groves and lower than expected pineapple production from the
Company's pineapple project.
Citrus juice and oil gross profit decreased from 26.0% in 1998 to 0.0% in
1999. This decrease was caused by unfavorable raw material costs as a result of
a smaller orange crop in Mexico this growing season compounded by a decline in
market prices for frozen concentrate orange juice.
12
<PAGE> 13
Overall, gross profit as a percentage of net sales declined from 33.0% in
1998 to 21.2% in 1999.
Selling, general and administrative expenses ("SG&A") as a percentage of
net sales increased from $11.9 million (23.8% of net sales) in 1998 to $13.0
million (28.1% of net sales) in 1999. This increase in SG&A is primarily due to
the following three factors. First, juice and oil sales were substantially
lower in 1999 than in 1998. These sales do not require significant sales and
marketing expenses as compared to packaged fruit sales, which increased by $
3.5 million in the 1999 period over the 1998 period. Second, in connection with
the Company's strategic decision to build on its "Sunfresh(R)" brand name,
deferred costs associated with the "Flavor Fresh(TM)" brand name became of
limited value. Accordingly, at June 30, 1999 the Company wrote off these
deferred costs which amounted to $ .6 million. Third, in management's efforts
to improve its business processes and internal controls, the Company has
incurred increased professional fees.
Interest expense decreased from 4.8% of net sales in 1998 to 2.9% in 1999.
Actual interest expense decreased from $2.4 million in 1998 to $1.3 million in
1999. This decrease was primarily the result of decreased levels of debt, the
netting of interest accrued from related party loans discussed in Note 3 and
the capitalization of interest cost associated with the Company's lemon project
of $.3 million. See "Liquidity and Capital Resources."
A foreign currency transaction net loss of $.6 million in 1999 resulted
primarily from the conversion of the Company's foreign subsidiaries' financial
statements to U.S. GAAP.
Income tax expense of $.4 million was recorded in 1999 on a loss before
income taxes of $5.0 million due primarily to permanent differences between
book income, or loss, reported in Mexico (as stated in U.S. dollars and U.S.
generally accepted accounting principles) and Mexican taxable income, or loss,
calculated in Mexican pesos according to Mexican income tax laws. In addition,
the Company has provided a valuation allowance for net operating losses
generated in the U.S., thus no income tax benefits from U.S. operating losses
are recognized.
As a result of the foregoing, the Company reported net income of $1.5
million in 1998 and a net loss of $5.4 million in 1999.
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 Mexican
employees are 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 (loss) 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's consolidated results of operations are affected by changes in
the valuation of the Mexican peso to the extent that ICMOSA or GISE have 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
13
<PAGE> 14
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.
MARKET RISK FACTORS
A significant portion of the Company's operations consists of processing
and sales activities in foreign jurisdictions. The Company processes its
products in the United States, Mexico and Canada and sells the products in
those markets as well as European markets and Japan. As a result, the Company's
financial results could be significantly affected by factors such as changes in
foreign currency exchange rates or weak economic conditions in the foreign
markets in which the Company distributes its products. The Company's operating
results are exposed to changes in exchange rates between the U.S. dollar and
the Mexican peso, Canadian dollar and the British pound.
When the U.S. dollar strengthens against these foreign currencies, the
value of nonfunctional currency sales decreases. When the U.S. dollar weakens,
the functional currency amount of sales increases. Overall, the Company is a
net payer of currencies other than the U.S. dollar and, as such, benefits from
a stronger dollar.
The Company procures and processes substantially all of its products in
Mexico for export to the United States, Canada, Europe and Japan. The cost of
citrus procured in Mexico generally reflects the spot market price for citrus
in the United States and all of UniMark's export sales from Mexico 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 Mexican peso. Labor and certain other processing costs are
Mexican peso denominated and, consequently, these costs are impacted by
fluctuations in the value of the Mexican peso relative to the U.S. dollar.
The Company's juice and oil segment primarily produces and sells frozen
concentrate orange juice. The price the Company is able to sell this product
for is generally determined by reference to the commodity futures market price,
over which the Company has no control.
The Company's interest expense is most sensitive to changes in the general
level of U.S. interest rates and London interbank offered rates ("LIBOR"). In
this regard, changes in these interest rates affect the interest paid on the
Company's debt.
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 adversely affected.
14
<PAGE> 15
SEASONALITY
Demand for UniMark's 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 sale in
supermarkets in North America. Management believes UniMark's quarterly net
sales will continue to be impacted by this pattern of seasonality.
YEAR 2000 ISSUES
As a result of certain computer programs and certain embedded computer chip
technology utilizing two digits rather than four to define the applicable year,
any of the Company's computer programs or systems that have date sensitive
software or computer chip technology may recognize a date using "00" as the
year 1900 rather than the year 2000. This could result in a system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, generate invoices, or
engage in similar normal business activities. Failure by the Company and/or any
third parties that the Company materially relies on, such as power utility
providers, financial institutions, other critical suppliers and major
customers, to complete Year 2000 readiness activities in a timely manner could
have a material adverse effect on the Company's business and results of
operations.
The Company has engaged in a company-wide effort to achieve Year 2000
readiness for both information technology ("IT") and non-information technology
("non-IT") systems. The Company expects to achieve company-wide Year 2000
readiness by the end of 1999. The Company has formed a team consisting of
senior management, information technology staff and consultants to assess,
remediate, test and implement processes to meet Year 2000 readiness.
In late 1997, the Company completed its assessment of all IT systems which
indicated that most of the Company's significant accounting systems could be
affected, particularly the general ledgers, billing, inventory and payment
systems. The Company has now completed implementation of Year 2000 compliant
accounting systems in all of its operations. The Company does not believe that
non-IT systems are material to its operations; however, the Company has
completed its review and testing of such systems which has not revealed any
significant problems.
The Company has inquired of its significant suppliers, contractors and
other third-party support services and customers to assess their Year 2000
readiness efforts. Letters of compliance have been requested from such third
parties. To date, the Company is not aware of any external agent with a Year
2000 issue that would materially impact the Company's results of operations,
liquidity or capital resources. However, the Company has no means of ensuring
that external agents will be Year 2000 ready. Contingency plans to choose
alternative third-party agents, if necessary, will be formalized in the fourth
quarter of 1999.
The Company is primarily utilizing internal resources to assess, remediate,
test and implement Year 2000 modifications while utilizing outside consultants
when necessary. The total cost of the Year 2000 project is not expected to
exceed $100,000 for the entire effort. Because the Company's readiness program
is not yet fully implemented and is subject to certain risks and uncertainties,
including readiness efforts of material third parties, there can be no
assurance that the Company will not incur material costs beyond the anticipated
costs described above. The cost of the Year 2000 project and the dates by which
the Company believes it will be Year 2000 ready are based on management's
current best estimates, which were dependent on numerous assumptions of future
events, including the continued availability of certain resources, third-party
modification plans and other factors. There can be no assurance, however, that
these estimates will be achieved and actual results could differ materially
from those anticipated.
15
<PAGE> 16
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1999, cash and cash equivalents totaled $5.8 million, an
increase of $1.6 million from year-end 1998. During 1999, operating activities
utilized cash of $3.9 million primarily due to current operating losses.
The Company's financing activities provided net cash of $5.0 million from
the sale of common stock and $5.0 million from additional short-term borrowings
under its existing lines of credit. On March 29, 1999, the Company sold
2,000,000 newly issued shares of common stock at a purchase price of $2.50 per
share, for an aggregate purchase price of $5,000,000 to M & M. In connection
with the transaction, M & M surrendered options to acquire additional 2,000,000
shares of common stock at a purchase price of $4.5375 per share issued to them
in July 1998.
In April 1998, GISE and The Coca-Cola Export Corporation ("Coca-Cola"), an
affiliate of The Coca-Cola Company, entered into a new twenty year Supply
Contract (the "Lemon Project"), with a ten year renewal option, for the
production of Italian lemons. Pursuant to the terms of the new Supply Contract,
which supersedes all previous agreements, GISE will plant and grow 3,500
hectares (approximately 8,650 acres) of Italian lemons within the next three
years for sale to Coca-Cola at pre-determined prices. The Supply Contract
requires Coca-Cola to provide, free of charge, up to 875,000 lemon trees,
enough to plant approximately 2,800 hectares. In addition, the Supply Contract
requires Coca-Cola to purchase all the production from the project. The
planting program began in November 1996 and harvesting of the first crops is
projected to begin in late 2000 with full production scheduled for 2003.
The status of the Lemon Project as of June 30, 1999 is as follows:
<TABLE>
<CAPTION>
Hectares Acres
-------- -----
<S> <C> <C>
Land -
Acquired 3,025 7,475
Unpurchased 475 1,175
Preparation and Planting -
Prepared and planted 1,534 3,791
Prepared but not planted 1,217 3,007
Acquired land to be prepared and planted 274 667
Expenditures -
Total projected expenditures $18.5 million
Incurred since inception 7.6 million
Remaining in 1999 6.2 million
Projected for year 2000 and beyond 4.7 million
</TABLE>
During 1999, UniMark utilized cash of $4.5 million in investing activities.
Of this amount, $2.0 million was expended on property, plant and equipment
primarily related to the Company's Lemon Project.
The Company has existing loan agreements with Cooperatieve Centrale
Raiffeisen-Boerenleenbank B.A. ("Rabobank Nederland") to provide short-term
dollar denominated debt of up to $24.5 million. These agreements are as
follows: (i) a revolving credit agreement to provide up to $9.5 million
collateralized by finished goods inventories in the U.S. and accounts
receivable from U.S. customers and (ii) revolving credit agreements to provide
up to $15.0 million collateralized by finished goods inventories in Mexico and
accounts receivable from export sales by the Company's Mexican subsidiaries. At
June 30, 1999 the Company had outstanding loan balances under the revolving
credit agreements of $19.4 million.
16
<PAGE> 17
These agreements are cross-collateralized and guaranteed by the Company and
its subsidiaries and require the Company to maintain certain consolidated
financial performance levels relative to tangible net worth, working capital,
and total debt. In addition, the agreements contain restrictions on the
issuance of additional shares of stock and the payment of dividends, among
other things, without the prior written consent of the bank. At December 31,
1998, the Company was in violation of certain consolidated financial
performance covenants and restrictions under these agreements, which the lender
waived as of that date. In addition, the primary lender extended the maturity
of the agreements from May 17, 1999 to January 3, 2000.
As of June 30, 1999 the Company is not in compliance with certain covenants
of its loan agreements with its primary lender including covenants that
restrict transactions with affiliates and consolidated financial performance
ratios relative to working capital, total debt and debt service and,
accordingly is in default of these agreements. The Company is working closely
with its primary lender to resolve these defaults; however, a waiver has not
been received at this time. Under the terms of the agreements, the primary
lender has the right, by written notice, to terminate the agreements and demand
payment of all outstanding principal and accrued interest.
The Company has not received such a notice.
Presently, the Company is in discussions with other financial institutions
regarding replacement of part, or all, of its existing debt with the primary
lender. Through August 14, 1999, the Company has received an approval from a
Mexican bank to provide a $3.5 million credit line and a proposal from an
asset-based lender to provide up to $30.0 million of short and long-term
financing. Funding of the Mexican bank facility is subject to completion of
loan documentation. The Company has not received a loan commitment from the
asset-based lender at this time. Such a loan would be subject to lender credit
committee approval, due diligence, and the completion of loan documentation.
There can be no assurances that the Company will be able to consummate such
lending transaction.
The Company's cash requirements for the remainder of 1999 and beyond will
depend primarily upon the level of sales, expenditures for capital equipment
and improvements, investments in agricultural projects, the timing of inventory
purchases and scheduled reductions of debt. Management believes that it will
not generate sufficient cash flow from operations until the year 2000 to
service its debt obligations and capital expenditures. As a result, the Company
is developing a restructuring plan to improve operating results and cash flow.
The plan will include actions to increase short-term cash flow as well as a
program to reorganize operations and improve operating efficiencies for the
long-term. Current levels of financing are insufficient to meet the Company's
current cash requirements for the remainder of 1999. The future success of the
Company depends on its ability to obtain replacement credit facilities for some
or all of its primary lender debt, obtain additional debt and raise additional
equity through sale of unregistered securities. There can be no assurances that
the Company's efforts to raise such additional financing will be successful,
and under certain circumstance, the Company may be required to limit its
operations, dispose of certain assets and take other actions as considered
necessary.
PART II. - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is subject to legal actions arising in the ordinary course of
business. Management does not believe that the outcome of any such legal action
would have a material adverse effect on the Company's financial position or
results of operations.
17
<PAGE> 18
ITEM 2. SALE OF UNREGISTERED SECURITIES
On March 29, 1999, the Company sold 2,000,000 newly issued shares of Common
Stock, par value $.01 per share, for a purchase price of U.S. $2.50 per share,
or an aggregate purchase price of U.S. $5,000,000 in cash, to M & M Nominee
L.L.C. ("M & M"). The sale of securities was made in reliance upon Section 4(2)
of the Securities Act of 1933, as amended, and Regulation D, promulgated
thereunder, as an offering only to an accredited investor. In connection with
the transaction, M & M surrendered options to acquire 2,000,000 shares of
Common Stock granted to them in July 1998.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
See "Management's Discussion and Analysis - Liquidity and Capital
Resources" for a description of certain defaults.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Annual Meeting of Shareholders on July 6, 1999, the shareholders of
the Company approved or elected, along with the results of these votes, the
following:
1. Approved the amendment to the Company's Articles of Incorporation to
change the Company name to "Sunfresh, Inc."
FOR: 12,592,400
AGAINST: 4,070
2. Elected ten (10) Directors.
<TABLE>
<CAPTION>
DIRECTOR NOMINEES FOR AGAINST
<S> <C> <C>
Soren Bjorn 12,008,543 591,727
Rafael Vaquero Bazan 12,008,543 591,727
Eduardo Vaquero Bazan 12,008,543 591,727
Jose Martinez Brohez 12,008,543 591,727
Fernando Camacho Casas 12,008,543 591,727
Jerry W. Johnson 12,008,543 591,727
Jakes Jordaan 12,008,543 591,727
Federico Chavez Peon 12,008,543 591,727
Luis A. Chico Pardo 12,008,543 591,727
Jose I. De Abiega Pons 12,008,543 591,727
</TABLE>
3. Approved the Company's 1999 Stock Option Plan.
FOR: 6,496,611
AGAINST: 755,757
4. Elected Ernst & Young LLP as the Company's independent public
accountants for the fiscal year ending December 31, 1999.
