-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RHltZHDffF0liCWZdLT6j3PZ+ildlTZGVLpOmVzx08wSvBsAbmeaODFzsxgVDDjV G/hBKQ5OkFrbXL1m/22bGA== 0000950134-00-003516.txt : 20000421 0000950134-00-003516.hdr.sgml : 20000421 ACCESSION NUMBER: 0000950134-00-003516 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000420 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNIMARK GROUP INC CENTRAL INDEX KEY: 0000922712 STANDARD INDUSTRIAL CLASSIFICATION: CANNED, FRUITS, VEG & PRESERVES, JAMS & JELLIES [2033] IRS NUMBER: 752436543 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 000-26096 FILM NUMBER: 605136 BUSINESS ADDRESS: STREET 1: UNIMARK HOUSE STREET 2: 124 MCMAKIN RD CITY: BARTONVILLE STATE: TX ZIP: 76226 BUSINESS PHONE: 8174912992 10-K405 1 FORM 10-K FOR FISCAL YEAR END DECEMBER 31, 1999 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K MARK (ONE) [X] Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 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 Securities registered pursuant to Section 12(b) of the Act: NONE Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK, $.01 PAR VALUE (Title of class) 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 [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The approximate aggregate market value of the voting stock held by non-affiliates computed by reference to the price at which the stock was sold as of April 10, 2000 was $6,992,143. The number of shares of common stock outstanding as of April 10, 2000 was 13,938,326. DOCUMENTS INCORPORATED BY REFERENCE: The UniMark Group, Inc.'s 1999 Proxy Statement contains much of the information required in Part III of this Form 10-K, and portions of the 1999 Proxy Statement are incorporated by reference herein from the applicable sections thereof. The Items of this Form 10-K, where applicable, specify which portions of the 1999 Proxy Statement are incorporated by reference. The portions of the 1999 Proxy Statement that are not incorporated by reference shall not be deemed to be filed with the Commission as part of this Form 10-K. 2 CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS The discussion in this Annual Report on Form 10-K contains forward-looking statements that involve risks and uncertainties. The Company's actual results could differ significantly from those discussed herein. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business," as well as those discussed elsewhere in this report. 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 2000 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: dependence upon availability and price of fresh fruit; competition; dependence upon significant customers; uncertainty of new product development and market acceptance of new products; 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. PART I ITEM 1. BUSINESS. GENERAL The UniMark Group, Inc., a Texas corporation ("UniMark" or the "Company"), is a producer and marketer of Sunfresh(R) brand citrus and tropical fruit products. The Company conducts substantially all of its operations through its wholly owned operating subsidiaries. In Mexico, the Company's subsidiaries include: Industrias Citricolas de Montemorelos, S.A. de C.V. ("ICMOSA"), Grupo Industrial Santa Engracia, S.A. de C.V. ("GISE") and AgroMark, S.A. de C.V. ("AgroMark"). In the United States, the Company's subsidiaries include: UniMark Foods, Inc. ("UniMark Foods"), and UniMark International, Inc. ("UniMark International"). In the United Kingdom the Company's subsidiary is Flavorfresh, Limited. ("Flavorfresh"). The Company operates and competes in two distinct business segments: packaged fruit and juice & oil. The UniMark Group, Inc. was organized in 1992 to combine the packaged fruit operations of ICMOSA, a Mexican citrus and tropical fruit processor which commenced operations in 1974, with UniMark Foods, a company that marketed and distributed ICMOSA's products in the United States. The Company focuses on niche citrus and tropical fruit products including chilled, frozen and canned cut fruits and other specialty food ingredients. The packaged fruit segment processes and packages its products at five plants in Mexico. The Company's Mexican plants are strategically located in major fruit growing regions. The Company utilizes food brokers and distributors to market and distribute its packaged fruit products under the brand names SUNFRESH(R), Fruits of Four Seasons(R) and Flavor Fresh(TM) and under various private labels to supermarket chains, foodservice distributors, wholesale clubs, specialty grocery stores and industrial users throughout the United States. In addition, the Company has developed and utilizes a unique processing method that separates cold-peeled citrus fruit into individual juice-containing "cell-sacs". These cell-sac products and other citrus products are sold to food and soft drink manufacturers in Japan to enhance the flavor and texture of fruit juices and desserts. Sales to the Company's Japanese consumers are facilitated through Japanese trading companies. 2 3 Through its subsidiary GISE, UniMark is a major Mexican producer of citrus concentrate, oils and juices. GISE produces and exports citrus concentrates, oils and juices. While its primary product is frozen concentrate orange juice ("FCOJ"), GISE also produces single strength orange juice ("SSOJ") and grapefruit, tangerine, Persian lime and lemon products. The juice division operates three juice concentrate plants strategically located in the citrus growing region of Mexico close to the United States and the Mexican ports of Tampico and Veracruz. The plant locations offer cost-effective transportation and distribution and faster time to market. Collectively the plants have the capacity to process 1,200 metric tons of fruit per day, with 19 juice extractors and over 115,000 square feet of plant space. The Company's citrus concentrates and single strength citrus juices are sold directly to juice importers and distributors in North America, Europe and the Pacific Rim. In addition, GISE is developing, pursuant to a long-term supply contract with an affiliate of the Coca-Cola Company, 8,650 acres of lemon groves. 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 2013. Presently, the Company has acquired substantially all of the land for the project and has planted approximately 5,780 acres. PACKAGED FRUIT SEGMENT UniMark's strategic objective is to become the leading vertically integrated grower, processor, marketer and distributor of niche fruit and other selected agricultural products. To achieve this objective, the key elements of UniMark's operating and acquisition strategies are as follows: Expand vertical integration of growing, processing, marketing and distribution operations: UniMark intends to continue its vertical integration strategy. UniMark believes that by vertically integrating its growing, processing, marketing and distribution operations, the Company can better control the availability, cost and quality of its products. Expand fruit growing operations in Mexico: To ensure the availability of the highest quality raw materials, UniMark intends to expand its fruit growing operations in Mexico, utilizing advanced agricultural practices. UniMark believes that Mexico's favorable climate and soil conditions, coupled with competitive labor and land costs, offer significant opportunities to grow high quality fruits in a cost effective manner. Capitalize on brand awareness and market penetration: In the retail market, UniMark intends to capitalize on the brand awareness and market penetration attained by its SUNFRESH(R) brand name products. Utilizing its Fruit Made Easy(R) concept, UniMark plans to expand its line of specialty chilled, frozen and canned "ready-to-eat" pre-cut fruit that offers the benefits of healthy, low-fat foods with a multitude of vitamins to the increasingly health conscious consumer. Introduce New Packaged Fruit Products: UniMark believes that a significant opportunity exists for the introduction of new cut fruit products. In 2000, the Company plans to expand introduction of its frozen to fresh, which utilize the Company's cryogenic freezing technology. UniMark's product development and commercialization efforts are subject to all of the risks inherent in the development of new products. Achieving market acceptance for the Company's new products will require substantial marketing efforts and the expenditure of significant funds. The Company's prospects will be significantly affected by its ability to commercialize its new products. CURRENT PRODUCTS The Company's principal products are derived from citrus and tropical fruits. The Company has focused on applying its knowledge of fruit growing and processing with its international marketing and distribution capabilities to develop two key product categories. These categories include cut fruits and specialty food ingredients. The following is a description of each of these categories and their specific products: 3 4 Packaged Fruits. Under the brand names of SUNFRESH(R), Fruits of Four Seasons(R), Flavor Fresh(TM) and various private labels, UniMark markets: Chilled fruit. The chilled fruit line includes mango slices, grapefruit segments, orange segments, pineapple chunks, sliced papaya and a variety of fruit salads. These products are packed for retail, wholesale club and food service customers. Canned fruit. The canned fruit line includes orange segments and grapefruit segments as well as citrus and tropical salads packed for retail and foodservice customers. IQF fruit. The frozen line of fruit includes melon, mango, orange, grapefruit, papaya, pineapple and various combinations of products packed for food service and industrial customers. Specialty Food Ingredients. Presently, UniMark's specialty food ingredients include: Citrus cell-sacs. The Company has developed and utilizes a unique processing method that separates cold-peeled citrus fruit into individual juice-containing cell-sacs. These cell-sac products are sold to food and soft drink manufacturers in Japan to enhance the flavor and texture of fruit juices and desserts. Citrus segments. The Company markets citrus sections packaged in industrial sizes to food and soft drink manufacturers in Japan to enhance the flavor and texture of fruit juices and desserts. MARKETING, SALES AND DISTRIBUTION Marketing. UniMark's marketing department develops brand strategies for the Company's products, including product development, pricing strategy, consumer and trade promotion, advertising, publicity and package design. This department's responsibilities includes determining the allocation of resources between consumer and trade spending programs, pricing and profitability analysis, as well as product and packaging designs. In the retail and wholesale club markets, the Company's primary focus has been on the chilled and canned fruit categories. UniMark intends to capitalize and strengthen the brand awareness and market penetration attained by its SUNFRESH(R) brand in the United States. Under its "Fruit Made Easy(R)" slogan, UniMark's marketing strategy includes continued expansion of its comprehensive line of brand name specialty chilled, frozen and canned "ready-to-eat" pre-cut fruit that offers the benefits of healthy, low-fat foods with a multitude of vitamins to the health conscious consumer. The Company's marketing objectives include increasing "impulse buying" of its retail products by building greater product visibility through "eye-catching" package designs, innovative rack systems and trial package promotions. In addition, the Company utilizes trade promotions, such as quarterly price allowances to generate "feature promotion activity" for its products. The SUNFRESH(R) product line also receives advertising support in trade publications and national food shows throughout the year. In the foodservice arena, the focus is on securing market leadership in the chilled fruit category, primarily through private label programs with major foodservice distributors, and a branded approach utilizing the Fruits of Four Seasons(R) label. Marketing efforts in these channels are directed toward trade usage programs and yearly trade rebates. Sales. UniMark's sales organization consists of three sales management teams primarily focusing on the management of independent food brokers or international representatives that directly interface with the customer. These sales teams are: retail, foodservice and export sales. 4 5 The retail team is led by a sales manager and consists of four regional managers, each with geographic responsibility for approximately 25 percent of the United States. The Company's exports are directed by an export sales manager located in Mexico City, who deals with agents primarily from Japanese trading companies. In addition, the Company's senior executives handle relationships with the Company's Japanese customers. The foodservice team is guided by a sales manager and an assistant. The following table shows, for the last three years, the amount and percentage of net sales contributed by the various distribution channels for the Company's packaged fruit products:
YEAR ENDED DECEMBER 31, ----------------------------------------------------------- 1997 1998 1999 ----------------- ----------------- ----------------- NET NET NET SALES PERCENT SALES PERCENT SALES PERCENT ------- ------- ------- ------- ------- ------- (DOLLARS IN THOUSANDS) Packaged Fruit: Retail .............. $23,207 44.8% $26,181 52.2% $25,606 47.4% Japan ............... 3,393 6.6 4,144 8.3 9,633 17.8 Wholesale club ...... 10,003 19.3 6,235 12.4 7,609 14.1 Food service ........ 12,631 24.4 8,496 17.0 7,431 13.7 Industrial and other 2,514 4.9 5,084 10.1 3,791 7.0 ------- ------- ------- ------- ------- ------- Total ....... $51,748 100.0% $50,140 100.0% $54,070 100.0% ======= ======= ======= ======= ======= =======
Retail sales. UniMark markets its products to more than 200 regional and national supermarket chains and wholesalers throughout the United States. In conjunction with its own national sales force, UniMark utilizes over 50 independent food brokers and distributors to sell its products. Japanese sales. UniMark exports a line of pasteurized citrus products and juice-containing citrus cell-sac products to Japan for use in the food and beverage industries. Although sales to industrial customers in Japan are facilitated through Japanese trading companies, the Company maintains direct relationships with its industrial customers. Wholesale club sales. UniMark sells products directly to wholesale clubs throughout the United States. Food service sales. Sales to the United States government, fast food chains, restaurants, hospitals and other food service customers are made either directly to or through food service distributors by the Company's foodservice sales force. The Company is represented by more than 30 food service brokers. Industrial and other sales. Industrial and other sales consist primarily of IQF sales to industrial users in the United States for re-packing or further processing. UniMark utilizes independent food brokers to sell its products to industrial users in the United States. Distribution. UniMark operates its own trucking fleet to transport finished packaged fruit products from its Mexican processing facilities to its distribution center in McAllen, Texas. From there, deliveries are made through an arrangement the Company has with England Logistics, Inc. ("England"), a division of C.R. England & Sons of Salt Lake City, Utah. Products exported to Europe and Japan are shipped directly from Mexico. PROCUREMENT Currently, a substantial quantity of the fruit processed by the Company is purchased from third parties. However, the Company's Mexican grapefruit growing operations supply a significant amount of the Company's grapefruit demand. In addition, the Company purchases grapefruit from growers in the Texas Rio Grande Valley for processing at its ICMOSA plant. Substantially all of the mangos, oranges and melons used in the Company's operations are purchased from third-party growers throughout Mexico. 5 6 UniMark has a significant pineapple project which UniMark intends to maintain at a level where the Company has sufficient supply for its own processing needs. PROCESSING Upon arrival at the Company's processing plants, fruit is inspected and washed. On the production line, the fruit is peeled and cut into various presentations (slices, sections, chunks, balls). Following this process, some fruits are further processed into juice-containing cell-sacs. In addition, some processed fruits are frozen utilizing the Company's IQF process. Other processed fruits are transferred directly into bulk storage or final product packaging (jars and cans). After further processing, the juice-containing cell-sacs are canned while the frozen products are packaged in plastic bags or trays. The ICMOSA plant is the Company's main plant and serves as the hub for the Company's other Mexican processing plants, which primarily produce semi-processed products. At the ICMOSA plant, products are labeled and packaged for final shipment. The Company cans fruit at its Montemorelos and Puebla plants. JUICE & OIL SEGMENT STRATEGY GISE's strategy includes: (1) reduce operating costs through optimization of plant capacities, (2) expand relationships with key customers and (3) increase sales to European and Mexican markets. Reduce operating costs through optimization of plant capacities: To optimize its plant capacities, GISE is focusing its efforts on finding fruit other than oranges to process, e.g. lemon, lime, apple, and grapefruit. A substantial component of this strategy is the execution of its long-term agreements to grow, supply and process Italian lemons for an affiliate of the Coca-Cola Company. Since lemons are harvested and processed during the orange "off-season" (September through November) the Company should be able to operate its facilities near full capacity throughout most of the year. The Company believes that this will allow the Company to allocate its fixed operating cost over a greater production volume, which should afford the Company with a competitive cost advantage for its primary orange production. Expand relationship with key customers: Over the years, GISE has been able to expand its supply relationship with existing key customers. Management believes that it will be able to further expand these relationships by supplying existing customers with additional products. Increase sales to European and Mexican markets: The Company's goal is to expand its position as a leading exporter of high quality Mexican citrus juices to the European market. The Company believes the success of this strategy has been enhanced by the forthcoming free trade agreement between Mexico and the European Union, known as "EUMEXFTA", which is expected to go into effect July 1, 2000. This agreement will result in lower duty for the Company's products sold in the European Union. Also, management believes that the improving economy in Mexico should lead to increased demand for the Company's juice products in Mexico. Furthermore, management believes the Company is well positioned to take advantage of such an opportunity. CURRENT PRODUCTS The Company, through GISE, markets directly to major industrial users a full line of citrus juice products including citrus concentrates and single strength juices: Citrus concentrate. Citrus juice concentrates are produced from oranges, grapefruits, tangerines, Persian limes and lemons. Single strength juices. Citrus juices are produced from oranges. 6 7 Citrus oils. Citrus oils are extracted from oranges, grapefruits, tangerines, Persian limes and lemons. These oils are primarily used by the Company's customers in beverages, perfumes and other scented products. Cattle feed. As a by-product of the juice production, the Company produces cattle feed. This by-product is sold to local farmers. PROCUREMENT The Company purchases citrus from growers throughout Mexico. GISE's three juice plants are located in Cd. Victoria, Tamaulipas; Alamo, Veracruz; and Poza Rica, Veracruz in the heart of Mexico's major citrus growing region. The State of Veracruz, located along the east coast of Mexico, is Mexico's largest orange producing state followed by the neighboring states of Tamaulipas and San Luis Potosi. Citrus from this region is available for processing at GISE's Veracruz facilities early in the season because of this region's southern location. GISE's Cd. Victoria plant processes fruit grown primarily in the northeastern region of Mexico. The fruit is transported by common carrier to GISE's three plants located in Mexico. MARKETING, SALES AND DISTRIBUTION Most of GISE's production is sold to industrial users and bottlers of juice. Mexican orange juice is often used for blending with juice from other locations. The Mexican juice is frequently used to enhance the flavor and color of the final product. GISE transports finished product in tankers or drums by common carrier to North American customers. Products to overseas customers are shipped directly in ocean freight containers. Juice and oil sales for the years ended December 31, 1997, 1998 and 1999 were $13.7, $22.2 and $12.2 million, respectively. PROCESSING GISE's operations are substantially automated. Once the fruit arrives at a plant, it is unloaded onto rollers. The fruit is then washed and inspected. Bruised and damaged fruit is removed by hand and the remaining fruit is then routed to rollers with short needles, which extract the oil from the peel. Once the oil is removed, the fruit is sorted by size and sent to slicing and squeezing machines. These machines slice the fruit and squeeze the juice and pulp completely from the peel. The juice is then separated from the pulp and the water is extracted from the juice. Upon further processing, the juice and juice concentrate are stored on site until it is shipped directly to customers. RESEARCH AND DEVELOPMENT The Company's research and development department provides product, packaging and process development, analytical and microbiological services, as well as agricultural research. EMPLOYEES As of December 31, 1999, UniMark employed approximately 2,400 employees in its packaged fruit operations and approximately 700 in its juice and oil operations, most of whom were located in Mexico. In Mexico, labor relations are governed by separate collective labor agreements between UniMark and the unions representing the particular group of employees. All of UniMark's employees in Mexico, whether seasonal or permanent, are affiliated with labor unions which are generally affiliated with a national confederation. Consistent with other labor practices in Mexico, wages are negotiated every year while other terms are negotiated every two years. In the United States, UniMark's employees are not covered by collective bargaining agreements. UniMark believes that its relations with all of its employees are good. 7 8 COMPETITION The food industry, including each of the markets in which the Company competes, is highly competitive with respect to price and quality (including taste, texture, healthfulness and nutritional value). The Company faces direct competition from citrus processors with respect to its existing product lines and faces potential