FOR: 12,599,242
AGAINST: 428
18
<PAGE> 19
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
10.37 Fifth Amendment to Revolving Credit Agreement by and among
UniMark Foods, Inc., the borrower, and The UniMark Group,
Inc., UniMark International, Inc., Simply Fresh Fruit, Inc.,
the guarantors, and Cooperatieve Centrale
Raiffeisen-Boerenleenbank B.A., "Rabobank Nederland", New
York Branch dated May 17,1999
10.38 The UniMark Group, Inc. 1999 Stock Option Plan
10.39 Employment Agreement by and among The UniMark Group, Inc. and
Charles Horne dated as of March 31, 1999
10.40 Employment Agreement by and among The UniMark Group, Inc. and
Roman Shumny dated as of November 20, 1998
27 Financial Data Schedule
B. Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE UNIMARK GROUP, INC.
-----------------------------------
Registrant
Date: August 14, 1999 /s/ Soren Bjorn
--------------------- -----------------------------------
Soren Bjorn, President
(Principal Executive Officer)
Date: August 14, 1999 /s/ Charles A. Horne
--------------------- -----------------------------------
Charles A. Horne, Chief Financial
Officer
(Principal Accounting Officer)
19
<PAGE> 20
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
----------- --------------------------------------------------------------
<S> <C>
10.37 Fifth Amendment to Revolving Credit Agreement by and among
UniMark Foods, Inc., the borrower, and The UniMark Group,
Inc., UniMark International, Inc., Simply Fresh Fruit, Inc.,
the guarantors and Cooperatieve Centrale
Raiffeisen-Boerenleenbank B.A., "Rabobank Nederland", New
York Branch dated May 17, 1999
10.38 The Unimark Group, Inc. 1999 Stock Option Plan
10.39 Employment Agreement by and among The UniMark Group, Inc. and
Charles Horne dated as of March 31, 1999
10.40 Employment Agreement by and among The UniMark Group, Inc. and
Roman Shumny dated as of November 20, 1998
27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 10.37
FIFTH AMENDMENT TO
REVOLVING CREDIT AGREEMENT
This Fifth Amendment to Revolving Credit Agreement (the "FIFTH
AMENDMENT") made as of May 17, 1999, by and among UNIMARK FOODS, INC., a Texas
corporation which is the "BORROWER," and THE UNIMARK GROUP, INC., a Texas
corporation ("GROUP") of which the Borrower is a wholly-owned subsidiary, and
UNIMARK INTERNATIONAL, INC., a Texas corporation and a wholly-owned subsidiary
of Group, and SIMPLY FRESH FRUIT, INC., a California corporation and a
wholly-owned subsidiary of Borrower (each of which shall be a "GUARANTOR"
hereunder and which collectively shall be "GUARANTORS") (Borrower, Group, and
the Guarantors shall collectively be referred to herein as "UniMark"); and
INDUSTRIAS CITRICOLAS DE MONTEMORELOS, S.A. DE C.V. ("ICMOSA"), a Mexican
corporation and wholly-owned subsidiary of Group, GRUPO INDUSTRIAL SANTA
ENGRACIA, S.A. DE C.V. ("GISE"), a Mexican corporation and wholly-owned
subsidiary of Group, and AGROMARK, S.A. DE C.V. ("AGROMARK"), a Mexican
corporation and wholly-owned subsidiary of Group, and COOPERATIEVE CENTRALE
RAIFFEISEN-BOERENLEENBANK B.A., "RABOBANK NEDERLAND," NEW YORK BRANCH, a New
York State licensed branch of a Netherlands Cooperative Banking Organization
which is the "LENDER."
R E C I T A L S
A. The Borrower, the Guarantors and the Lender are parties to a
Revolving Credit Agreement dated as of February 12, 1997, as amended by that
First Amendment to Revolving Credit Agreement dated October 7, 1997 (the "FIRST
AMENDMENT"), the Second Amendment to Credit Agreement dated November 14, 1997
(the "SECOND AMENDMENT"), the Extension Agreement and Waiver of Defaults dated
as of April 30, 1998 (the "EXTENSION AGREEMENT"), the Third Amendment to
Revolving Credit Agreement made as of May 22, 1998 (the "THIRD AMENDMENT") the
Fourth Amendment to Revolving Credit Agreement dated as of December 31, 1998
(the "FOURTH AGREEMENT") (collectively, the "CREDIT AGREEMENT"), and such
revolving loan in the original principal amount of $9,500,000 now outstanding to
Borrower from Lender under such Credit Agreement matures on May 17, 1999, and is
evidenced by the Renewal Revolving Note dated as of January 1, 1999 (the
"NOTE").
B. The obligations of the Borrower to the Lender under the Credit
Agreement are secured by, among other things: (i) Security Agreements dated
February 12, 1997 by and between Lender and each of Borrower, Group and the
Guarantors (the "SECURITY AGREEMENTS"); (ii) Pledge Agreements dated February
12, 1997 by and between Lender and each of Borrower and Group (the "PLEDGE
AGREEMENTS"); and (iii) Unconditional Guaranty Agreements dated as of February
12, 1997 by and between Lender and each of the Guarantors (collectively, the
"U.S. GUARANTY").
C. GISE, as borrower, and the Lender executed a Revolving Loan Agreement
with Security Interest on April 10, 1997 (the "GISE LOAN AGREEMENT") by means of
which the Lender, subject to the terms and conditions set forth therein,
extended to GISE an uncommitted
FIFTH AMENDMENT TO REVOLVING CREDIT AGREEMENT, PAGE 1
<PAGE> 2
U.S. $8,500,000 (Eight Million Five Hundred Thousand Dollars, currency of the
United States of America) revolving loan facility, which Loan Agreement was
thereafter amended.
D. ICMOSA, as borrower, and the Lender executed a Revolving Loan
Agreement with Security Interest on April 10, 1997 (the "ICMOSA LOAN AGREEMENT")
by means of which the Lender, subject to the terms and conditions set forth
therein, extended to the ICMOSA an uncommitted U.S.$7,500,000 (Seven Million
Five Hundred Thousand Dollars, currency of the United States of America)
revolving loan facility, which Loan Agreement was thereafter amended.
E. ICMOSA, GISE and Agromark, as borrowers, and the Lender executed a
Loan Agreement on May 29, 1997 by means of which the Lender, subject to the
terms and conditions set forth therein, made available a $10,000,000 bridge loan
facility to ICMOSA, GISE and Agromark (the "BRIDGE LOAN AGREEMENT"), which loan
was thereafter paid in full (with the ICMOSA Loan Agreement, as amended, and the
GISE Loan Agreement, as amended, being collectively called herein the "MEXICAN
LOAN AGREEMENTS").
F. Group did execute a guaranty agreement dated April 10, 1997 by which
Group did guarantee the obligations arising under the Mexican Loan Agreements
("MEXICAN GUARANTY").
G. ICMOSA and Agromark executed the GISE Loan Agreement in order to
guarantee the punctual payment of the GISE obligations under the GISE Loan
Agreement by GISE (the "GISE GUARANTY").
H. GISE and Agromark executed the ICMOSA Loan Agreement in order to
guarantee the punctual payment of the ICMOSA Obligations under the ICMOSA Loan
Agreement (the "ICMOSA GUARANTY") (with the Mexican Guaranty, the U.S. Guaranty,
ICMOSA Guaranty and the GISE Guaranty being collectively known herein as the
"GUARANTY AGREEMENTS") (with Borrower, Group, the Guarantors, ICMOSA, GISE and
Agromark being known individually herein as a "LOAN Party" and collectively
herein as the "LOAN PARTIES").
I. Group and its Subsidiaries, including the Borrower, and the Lender
did execute and deliver Waiver of Defaults dated as of August 12, 1998 by the
terms of which the Lender did waive certain defaults existing under the Credit
Agreement and the Mexican Loan Agreements (with the Credit Agreement and the
Mexican Loan Agreements being known herein collectively as the "LOAN
AGREEMENTS").
J. Pursuant to that Fourth Amendment to Revolving Credit Agreement dated
as of December 31, 1998, Lender renewed and extended to May 17, 1999, the
revolving loan extended to Borrower under the Credit Agreement and evidenced by
the Note.
K. Group and its Subsidiaries, including the Borrower, and the Lender
did execute and deliver Waiver of Defaults dated as of April 14, 1999 by the
terms of which the Lender did waive certain defaults existing under the Loan
Agreements.
FIFTH AMENDMENT TO REVOLVING CREDIT AGREEMENT, PAGE 2
<PAGE> 3
L. Group and its Subsidiaries, including the Borrower, taken as a whole,
have now requested that the Lender renew and extend the revolving loan now
extended to the Borrower under the Credit Agreement and evidenced by the Note
dated as of January 1, 1999, which Note matures on May 17, 1999, and also make
certain changes in the terms and conditions of the Credit Agreement.
M. The Lender has agreed to renew and extend the revolving loan now
outstanding under the Credit Agreement and evidenced by the Note and to make
certain changes in the terms and conditions of the Credit Agreement, subject to
the terms and conditions hereinafter provided.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt, sufficiency and adequacy of which are
hereby acknowledged, the parties hereto agree as follows:
1. LOAN DOCUMENTS ARE IN FULL FORCE. Except as specifically provided
herein, all the terms of the Credit Agreement, the Note and the security
agreement, the pledge agreement and the other Loan Documents (as defined in the
Credit Agreement) and the other Loan Agreements and their related documents are
unaffected hereby and remain in full force and effect.
2. SAME TERMS. All terms used herein which are defined in the Credit
Agreement shall have the same meanings when used herein, unless the context
hereof otherwise requires or provides. In addition, all references in the Credit
Agreement and in the Loan Documents (as defined in the Credit Agreement) to the
"Agreement" shall mean the Credit Agreement as amended by the First Amendment,
the Second Amendment, the Extension Agreement, the Third Amendment, the Fourth
Amendment and this Fifth Amendment to Revolving Credit Agreement ("FIFTH
AMENDMENT") and as the same shall hereafter be amended from time to time.
3. AMENDMENTS TO CREDIT AGREEMENT. Effective as of the date above, the
following changes shall be made to the Credit Agreement:
a. The definition of "EXPIRATION DATE" in the Appendix of the Credit
Agreement as previously amended pursuant to the terms of the Fourth Amendment is
hereby deleted and the following paragraph containing the new definition of
"Expiration Date" in the Appendix of the Credit Agreement is substituted in
verbatim therefor:
"Expiration Date" means January 3, 2000, or any other date on
which the Commitment terminates pursuant to the terms hereof."
b. The definition of "Revolving Note" in the Appendix to the Credit
Agreement is deleted and the following paragraph containing a new definition of
"Revolving Note" which includes the Second Renewal Revolving Note of even date
herewith shall be substituted in verbatim therefor:
"Revolving Note" means the completed and executed Second Renewal
Revolving Note payable to the Lender in the form attached
FIFTH AMENDMENT TO REVOLVING CREDIT AGREEMENT, PAGE 3
<PAGE> 4
hereto as Exhibit 2.2D and any renewals, extensions, rearrangements
or restatements thereof and any substitutions or replacements
therefor."
c. Exhibit 2.2C, Form of Renewal Revolving Note, shall be wholly
replaced by Exhibit 2.2D, Form of Second Renewal Revolving Note, which is
attached hereto as Exhibit 2.2D and incorporated herein by reference.
d. In Section 2.4(a)(ii), the reference to the Margin for LIBOR
Tranches which is 2.00% pursuant to the terms of the Fourth Amendment, shall
hereafter be 2.50% per annum and, therefore, Section 2.4(a)(ii) shall now read
in verbatim as follows:
"(ii) for LIBOR Tranches, a rate equal to the sum of the LIBOR
Rate plus the appropriate percentage determined as follows:
<TABLE>
<CAPTION>
Period Margin
------ ------
<S> <C>
30, 60, 90 & 180 days 2.50%"
</TABLE>
e. Section 5.18 shall be amended to provide that each Obligated Party
will submit to and bear audits (and the related costs and expenses thereof) of
the Collateral on a semi-annual basis or any other occasion as Lender may
determine in its sole discretion. Therefore, Section 5.18 shall now read in
verbatim as follows:
"5.18 COLLATERAL AUDIT. Each Obligated Party will submit to and
bear audits (and the related costs and expenses thereof) of the
Collateral. Such audits shall occur on a semi-annual basis or on any
other occasion as Lender may determine in its sole discretion."
f. Section 6.2 shall be amended to disallow the payment at any time
by Group of any Restricted Payments, including any dividend distributions.
Therefore, Section 6.2 shall now read in verbatim as follows:
"6.2 NO RESTRICTED PAYMENTS. Group, a publicly-held entity, will
not directly or indirectly make, declare, order, or set aside any
funds for Restricted Payments."
g. To increase the aggregate Capital Expenditures of Group and its
Subsidiaries on a consolidated basis permitted under the Credit Agreement from
$2,730,000 to $3,600,000 but to restrict any such Capital Expenditures for,
related to or concerning the Lemon Project, Section 7.5 shall be amended to read
in verbatim as follows:
"7.5 CAPITAL EXPENDITURES. Group and its Subsidiaries on a
consolidated basis will not make any Capital Expenditures in excess
of $3,600,00 in the aggregate; however, there shall not be any such
FIFTH AMENDMENT TO REVOLVING CREDIT AGREEMENT, PAGE 4
<PAGE> 5
Capital Expenditures permitted for, related to or concerning the
Lemon Project unless, prior to the expenditure of such Capital
Expenditure, Group raises an additional amount of equity capital
which is equal to or greater than any such Capital Expenditure for,
related to, or concerning the Lemon Project."
h. Section 7.6, Interest Coverage, shall be wholly replaced in
verbatim by the following:
"7.6 INTEREST COVERAGE RATIO. The ratio of EBITDA to Interest
Expense of Group and its Subsidiaries on a consolidated basis shall
be no less than: (i) 1.5 to 1.0 as of March 31, 1999 for the
preceding twelve (12) month period; (ii) 1.40 to 1.0 on June 30, 1999
for the preceding twelve (12) month period; and (iii) 1.85 to 1.0 on
September 30, 1999 and on each December 31, March 31, June 30, and
September 30 thereafter (separately, the "LAST DAY OF THE QUARTER")
for the preceding twelve (12) month period ended on each such Last
Day of the Quarter."