competition from numerous, well established competitors possessing substantially greater financial, marketing, personnel and other resources than the Company, including Del Monte Foods Company (NYSE symbol: "DLM"). The Company's fruit juice products compete broadly with all beverages available to consumers. In addition, the food industry is characterized by frequent introduction of new products, accompanied by substantial promotional campaigns. In recent years, numerous companies have introduced products positioned to capitalize on growing consumer preference for fresh fruit products. It can be expected that the Company will be subject to increasing competition from companies whose products or marketing strategies address these consumer preferences. ENVIRONMENTAL MATTERS As a result of its agricultural, food and juice processing activities, the Company is subject to numerous foreign and domestic environmental laws and regulations. The operations of UniMark in Mexico are subject to Mexican federal and state laws and regulations relating to the protection of the environment. The principal legislation is the federal General Law of Ecological Balance and Environmental Protection (the "Ecological Law"), which is enforced by the Ministry of Social Development ("Sedesol"). Under the Ecological Law, rules have been promulgated concerning water pollution, air pollution, noise pollution and hazardous substances. Sedesol can bring administrative and criminal proceedings against companies that violate these environmental laws, and can also close non-complying facilities. Similarly, the operations of UniMark in the United States are subject to United States federal and state laws and regulations relating to the protection of the environment. Although the Company believes that its facilities currently are in compliance with all applicable environmental laws, failure to comply with any such laws could have a material adverse effect on the Company. GOVERNMENT REGULATION The manufacturing, processing, packing, storage, distribution and labeling of food and juice products are subject to extensive regulations enforced by, among others, the FDA and state, local and foreign equivalents thereof and to inspection by the United States Department of Agriculture and other federal, state, local and foreign agencies. Applicable statutes and regulations governing food products include "standards of identity" for the content of specific types of foods, nutritional labeling and serving size requirements and under "Good Manufacturing Practices" with respect to production processes. The Company believes that its products satisfy, and its new products will satisfy, all applicable regulations and that all of the ingredients used in its products are "Generally Recognized as Safe" by the FDA for the intended purposes for which they will be used. The Company, on a daily basis, tests its products at its internal laboratories and, from time to time, submits samples of its products to independent laboratories for analysis. Failure to comply with applicable laws and regulations could subject the Company to civil remedies, including fines, injunctions, recalls or seizures, as well as potential criminal sanctions, which could have a material adverse effect on the Company. PRODUCT LIABILITY AND PRODUCT RECALL The testing, marketing, distribution and sale of food and beverage products entails an inherent risk of product liability and product recall. There can be no assurance that product liability claims will not be asserted against the Company or that the Company will not be obligated to recall its products. Although the Company maintains product liability insurance coverage in the amount of $11,000,000 per occurrence, there can be no assurance that this level of coverage is adequate. A product recall or a partially or 8 9 completely uninsured judgment against the Company could have a material adverse effect on the Company. INTELLECTUAL PROPERTY RIGHTS The Company regards its trademarks, trade dress, trade secrets and similar intellectual property as important to its success. The Company has been issued a registered trademark for its SUNFRESH(R), Fruits of Four Seasons(R), and Fruit Made Easy(R) trademarks. The Company also utilizes the Flavor Fresh(TM) tradename. ITEM 2. PROPERTIES. GROWING OPERATIONS To ensure the availability of the highest quality raw materials, UniMark intends to expand its fruit growing operations in Mexico, utilizing advanced agricultural practices. UniMark believes that Mexico's favorable climate and soil conditions, coupled with competitive labor and land costs, offer significant opportunities to grow high quality fruits in a cost effective manner. Presently, a large portion of the Company's raw materials are provided by growers under various arrangements, including operating agreements and individual fixed price contracts to purchase entire production. The following table sets forth the Company's various agricultural projects:
PROPERTY NAME LOCATION ACREAGE CROP INTEREST ----------------------- ------------------- --------- ----------------- --------- Loma Bonita Grove........... Loma Bonita, 190 acres White grapefruit Leased Oaxaca, Mexico Las Varas Grove (1)......... Loma Bonita, Oaxaca, 642 acres Pink grapefruit, Leased Mexico pineapple, hearts of palm. Villa Azueta I Grove (2).... Villa Azueta, 84 acres Pineapple growing Leased Veracruz, Mexico and packing. Villa Azueta II Grove....... Villa Azueta, 610 acres Pineapple Owned Veracruz, Mexico Azteca Grove (3)............ Montemorelos, Nuevo 144 acres White and Rio Red Leased Leon, Mexico Grapefruit Las Tunas Grove............. Isla, 120 acres White and pink Leased Veracruz, Mexico Grapefruit Laborcitas Grove............ Cd. Victoria, 252 acres Oranges and Owned Tamaulipas, Mexico Italian lemons El Milagro Grove ........... Cd. Victoria, 123 acres Italian lemons Owned Tamaulipas, Mexico Paraiso Grove .............. Cd. Victoria, 336 acres Italian lemons Owned Tamaulipas, Mexico El Cielo Grove ............. Gomez Farias, 1,767 acres Italian lemons Owned Tamaulipas, Mexico Flor De Maria Grove......... Cd. Valles, San Luis 5,169 acres Italian lemons Owned Potosi, Mexico La Estrella Grove........... Cd. Victoria, 188 acres Italian lemons Owned Tamaulipas, Mexico
- --------- (1) Presently, this grove consists of approximately 240 acres of pink grapefruit, 300 acres of pineapple and 60 acres of hearts of palm. 9 10 (2) Villa Azueta is the southern headquarters of UniMark's agricultural operations. The agricultural headquarters is used for the development of pineapple seedlings, as well as other agricultural crops, and the packing of fresh pineapple. In 1995, the Company entered into a 10-year lease for this facility and has an option to purchase the facility for fair market value determined at the time such option is exercised. (3) In 1994, ICMOSA entered into a 10-year operating agreement with the owners of this grove, which is located near the ICMOSA plant in Montemorelos. Pursuant to the agreement, ICMOSA operates the grove and purchases all the grapefruit at a formula price tied to the price of grapefruit purchased from unrelated third parties. The grove consists of approximately 13,000 grapefruit trees and incorporates advanced agricultural technology. Each tree has a watering and feeding system which can also be utilized as an anti-freeze system utilizing mist generated by three 500 horsepower boilers. FACILITIES The Company's principal processing facilities are described below:
APPROXIMATE NUMBER OF APPROXIMATE EMPLOYEES SQUARE (AS OF MARCH 1, NAME LOCATION FOOTAGE 2000) INTEREST -------------------- -------- ----------- --------------- -------- PACKAGED FRUIT OPERATIONS ICMOSA Plant ................ Montemorelos, Nuevo Leon, Mexico 80,000 856 Owned (1) IHMSA Plant.................. Montemorelos, Nuevo Leon, Mexico 40,000 354 Leased (2) Azteca Plant................. Montemorelos, Nuevo Leon, Mexico 50,000 402 Leased (3) Puebla Plant................. Tlatlauquipec, Puebla, Mexico 50,000 399 Owned Isla Plant (6)............... Isla, Veracruz, Mexico 32,000 195 Leased San Rafael Plant (5)......... San Rafael, Veracruz, Mexico 28,500 -- Leased Zamora Plant (4)............. Zamora, Michoacan, Mexico 41,000 -- Leased Flavor Fresh Plant (4)....... Lawrence, Massachusetts 60,000 -- Leased JUICE AND OIL OPERATIONS Victoria Juice Plant......... Cd. Victoria, Tamaulipas, Mexico 65,700 170 Owned (1) Frutalamo Juice Plant........ Alamo, Veracruz, Mexico 27,700 97 Leased (7) Veracruz Juice Plant......... Poza Rica, Veracruz, Mexico 22,900 90 Owned
- ---------------- (1) This property is subject to individual mortgages with the real estate as collateral. (2) The agreement pursuant to which this facility is leased, grants the Company the option to purchase the facility prior to the expiration of such agreement at a purchase price of $4.5 million. (3) The agreement pursuant to which this facility is leased, grants the Company the option to purchase the facility prior to the expiration of such agreement at its then fair market value. (4) These plants are idle and are being sub-leased. (5) This plant is idle and is being offered for sub-lease. (6) This facility is scheduled to be temporarily closed for a period of 8-10 months beginning in April 2000. (7) The Company has entered into a letter of intent to exercise an option to acquire the entity that owns this facility. The Company's other supporting facilities are described below: 10 11 In addition to the properties described above, the Company maintains its corporate headquarters in Bartonville, Texas, a distribution center in McAllen, Texas, and a lodging/conference facility in Cd. Victoria, Tamaulipas, Mexico. Corporate headquarters: UniMark leases approximately 13,000 square feet of office space for its corporate headquarters in Bartonville, Texas (located 20 miles from the Dallas/Fort Worth International Airport). As of March 1, 2000, UniMark employed 20 people at this facility. McAllen distribution center: The Company's refrigerated distribution center in McAllen, Texas (on the Texas/Mexico border) consists of approximately 110,000 square feet and is fully utilized. As of March 1, 2000, 19 people were employed at this company-owned facility. The GISE conference facility: The Company owns a "hacienda" which has been declared a historic landmark. This lodging facility is located near GISE's plant in Cd. Victoria, Tamaulipas, Mexico, occupies approximately 90,000 square feet and is situated on approximately 10 acres. The Company utilizes this facility, in part, as a conference center. ITEM 3. LEGAL PROCEEDINGS. From time to time the Company is involved in litigation relating to claims arising from its operations in the normal course of business or otherwise the outcome of which is not expected to have a materially adverse affect on the Company's results of operations or financial condition. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. At the Annual Meeting of Shareholders held on July 6, 1999, the shareholders of the Company approved or elected 1) an amendment to the Company's articles of Incorporation to change the Company name to "Sunfresh, Inc.", 2) the proposed ten member Board of Directors, 3) the Company's 1999 Stock Option Plan, and 4) Ernst & Young LLP as the Company's independent public accountants for the fiscal year ending December 31,1999. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. The Common Stock is quoted on the NASDAQ National Market under the symbol "UNMG". The following table sets forth, for the periods indicated, the high and low sale prices as reported on the NASDAQ National Market.
HIGH LOW ---- --- Year ended December 31, 1998: First Quarter....................................... $5.375 $3.438 Second Quarter...................................... 6.625 3.875 Third Quarter....................................... 4.375 2.000 Fourth Quarter...................................... 3.250 1.875 Year ended December 31, 1999: First Quarter....................................... 2.688 2.188 Second Quarter...................................... 3.688 2.688 Third Quarter....................................... 3.000 1.000 Fourth Quarter...................................... 1.875 1.188
11 12 - ---------- The quotations in the tables above reflect inter-dealer prices without retail markups, markdowns or commissions. On April 10, 2000, the last reported sale price for the Common Stock on the NASDAQ National Market was $1.00. As of April 10, 2000 there were 122 shareholders of record of the Common Stock and approximately 2,000 beneficial shareholders. The Company has not paid any cash dividends since its inception and for the foreseeable future intends to follow a policy of retaining all of its earnings, if any, to finance the development and continued expansion of its business. There can be no assurance that dividends will ever be paid by the Company. Additionally, the Company's loan agreements with Cooperatieve Centrale Raiffeisen-Boerenleenbank B. A. ("Rabobank Nederland") restrict the Company from declaring or paying any dividends on its shares of Common Stock without the prior written consent of Rabobank Nederland. Any future determination as to payment of dividends will depend upon the Company's financial condition, results of operations and such other factors as the Board of Directors deems relevant. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources." ITEM 6. SELECTED FINANCIAL DATA. The following table sets forth, for the periods and at the dates indicated, selected historical consolidated financial data of the Company. The selected historical consolidated financial data has been derived from the historical consolidated financial statements of the Company and in the case of the fiscal years ended December 31, 1997, 1998 and 1999 should be read in conjunction with such financial statements and the notes thereto included elsewhere herein.
YEARS ENDED DECEMBER 31, ------------------------------------------------------- 1995 1996 (1) 1997 1998 1999 -------- -------- -------- -------- -------- (IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS) Net sales ............................... $ 36,866 $ 53,602 $ 65,427 $ 72,311 $ 66,223 Gross profit ............................ 12,674 13,669 13,404 16,148 7,630 Income (loss) from operations ........... 4,251 1,295 (5,605) 1,758 (9,167) Operating results of certain operations disposed of during 1999 (2): Operating income (loss) .............. -- (510) (479) 122 (127) Loss on disposal of operations ....... -- -- -- -- (1,517) Extraordinary gain ...................... -- 330 139 -- -- Net income (loss) ....................... 2,947 543 (9,680) (2,965) (12,996) Basic earnings (loss) per share: Income (loss) before extraordinary gain $ 0.57 $ 0.03 $ (1.15) $ (0.29) $ (0.97) Extraordinary gain .................... -- 0.04 0.02 -- -- -------- -------- -------- -------- -------- Net income (loss) ..................... $ 0.57 $ 0.07 $ (1.13) $ (0.29) $ (0.97) ======== ======== ======== ======== ======== Diluted earnings (loss) per share: Income (loss) before extraordinary gain $ 0.53 $ 0.03 $ (1.15) $ (0.29) $ (0.97) Extraordinary gain .................... -- 0.04 0.02 -- -- -------- -------- -------- -------- -------- Net income (loss) ..................... $ 0.53 $ 0.07 $ (1.13) $ (0.29) $ (0.97) ======== ======== ======== ======== ======== Shares used in per share calculations: Basic ............................... 5,213 7,450 8,590 10,131 13,462 Diluted ............................. 5,571 7,796 8,590 10,131 13,462 Total assets ............................ $ 26,498 $ 76,683 $ 94,616 $ 93,513 $ 82,352 Long-term debt .......................... 699 4,332 8,626 7,833 6,207 Stockholders' equity .................... 14,978 47,800 38,252 48,712 40,691
- ------------------- 12 13 (1) Includes the results of operations of GISE and Simply Fresh since April 1, 1996, and Deli-Bon since January 3, 1996, the effective dates of these acquisitions. (2) Includes the operating results of Simply Fresh and Deli-Bon, which were disposed of during 1999, which is more fully discussed in Notes 1 and 2 to the consolidated statements. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. INTRODUCTION The following discussion should be read in conjunction with the consolidated financial statements and notes thereto and "Selected Financial Data" included elsewhere herein. This discussion does not include the results of operations of Deli-Bon, GISE and Simply Fresh before their respective acquisition dates. 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 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, as well as managing the Company's Lemon Project. 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. Flavorfresh Limited 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. The functional currency of UniMark and its subsidiaries is the U.S. dollar. 13 14 RESULTS OF OPERATIONS The following table sets forth certain consolidated financial data, after reflecting 1) the disposition of certain operations disposed of during 1999 and 2) the reclassifications of customer discounts and allowances and freight expenses (which are more fully discussed in Notes 1 and 2 to the consolidated statements), expressed as a percentage of net sales for the periods indicated:
YEAR ENDED DECEMBER 31, ------------------------- 1997 1998 1999 ----- ----- ----- Net sales ............................................. 100.0% 100.0% 100.0% Cost of products sold ................................. 79.5 77.7 88.5 ----- ----- ----- Gross profit .......................................... 20.5 22.3 11.5 Selling, general and administrative expenses .......... 29.1 19.9 25.4 ----- ----- ----- Income (loss) from operations ......................... (8.6) 2.4 (13.9) Other income (expense): Interest expense .................................... (4.9) (5.7) (4.5) Interest income ..................................... 0.7 0.2 0.5 Foreign currency translation loss ................... (1.4) (0.1) (1.4) ----- ----- ----- Loss before disposal of certain operations, income taxes and extraordinary gain: ....................... (14.2) (3.2) (19.3) Operating results of certain operations disposed of during 1999: Operating income (loss) ....................... (0.8) 0.2 (0.2) Loss on disposal of operations ................ -- -- (2.3) ----- ----- ----- Loss before income taxes and extraordinary gain ....... (15.0) (3.0) (21.8) Income tax expense (benefit) .......................... -- 1.1 (2.2) Extraordinary gain, net of applicable income taxes .... 0.2 -- -- ----- ----- ----- Net loss .............................................. (14.8)% (4.1)% (19.6)% ===== ===== =====
Years Ended December 31, 1998 and 1999 Net sales consist of packaged fruit and citrus juice and oils. Packaged fruit sales increased 8.0% from $50.1 million in 1998 to $54.1 million in 1999. This increase was primarily due to a 132.5% increase in sales to Japan from $4.1 million in 1998 to $9.6 million in 1999. Packaged fruit retail sales decreased 2.2% from $26.2 million in 1998 to $25.6 million in 1999 and food service sales decreased by 12.9% from $8.5 million in 1998 to $7.4 million in 1999. Both of these decreases were impacted by reduced product lines and product offerings in 1999. Industrial and other sales decreased 25.5% from $5.1 million in 1998 to $3.8 million in 1999. This decrease was caused by reduced sales for fresh pineapple in 1999. Citrus juice and oil sales decreased 45.0% from $22.2 million in 1998 to $12.2 million in 1999. This decrease in juice and oil sales resulted principally from lower juice processing volume due to unfavorable raw material costs and a general decline in the market prices of frozen concentrate orange juice. This market decline was brought on by a decline in futures related pricing for concentrate orange juice caused by worldwide inventory levels and the anticipation of larger crops in Brazil and Florida during the 1999/2000 season. As a result of the foregoing, net sales decreased 8.4% from $72.3 million in 1998 to $66.2 million in 1999 due to the increase in packaged fruit sales being more than offset by the decline in citrus juice and oil sales. Gross profit on packaged fruit sales decreased from 22.3% in 1998 to 14.7% in 1999. This decrease was primarily the result of increased business to Japan, which had to be processed towards the end of the orange season at substantially higher costs than anticipated, inventory write downs associated with discontinued products and continued agricultural problems associated with the Company's pineapple growing 14 15 operations, which resulted in 1999 write-offs of deferred growing costs of approximately $1.8 million and current year Mexican inflation and a peso revaluation which significantly increased raw material and production costs in United States dollar terms. Citrus fruit and oil gross profit decreased from 22.8% in 1998 to (2.5)% in 1999. This segments 1999 results were negatively impacted by increased production costs at GISE's three processing plants and unfavorable raw material costs as a result of a smaller orange crop in Mexico in the 1999 growing season compounded by the decline in market prices for frozen concentrate orange juice. Selling, general and administrative expense ("SG&A") increased from $14.4 million in 1998 to $16.8 million in 1999, or $2.4 million. This increase in SG&A was primarily due to costs associated with management's efforts to improve its business processes and internal controls, which increased professional and outside consulting fees, the write-off of deferred costs associated with a trade name that became of limited value and the write-off of fixed assets no longer used in the Company's manufacturing processes, primarily those associated with the Company's Fruit Jelite product line which was discontinued in 1999. Interest expense decreased from 5.7% of net sales in 1998 to 4.5% in 1999. Actual interest expense decreased from $4.1 million in 1998 to $3.0 million in 1999. This decrease was primarily the result of decreased levels of debt during 1999 and the capitalization of interest costs associated with the Company's lemon project of $0.6 million. Interest income increased from $0.1 million in 1998 to $0.3 million in 1999 primarily from the temporary cash investment of excess cash balances. Foreign currency translation losses, which result from the conversion of the Company's foreign subsidiaries financial statements to U.S. GAAP, increased from a loss of $0.1 million in 1998 to a loss of $0.9 million in 1999, or an increase of $0.8 million. This increase was due to translation losses on local currency denominated net monetary assets in Mexico. Operating results and loss on disposal of certain operations in 1999 present separately the operating results applicable to the disposed operations and transaction losses on the disposals. In 1999, these disposed operations generated operating losses of $0.13 million and a one time charge of $1.5 million from disposal, as compared to 1998 when operations resulted in operating income of $0.1 million. Income tax benefit of $1.5 million was recorded in 1999 on a loss before income taxes of $14.5 million. This tax benefit is less than the expected benefit at statutory rates 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., and accordingly, no income tax benefits from U.S. operating losses are recognized. As a result of the foregoing, the Company reported net losses of $3.0 million in 1998 and $13.0 million in 1999. Years Ended December 31, 1997 and 1998 Net sales increased 10.5% from $65.4 million in 1997 to $72.3 million in 1998. This increase was primarily due to increases in citrus juice and oil sales as well as packaged fruit retail sales. Citrus juice and oil sales increased 62% from $13.7 million in 1997 to $22.2 million in 1998. This increase was primarily the result of a relative large orange crop and comparatively favorable market conditions for "frozen concentrate orange juice". These favorable market conditions reversed in the fourth quarter of 1998. 