4. REPRESENTATIONS AND WARRANTIES OF LOAN PARTIES. As an inducement to
Lender to enter into this Agreement, each Loan Party makes the following
representations and warranties to Lender (which survive the execution and
delivery of this Agreement):
a. Each Loan Party is in compliance in all material respects with all
covenants contained in each of the Loan Agreements and the documents related
thereto.
b. All representations and warranties of each Loan Party contained in
the Loan Agreements are true and correct in all material respects on and as of
this date.
c. No Event of Default exists under any of the Loan Agreements.
d. No adverse change in condition (financial or otherwise) of Group
or any of its Subsidiaries (as defined in the Credit Agreement) not previously
disclosed to the Lender in writing or any other event has occurred which creates
a possibility of adversely affecting: (i) the condition (financial or otherwise)
of Group or any of its Subsidiaries, or Group and its Subsidiaries taken as a
whole; (ii) the validity or enforceability of any of the Loan Agreements or any
documents related thereto; or (iii) the ability of Group, or any Subsidiary of
Group, to meet and carry out their respective obligations under the Loan
Agreements or any documents related thereto or to perform the transactions
contemplated thereby.
e. All information that any Loan Party or any Subsidiary of a Loan
Party has provided to Lender in connection herewith is true and accurate and no
Loan Party nor any Subsidiary of a Loan Party has failed to disclose any
information of a material nature regarding its financial condition.
FIFTH AMENDMENT TO REVOLVING CREDIT AGREEMENT, PAGE 5
<PAGE> 6
f. Each of the Loan Parties has the full power, authority and legal
right to execute, deliver, perform and observe the provisions of the Loan
Agreements, this Agreement and any document executed pursuant to this Agreement,
and to carry out the transactions contemplated hereby and thereby.
g. The execution, delivery and performance by each of the Loan
Parties of its respective obligations under the Loan Agreements and the
documents related thereto have been duly authorized by all necessary action, and
does not and will not require any registration with, consent or approval of, or
notice to, or any action by, any person. The Loan Agreements and the documents
related thereto including this Agreement constitute the legal, valid and binding
obligation of the Loan Parties and each of them enforceable against such party
in accordance with their respective terms.
h. The execution and delivery of this Agreement, and the compliance
with its terms as contemplated herein, will not result in a breach of any of the
terms or conditions of, or result in the imposition of any lien, charge or
encumbrance upon any of the collateral referred to in any Loan Agreement or any
document related thereto (the "COLLATERAL") or constitute a default (with due
notice or lapse of time or both) or result in an occurrence of any event of
default for which any holder or holders of indebtedness for borrowed money may
declare the same due and payable under any indenture, agreement, order, judgment
or instrument under which any Loan Party is a party or by which any Loan Party
or the Collateral may be bound or affected, and will not violate any provision
of applicable law.
i. There are no suits, actions or proceedings (whether or not
purportedly on behalf of Group or any Subsidiary of Group) pending, or to the
knowledge of any Loan Party threatened, against or affecting any Loan Party or
the Collateral at law or in equity, before or by any person which, if determined
adversely to any Loan Party, would have a material adverse effect on the
business or condition (financial or otherwise) of any Loan Party or the
Collateral. No Loan Party is in violation of or in default with respect to any
applicable laws or regulations which materially affect the operations or
conditions (financial or otherwise) of any Loan Party or the Collateral, nor is
it in violation of or in default with respect to any order, writ, injunction,
demand or decree of any court or any person or in violation or in default in any
material respect under any indenture, agreement or instrument, under which any
Loan Party is a party or may be bound, other than as may exist under the Note.
j. No property, tangible or intangible, subject to any security
interest, mortgage, deed of trust, pledge, lien, or encumbrance to Lender is
subject to any other security interest, mortgage, deed of trust or encumbrance.
k. The Borrower is a corporation duly organized, validity existing
and in good standing under the laws of the State of Texas and is authorized to
transact business in all necessary jurisdictions.
Each Loan Party, jointly and severally, agrees to indemnify and hold
Lender harmless against any losses, claim, damage, liability or expense
(including, without limitation, attorneys' fees)
FIFTH AMENDMENT TO REVOLVING CREDIT AGREEMENT, PAGE 6
<PAGE> 7
incurred as a result of any representation or warranty made by it herein proving
to be untrue in any respect.
5. RATIFICATION OF GUARANTY. Each of the Guarantors, ICMOSA, GISE and
Agromark hereby recognizes, ratifies, approves and confirms the validity of the
respective Guaranty Agreements and agrees that each of said Guaranty Agreements
continues to secure the indebtedness evidenced by the Loan Agreements and the
documents related thereto.
6. REPRESENTATIONS AND WARRANTIES OF GUARANTORS. As an inducement to
Lender to enter into this Agreement, each of the Guarantors, ICMOSA, GISE and
Agromark make the following representations and warranties to Lender (which
survive the execution and delivery of this Agreement):
a. No adverse change in condition (financial or otherwise) of any
Guarantor or ICMOSA, GISE or Agromark not previously disclosed to the Lender in
writing or any other event has occurred which creates the possibility of
adversely affecting: (i) the condition (financial or otherwise) of any
Guarantor, ICMOSA, GISE or Agromark; (ii) the validity or enforceability of any
Guaranty; or (iii) the ability of any Guarantor, ICMOSA, GISE or Agromark to
meet and carry out its respective obligations under any Guaranty Agreement.
b. Each of the Guarantors, ICMOSA, GISE and Agromark is in compliance
in all material respects with all covenants contained in the Guaranty
Agreements.
c. All representations and warranties of each of the Guarantors,
ICMOSA, GISE, and Agromark contained in the Guaranty Agreements are true and
correct in all material respects on and as of this date.
7. NO RELEASE OF ANY LOAN PARTY. Nothing herein contained shall operate
to release any Loan Party from liability to keep and perform all of the terms,
conditions, obligations and agreements contained in the Credit Agreement or any
of the other Loan Documents or any of the other Loan Agreements or the documents
related thereto.
8. NO RELEASE OF GUARANTORS. Nothing herein contained shall operate to
release any of the Guarantors, ICMOSA, GISE or Agromark from liability to keep
and perform all of the terms, conditions, obligations and agreements contained
in each respective Guaranty Agreement.
9. OBLIGATIONS UNAFFECTED. Except as otherwise specified herein, the
terms and provisions hereof shall in no manner impair, limit, restrict or
otherwise affect the obligations of the Loan Parties to Lender as evidenced by
the Loan Agreements. As a material inducement to Lender to execute and deliver
this Agreement, each of the Loan Parties acknowledges that there are no claims
or offsets against, or defenses or counterclaims to, the terms or provisions of
and the other obligations created or evidenced by the Credit Agreement or any
other Loan Agreement or any document related thereto.
FIFTH AMENDMENT TO REVOLVING CREDIT AGREEMENT, PAGE 7
<PAGE> 8
10. NO WAIVER BY THIS AGREEMENT. Each of the parties hereto acknowledges
that, except to the extent expressly set forth herein, the execution of this
Agreement by Lender is not intended nor shall it be construed as: (a) an actual
or implied waiver of any default under any Loan Agreement or any document
related thereto; or (b) an actual or implied waiver of any condition or
obligation imposed upon any of the parties hereto pursuant to the Loan
Agreements or any document related thereto; (c) an actual or implied waiver of
any condition or obligation imposed upon any of the Loan Parties; or (d)
affecting any right or rights which Lender may now have or may have in the
future under or in connection with the Loan Agreements or any document related
thereto.
11. CONDITIONS OF EFFECTIVENESS.
a. The Lender shall have received this Fifth Amendment executed by
Borrower, each Guarantor, ICMOSA, GISE and Agromark.
b. The Lender shall have received the Second Renewal Revolving Note
dated as of May 17, 1999 and executed by Borrower, such Second Renewal Revolving
Note to be in renewal and extension of the unpaid principal balance of the
Renewal Revolving Note dated as of January 1, 1999.
c. Corporate resolutions of each of Borrower, Guarantor, ICMOSA,
GISE and Agromark authorizing the execution, delivery and performance of this
Fifth Amendment and satisfactory to Lender in form and content.
d. Incumbency Certificate to the satisfaction of Lender from Group
containing specimen signatures of all officers of Group who are authorized to
execute or attest to this Fifth Amendment or any of the other Loan Documents on
behalf of Group executed by the President and by the Secretary of Group; such
certification may be conclusively relied upon by Lender until Lender receives
notice in writing from Group to the contrary and provides a substitute
certificate conforming to the requirements specified by Lender.
e. Incumbency Certificate to the satisfaction of Lender from Foods
containing specimen signatures of all officers of Foods who are authorized to
execute or attest to this Fifth Amendment or any of the other Loan Documents on
behalf of Foods executed by the President and by the Secretary of Foods; such
certification may be conclusively relied upon by Lender until Lender receives
notice in writing from Foods to the contrary and provides a substitute
certificate conforming to the requirements specified by Lender.
f. Incumbency Certificate to the satisfaction of Lender from
International containing specimen signatures of all officers of International
who are authorized to execute or attest to this Fifth Amendment or any of the
other Loan Documents on behalf of International executed by the President and by
the Secretary of International; such certification may be conclusively relied
upon by Lender until Lender receives notice in writing from International to the
contrary and provides a substitute certificate conforming to the requirements
specified by Lender.
FIFTH AMENDMENT TO REVOLVING CREDIT AGREEMENT, PAGE 8
<PAGE> 9
g. Incumbency Certificate to the satisfaction of Lender from Simply
Fresh containing specimen signatures of all officers of Simply Fresh who are
authorized to execute or attest to this Fifth Amendment or any of the other Loan
Documents on behalf of Simply Fresh executed by the President and by the
Secretary of Simply Fresh; such certification may be conclusively relied upon by
Lender until Lender receives notice in writing from Simply Fresh to the contrary
and provides a substitute certificate conforming to the requirements specified
by Lender.
h. Incumbency Certificate to the satisfaction of Lender from GISE
containing specimen signatures of all officers of GISE who are authorized to
execute or attest to this Fifth Amendment or any of the other Loan Documents on
behalf of GISE executed by the President and by the Secretary of GISE; such
certification may be conclusively relied upon by Lender until Lender receives
notice in writing from GISE to the contrary and provides a substitute
certificate conforming to the requirements specified by Lender.
i. Incumbency Certificate to the satisfaction of Lender from ICMOSA
containing specimen signatures of all officers of ICMOSA who are authorized to
execute or attest to this Fifth Amendment or any of the other Loan Documents on
behalf of ICMOSA executed by the President and by the Secretary of ICMOSA; such
certification may be conclusively relied upon by Lender until Lender receives
notice in writing from ICMOSA to the contrary and provides a substitute
certificate conforming to the requirements specified by Lender.
j. Incumbency Certificate to the satisfaction of Lender from
Agromark containing specimen signatures of all officers of Agromark who are
authorized to execute or attest to this Fifth Amendment or any of the other Loan
Documents on behalf of Agromark executed by the President and by the Secretary
of Agromark; such certification may be conclusively relied upon by Lender until
Lender receives notice in writing from Agromark to the contrary and provides a
substitute certificate conforming to the requirements specified by Lender.
k. All the conditions precedent set forth in Section 3.2, ADDITIONAL
CONDITIONS, of the Credit Agreement shall be satisfied.
l. Payment of all costs and expenses of Lender (including the
reasonable fees of Lender's counsel) in connection with the preparation of this
Fifth Amendment and any other documents in connection therewith.
m. The Lender shall have received such other documents, opinions,
certifications, consents, waivers, agreements and evidence as the Lender may
reasonably request.
12. EXPENSES, WAIVER FEE AND INDEMNITY. The parties hereto agree,
whether or not the transactions herein contemplated shall become effective, to
reimburse and hold Lender harmless against any liability for the payment of all
out-of-pocket expenses arising in connection with the preparation, delivery,
administration (including, without limitation, any modification of, or consent
or waiver under, the Credit Agreement or any other Loan Agreement), amendment,
interpretation or enforcement of this Agreement, including, without limitation,
the reasonable fees and expenses of legal counsel for Lender. Further, each of
the Loan Parties jointly and severally agree to
FIFTH AMENDMENT TO REVOLVING CREDIT AGREEMENT, PAGE 9
<PAGE> 10
indemnify Lender from and hold it harmless against any and all losses,
liabilities, claims, damages and expenses incurred by Lender arising out of its
entering into any of this Agreement, including without limitation, the fees and
disbursements of counsel incurred in connection with any litigation or other
proceeding arising out of or by reason of any of the aforesaid.
13. CONFIRMATION OF CONTINUED EFFECTIVENESS OF LOAN AGREEMENTS. Each
Loan Party hereby confirms and agrees that each of the Loan Agreements and each
of the documents related thereto secures and shall continue to secure, in the
same manner and to the same extent provided therein, the payment and performance
of the obligations, as extended by this Agreement.
14. SEVERABILITY OF PROVISIONS. In case any one or more of the
provisions contained in this Agreement should be invalid, illegal, or
unenforceable in any respect, the validity, legality, or enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby.
15. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of each of the Loan Parties and Lender and their respective
heirs, administrators, successors and assigns; provided, however, that none of
such entities may not transfer its rights under this Agreement to any other
person without the prior written consent of Lender.