15 16 Packaged fruit retail sales increased 12.8% from $23.2 million in 1997 to $26.2 million in 1998. This increase was the result of new distribution of the Company's canned fruit and fresh-cut fruit product lines. The Company also saw an increase in sales to Japan and other industrial customers. Japanese sales increased 20.6% from $3.4 million in 1997 to $4.1 million in 1998. Industrial and other sales increased 102.2% from $2.5 million in 1997 to $5.2 million in 1998. These sales are primarily comprised of bulk IQF products and fresh pineapple. The sales increase was negatively impacted by declining sales in the Company's food service and wholesale club businesses. Food service sales declined 32.7% from $12.6 million in 1997 to $8.5 in 1998. This decline can be attributed to the Company's closing of its Lawrence, MA plant and distribution facility in the fourth quarter of 1997. The wholesale club business declined 37.7% from $10.0 million in 1997 to $6.2 million in 1998. The decline was the result of discontinuing production of the Company's avocado products in the first quarter of 1998. The Company also lost significant distribution of its chilled fruit products to a competitor. While the Company's overall retail sales increased in 1998, the Company did experience significant competitive pressures as a competitor entered the category with a new line of similar products accompanied with substantial promotional campaigns. This resulted in smaller than anticipated growth for the Company's chilled fruit category. Gross profit as a percentage of net sales increased from 20.5% in 1997 to 22.3% in 1998. The increase can be attributed to the prior years inflation in Mexico, which significantly increased the Company's cost of production. The gross profits were negatively impacted by the relative increase in citrus juice and oil sales as compared to packaged fruit sales, since citrus juice and oil sales generally yield lower margins. Gross profit on packaged fruit sales decreased from 22.3% in 1997 to 22.1% in 1998. This decrease was primarily the result of higher than anticipated fruit cost resulting from the aftermath of the recent El Nino weather pattern and crop failures in the Company's pineapple project. At December 31, 1998, the Company wrote-off $1.3 million as a result of crop failures in the Company's pineapple project. Gross profit on citrus juice and oils increased from 13.5% in 1997 to 22.8% in 1998 primarily as a result of lower product cost due to increased production volume and improved market prices. Gross profit for the citrus juice and oil segment is anticipated to be significantly lower in 1999 as a result of higher fruit prices resulting from a smaller crop and unfavorable market conditions. Selling, general and administrative expenses ("SG&A") as a percentage of net sales decreased from 29.1% in 1997 to 19.9% in 1998. Actual SG&A expenses decreased 24.3% from $19.0 million in 1997 to $14.4 million in 1998. This decrease is partly the result of the relative increase in citrus juice and oil sales that do not require significant sales and marketing expenditures. It is also the result of cost savings realized from the Company's reorganization of its packaged fruit operations and the overall increase in sales volume. SG&A expenses in 1998 were negatively impacted by a charge of $540,000 to write-off certain capital improvements and other capitalized costs, primarily related to closed plant facilities. Interest expense increased from 4.9% of net sales in 1997 to 5.7% in 1998. Actual interest expense increased from $3.2 million in 1997 to $4.1 million in 1998. This increase was primarily the result of increased levels of debt maintained to support capital expenditures and increased cost of funds from the Company's primary lender. Interest income of $432,000 in 1997 and $133,000 in 1998 was earned primarily from the temporary cash investment of excess cash balances. A foreign currency translation loss which results from the conversion of the Company's foreign subsidiaries' financial statements to U.S. GAAP, decreased from a loss of $0.9 million in 1997 to a loss of 16 17 $0.1 million in 1998. This reduction in losses was primarily due to a smaller devaluation in the Mexican peso in the 1998 period than was incurred in the 1997 period. Operating results of certain operations in 1998 present separately the operating results applicable to the disposed operations. In 1998, these disposed operations generated operating income of $0.1 million, as compared to losses of $0.5 million in 1997. As a result of the foregoing, the Company reported net losses of $9.7 million in 1997 and $3.0 million in 1998. 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. Statutory employee profit sharing expense is reflected in the Company's cost of goods sold and selling, general and administrative expenses, depending upon the function of the employees to whom profit sharing payments are made. The Company's net income on a consolidated basis as shown in the consolidated financial statements is not a meaningful indication of net income of the Company's subsidiaries for profit sharing purposes or of the amount of employee profit sharing. Provisions for Mexican employee profit sharing expense were $406,000, $176,000 and $-0- in 1997, 1998 and 1999, respectively. 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 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 and Mexico 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, British pound and the Japanese yen. 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. 17 18 The Company procures and processes substantially all of its products in Mexico for export to the United States, 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 at which the Company is able to sell this product 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. The following table presents principal cash flows and related weighted-average interest rates by expected maturity dates for the Company's debt obligations. INTEREST RATE SENSITIVITY Principal Amount by Expected Maturity Average Interest Rate (In thousands, except interest rates)
Estimated There- Fair Value 2000 2001 2002 2003 2004 after Total 12/31/99 ---- ---- ---- ---- ---- ------ ----- -------- Long-term debt, including current portion Fixed rate $ 477 $ 401 $ 195 $ 229 $ 233 $ -- $1,535 $1,535 Average interest rate 11.3% 12.3% 16.8% 17.1% 17.9% Variable rate $ 421 $ 416 $ 3,045 $ 95 $ 104 $ 1,489 $5,570 $5,570 Average interest rate 12.0% 11.4% 10.2% 9.5% 9.5% 9.5%
The Company does not have a significant exposure to foreign currency denominated debt obligations. At December 31, 1999, all long-term debt is U.S. dollar denominated except for $832,000 that is Mexican peso denominated. 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 and Texas. 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. SEASONALITY Demand for UniMark's citrus and tropical fruit products is strongest during the fall, winter and spring when many seasonal fresh products are not readily available for sales in supermarkets in North America. In 18 19 addition, a substantial portion of UniMark's exports to Japan are processed and shipped during the first and fourth quarters each year. Management believes UniMark's quarterly net sales will continue to be impacted by this pattern of seasonality. IMPACT OF YEAR 2000 In prior years, the Company discussed the nature and progress of its plan to become Year 2000 ready. In late 1999, the Company completed its remediation and testing of systems. As a result of those planning and implementation efforts, the Company experienced no significant disruptions in mission critical information technology and non-information technology systems and believes those systems successfully responded to the Year 2000 date change. The Company expensed approximately $50,000 during 1999 in connection with remediating its systems. The Company is not aware of any material problems resulting from Year 2000 issues, either with its products, its internal systems, or the products and services of third parties. The Company will continue to monitor its mission critical computer applications and those of its suppliers and vendors throughout the year 2000 to ensure that any latent Year 2000 matters that may arise are addressed promptly. LIQUIDITY AND CAPITAL RESOURCES At December 31, 1999, cash and cash equivalents totaled $4.1 million, a $0.1 million decrease from year-end 1998. During 1999, operating activities used cash of $1.1 million to fund operations. The Company's investing activities for 1999 resulted in a net utilization of cash of $2.5 million. The Company's net use of cash in 1999 was due to expenditures of $6.0 million for property and equipment offset by $3.5 million of net proceeds from the sale of assets and businesses in 1999. The Company's financing activities provided net cash of $5.0 million from the sale of common stock. Cash was utilized to reduce net long-term debt by $1.5 million. 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. The Company has existing loan agreements with Cooperative Centrale Raiffeisen-Boerenleenbank B.A. ("Rabobank Nederland") to provide short-term dollar denominated debt of up to $15.9 million at December 31, 1999. These agreements are as follows: (i) a revolving credit agreement to provide up to $9.5 million of committed funds collateralized by finished goods inventories in the U.S. and accounts receivable from U.S. customers and (ii) revolving credit agreements to provide discretionary uncommitted lines up to $7.9 million collateralized by finished goods inventories in Mexico and accounts receivable from export sales by the Company's Mexican subsidiaries. At December 31, 1999, the Company had outstanding loan balances under the revolving credit agreements of $11.1 million. Subsequent to December 31, 1999, the U.S. revolving credit agreement was reduced to $8.0 million. Effective January 1, 2000, the interest rates associated with these lines increased by 200 basis points. 