16. CHOICE OF LAW. THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES.
17. AMENDMENT AND WAIVER. No provision of this Agreement (including,
without limitation, any of the documents that are attached hereto in the form of
exhibits) may be amended, modified, supplemented, changed, waived, discharged or
terminated unless each party hereto consents in writing.
18. FURTHER ASSURANCES. Each of the Loan Parties shall from time to time
execute and deliver all such other documents, instruments and assurances hereof
and take all such other actions as may be necessary or reasonably required by
Lender to carry into force and effect the purpose and intent of this Agreement.
19. AGREEMENT CONTROLLING. In the event of a conflict between the terms
and provisions of this Agreement and the terms and provisions of any of the Loan
Agreements, the terms and provisions of the Loan Agreement shall control.
20. ENTIRE AGREEMENT. This Agreement (including its recitals and
exhibits) constitutes the entire agreement between the parties with respect to
the subject matter hereof, and this Agreement (including its recitals and
exhibits) supersedes all previous negotiations, discussions and agreements
between the parties with respect to the waiver of defaults, and no parol
evidence of any prior or other agreement with respect thereto shall be permitted
to contradict or vary the terms hereof.
FIFTH AMENDMENT TO REVOLVING CREDIT AGREEMENT, PAGE 10
<PAGE> 11
21. COUNTERPART EXECUTION. This Agreement may be executed in any number
of counterparts with the same effect as if all parties hereto had signed the
same document. All such counterparts shall be construed together and shall
constitute one instrument. In making proof hereof it shall only be necessary to
produce one such counterpart.
22. HEADINGS. The headings of the sections, paragraphs and subdivisions
of this Agreement are for the convenience of reference only, and are not to be
considered a part hereof and shall not limit or otherwise affect any of the
terms hereof.
23. NO ORAL AGREEMENTS. THIS AGREEMENT REPRESENTS THE FINAL AGREEMENT
BETWEEN THE PARTIES WITH RESPECT TO THE TRANSACTIONS THEREIN DESCRIBED AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective duly authorized officers to be effective as of
the date first above written.
BORROWER AND OBLIGATED PARTY:
UNIMARK FOODS, INC., a Texas corporation
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
FIFTH AMENDMENT TO REVOLVING CREDIT AGREEMENT, PAGE 11
<PAGE> 12
LENDER:
COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK B.A., "RABOBANK
NEDERLAND," NEW YORK BRANCH, a New
York State licensed branch of a
Netherlands Cooperative Banking
Organization
By:
------------------------------------
David L. Streeter, Vice President
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
OTHER OBLIGATED PARTIES:
THE UNIMARK GROUP, INC.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
UNIMARK INTERNATIONAL, INC.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
SIMPLY FRESH FRUIT, INC.
By:
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
FIFTH AMENDMENT TO REVOLVING CREDIT AGREEMENT, PAGE 12
<PAGE> 13
GISE:
GRUPO INDUSTRIAL SANTA ENGRACIA, S.A. DE C.V.,
a Mexican corporation
By:
--------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
ICMOSA:
INDUSTRIAS CITRICOLAS DE MONTEMORELOS, S.A.
DE C.V., a Mexican corporation
By:
--------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
AGROMARK:
AGROMARK S.A. DE C.V., a Mexican corporation
By:
--------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
FIFTH AMENDMENT TO REVOLVING CREDIT AGREEMENT, PAGE 13
<PAGE> 14
EXHIBIT 2.2D
SECOND RENEWAL REVOLVING NOTE
NEW YORK CITY, NEW YORK
$9,500,000 DATED AS OF MAY 17, 1999
FOR VALUE RECEIVED, UNIMARK FOODS, INC., a Texas corporation having its
principal place of business at 124 McMakin Road, City of Bartonville, Denton
County, Texas, 76226 (referred to herein as the "Borrower"), promises to pay to
the order of COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A., "RABOBANK
NEDERLAND," NEW YORK BRANCH, a New York Branch of a Netherlands Cooperative
Banking Organization (referred to herein as the "Lender"), the principal sum of
Nine Million Five Hundred Thousand Dollars ($9,500,000) or, if less, all such
sums as may have been advanced by the Lender under this Note as Advances
pursuant to the terms of the Agreement (defined below) and be outstanding
hereunder, together with interest on the unpaid principal balance payable at the
rates specified in the Agreement. All sums hereunder are payable to the Lender
in lawful money of the United States of America in funds available for immediate
use at the offices of the Lender at New York City, New York (or such other
office as the Lender may specify from time to time by written notice to the
Borrower) at the time and in the manner specified in the Agreement.
Unless the context hereof otherwise requires or provides, the terms used
herein defined in that certain Revolving Credit Agreement, as amended by that
certain First Amendment to Revolving Credit Agreement dated October 7, 1997, the
Second Amendment to Revolving Credit Agreement dated November 14, 1997, the
Third Amendment to Revolving Credit Agreement dated as of May 22, 1998 (the
"Third Amendment"), the Fourth Amendment to Revolving Credit Agreement dated as
of December 31, 1998 (the "Fourth Amendment"), and the Fifth Amendment dated as
of May 17, 1999 (the "Fifth Amendment"), by and between the Borrower, the other
Obligated Parties GISE, ICMOSA and Agromark and the Lender, as the same has been
or may be amended or supplemented from time to time (the "Agreement") have the
same meanings.
This Note is the Second Renewal Revolving Note referred to in the Fifth
Amendment, and is entitled to the benefits thereof and the security as provided
for therein. Reference is made to the Agreement and the Loan Documents for a
statement of the rights and obligations of the Borrower and of the terms and
conditions under which Advances evidenced hereby are made and principal
outstanding hereunder (together with accrued interest thereon) are to be repaid,
a description of the rate or rates of interest which may apply to amounts
outstanding hereunder and of limitations thereon, a description of the nature
and extent of the security and the rights of the parties in respect to such
security, and a statement of the terms and conditions under which the maturity
of sums owed evidenced by this Note may be accelerated. This Note is secured by
Liens granted pursuant to the Loan Documents, and reference is made to the Loan
Documents for a description of the rights and duties of the parties with respect
thereto.
SECOND RENEWAL REVOLVING NOTE-PAGE 1
EXHIBIT 2.2D
<PAGE> 15
All Advances and payments made on account of the principal hereof may be
endorsed by the holder hereof on the schedule attached hereto (provided that any
failure of the Lender or such holder to make any such endorsement shall not
affect the obligations of the Borrower hereunder in respect of such Advance.
The Borrower and each Surety hereby severally: (a) waive grace, demand,
presentment for payment, notice of nonpayment, protest, notice of protest,
non-payment or dishonor, notice of intent to accelerate, notice of acceleration
and all other notices (except as explicitly provided in the Agreement), filing
of suit and diligence in collecting this Note or enforcing any other security
with respect to same; (b) agree to any substitution, surrender, subordination,
waiver, modification, change, exchange or release of any security or of the
liability of any parties primarily or secondarily liable hereon; (c) agree that
the Lender is not required first to institute suit or exhaust its remedies
hereon against the Borrower, any Surety or others liable or to become liable
hereon or to enforce its rights against them or any security with respect to
same; and (d) consent to any extension or postponement of time of payment of
this Note and to any other indulgence with respect hereto without notice thereof
to any of them. No failure or delay on the part of the Lender in exercising any
right, power or privilege hereunder shall operate as a waiver thereof.
If this Note is not paid at maturity, regardless of how such maturity
may be brought about, or is collected or attempted to be collected through the
initiation or prosecution of any suit or through any bankruptcy or other
judicial proceedings, or is placed in the hands of an attorney for collection,
the Borrower shall pay, in addition to all other amounts owing hereunder, all
actual expenses of collection, all court costs and reasonable attorney's fees
incurred by the holder hereof.
This Note and the rights and obligations of the parties hereunder shall
be governed by the laws of the United States of America and by the laws of the
State of NEW YORK, provided that to the extent the laws of the United States of
America may permit the Lender to contract for, charge, receive, take, or reserve
interest hereon at a higher rate governed by the laws of another state, the laws
of such other state shall with respect to such matters govern. This Note is
performable in NEW YORK CITY, NEW YORK.
All agreements between the Borrower and the Lender, whether now existing
or hereafter arising, are hereby limited so that in no event shall the amount
paid, or agreed to be paid to or charged or demanded by the Lender for the use,
forbearance, or detention of money or for the payment or performance of any
covenant or obligation contained herein or in any other document evidencing,
securing or pertaining to this Note, exceed the Legal Maximum. If any
circumstance otherwise would cause the amount paid, charged or demanded to
exceed the Legal Maximum, the amount paid or agreed to be paid to or charged or
demanded by the Lender shall be reduced to the Legal Maximum, and if the Lender
ever receives an amount which otherwise would exceed the Legal Maximum, such
amount which would be excessive interest shall be applied to the reduction of
the principal of this Note and not to the payment of interest, or to the extent
such excessive amount otherwise would exceed the unpaid balance of principal of
this Note such excess shall be applied first to other indebtedness of the
Borrower to the Lender, and the balance, if any, shall be refunded to the
Borrower. In determining whether the interest paid, agreed to be paid, charged
or demanded hereunder exceeds the Legal Maximum, all sums paid or agreed to be
paid to or charged or demanded by the Lender for the use, forbearance or
detention of the indebtedness of the Borrower to the Lender shall, to the extent
permitted by applicable law: (i) be amortized, prorated, allocated
SECOND RENEWAL REVOLVING NOTE-PAGE 2
EXHIBIT 2.2D
<PAGE> 16
and spread throughout the full term of such indebtedness until payment in full
so that the actual rate of interest on account of such indebtedness is uniform
throughout such term; (ii) be characterized as a fee, expense or other charge
other than interest; and (iii) exclude any voluntary prepayments and the effects
thereof. The terms and provisions of this paragraph shall control and supersede
every other provision of all agreements between the Lender and the Borrower in
conflict herewith.
This Note is in renewal and extension of the unpaid principal sum of
$7,845,000 left owing and unpaid by Borrower upon that Renewal Revolving Note
dated as of January 1, 1999, and executed by Borrower and payable to the order
of Lender, of which the maturity date is May 17, 1999, as established by the
terms of the Fourth Amendment.
UNIMARK FOODS, INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
---------------------------------
SECOND RENEWAL REVOLVING NOTE-PAGE 3
EXHIBIT 2.2D
<PAGE> 17
Attached to and forming a part of that certain Second Renewal Revolving Note in
the original principal sum of $9,500,000 dated as of May 17, 1999, from
COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A., "RABOBANK NEDERLAND," NEW
YORK BRANCH, a New York Branch of a Netherlands Cooperative Banking Organization
to THE UNIMARK FOODS, INC.
<TABLE>
<CAPTION>
ADVANCES AND PAYMENT OF PRINCIPAL AND INTEREST
AMOUNT OF AMOUNT OF UNPAID
AMOUNT OF PRINCIPAL INTEREST PRINCIPAL
DATE ADVANCE PAID PAID BALANCE
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
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</TABLE>
SECOND RENEWAL REVOLVING NOTE-PAGE 4
EXHIBIT 2.2D
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EXHIBIT 10.38
THE UNIMARK GROUP, INC.
1999 STOCK OPTION PLAN
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TABLE OF CONTENTS
<TABLE>
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PAGE
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ARTICLE I
DEFINITIONS..................................................................................................1
ARTICLE II
THE PLAN.....................................................................................................3
2.1 Name...............................................................................................3
2.2 Purpose............................................................................................3
2.3 Effective Date.....................................................................................3
2.4 Eligibility to Participate.........................................................................3
2.5 Shares Subject to the Plan.........................................................................4
2.6 Maximum Number of Plan Shares......................................................................4
2.7 Options and Stock Granted Under Plan...............................................................4
2.8 Conditions Precedent...............................................................................4
2.9 Reservation of Shares of Common Stock..............................................................5
2.10 Tax Withholding....................................................................................5
2.11 Exercise of Options................................................................................6
2.12 Acceleration in Certain Events.....................................................................6
2.13 Written Notice Required............................................................................7
2.14 Compliance with Securities Laws....................................................................7
2.15 Employment or Service of Optionee..................................................................7
2.16 Rights of Optionees Upon Termination of Employment or Service......................................8
2.17 Transferability of Options.........................................................................9
2.18 Information to Optionees..........................................................................10
ARTICLE III
ADMINISTRATION..............................................................................................10
3.1 Committee.........................................................................................10
3.2 Appointment of Committee..........................................................................10
3.3 Majority Rule; Unanimous Written Consent..........................................................10
3.4 Company Assistance................................................................................10
ARTICLE IV
INCENTIVE STOCK OPTIONS.....................................................................................11
4.1 Terms and Conditions..............................................................................11
4.2 Duration of Options...............................................................................11
4.3 Purchase Price....................................................................................11
4.4 Maximum Amount of Options First Exercisable in Any Calendar Year..................................11
4.5 Individual Option Agreements......................................................................11
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<TABLE>
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ARTICLE V
NONQUALIFIED STOCK OPTIONS..................................................................................12
5.1 Option Terms and Conditions.......................................................................12
5.2 Duration of Options...............................................................................12
5.3 Purchase Price....................................................................................12
5.4 Individual Option Agreements......................................................................12
5.5 Automatic Grants of Options to Nonemployee Directors..............................................12
ARTICLE VI
TERMINATION, AMENDMENT, AND ADJUSTMENT......................................................................12
6.1 Termination and Amendment.........................................................................12
6.2 Adjustments.......................................................................................13
ARTICLE VII
MISCELLANEOUS...............................................................................................13
7.1 Other Compensation Plans..........................................................................13
7.2 Plan Binding on Successors........................................................................13
7.3 Number and Gender.................................................................................13
7.4 Headings..........................................................................................13
7.5 Choice of Law.....................................................................................13
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THE UNIMARK GROUP, INC.