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. As of December 31, 1999, the Company was not in compliance with certain covenants of its loan agreements with its primary lender including covenants that restrict transactions with affiliates and 19 20 consolidated financial performance ratios relative to working capital, total debt and debt service and, accordingly, was in default of these agreements. The Company has received waivers of these defaults from the primary lender. In addition, the primary lender has committed to extend the maturity date of the agreements to January 1, 2001 and make certain modifications and amendments to the agreements covenants and conditions. The amendment to the covenants will eliminate the fixed charge and interest coverage ratios, increase the tangible net worth covenant and modify the current ratio and total liabilities to tangible net worth ratio to reduce required levels. The amendment also requires the Company to obtain at least $2.5 million in new equity by July 1, 2000, increases the interest rates associated with the outstanding borrowings effective June 1, 2000 and slightly modifies the borrowing base formulas. In recent years, the Company has relied upon bank financing, principally short term, to finance its working capital and certain of its capital expenditure needs. Although these revolving credit facilities with Rabobank Nederland are being extended until January 1, 2001, no assurances can be given that Rabobank Nederland will continue to renew such loan facilities or that such loans will not be called in the event of default due to noncompliance with the loan covenants during the year 2000. Presently, the Company is in discussions with other financial institutions to replace existing working capital facilities and to establish a permanent long-term debt facility. Although no assurances can be given, the Company believes it will be able to obtain such working capital and long-term debt facilities on terms acceptable to the Company. The failure to obtain such facilities could have a material adverse effect on the Company and its ability to continue as a going concern. In December, 1996, the Company entered into a deposit, operation and stock purchase agreement with the owners of Frutalamo, S.A. de C.V. ("Frutalamo") for the operation of the Frutalamo juice processing plant. Pursuant to the terms of the agreement, the Company has paid a non-refundable deposit of $1.9 million for the right to purchase all the issued and outstanding shares of stock of Frutalamo from its existing shareholders. The agreement also required the Company to pay a contractual penalty of $1.0 million to the owners of Frutalamo in the event a purchase of the shares is not completed. The Company has subsequently entered into a letter of intent to purchase the shares which applies the previous deposits paid to Frutalamo as the down payment and waives the contractual penalty of $1.0 million. 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 Supply Contract, 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 2013. The status of the Lemon Project as of December 31, 1999 is as follows:
Hectares Acres -------- ----- Land - Acquired 3,032 7,489 Unpurchased or subcontracted 468 1,156 Preparation and Planting - Prepared and planted 2,340 5,780 Prepared but not planted 460 1,136 Acquired land to be prepared and planted 232 573 Expenditures - Total projected expenditures $18.5 million Incurred since inception 10.5 million Projected for year 2000 and beyond 8.0 million
20 21 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. During the term of the operating agreement, which has been extended to January 1, 2001, the Company has the option to buy the IHMSA facility for $4.5 million. Since, under the terms of the operating agreement, the Company would benefit from the reduction of IHMSA's debt, the Company elected to advance funds to IHMSA to retire certain of its outstanding debt. At December 31, 1999 amounts due from IHMSA of $1,602,000 includes $1,481,000 that was a cash advance used to reduce IHMSA's outstanding debt. This amount will be applied to the purchase price when the Company elects to purchase the facility pursuant to its purchase option, which is expected to occur during 2000. The failure or inability of the Company to exercise its purchase option could have a material adverse affect on the Company. The Company's cash requirements for the remainder of 2000 and beyond will depend primarily upon the level of sales and gross margins, expenditures for capital equipment and improvements, investments in agricultural projects, the timing of inventory purchases, increased acceptance of recently introduced products and necessary reductions of debt. Presently, the Company is in discussions with other financial institutions regarding further extending or replacing its existing debt facilities. Although no assurances can be given, the Company believes it will be able to obtain such debt facilities on terms acceptable to the Company. The failure to obtain such debt facilities could have a material adverse effect on the Company. UniMark believes that anticipated revenue from operations, the Commitment described below and existing and future debt facilities will be adequate for its working capital requirements for at least the next twelve months. On February 21, 2000, the Company entered into a $5.1 million (48,000,000 Mexican pesos) nine year term financing agreement (the "Agreement") with Fondo de Capitalizacion e Inversion del Sector Rural ("FOCIR"), a public Trust of the Mexican Federal Government that invests in agricultural projects with long-term viability. Under the terms of the Agreement, FOCIR will provide up to $5.1 million to fund additional lemon project costs, which will include land preparation, planting, equipment, irrigation systems and grove maintenance. This financing represents the purchase of an equity interest in GISE of approximately 17.6%. Amounts advanced under this agreement will be classified outside equity due to mandatory redemption provisions. The terms of the Agreement provide for the calculation and accrual of annual accretion using one of two alternative methods. The first method determines accretion by multiplying the year's Mexican inflation index rate plus 4.2% by the FOCIR balance. The second method determines annual accretion by multiplying GISE's shareholders equity, using Mexican generally accepted accounting principles, at the end of the year by a factor of 1.036 and then multiplying by the FOCIR equity interest percent. The calculation that results in the greater amount will be the annual accretion amount. Accretion accumulates annually over the nine-year period of the Agreement and is paid only upon expiration or early termination of the Agreement. The Agreement also contains, among other, certain provisions relating to GISE's future financial performance, the establishment of an irrevocable trust guaranteeing the FOCIR loan, which includes transferring to the trust GISE common shares that represent 33.4% of GISE's outstanding shares and the governance of GISE. On April 17, 2000, the Company entered into a Stand-by Funding Commitment (the "Commitment") with its largest shareholder (the "Shareholder") to sell, at the Company's option, on or before July 1, 2001, a $2.5 million 12% Convertible Subordinated Debenture (the "Debenture") subject to certain terms and conditions. The Shareholder, upon purchase, has the option at anytime during the a five year period to convert the Debenture into Company common stock at 75% of the average closing prices for the Company's common stock over a thirty-day period prior to exercise. The Commitment will terminate upon completion of specified future financial transactions by the Company. 21 22 New Accounting Pronouncement: In June 1998, Statements of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities ("FAS 133") was issued. This pronouncement standardizes the accounting for derivative instruments by requiring that an entity recognize those items as assets or liabilities in the financial statements and measure them at fair value. FAS 133 is required to be adopted by the Company for all quarters of fiscal years beginning after June 15, 2000. The Company is currently reviewing the requirements of FAS 133 and assessing the impact on its consolidated financial statements ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. INDEX TO FINANCIAL STATEMENTS
PAGE ---- Report of Independent Auditors............................................................... 23 Consolidated Balance Sheets as of December 31, 1998 and 1999................................. 24 Consolidated Statements of Operations for the Years Ended December 31, 1997, 1998 and 1999......................................................... 25 Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 1997, 1998 and 1999......................................................... 26 Consolidated Statements of Cash Flows for the Years Ended December 31, 1997, 1998 and 1999......................................................... 27 Notes to Consolidated Financial Statements................................................... 28
22 23 REPORT OF INDEPENDENT AUDITORS The Board of Directors and Shareholders The UniMark Group, Inc. We have audited the accompanying consolidated balance sheets of The UniMark Group, Inc. (the Company) as of December 31, 1998 and 1999, and the related consolidated statements of operations, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of The UniMark Group, Inc. at December 31, 1998 and 1999, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1999, in conformity with accounting principles generally accepted in the United States. ERNST & YOUNG LLP Dallas, Texas April 19, 2000 23 24 THE UNIMARK GROUP, INC. CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE AMOUNTS)
DECEMBER 31, -------------------------- 1998 1999 ----------- ----------- ASSETS Current assets: Cash and cash equivalents .......................................... $ 4,247 $ 4,068 Accounts receivable -- trade, net of allowance of $657 in 1998 and $378 in 1999 ........................................... 9,270 7,273 Accounts receivable - other ........................................ 731 478 Notes receivable ................................................... -- 762 Inventories ........................................................ 22,320 15,521 Income and value added taxes receivable ............................ 1,560 1,478 Prepaid expenses ................................................... 1,315 1,011 ----------- ----------- Total current assets ....................................... 39,443 30,591 Property, plant and equipment, net ................................... 41,347 41,387 Deferred income taxes ................................................ 1,365 2,788 Goodwill, net ........................................................ 6,425 2,958 Identifiable intangible assets ....................................... 1,535 166 Due from related parties ............................................. 1,651 1,602 Notes receivable, less current portion ............................... -- 1,060 Other assets ......................................................... 1,747 1,800 ----------- ----------- Total assets ............................................... $ 93,513 $ 82,352 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Short-term borrowings .............................................. $ 21,654 $ 21,551 Current portion of long-term debt .................................. 763 898 Accounts payable - trade ........................................... 5,156 3,209 Accrued liabilities ................................................ 3,484 4,359 Income taxes payable ............................................... 38 104 Deferred income taxes .............................................. 5,873 5,333 ----------- ----------- Total current liabilities .................................. 36,968 35,454 Long-term debt, less current portion ................................. 7,833 6,207 Commitments 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) (23,214) ----------- ----------- Total shareholders' equity ................................. 48,712 40,691 ----------- ----------- Total liabilities and shareholders' equity ................. $ 93,513 $ 82,352 =========== ===========
See accompanying notes. 24 25 THE UNIMARK GROUP, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
YEAR ENDED DECEMBER 31, 1997 1998 1999 ----------- ----------- ----------- Net sales ........................................................... $ 65,427 $ 72,311 $ 66,223 Cost of products sold ............................................... 52,023 56,163 58,593 ----------- ----------- ----------- Gross profit ........................................................ 13,404 16,148 7,630 Selling, general and administrative expenses ........................ 19,009 14,390 16,797 ----------- ----------- ----------- Income (loss) from operations ....................................... (5,605) 1,758 (9,167) Other income (expense): Interest expense .................................................. (3,220) (4,087) (3,013) Interest income ................................................... 432 133 309 Foreign currency translation loss ................................. (912) (112) (946) ----------- ----------- ----------- (3,700) (4,066) (3,650) ----------- ----------- ----------- Loss before disposal of certain operations, income taxes and extraordinary gain ................... (9,305) (2,308) (12,817) Operating results of certain operations disposed of during 1999: Net sales .................................................... 12,985 16,095 13,658 Costs and expenses ........................................... (13,464) (15,973) (13,785) ----------- ----------- ----------- Operating income (loss) ...................................... (479) 122 (127) Loss on disposal of certain operations ............................ -- -- (1,517) ----------- ----------- ----------- (479) 122 (1,644) ----------- ----------- ----------- Loss before income taxes and extraordinary gain ..................... (9,784) (2,186) (14,461) Income tax expense (benefit) ........................................ 35 779 (1,465) ----------- ----------- ----------- Loss before extraordinary gain ...................................... (9,819) (2,965) (12,996) Extraordinary gain on forgiveness of debt, net of applicable income taxes of $109 in 1997 ........................... 139 -- -- ----------- ----------- ----------- Net loss ............................................................ $ (9,680) $ (2,965) $ (12,996) =========== =========== =========== Basic and diluted earnings (loss) per share: Loss before extraordinary item .................................... $ (1.15) $ (0.29) $ (0.97) Extraordinary item ................................................ 0.02 -- -- ----------- ----------- ----------- Net loss .......................................................... $ (1.13) $ (0.29) $ (0.97) =========== =========== ===========
See accompanying notes. 25 26 THE UNIMARK GROUP, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
ADDITIONAL RETAINED COMMON PAID-IN EARNINGS SHARES STOCK CAPITAL (DEFICIT) TOTAL ------------ ------------ ------------ ------------ ---------- Balance at December 31, 1996 ................. 8,561,333 $ 86 $ 45,287 $ 2,427 $ 47,800 Exercise of options ........................ 37,500 -- 132 -- 132 Net loss ................................... -- -- -- (9,680) (9,680) ------------ ------------ ------------ ------------ ---------- Balance at December 31, 1997 ................. 8,598,833 86 45,419 (7,253) 38,252 Exercise of options ........................ 10,000 -- 35 -- 35 Additional shares issued in acquisition of Deli-Bon ............................... 23,993 -- -- -- -- Cash paid to former Simply Fresh shareholders pursuant to arbitration award ..................................... -- -- (1,005) -- (1,005) Shares issued for cash in a private offering, net of offering expenses ........ 3,305,500 33 14,362 -- 14,395 Net loss ................................... -- -- -- (2,965) (2,965) ------------ ------------ ------------ ------------ ---------- Balance at December 31, 1998 ................. 11,938,326 119 58,811 (10,218) 48,712 Shares issued for cash in a private offering, net of offering expenses ....... 2,000,000 20 4,955 -- 4,975 Net loss ................................... -- -- -- (12,996) (12,996) ------------ ------------ ------------ ------------ ---------- Balance as of December 31, 1999 .............. 13,938,326 $ 139 $ 63,766 $ (23,214) $ 40,691 ============ ============ ============ ============ ==========
See accompanying notes. 26 27 THE UNIMARK GROUP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
YEAR ENDED DECEMBER 31, 1997 1998 1999 ----------- ----------- ----------- OPERATING ACTIVITIES Net loss ..................................................... $ (9,680) $ (2,965) $ (12,996) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Loss on disposal of certain operations in 1999 ........... -- -- 1,517 Depreciation ............................................. 2,625 3,031 2,142 Amortization of intangible assets ........................ 840 590 1,132 Deferred income taxes .................................... 634 290 (1,963) Extraordinary gain ....................................... (248) -- -- Loss on disposal or impairment of plant and equipment .... -- 1,840 655 Cash provided by (used in) operating working capital: Receivables ........................................... (2,313) 3,066 2,332 Inventories ........................................... (6,315) 532 6,799 Prepaid expenses ...................................... (834) 290 304 Accounts payable and accrued liabilities .............. 1,846 114 (1,072) Income taxes payable .................................. (854) (2) 66 ----------- ----------- ----------- Net cash provided by (used in) operating activities .......... (14,299) 6,786 (1,084) INVESTING ACTIVITIES Purchases of property, plant and equipment ................... (11,578) (5,214) (5,955) Proceeds from sale of businesses in 1999 ..................... -- -- 3,072 Proceeds from sale of plant and equipment .................... -- -- 411 (Increase) decrease in intangible assets ..................... 89 (121) -- Decrease (increase) in amounts due from related parties ...... (1,046) 27 49 (Increase) in other assets ................................... (260) (410) (53) ----------- ----------- ----------- Net cash used in investing activities ........................ (12,795) (5,718) (2,476) FINANCING ACTIVITIES Net proceeds from the issuance of common shares .............. 132 13,425 4,975 Increase (decrease) in short-term debt ....................... 22,982 (9,798) (103) Proceeds from long-term debt ................................. 2,613 240 334 Payments of long-term debt ................................... (1,664) (1,925) (1,825) ----------- ----------- ----------- Net cash provided by financing activities .................... 24,063 1,942 3,381 ----------- ----------- ----------- Net increase (decrease) in cash and cash equivalents ......... (3,031) 3,010 (179) Cash and cash equivalents at beginning of year ............... 4,268 1,237 4,247 ----------- ----------- ----------- Cash and cash equivalents at end of year ..................... $ 1,237 $ 4,247 $ 4,068 =========== =========== =========== SUPPLEMENTAL CASH FLOW INFORMATION Interest paid .............................................. $ 3,170 $ 4,059 $ 3,739 =========== =========== =========== Income taxes received ...................................... $ 470 $ 65 $ -- =========== =========== ===========
See accompanying notes. 27 28 THE UNIMARK GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1999 NOTE 1 SIGNIFICANT ACCOUNTING POLICIES Description of Business: The Company is a producer and marketer of Sunfresh(R) brand citrus and tropical fruit products. 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"), Flavorfresh Limited ("Flavorfresh", formerly UniMark Foods Europe Limited) and Grupo Industrial Santa Engracia, S.A. de C.V. ("GISE"). Going Concern Considerations: The Company experienced significant losses from operations during 1999 consuming $1.1 million of cash in operating activities. In addition, as discussed in Notes 9 and 15, the Company has several projects and commitments requiring substantial capital. The Company's cash requirements for 2000 and beyond will depend primarily upon the level of sales and gross margins, expenditures for capital equipment and improvements, investments in agricultural projects, the timing of inventory purchases, increased acceptance of recently introduced products and necessary reductions of debt. The Company has, in recent years, relied upon sales of its common stock to its principal shareholder and bank financing to finance its working capital and certain of its capital expenditure needs (see Notes 7 and 8). Although the Company is exploring various financing options, possibly including a sale or other independent financing of one of its lines of business, and believes sufficient capital will ultimately be available, there can be no assurances that adequate financing or capital can be obtained on acceptable terms or at all. The inability to obtain sufficient debt or equity capital for these projects and commitments and for working capital requirements could have a material adverse effect on the Company and its projects including the realization of the amounts capitalized, deferred costs and deposits related to these projects and commitments. The Company's revolving credit facilities were scheduled to mature on March 31, 2000 but, in a commitment letter dated April 13, 2000, the lender has agreed to extend the maturity to January 1, 2001. In addition, the primary lender has agreed to make certain modifications and amendments to the agreements covenants and conditions. The amendment to the covenants will eliminate the fixed charge and interest coverage ratios, increase the tangible net worth covenant and modify the current ratio and total liabilities to tangible net worth ratio to reduce required levels. The amendment also requires the Company to obtain at least $2.5 million in new equity by July 1, 2000, increases the interest rates associated with the outstanding borrowings effective June 1, 2000 and slightly modifies the borrowing base formulas. Although the Company's revolving credit facilities are being extended until January 1, 2001, no assurances can be given that the lender will continue to renew such loan facilities and, perhaps the Company's ability to continue as a going concern. Risk Factors: The Company obtains a substantial amount of its raw materials from third-party suppliers throughout various growing regions in Mexico and Texas. 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. 28 29 Principles of Consolidation: The consolidated financial statements include the accounts of The UniMark Group, Inc. and its subsidiaries, all of which are wholly owned. All significant intercompany accounts and transactions have been eliminated. Revenue Recognition: The Company recognizes revenue upon shipment of its products to customers. Foreign Operations: A significant portion of the Company's operations are located in Mexico and a significant portion of the Company's fruit is procured in Mexico. In addition, substantially all of the Company's Mexican employees are affiliated with labor unions. As is typical in Mexico, wages are renegotiated every year while other terms are negotiated every two years. Recently, Mexico has faced turbulent political and economic times. Should political unrest spread or political leadership or other causes vastly change economic conditions in Mexico, the Company's operations could be adversely affected. Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions in determining the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company is vertically integrated for a portion of its raw materials. Such inventory is recorded at the lower of cost or market which involves significant estimates. Factors such as weather, pestilence, disease or other natural disasters could affect estimated yields causing actual results to differ from those estimated. Cash Equivalents: The Company considers all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents. Concentration of Credit Risk: The Company processes and sells niche citrus and tropical fruit products, citrus juices and oils and other specialty food ingredients to customers in the food service and retail industries in the United States, Europe and Japan. The Company performs periodic credit evaluations of its customers' financial condition and generally does not require collateral. Trade receivables generally are due within 30 days. Credit losses have been within management's expectations. No one customer accounted for more than 10% of the Company's net sales for the years ended December 31, 1997 and 1998 and one customer accounted for 12.3% of net sales for the year ended December 31, 1999. Advertising Costs: The Company expenses advertising costs as incurred. Advertising expenses were $262,000, $369,000 and $207,000 for the years ended December 31, 1997, 1998 and 1999, respectively. Inventories: Inventories held in the United States are carried at the lower of cost or market using the first-in, first-out method. Mexican inventories are valued at the lower of cost or market using average cost. Property, Plant and Equipment: Property, plant and equipment are stated at cost. Depreciation is computed by the straight-line method over the following estimated useful lives: Buildings...................................... 20 years Pineapple orchards............................. 2 years Machinery and equipment........................ 5-12.5 years Transportation equipment....................... 5-7 years Computer equipment............................. 4-7 years Office equipment............................... 5-10 years Automobiles.................................... 3-5 years