1999 STOCK OPTION PLAN
ARTICLE I
DEFINITIONS
As used herein with initial capital letters, the following terms have
the meanings hereinafter set forth unless the context clearly indicates to the
contrary:
1.1 "Advisor" means any person performing services for the Company or
any Subsidiary of the Company, with or without compensation, to whom the
Company chooses to grant Options under the Plan, provided that bona fide
services are rendered by such person and such services are not rendered in
connection with the offer or sale of securities in a capital-raising
transaction.
1.2 "Board" means the Board of Directors of the Company.
1.3 "Cause" means conviction of a crime involving moral turpitude or a
crime providing for a term of imprisonment in a federal or state penitentiary;
failure or refusal to follow reasonable instructions of the Board; failure or
refusal to comply with the reasonable policies, standards and regulations of
the Company, which from time to time may be established; failure or refusal to
faithfully and diligently perform the usual customary duties of his employment
or service; acting in an unprofessional, unethical, immoral or fraudulent
manner; acting in a manner which discredits or is detrimental to the
reputation, character and standing of the Company or a Subsidiary; or the
commission of any other act that causes or reasonably may be expected to cause
substantial injury to the Company.
1.4 "Code" means the Internal Revenue Code of 1986, as amended.
1.5 "Committee" means the Committee appointed in accordance with
Section 3.1.
1.6 "Common Stock" means the Common Stock, par value $0.01 per share,
of the Company or, in the event that the outstanding shares of such Common
Stock are hereafter changed into or exchanged for shares of a different stock
or security of the Company or some other corporation, such other stock or
security.
1.7 "Company" means The UniMark Group, Inc., a Texas corporation, or
one or more of its Subsidiaries.
1.8 "Director" means a member of the Board.
1.9 "Effective Date" means ________________, 1999.
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1.10 "Employee" means an employee (as defined in Section 3401(c) of
the Code and the Treasury regulations thereunder) of the Company or any
Subsidiary that adopts the Plan, including an Officer.
1.11 "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
1.12 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
1.13 "Fair Market Value" means such value as determined by the
Committee on the basis of such factors as it deems appropriate; provided that
if the Common Stock is traded on a national securities exchange or transactions
in the Common Stock are quoted on the Nasdaq National Market System, such value
as shall be determined by the Committee on the basis of the last reported sales
price for the Common Stock on the date for which such determination is
relevant, as reported on the national securities exchange or the Nasdaq
National Market System, as the case may be. If the Common Stock is not listed
and traded upon a recognized securities exchange or on the Nasdaq National
Market System, the Committee shall make a determination of Fair Market Value on
the basis of the mean between the closing bid and asked quotations for such
Common Stock on the date for which such determination is relevant (as reported
by a recognized stock quotation service) or, in the event that there shall be
no bid or asked quotations on the date for which such determination is
relevant, then on the basis of the mean between the closing bid and asked
quotations on the date nearest preceding the date for which such determination
is relevant for which such bid and asked quotations were available.
1.14 "Incentive Stock Option" means an Option granted pursuant to
Article IV.
1.15 "Nonemployee Director" means a member of the Board who is not an
Officer or Employee; provided, however, that, as used in Section 3.1, the term
"Non-Employee Director" shall have the meaning given to that term in Rule
16b-3.
1.16 "Nonqualified Stock Option" means an Option granted pursuant to
Article V.
1.17 "Officer" means an officer of the Company or any Subsidiary of
the Company.
1.18 "Option" means an Incentive Stock Option or a Nonqualified Stock
Option.
1.19 "Optionee" means an Employee, Nonemployee Director or Advisor to
whom an Option has been granted hereunder.
1.20 "Option Agreement" means an agreement between the Company and an
Optionee with respect to one or more Options.
1.21 "Permanent Disability" has the same meaning as that provided in
Section 22(e)(3) of the Code.
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1.22 "Plan" means The UniMark Group, Inc. 1999 Stock Option Plan, as
amended from time to time.
1.23 "Plan Shares" means shares of Common Stock issuable pursuant to
the Plan.
1.24 "Retirement" occurs when an Optionee terminates his relationship
with the Company or a Subsidiary on or after the date the Optionee (a) turns 65
years old or (b) turns 55 years old and has completed ten (10) years of service
with the Company or a Subsidiary as otherwise determined by the Board.
1.25 "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act
or any successor rule.
1.26 "Securities Act" means the Securities Act of 1933, as amended.
1.27 "Subsidiary" means a subsidiary corporation of the Company, as
defined in Section 424(f) of the Code.
1.28 "Tax Date" means the date on which the amount of tax to be
withheld required to be determined pursuant to the Code.
ARTICLE II
THE PLAN
2.1 Name. This Plan shall be known as the "The UniMark Group, Inc.
1999 Stock Option Plan."
2.2 Purpose. The purpose of the Plan is to promote the growth and
general prosperity of the Company by permitting the Company to grant to its
Employees, Nonemployee Directors and Advisors Options to purchase Common Stock
of the Company. The Plan is designed to help the Company and its Subsidiaries
attract and retain superior personnel for positions of substantial
responsibility and to provide Employees, Nonemployee Directors and Advisors
with an additional incentive to contribute to the success of the Company. The
Company intends that Incentive Stock Options granted pursuant to Article IV
shall qualify as "incentive stock options" within the meaning of Section 422 of
the Code.
2.3 Effective Date. The Plan shall become effective upon the Effective
Date subject to the approval of the Plan by the Company's shareholders.
2.4 Eligibility to Participate. Any Employee, Nonemployee Director or
Advisor shall be eligible to participate in the Plan. Subject to the provisions
of Section 5.5, the Committee may grant Options in accordance with such
determinations as the Committee from time to time in its sole
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discretion shall make, provided that Incentive Stock Options may be granted
only to persons who are Employees.
2.5 Shares Subject to the Plan. The shares of Common Stock to be
issued pursuant to the Plan shall be either authorized and unissued shares of
Common Stock or shares of Common Stock issued and thereafter acquired by the
Company.
2.6 Maximum Number of Plan Shares. Subject to adjustment pursuant to
the provisions of Section 6.2, and subject to any additional restrictions
elsewhere in the Plan, the maximum aggregate number of shares of Common Stock
which may be optioned, sold, granted, or otherwise issued under the Plan shall
initially be 500,000 which amount may, at the discretion of the Board, be
increased from time to time to a number such that the number of Plan Shares
available for issuance pursuant to Options to be granted pursuant to this Plan
equals 10% of the total number of shares of Common Stock of the Company and
shares of any other class of common stock of the Company outstanding from time
to time; provided however, subject to adjustment under Section 6.2 of the Plan,
the number of shares of Common Stock which may be optioned, sold, granted, or
otherwise issued under the Plan shall never be less than 500,000.
Notwithstanding the foregoing, subject to adjustment under Section 6.2 of the
Plan, no more than 500,000 Plan Shares will be available for the granting of
Incentive Stock Options under the Plan. Subject to adjustment pursuant to the
provisions of Section 6.2, the maximum aggregate number of shares of Common
Stock with respect to which Options may be granted during the term of the Plan
shall not exceed 1,500,000 shares. The maximum aggregate number of shares of
Common Stock with respect to which Options during the term may be granted to
any Optionee during the term of the Plan shall not exceed ten percent (10%) of
the shares eligible for issuance under the Plan.
2.7 Options and Stock Granted Under Plan. Plan Shares with respect to
which an Option shall have been exercised shall not again be available for
grant hereunder. If Options terminate for any reason without being wholly
exercised, new Options may be granted hereunder covering the number of Plan
Shares to which such Option termination relates.
2.8 Conditions Precedent. The Company shall not issue any certificate
for Plan Shares pursuant to the Plan prior to fulfillment of all of the
following conditions:
(a) The admission of the Plan Shares to listing on all stock
exchanges on which the Common Stock is then listed, unless the
Committee determines in its sole discretion that such listing is
neither necessary nor advisable;
(b) The completion of any registration or other qualification
of the offer or sale of the Plan Shares under any federal or state law
or under the rulings or regulations of the Securities and Exchange
Commission or any other governmental regulatory body that the
Committee shall in its sole discretion deem necessary or advisable;
and
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(c) The obtaining of any approval or other clearance from any
federal or state governmental agency that the Committee shall in its
sole discretion determine to be necessary or advisable.
2.9 Reservation of Shares of Common Stock. During the term of the
Plan, the Company shall at all times reserve and keep available such number of
shares of Common Stock as shall be necessary to satisfy the requirements of the
Plan as to the number of Plan Shares. In addition, the Company shall from time
to time, as is necessary to accomplish the purposes of the Plan, seek or obtain
from any regulatory agency having jurisdiction any requisite authority that is
necessary to issue Plan Shares hereunder. The inability of the Company to
obtain from any regulatory agency having jurisdiction the authority deemed by
the Company's counsel to be necessary to the lawful issuance of any Plan Shares
shall relieve the Company of any liability in respect of the non-issuance of
Plan Shares as to which the requisite authority shall not have been obtained.
2.10 Tax Withholding.
(a) Condition Precedent. The issuance of Plan Shares pursuant
to the exercise of any Option under the Plan is subject to the
condition that if at any time the Committee shall determine, in its
discretion, that the satisfaction of withholding tax or other
withholding liabilities under any federal, state or local law is
necessary or desirable as a condition of, or in connection with such
issuances, then the issuances shall not be effective unless the
withholding shall have been effected or obtained in a manner
acceptable to the Committee.
(b) Manner of Satisfying Withholding Obligation. When an
Optionee is required by the Committee to pay to the Company an amount
required to be withheld under applicable income tax laws in connection
with the exercise of an Option, such payment may be made (i) in cash,
(ii) by check, (iii) if permitted by the Committee, by delivery to the
Company of shares of Common Stock already owned by the Optionee having
a Fair Market Value on the Tax Date equal to the amount required to be
withheld, (iv) through the withholding by the Company of a portion of
the Plan Shares acquired upon the exercise of the Options having a
Fair Market Value on the Tax Date equal to the amount required to be
withheld or (v) in any other form of valid consideration, as permitted
by the Committee in its discretion.
(c) Notice of Disposition of Stock Acquired Pursuant to
Incentive Stock Options. The Company may require as a condition to the
issuance of Plan Shares covered by any Incentive Stock Option that the
party exercising such Option give a written representation to the
Company, which is satisfactory in form and substance to its counsel
and upon which the Company may reasonably rely, that he shall report
to the Company any disposition of such shares prior to the expiration
of the holding periods specified by Section 422(a)(1) of the Code. If
and to the extent that the realization of income in such a disposition
imposes upon the Company federal, state or local withholding tax
requirements, or any such withholding is required to secure for the
Company an otherwise available tax deduction, the Company shall have
the right to require that the recipient remit to the Company an amount
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<PAGE> 9
sufficient to satisfy those requirements; and the Company may require
as a condition to the issuance of Plan Shares covered by an Incentive
Stock Option that the party exercising such Option give a satisfactory
written representation promising to make such a remittance.
2.11 Exercise of Options.
(a) Method of Exercise. Each Option shall be exercisable in
accordance with the terms of the Option Agreement pursuant to which
the Option was granted. No Option may be exercised for a fraction of a
Plan Share.
(b) Payment of Purchase Price. The purchase price of any Plan
Shares purchased shall be paid at the time of exercise of the Option
either (i) in cash, (ii) by certified or cashier's check, (iii) if
permitted by the Committee, by shares of Common Stock, (iv) if
permitted by the Committee, by cash or certified or cashier's check
for the par value of the Plan Shares plus a promissory note for the
balance of the purchase price, which note shall provide for full
personal liability of the maker and shall contain such terms and
provisions as the Committee may determine, including without
limitation the right to repay the note partially or wholly with Common
Stock, (v) by delivery of a copy of irrevocable instructions from the
Optionee to a broker or dealer, reasonably acceptable to the Company,
to sell certain of the Plan Shares purchased upon exercise of the
Option or to pledge them as collateral for a loan and promptly deliver
to the Company the amount of sale or loan proceeds necessary to pay
such purchase price or (vi) in any other form of valid consideration,
as permitted by the Committee in its discretion. If any portion of the
purchase price or a note given at the time of exercise is paid in
shares of Common Stock, those shares shall be valued at the then Fair
Market Value.
2.12 Acceleration in Certain Events. The Committee may accelerate the
exercisability of any Option in whole or in part at any time. Notwithstanding
the provisions of any Option Agreement, the following provisions shall apply:
(a) Mergers and Reorganizations. If the Company or its
shareholders enter into an agreement to dispose of all or
substantially all of the assets of the Company by means of a sale,
merger, or other reorganization, liquidation or otherwise in a
transaction in which the Company is not the surviving Company, all
Options shall become immediately exercisable with respect to the full
number of shares subject to such Options during the period commencing
as of the date of the agreement to dispose of all or substantially all
of the assets or stock of the Company and ending when the disposition
of assets or stock contemplated by that agreement is consummated or
the Options are otherwise terminated in accordance with their
provisions or the provisions of this Plan, whichever occurs first;
provided that no Option will be immediately exercisable under this
Section on account of any agreement of merger or other reorganization
when the shareholders of the Company immediately before the
consummation of the transaction will own at least fifty percent (50%)
of the total combined voting power of all the classes of the stock
entitled to vote of the surviving entity
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<PAGE> 10
immediately after the consummation of the transaction. An Option shall
not become immediately exercisable, however, if the transaction
contemplated in the agreement is a merger or reorganization in which
the Company shall survive.
(b) Change in Control. In the event of a change in control or
threatened change in control of the Company after the completion of an
initial public offering of the Company's Common Stock, all Options
granted prior to the change in control or threatened change in control
shall become immediately exercisable. A "change in control" will be
deemed to have occurred for purposes hereof (i) upon the occurrence of
a change of stock ownership of the Company of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A
promulgated under the Exchange Act, and any successor Item of a
similar nature; or (ii) upon the acquisition of beneficial ownership,
directly or indirectly, by any person (as such term is used in
Sections 13(d) and 14(d)(2) of the Exchange Act) of securities of the
Company representing 33% or more of the combined voting power of the
Company's then outstanding securities; or (iii) upon a change during
any period of two (2) consecutive years of a majority of the members
of the Board for any reason, unless the election, or the nomination
for election by the Company's shareholders, of each director was
approved by a vote of a majority of the directors then still in office
who were directors at the beginning of the period; provided that a
change in control will not be deemed to have occurred for purposes
hereof with respect to any person meeting the requirements of clauses
(i) and (ii) of Rule 13d-1(b)(1) promulgated under the Exchange Act.
2.13 Written Notice Required. Any Option shall be deemed to be
exercised for purposes of the Plan when written notice of exercise has been
received by the Company at its principal office from the person entitled to
exercise the Option and payment for the Plan Shares with respect to which the
Option is exercised has been received by the Company in accordance with Section
2.11.
2.14 Compliance with Securities Laws. Plan Shares shall not be issued
with respect to any Option unless the issuance and delivery of the Plan Shares
(and the exercise of an Option, if applicable) shall comply with all relevant
provisions of state and federal law (including without limitation (i) the
Securities Act, the rules and regulations promulgated thereunder, and (ii) the
requirements of any stock exchange upon which the Plan Shares may then be
listed) and shall be further subject to the approval of counsel for the Company
with respect to such compliance. The Committee may also require an Optionee to
furnish evidence satisfactory to the Company, including without limitation a
written and signed representation letter and consent to be bound by any
transfer restrictions imposed by law, legend, condition, or otherwise, that the
Plan Shares are being acquired only for investment and without any present
intention to sell or distribute the shares in violation of any state or federal
law, rule, or regulation. Further, each Optionee shall consent to the
imposition of a legend on the certificate representing the Plan Shares issued
pursuant to the exercise of an Option restricting their transfer as required by
law or this Section.
2.15 Employment or Service of Optionee. Nothing in the Plan or in any
Option granted hereunder shall confer upon any Employee any right to continued
employment by the Company or
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any of its Subsidiaries or limit in any way the right of the Company or any
Subsidiary at any time to terminate or alter the terms of that employment.
Nothing in the Plan or in any Option granted hereunder shall confer upon any
Nonemployee Director or Advisor any right to continued service as a Nonemployee
Director or Advisor of the Company or any of its Subsidiaries or limit in any
way the right of the Company or any Subsidiary at any time to terminate or
alter the terms of that service.
2.16 Rights of Optionees Upon Termination of Employment or Service. In
the event an Optionee ceases to be an Employee, Nonemployee Director or Advisor
for any reason other than death, Retirement, Permanent Disability, for Cause or
upon providing certain required notice of termination prior to an annual
anniversary of an Employee's employment agreement with the Company, (i) the
Committee shall have the ability to accelerate the vesting of the Optionee's
Option, in its sole discretion, and (ii) such Optionee's Option shall be
exercisable (to the extent exercisable on the date of termination of employment
or rendition of services, or, if the vesting of such Option has been
accelerated, to the extent exercisable following such acceleration) at any time
within three (3) months after the date of termination of employment or
rendition of services, unless by its terms the Option expires earlier or
unless, with respect to a Nonqualified Stock Option, the Committee agrees, in
its sole discretion, to further extend the term of such Nonqualified Stock
Option; provided that the term of any such Nonqualified Stock Option shall not
be extended beyond its initial term. In the event an Optionee ceases to serve
as an Employee, Nonemployee Director or Advisor due to death, Permanent
Disability, Retirement, for Cause or upon providing certain required notice of
termination prior to an annual anniversary of an Employee's employment
agreement with the Company, an Optionee's Options may be exercised as follows:
(a) Death. Except as otherwise limited by the Committee at
the time of the grant of an Option, if an Optionee dies while serving
as an Employee, Nonemployee Director or Advisor or within three (3)
months after ceasing to be an Employee, Nonemployee Director or
Advisor, his Option shall become fully exercisable on the date of his
death and shall expire twelve (12) months thereafter, unless by its
terms it expires sooner or unless, with respect to a Nonqualified
Stock Option, the Committee agrees, in its sole discretion, to further
extend the term of such Nonqualified Stock Option; provided that the
term of any such Nonqualified Stock Option shall not be extended
beyond its initial term. During such period, the Option may be fully
exercised, to the extent that it remains unexercised on the date of
death, by the Optionee's personal representative or by the
distributees to whom the Optionee's rights under the Option shall pass
by will or by the laws of descent and distribution.
(b) Retirement. If an Optionee ceases to serve as an
Employee, Nonemployee Director or Advisor as a result of Retirement,
(i) the Committee shall have the ability to accelerate the vesting of
the Optionee's Option, in its sole discretion, and (ii) such
Optionee's Option shall be exercisable (to the extent exercisable on
the effective date of such Retirement or, if the vesting of such
Option has been accelerated, to the extent exercisable following such
acceleration) at any time within three (3) months after the effective
date of such Retirement, unless by its terms the Option expires
earlier or unless, with respect to a
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Nonqualified Stock Option, the Committee agrees, in its sole
discretion, to further extend the term of such Nonqualified Stock
Option; provided that the term of any such Nonqualified Stock Option
shall not be extended beyond its initial term.
(c) Disability. If an Optionee ceases to serve as an
Employee, Nonemployee Director or Advisor as a result of Permanent
Disability, the Optionee's Option shall become fully exercisable and
shall expire twelve (12) months thereafter, unless by its terms it
expires sooner or, unless, with respect to a Nonqualified Stock
Option, the Committee agrees, in its sole discretion, to extend the
term of such Nonqualified Stock Option; provided that the term of any
Option shall not be extended beyond its initial term.
(d) Cause. If an Optionee ceases to be employed by the
Company or a Subsidiary or ceases to serve as a Nonemployee Director
or Advisor because the Optionee's relationship with the Company or a
Subsidiary is terminated for Cause, the Optionee's Options shall
automatically expire on the date of such termination. If any facts
that would constitute Cause for termination or removal of an Optionee
are discovered after the Optionee's relationship with the Company has
ended, any Options then held by the Optionee may be immediately
terminated by the Committee. Notwithstanding the foregoing, if an
Optionee is an Employee employed pursuant to a written employment
agreement with the Company or a Subsidiary, the Optionee's
relationship with the Company or a Subsidiary shall be deemed
terminated for Cause for purposes of the Plan only if the Optionee is
considered under the circumstances to have been terminated "for cause"
for purposes of such written agreement or the Optionee voluntarily
ceases to be an Employee in breach of such Optionee's employment
agreement with the Company or a Subsidiary.
(e) Notice. If an Optionee's employment agreement with the
Company or a Subsidiary is terminated by either the Company, a
Subsidiary or the Optionee by providing certain required notices of
termination prior to an annual anniversary of such Optionee's
employment agreement, the Options that are vested as of the date of
termination shall remain exercisable for a period of twelve (12)
months (three (3) months if Incentive Stock Options) after the date of
termination and shall expire at the end of such twelve (12) month
period (three (3) month period if Incentive Stock Options).
2.17 Transferability of Options. Except as may be agreed upon by the
committee in accordance with the following paragraph, Options shall not be
transferable other than by will or the laws of descent and distribution or,
with respect to Nonqualified Stock Options, pursuant to the terms of a
qualified domestic relations order as defined by the Code or Title I of ERISA,
or the rules thereunder, and, with respect to Incentive Stock Options, may be
exercised during the lifetime of an Optionee only by that Optionee or by his
legally authorized representative. The designation by an Optionee of a
beneficiary shall not constitute a transfer of the Option.
The Committee may, in its discretion, provide in an Option Agreement
that Nonqualified Stock Options granted hereunder may be transferred by the
Optionee to members of his immediate
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family, trusts for the benefit of such immediate family members and
partnerships in which such immediate family members are the only partners,
provided that there cannot be any consideration for the transfer.
2.18 Information to Optionees. The Company shall furnish to each
Optionee a copy of the annual report, proxy statements and all other reports
sent to the Company's shareholders. Upon written request, the Company shall
furnish to each Optionee a copy of its most recent Form 10-K Annual Report and
each quarterly report to shareholders issued since the end of the Company's
most recent fiscal year.
ARTICLE III
ADMINISTRATION
3.1 Committee. Subject to Section 3.2, the Plan shall be administered
by a Committee of not fewer than two members of the Board; provided, however
that the entire Board may exercise the functions of the Committee at any time.
Each member of the Committee shall be a "Non-Employee Director" within the
meaning of Rule 16b-3 and an "outside director" within the meaning of Section
162(m) of the Code. Subject to the provisions of the Plan, the Committee shall
have the sole discretion and authority to determine from time to time the
Employees, Nonemployee Directors, and Advisors to whom Options shall be granted
and the number of Plan Shares subject to each Option, to interpret the Plan, to
prescribe, amend and rescind any rules and regulations necessary or appropriate
for the administration of the Plan, to determine and interpret the details and
provisions of each Option Agreement, to modify or amend any Option Agreement or
waive any conditions or restrictions applicable to any Options (or the exercise
thereof), and to make all other determinations necessary or advisable for the
administration of the Plan.
3.2 Appointment of Committee. The Committee shall be appointed by the
Board; provided that the Board may remove any Committee member, with or without
cause.
3.3 Majority Rule; Unanimous Written Consent. A majority of the
members of the Committee shall constitute a quorum, and any action taken by a
majority present at a meeting at which a quorum is present or any action taken
without a meeting evidenced by a writing executed by all members of the
Committee shall constitute the action of the Committee. Meetings of the
Committee may take place by telephone conference call.
3.4 Company Assistance. The Company shall supply full and timely
information to the Committee on all matters relating to Employees, Nonemployee
Directors, and Advisors, their employment, death, Retirement, Permanent
Disability, or other termination of employment or service, and such other
pertinent facts as the Committee may require. The Company shall furnish the
Committee with such clerical and other assistance as is necessary in the
performance of its duties.
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ARTICLE IV
INCENTIVE STOCK OPTIONS
4.1 Terms and Conditions. The terms and conditions of Options granted
under this Article may differ from one another as the Committee shall, in its
discretion, determine, as long as all Options granted under this Article
satisfy the requirements of this Article.
4.2 Duration of Options. Each Option granted pursuant to this Article
and all rights thereunder shall expire on the date determined by the Committee,
but in no event shall any Option granted under this Article expire earlier than
one (1) year or later than ten (10) years after the date on which the Option is
granted; provided, however, in the event of the grant of any Option to an
individual who, at the time the Option is granted, owns shares of stock
possessing more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company or any Subsidiary or affiliate thereof
within the meaning of Section 422 of the Code, the Option must not be
exercisable after the expiration of five (5) years from the date of its grant.
In addition, each Option shall be subject to early termination as provided
elsewhere in the Plan.
4.3 Purchase Price. The purchase price for Plan Shares acquired
pursuant to the exercise, in whole or in part, of any Option granted under this
Article shall not be less than the Fair Market Value of the Plan Shares at the
time of the grant of the Option; provided, however, in the event of the grant
of any Option to an individual who, at the time the Option is granted, owns
shares of stock possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or any Subsidiary or
affiliate thereof within the meaning of Section 422 of the Code, the purchase
price for the Plan Shares subject to that Option must be at least 110% of the
Fair Market Value of those Plan Shares at the time the Option is granted and
the Option must not be exercisable after the expiration of five (5) years from
the date of its grant.
4.4 Maximum Amount of Options First Exercisable in Any Calendar Year.
The aggregate Fair Market Value of Plan Shares (determined at the time the
Option is granted) with respect to which Options issued under this Article are
exercisable for the first time by any Employee during any calendar year under
all incentive stock option plans of the Company and its Subsidiaries and
affiliates shall not exceed $100,000. Any portion of an Option granted under
the Plan in excess of the foregoing limit shall be considered granted pursuant
to Article V.
4.5 Individual Option Agreements. Each Employee receiving Options
pursuant to this Article shall be required to enter into a written Option
Agreement with the Company. In such Option Agreement, the Employee shall agree
to be bound by the terms and conditions of the Plan, the Options made pursuant
hereto, and such other matters as the Committee deems appropriate.
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<PAGE> 15
ARTICLE V
NONQUALIFIED STOCK OPTIONS
5.1 Option Terms and Conditions. The terms and conditions of Options
granted under this Article may differ from one another as the Committee shall,
in its discretion, determine as long as all Options granted under this Article
satisfy the requirements of this Article.
5.2 Duration of Options. Each Option granted pursuant to this Article
and all rights thereunder shall expire on the date determined by the Committee,
but in no event shall any Option granted under this Article expire later than
ten (10) years after the date on which the Option is granted. In addition, each
Option shall be subject to early termination as provided elsewhere in the Plan.
5.3 Purchase Price. The Committee may elect to grant Options pursuant
to this Article at an exercise price less than the Fair Market Value of the
Plan Shares at the time of the grant of the Option.
5.4 Individual Option Agreements. Each Optionee receiving Options
pursuant to this Article shall be required to enter into a written Option
Agreement with the Company. In such Option Agreement, the Optionee shall agree
to be bound by the terms and conditions of the Plan, the Options made pursuant
hereto, and such other matters as the Committee deems appropriate.
5.5 Automatic Grants of Options to Nonemployee Directors. Each
Nonemployee Director shall automatically be granted a Nonqualified Stock Option
to purchase 20,000 shares of Common Stock upon initial election or appointment
to the Board. Each Nonemployee Director will receive a Nonqualified Stock
Option to purchase 5,000 shares of Common Stock on the date of each annual
meeting of shareholders of the Company subsequent to his initial election as a
director. The purchase price for Plan Shares acquired pursuant to the exercise,
in whole or in part, of any Option received by Nonemployee Directors shall be
the Fair Market Value of the Plan Shares on the date of grant of such Option.
Each Option shall become exercisable on the first anniversary of the date of
grant of such Option. Each Option shall expire on the day prior to the tenth
anniversary of the date of grant of such Option, unless otherwise specified
herein.
ARTICLE VI
TERMINATION, AMENDMENT, AND ADJUSTMENT
6.1 Termination and Amendment. The Plan shall terminate on April 30,
2009. No Option shall be granted under the Plan after that date of termination.
The Board may at any time terminate or amend the Plan or any provision of the
Plan. No termination or amendment of the Plan may, without the consent of the
Optionee to whom any Option has been granted, adversely affect the rights of
such Optionee under such Option nor may any amendment be made without the prior
approval of the Company's shareholders if such amendment would:
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<PAGE> 16
(a) increase the number of shares of Common Stock that may be
issued pursuant to the Plan as provided in Section 6.2;
(b) change the designation or class of Employees eligible for
participation in the Plan; or
(c) require approval of the Company's shareholders under any
applicable law, regulation or stock exchange rule.
provided that prior approval of the Company's shareholders with respect to the
foregoing shall be required only to the extent required by any statutory law,
regulation or stock exchange rule.
6.2 Adjustments. If the outstanding Common Stock is increased,
decreased, changed into, or exchanged for a different number or kind of shares
or securities through merger, consolidation, combination, exchange of shares,
other reorganization, recapitalization, reclassification, stock dividend, stock
split, or reverse stock split, an appropriate and proportionate adjustment
shall be made in the maximum number and kind of Plan Shares as to which Option
may be granted under the Plan. A corresponding adjustment changing the number
or kind of shares allocated to unexercised Options or portions thereof, which
shall have been granted prior to any such change, shall likewise be made. Any
such adjustment in outstanding Options shall be made without change in the
aggregate purchase price applicable to the unexercised portion of the Options,
but with a corresponding adjustment in the price for each share covered by the
Options. The foregoing adjustments and the manner of application of the
foregoing provisions shall be determined solely by the Committee, and any such
adjustment may provide for the elimination of fractional share interests.
ARTICLE VII
MISCELLANEOUS
7.1 Other Compensation Plans. The adoption of the Plan shall not
affect any other stock option or incentive or other compensation plans in
effect for the Company or any Subsidiary or affiliate of the Company, nor shall
the Plan preclude the Company or any Subsidiary or affiliate thereof from
establishing any other forms of incentive or other compensation plans.
7.2 Plan Binding on Successors. The Plan shall be binding upon the
successors and assigns of the Company and any Subsidiary or affiliate of the
Company that adopts the Plan.
7.3 Number and Gender. Whenever used herein, nouns in the singular
shall include the plural where appropriate, and the masculine pronoun shall
include the feminine gender.
7.4 Headings. Headings of articles and sections hereof are inserted
for convenience of reference and constitute no part of the Plan.
7.5 Choice of Law. The Plan shall be governed and construed in
accordance with the laws of the State of Texas.
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<PAGE> 1
EXHIBIT 10.39
EMPLOYMENT AGREEMENT
This Employment Agreement is entered into as of March 31, 1999, by and
among The UniMark Group, Inc., a Texas corporation (the "COMPANY"), and Charles
Horne, an individual (the "EXECUTIVE").
WHEREAS, the Company wishes to employ Executive and Executive wishes to
be an Executive 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 perform services for the Company in the
position of Chief Financial 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.
2. Term of Agreement. The term of this Agreement shall commence as of
March 31, 1999 (the "EFFECTIVE DATE"), and shall continue for a period of 48
consecutive months (the "TERM") unless Executive's services are terminated
pursuant to the provisions of Section 7 hereof. If prior to three (3) months
before the end of the Term the Company has not advised Executive by written
notice that Executive's employment shall not be terminated at the end of the
term, the term of this Agreement shall be extended for an additional 12
consecutive months under the same terms or under such terms and conditions
agreed upon by mutual consent of the parties hereto.
3. Location of Services. Executive's services under this Agreement
shall be performed primarily at the facilities of the Company located in
Bartonville, Texas, or at such other facilities as the Company and Executive may
agree upon from time to time. Executive shall not be required to relocate his
primary residence during the terms of this Agreement. Executive acknowledges and
agrees that Executive's job responsibilities may require reasonable travel, and
Executive agrees to travel as necessary to discharge those duties.
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.
<PAGE> 2
5. Compensation.
5.1 Base Compensation. Effective as of the Effective Date, the
Company shall pay to Executive base compensation at the annualized rate as set
forth below, less taxes and other usual deductions:
<TABLE>
<CAPTION>
FOR THE TWELVE MONTH PERIOD ENDING MARCH 31: BASE COMPENSATION AMOUNT:
<S> <C>
2000 $180,000.00
2001 $189,000.00
2002 $198,450.00
2003 $208,372.00
</TABLE>
Executive's base compensation shall be payable in installments
consistent with the Company's normal payroll practices for its executives.
5.2 Bonus Compensation. On March 31 of each year following the
execution of this Agreement (the "Anniversary Date"), the Company may pay to
Executive aggregate a performance bonus compensation (the "PERFORMANCE BONUS")
not to exceed 50 percent of Executive's then applicable base compensation
amount, as set forth in Section 5.1 hereof. The Performance Bonus shall consist
of (a) a subjective review component (the "SUBJECTIVE COMPONENt") and (b) a
financial performance component (the "FINANCIAL PERFORMANCE COMPONENT").
(a) The Subjective Component. On an annual basis, the Executive and
the Company shall mutually outline specific subjective criteria
to be accomplished by the Executive during the following 12
month period (the "ANNUAL OBJECTIVES"). The Annual Objectives
shall be presented to the Compensation Committee and/or the
Board of Directors for approval and such approval shall not be
unreasonably denied or delayed. Based upon Executive's
performance during the preceding year, including, but not
limited to, achievement of the Annual Objectives, the
Compensation Committee, in its sole discretion, shall determine
the amount of the of the Subjective Component and authorize the
Company to pay up to the following amounts:
<TABLE>
<CAPTION>
FOR THE TWELVE MONTH PERIOD ENDING MARCH 31: MAXIMUM SUBJECTIVE COMPONENT AMOUNT:
<S> <C>
2000 $63,000.00
2001 $66,150.00
2002 $69,457.50
2003 $72,930.00
</TABLE>
(b) The Financial Performance Component. Company shall pay to
Executive as the Financial Performance Component of the based
upon the Company's achievement of (i) Budget Revenue (as defined
below) and (ii) Budget Net Income (as defined below). As used
herein, (i) "BUDGET REVENUE" shall mean the total revenue amount
of the Company, as set forth in the annual budget approved by
the Company's Board
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<PAGE> 3
of directors for such fiscal year, (ii) "BUDGET NET INCOME"
shall mean the net income amount of the Company as set forth in
the annual budget approved by the Company's Board of directors
for such fiscal year, (iii) "ACTUAL REVENUE" shall mean the
Company's annual revenue for such fiscal year as set forth in
its Annual Report on Form 10-K, as filed with the Securities and
Exchange Commission and (iv) "ACTUAL NET INCOME" shall mean the
Company's annual net income for such fiscal year as set forth in
its Annual Report on Form 10-K, as filed with the Securities and
Exchange Commission.
(i) With respect to the revenue component of the Financial
Performance Component, on each Anniversary Date, the
Company shall pay to Executive an amount as follows for
each of the fiscal year as follows:
FOR THE TWELVE MONTH PERIOD FINANCIAL PERFORMANCE COMPONENT BASED UPON
ENDING MARCH 31, BUDGET REVENUE:
2000 (i) If the Company's Actual Revenue for
fiscal 1999 is 90% of Budget Revenue
for fiscal 1999, the Company shall pay
Executive $4,500; or
(ii) If the Company's Actual Revenue for
fiscal 1999 is 100% of Budget Revenue
for fiscal 1999, the Company shall pay
Executive $9,000; or
(iii) If the Company's for fiscal 1999 is
110% of Budget Revenue or higher for
fiscal 1999, the Company shall pay
Executive $13,500.
2001 (i) If the Company's Actual Revenue for
fiscal 2000 is 90% of Budget Revenue
for fiscal 2000, the Company shall pay
Executive $4,725; or
(ii) If the Company's Actual Revenue for
fiscal 1999 is 100% of Budget Revenue
for fiscal 1999, the Company shall pay
Executive $9,450; or
(iii) If the Company's Actual Revenue for
fiscal 1999 is 110% of Budget Revenue
or higher for fiscal 1999, the Company
shall pay Executive $14,175.
2002 (i) If the Company's Actual Revenue for
fiscal 2001 is 90% of Budget Revenue
for fiscal 2001, the Company shall pay
Executive $4,961; or
(ii) If the Company's Actual Revenue for
fiscal 1999 is 100% of Budget Revenue
for fiscal 1999, the Company shall pay
Executive $9,922; or
(iii) If the Company's Actual Revenue for
fiscal 1999 is 110% of Budget Revenue
or higher for fiscal 1999, the Company
shall pay Executive $14,889.
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<PAGE> 4
2003 (i) If the Company's Actual Revenue for
fiscal 2002 is 90% of Budget Revenue
for fiscal 2002, the Company shall pay
Executive $5,209; or
(ii) If the Company's Actual Revenue for
fiscal 2002 is 100% of Budget Revenue
for fiscal 2002, the Company shall pay
Executive $10,418; or
(iii) If the Company's Actual Revenue for
fiscal 2002 is 110% of Budget Revenue
or higher for fiscal 2002, the Company
shall pay Executive $15,628.
(ii) With respect to the net income component of the
Financial Performance Component, the Company shall pay
to Executive an amount of follows for each of the fiscal
year as follows:
FOR THE TWELVE MONTH PERIOD FINANCIAL PERFORMANCE COMPONENT BASED UPON
ENDING MARCH 31, BUDGET NET INCOME:
2000
(i) If the Company's Actual Net Income for
fiscal 1999 is 90% of Budget Net
Income for fiscal 1999, the Company
shall pay Executive $4,500; or
(ii) If the Company's Actual Net Income for
fiscal 1999 is 100% of Budget Net
Income for fiscal 1999, the Company
shall pay Executive $9,000; or
(iii) If the Company's Actual Net Income for
fiscal 1999 is 110% of Budget Net
Income or higher for fiscal 1999, the
Company shall pay Executive $13,500.
2001 (i) If the Company's Actual Net Income for
fiscal 2000 is 90% of Budget Net
Income for fiscal 2000, the Company
shall pay Executive $4,725; or
(ii) If the Company's Actual Net Income for
fiscal 1999 is 100% of Budget Net
Income for fiscal 1999, the Company
shall pay Executive $9,450; or
(iii) If the Company's Actual Net Income for
fiscal 1999 is 110% of Budget Net
Income or higher for fiscal 1999, the
Company shall pay Executive $14,175.
2002 (i) If the Company's Actual Net Income for
fiscal 2001 is 90% of Budget Net
Income for fiscal 2001, the Company
shall pay Executive $4,961; or
(ii) If the Company's Actual Net Income for
fiscal 1999 is 100% of Budget Net
Income for fiscal 1999, the Company
shall pay Executive $9,922; or
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<PAGE> 5
(iii) If the Company's Actual Net Income for
fiscal 1999 is 110% of Budget Net
Income or higher for fiscal 1999, the
Company shall pay Executive $14,884.
2003 (i) If the Company's Actual Net Income for
fiscal 2002 is 90% of Budget Net
Income for fiscal 2002, the Company
shall pay Executive $5,209.31; or
(ii) If the Company's Actual Net Income for
fiscal 2002 is 100% of Budget Net
Income for fiscal 2002, the Company
shall pay Executive $10,418; or
(iii) If the Company's Actual Net Income for
fiscal 2002 is 110% of Budget Net
Income or higher for fiscal 2002, the
Company shall pay Executive $15,628.
5.3 Options for Common Stock Options Granted. On the Effective Date and
in connection with his employment with the Company, the Company shall grant to
Executive options for fifty thousand (50,000) shares of Common Stock, par value
$.01 per share, of The UniMark Group, Inc. at market value at the date of grant
pursuant to The UniMark Group, Inc.'s 1994 Executive Stock Option Plan
(the"INITIAL GRANT"). The options included in the Initial Grant vest
immediately. In addition, on an annualized basis, the Company shall grant to
Executive options for ten thousand (10,000) shares of Common Stock, pursuant to
The UniMark Group, Inc.'s 1994 Executive Stock Option Plan.
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 its executive Executives, including a car allowance of $650 per month.
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 Executives
by the Company. Executive shall be entitled to paid vacation in accordance with
the Company's standard employment policies and practices for executive
Executives, 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 Executives. Executive shall
receive such additional fringe benefits, if any, as the Board shall determine in
its sole discretion from time to time. Executive shall be entitled to, at the
sole cost of the Company, no less than Eighty Thousand Dollars ($80,000) in life
insurance, and shall be named as an additional insured under the Company's
Director and Officer liability insurance policy.
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
Executives.
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<PAGE> 6
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" shall mean (a) gross or habitual failure to
perform pursuant to the terms of this Agreement and such performance failure is
not corrected within thirty (30) days after written notice by the Company or the
Board to Executive thereof; or (b) misconduct, including, but not limited, to:
(i) conviction of a crime or entry of a plea of nolo contendere with regard to a
crime involving moral turpitude or dishonesty, (ii) any breach of the
Non-Disclosure Agreement, (iii) Executive's repeated insubordination or refusal
to comply with any lawful and reasonable request of the Board relating to the
scope or performance of Executive's duties, provided Executive receives written
notice of asserted insubordination and reasonable opportunity to cure such
asserted insubordination, or (iv) conduct that in the good faith and reasonable
determination of the Board demonstrates Executive's gross unfitness to serve,
provided Executive receives written notice of asserted conduct and reasonable
opportunity to cure such asserted conduct.
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 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.
7.4 Termination of Executive. Executive shall be entitled to
terminate Executive's employment with the Company during the term, within 60
days after the occurrence of a Change in Control (as defined in Section 7.5),
for any reason or without any reason whatsoever, with the right to severance
compensation as provided in Section 7.5 of this Agreement.
7.5 Severance Payment after Change in Control.
(a) If the Executive terminates Executive's employment pursuant to
Section 7.4 hereof, Executive shall be entitled to a lump sum severance payment
as set forth in Section 8.2.
(b) For purposes of this Agreement, a "Change in Control" shall be
deemed to have taken place if, at any time during the term, any of the following
events occurs:
(i) The Company is merged, consolidated or reorganized into or
with another corporation or other legal person, or securities of the Company are
exchanged for securities of another corporation or other legal person, and
immediately after such merger, consolidation,
6
<PAGE> 7
reorganization or exchange less than a majority of the combined voting power of
the then-outstanding securities of such corporation or person immediately after
such transactions are held, directly or indirectly, in the aggregate by the
holders of securities entitled to vote generally in the election of directors of
the Company immediately prior to such transaction;
(ii) The Company, in any transaction or series of related
transactions, sells all or substantially all of its assets to any other
corporation or other legal person, and less than a majority of the combined
voting power of the then-outstanding securities of such corporation or person
immediately after such sale or sales are held, directly or indirectly, in the
aggregate by the holders of securities entitled to vote generally in the
election of directors of the Company immediately prior to such sale; or
(iii) The Company and its affiliates shall sell or dispose of
(in a single transaction or series of related transactions) business operations
that generated two-thirds of the consolidated revenues (determined on the basis
of the Company's four most recently completed fiscal quarters for which reports
have been filed under the Securities Exchange Act of 1934) or the Company and
its subsidiaries immediately prior thereto.
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 except for the Financial Performance Component
set forth in Section 5.2 with respect to any fiscal year completed before the
date that the Company sends written notice of termination to Employee.
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 in one payment equal to Executive's
then applicable base compensation as determined pursuant to Section 5.1 for
twelve (12) months within 15 days after such termination. In addition, subject
to the Company's sole discretion, the Company shall pay for reasonable executive
level outplacement costs. The Company shall make no further bonus payments
except for the Financial Performance Component set forth in Section 5.2 with
respect to any fiscal year completed before the date that the Company sends
written notice of termination to Employee..
8.3 Termination By Executive's Death or Disability. If employment
shall terminate by reason of Executive's death or disability, the Company shall
compensate Executive or Executive's estate pursuant to the Company's death and
disability insurance plan in place at the time of Executive's termination.
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 fruit processing,
distribution or marketing business that competes with the Company, excepting
ownership by Executive of no more than five percent (5%) 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
7
<PAGE> 8
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 Executives,
disrupting its relationship with customers, agents, representatives or vendors,
or otherwise.
10. Arbitration. Any and all disputes or controversies, whether of law
or fact of any nature whatsoever, arising from or respecting this Agreement
shall be decided by arbitration by the Judicial Arbitration Mediation Services,
Inc. ("JAMS") in accordance with the rules and regulations of JAMS, or by any
other body mutually agreed upon by the parties. Pre-arbitration discovery shall
be permitted at the request of any party under appropriate protection for
proprietary and confidential business information.
Before filing a demand for arbitration, a party must send the other
parties written notice identifying the matter in dispute and invoking the
procedures in this paragraph. Such written notice shall be sent promptly after
the party knew or reasonably should have known of an alleged violation of this
Agreement. Within fifteen (15) days after such written notice is given, one or
more principals of each party shall meet at a mutually agreeable location in
Dallas, Texas, or any other location mutually agreeable to the parties, for the
purpose of determining whether they can resolve the dispute themselves by
written agreement. If the parties fail to resolve the dispute by written
agreement within the fifteen-day (15-day) period, the complaining party may then
initiate the arbitration process by filing a demand with JAMS or such other body
as the parties may agree upon. Nothing in this paragraph shall prevent a party
from seeking temporary equitable relief from JAMS or such other body as the
parties may mutually agree upon during the fifteen-day (15-day) period if
necessary to prevent irreparable harm.
The arbitrators shall be selected as follows: the Company and
Executive shall each select one (1) independent, qualified arbitrator and the
two (2) arbitrators so selected shall select the third arbitrator. Any party may
disqualify any individual arbitrator who is a present or past Executive, owner,
officer, director, relative or consultant to any party hereto or a competing
organization.
Arbitration shall take place in Dallas, Texas, or any other
location mutually agreeable to the parties. At the request of any party,
arbitration proceedings will be conducted in the utmost secrecy and, in such
case, all documents, testimony and records shall be received, heard and
maintained by the arbitrators in secrecy under seal, available for inspection
only by the Company or Executive, their respective attorneys, and their
respective experts or consultants who shall agree, in advance and in writing, to
receive all such information confidentially and to maintain such information in
secrecy, and make no use of such information except for the purposes of the
arbitration, until such information shall become generally known.
The arbitrators, who shall act by majority vote, shall be able to
decree any and all relief of an equitable nature, including but not limited to
such relief as a temporary restraining order, a temporary injunction, or a
permanent injunction, and shall also be able to award damages, with or without
an accounting and costs. The decree or judgment of an award rendered by the
arbitrators may be entered in any court having jurisdiction over the parties.
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<PAGE> 9
Reasonable notice of the time and place of arbitration shall be
given to persons other than the parties, if such notice is required by law, in
which case such persons or their authorized representatives shall have the right
to attend or participate in the arbitration hearing in such manner as the law
shall require.
If any action is necessary to enforce or interpret the terms of
this Agreement, the prevailing party shall be entitled to reasonable attorneys'
fees, costs, and necessary disbursements in addition to any other relief to
which that party may be entitled.
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.
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,
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<PAGE> 10
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:
THE UNIMARK GROUP, INC.
A Texas Corporation
By: /s/ Soren Bjorn
----------------------------------
Soren Bjorn
President and Chief Executive Officer
Executive:
/s/ Charles Horne
---------------------------------------
Charles Horne
10
<PAGE> 1
EXHIBIT 10.40
EMPLOYMENT AGREEMENT
This Employment Agreement is entered into as of November 20, 1998, by
and among The UniMark Group, Inc., a Texas corporation, UniMark Foods, Inc., a
Texas corporation and wholly owned subsidiary of The UniMark Group, Inc.
(collectively, the "Company"), and Roman Shumny, an individual (the "Employee").
WHEREAS, the Company wishes to employ Employee and Employee wishes to
be an employee 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. Employee shall perform services for the Company in the
position of Senior Vice President of Marketing of UniMark Foods, Inc., and
Employee 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
Employee's position. From time to time, the Company may change Employee's title
as it may determine appropriate in light of the Company's current structure and
staffing provided that the title shall properly reflect Employee's status as an
executive. During the term of his employment with the Company, Employee 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.
2. Term of Agreement. The term of this Agreement shall commence as of
November 30, 1998 (the "Effective Date"), and shall continue for a period of 24
months (the "Term") unless Employee's services are terminated pursuant to the
provisions of Section 7 hereof. At the end of the Term, if Employee 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. Employee's services under this Agreement shall
be performed primarily at the facilities of the Company located in Bartonville,
Texas, or at such other facilities as the Company and Employee may agree upon
from time to time. Employee acknowledges and agrees that Employee's job
responsibilities may require extensive travel, and Employee agrees to travel as
necessary to discharge those duties.
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.
<PAGE> 2
5. Compensation.
5.1 Base Compensation. Effective as of the Effective Date, the
Company shall pay to Employee base compensation at the annualized rate of one
hundred five thousand dollars ($105,000) through the end the Company's fiscal
year ending 1999 ("Fiscal 1999"), less taxes and other usual deductions. After
Fiscal 1999, Employee's base compensation shall be reviewed by the Board
annually, and the Board may, but is not required to, change such base
compensation. Employee's base compensation shall be payable in installments
consistent with the Company's normal payroll practices for its executive
employees.
5.2 Bonus Compensation. Effective as of the Effective Date, the
Company may pay to Employee bonus compensation ranging from 0% to 25% of
Employee's base compensation, pursuant to the provisions of Section 5.1 hereof,
based on Employee's performance of services. The criteria to be used by the
Company to determine any bonus compensation shall be established by the Company
at a later date.
5.3 Options for Common Stock Options Granted. On or around the
Effective Date and in connection with his employment with the Company, the
Company shall grant to Employee options for twenty thousand (20,000) shares of
Common Stock, par value $.01 per share, of The UniMark Group, Inc. pursuant to
The UniMark Group, Inc.'s 1994 Employee Stock Option Plan.
6. Benefits.
6.1 General. Except as otherwise expressly provided in this Section
6, for as long as Employee is employed by the Company, Employee shall be
entitled to all fringe benefits that the Company may make available from time to
time for all executive employees. 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. Employee 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, Employee shall be entitled to take all Company holidays as
the same may be designated by the Company from time to time for all employees.
Employee 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 Employee for all
ordinary and necessary expenses incurred by Employee, including disbursements,
in the performance of Employee'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 Employee's
employment hereunder for any reason whatsoever. Nothing herein shall vest any
rights in any profit sharing or bonus plans, general
2
<PAGE> 3
expense or automotive reimbursements, and similar fringe benefits that the
Company may provide, if any, beyond the date on which Employee's employment is
terminated for any reason.
7. Termination of Employment.
7.1 Termination For Cause. Notwithstanding any other provision of
this Agreement, Employee's employment with the Company may be terminated for
cause at any time by the Company, upon reasonable notice to Employee. For the
purposes of this Agreement, "cause" shall mean (a) gross or habitual failure to
perform pursuant to the terms of this Agreement and such performance failure is
not corrected within thirty (30) days after written notice by the Company or the
Board to Employee thereof; or (b) misconduct, including, but not limited, to:
(i) conviction of a crime or entry of a plea of nolo contendere with regard to a
crime involving moral turpitude or dishonesty, (ii) any breach of the
Confidentiality Agreement, (iii) Employee's repeated insubordination or refusal
to comply with any reasonable request of the Board relating to the scope or
performance of Employee's duties, or (iv) conduct that in the good faith and
reasonable determination of the Board demonstrates Employee's gross unfitness to
serve.
7.2 Termination Without Cause. The Company may terminate Employee's
employment under this Agreement without cause at any time upon written notice to
Employee.
7.3 Termination for Death or Disability. Employment hereunder shall
automatically terminate upon Employee's death or disability. Disability, for
purposes of this Agreement, shall mean a physical or mental disability that
interferes with Employee'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 Employee'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 Employee severance in one payment equal to Employee's base
compensation as determined pursuant to Section 5.1 for six (6) months. In
addition, subject to the Company's sole discretion, the Company shall pay for
reasonable outplacement costs. The Company shall make no further bonus payments.
8.3 Termination By Employee's Death or Disability. If employment
shall terminate by reason of Employee's death or disability, the Company shall
compensate Employee or Employee's estate pursuant to the Company's death and
disability insurance plan in place at the time of Employee's termination.
9. Noncompetition. Until two (2) years after termination of Employee's
employment with the Company, Employee 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 Employee of no more than one
percent (1%) of the publicly traded common stock of any corporation, (b) without
3
<PAGE> 4
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. Any and all disputes or controversies, whether of law
or fact of any nature whatsoever, arising from or respecting this Agreement
shall be decided by arbitration by the Judicial Arbitration Mediation Services,
Inc. ("JAMS") in accordance with the rules and regulations of JAMS, or by any
other body mutually agreed upon by the parties. Pre-arbitration discovery shall
be permitted at the request of any party under appropriate protection for
proprietary and confidential business information.
Before filing a demand for arbitration, a party must send the other
parties written notice identifying the matter in dispute and invoking the
procedures in this paragraph. Such written notice shall be sent promptly after
the party knew or reasonably should have known of an alleged violation of this
Agreement. Within fifteen (15) days after such written notice is given, one or
more principals of each party shall meet at a mutually agreeable location in
Dallas, Texas, or any other location mutually agreeable to the parties, for the
purpose of determining whether they can resolve the dispute themselves by
written agreement. If the parties fail to resolve the dispute by written
agreement within the fifteen-day (15-day) period, the complaining party may then
initiate the arbitration process by filing a demand with JAMS or such other body
as the parties may agree upon. Nothing in this paragraph shall prevent a party
from seeking temporary equitable relief from JAMS or such other body as the
parties may mutually agree upon during the fifteen-day (15-day) period if
necessary to prevent irreparable harm.
The arbitrators shall be selected as follows: the Company and
Employee shall each select one (1) independent, qualified arbitrator and the two
(2) arbitrators so selected shall select the third arbitrator. Any party may
disqualify any individual arbitrator who is a present or past employee, owner,
officer, director, relative or consultant to any party hereto or a competing
organization.
Arbitration shall take place in Dallas, Texas, or any other
location mutually agreeable to the parties. At the request of any party,
arbitration proceedings will be conducted in the utmost secrecy and, in such
case, all documents, testimony and records shall be received, heard and
maintained by the arbitrators in secrecy under seal, available for inspection
only by the Company or Employee, their respective attorneys, and their
respective experts, consultants or witnesses who shall agree, in advance and in
writing, to receive all such information confidentially and to maintain such
information in secrecy, and make no use of such information except for the
purposes of the arbitration, until such information shall become generally
known.
The arbitrators, who shall act by majority vote, shall be able to
decree any and all relief of an equitable nature, including but not limited to
such relief as a temporary restraining order, a temporary injunction, or a
permanent injunction, and shall also be able to award damages, with or without
an accounting and costs. The decree or judgment of an award rendered by the
arbitrators may be entered in any court having jurisdiction over the parties.
4
<PAGE> 5
Reasonable notice of the time and place of arbitration shall be
given to persons other than the parties, if such notice is required by law, in
which case such persons or their authorized representatives shall have the right
to attend or participate in the arbitration hearing in such manner as the law
shall require.
If any action is necessary to enforce or interpret the terms of
this Agreement, the prevailing party shall be entitled to reasonable attorneys'
fees, costs, and necessary disbursements in addition to any other relief to
which that party may be entitled.
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.
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 Employee any amounts of
money by virtue of this Agreement or otherwise, the Company shall be entitled to
setoff against any such sums due to Employee the amount of any claims that the
Company has against Employee. 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.
5
<PAGE> 6
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:
THE UNIMARK GROUP, INC.
A Texas Corporation
By:
-------------------------------------
Soren Bjorn
President and Chief Executive Officer
UNIMARK FOODS, INC.
A Texas Corporation
By: /s/ Soren Bjorn
-------------------------------------
Soren Bjorn
President and Chief Executive Officer
EMPLOYEE:
/s/ Roman Shumny
-----------------------------------------
Roman Shumny
6
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