The Company reviews its property, plant and equipment and other non-current assets for impairment when changes in circumstances indicate that the carrying amount of an asset may not be recoverable. 29 30 Impairment is measured as the amount by which the carrying amount of the asset exceeds the estimated fair value of the asset less disposal costs. The Company capitalizes costs incurred to plant and maintain orchards until they become commercially productive. The capitalized costs of the Company's pineapple orchards are depreciated over a two-year period. The Company's lemon orchards are expected to become commercially productive by 2003 at which time they will begin to be depreciated over their estimated useful lives. Foreign Currency Translation: The functional currency of the Company and its subsidiaries is the United States dollar. Transactions in foreign currency are recorded at the prevailing exchange rate on the day of the related transaction. Assets and liabilities denominated in foreign currency are remeasured to dollars at the prevailing exchange rate as of the balance sheet date. Exchange rate differences are reflected in the current year's operations. 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 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. Income Taxes: Deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Reclassifications: In prior periods, the Company classified freight expense and discounts and allowances associated with customer invoicing as operating expenses. In connection with the Company's further automation of its order entry and pricing systems to customers and in improving changes in controls over these costs, these expenses are now being classified differently in the financial statements. Discounts and allowances are now classified as a reduction in net sales and freight expense as a charge to cost of products sold. All prior and current year operating results have been reclassified to conform to the new presentation. As discussed in Note 2 below, the Company disposed of several operations in 1999. The consolidated statements of operations have been reclassified for all years presented to disclose separately the operating results of the disposed operations. New Accounting Pronouncement: In June 1998, Statements of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities ("FAS 133") was issued. This pronouncement standardizes the accounting for derivative instruments by requiring that an entity recognize those items as assets or liabilities in the financial statements and measure them at fair value. FAS 133 is required to be adopted by the Company for all quarters of fiscal years beginning after June 15, 2000. The Company is currently reviewing the requirements of FAS 133 and assessing the impact on its consolidated financial statements. 30 31 NOTE 2 DISPOSAL OF CERTAIN OPERATIONS In September 1999, the Board of Directors of the Company approved a strategic plan for its packaged fruit segment designed to maximize shareholder value by leveraging the Company's manufacturing facilities in Mexico with its Sunfresh (R) brand and distribution network in the United States. Two of the Company's subsidiaries, Les Produits Deli-Bon Inc. ("Deli-Bon") and Simply Fresh Fruit, Inc. ("Simply Fresh") primarily sold private label fruit salads to the food service industry and non-branded fresh cut fruit. Because the Company believed that these lines of business offered less attractive growth opportunities and lower operating margins than its Sunfresh (R) brand product lines and did not further the Company's strategic objectives, the decision was reached to divest these subsidiaries. During October, 1999, the Company completed the sale of its Canadian subsidiary, Deli-Bon, in a transaction valued at approximately $1.4 million, and sold substantially all the assets of its California based subsidiary, Simply Fresh, in a transaction valued at approximately $3.6 million. Both transactions included cash payments at closing and short and long-term secured notes. In addition, the Simply Fresh sale included the forgiveness of the remaining payments under a certain covenant-not-to-compete and the return to the Company of 68,182 shares of UniMark common stock owned by the principal buyer. These transactions resulted in the Company recording losses of approximately $1.5 million in 1999. The results of operations for both Deli-Bon and Simply Fresh for the three years ended 1997, 1998 and 1999 have been reclassified from sales and expenses and included in the consolidated statements of operations as "Operating results of certain businesses disposed of during 1999". Additionally, the reportable segment information for packaged fruit in Note 16 has been restated to reflect the above reclassifications. NOTE 3 EARNINGS PER SHARE The following table sets forth the computation of basic and diluted earnings (loss) per share for loss before extraordinary gain:
YEAR ENDED DECEMBER 31, -------------------------------------------- 1997 1998 1999 ------------ ------------ ------------ (IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS) NUMERATOR Loss before extraordinary gain .................. $ (9,819) $ (2,965) $ (12,996) ============ ============ ============ DENOMINATOR Denominator for basic earnings per share - Weighted average shares ....................... 8,590 10,131 13,462 ============ ============ ============ Basic and diluted loss per share ................ $ (1.15) $ (0.29) $ (0.97) ============ ============ ============
At December 31, 1997, 1998 and 1999 the Company had options and warrants outstanding of 668,000, 2,447,000 and 528,000, respectively, that were not included in their respective year's per share calculations because their effect would have been anti-dilutive. 31 32 NOTE 4 INVENTORIES Inventories consist of the following :
DECEMBER 31, ---------------------- 1998 1999 --------- -------- (IN THOUSANDS) Finished goods: Cut fruits............................. $ 12,212 $ 6,750 Juice and oils......................... 1,663 2,814 --------- -------- 13,875 9,564 Pineapple orchards........................ 2,964 1,717 Raw materials and supplies................ 4,376 2,995 Advances to suppliers..................... 1,105 1,245 --------- -------- Total........................... $ 22,320 $ 15,521 ========= ========
NOTE 5 PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment, at cost, consists of the following:
DECEMBER 31, ---------------------- 1998 1999 --------- -------- (IN THOUSANDS) Land............................................... $ 3,223 $ 3,482 Orchards........................................... Pineapple............................. 1,000 1,000 Lemon................................. 4,022 8,227 Construction in progress........................... 2,121 304 Buildings and improvements......................... 13,562 12,549 Machinery and equipment............................ 25,419 24,797 --------- -------- 49,347 50,359 Accumulated depreciation........................... 8,000 8,972 --------- -------- Total.................................... $ 41,347 $ 41,387 ========= ========
Depreciation expense was $2,625,000, $3,031,000 and $2,142,000 for the years ended December 31, 1997, 1998 and 1999, respectively. At December 31, 1998 and 1999, the Company recorded charges of $1.3 million and $0.8 million to reduce the carrying value of its pineapple orchards based on current crop estimates over the next two years. These charges are reflected in cost of products sold. In addition, the Company recorded a charge of $540,000 in 1998 and $714,000 in 1999 to write-off certain other assets, primarily related to closed plant facilities, which are reflected in selling, general and administrative expenses. All of these charges were related to the Company's packaged fruit operations. 32 33 NOTE 6 IDENTIFIABLE INTANGIBLE ASSETS Identifiable intangible assets consist of the following:
DECEMBER 31, ---------------------- 1998 1999 --------- -------- (IN THOUSANDS) Covenants not to compete............................. $ 1,628 $ 325 Tradename............................................ 704 -- Other................................................ 352 158 --------- -------- 2,684 483 Less accumulated amortization........................ 1,149 317 --------- -------- $ 1,535 $ 166 ========= ========
The covenants not to compete relate to agreements with the former owner of an acquired business. These amounts are being amortized on the straight-line method over a five-year term of this agreement. As a result of reduced use, the tradename related to the Flavor Fresh brand name became of limited value in 1999 and was written off. NOTE 7 SHORT-TERM DEBT The Company has existing loan agreements with Cooperative Centrale Raiffeisen-Boerenleenbank B.A. ("Rabobank Nederland") to provide short-term dollar denominated debt of up to $24.5 million at December 31, 1998 and $15.9 million at December 31, 1999. These agreements are as follows: (i) a revolving credit agreement to provide up to $9.5 million of committed funds collateralized by finished goods inventories in the U.S. and accounts receivable from U.S. customers and (ii) revolving credit agreements to provide discretionary uncommitted lines up to $7.9 million collateralized by finished goods inventories in Mexico and accounts receivable from export sales by the Company's Mexican subsidiaries. At December 31, 1998 and 1999, the Company had outstanding loan balances under the revolving credit agreements of $15.2 million and $11.1 million, respectively. Subsequent to December 31, 1999, the U.S. revolving credit agreement was reduced to $8.0 million. Effective January 1, 2000, the interest rates associated with these lines increased by 200 basis points. 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. As of December 31, 1999, the Company was not in compliance with certain covenants of its loan agreements with its primary lender including consolidated financial performance ratios relative to working capital, total debt and debt service and, accordingly was in default of these agreements. The Company has received waivers of these defaults from the primary lender. In addition, the primary lender has committed to extend the maturity date of the agreements to January 1, 2001, and make certain modifications and amendments to the agreements' covenants and conditions. The amendment to the covenants will eliminate the fixed charge and interest coverage ratios, increase the tangible net worth covenant and modify the current ratio and total liabilities to tangible net worth ratio to reduce required levels. The amendment also requires the Company to obtain at least $2.5 million in new equity by July 1, 2000, increases the interest rates associated with the outstanding borrowings effective June 1, 2000 and slightly modifies the borrowing base formulas. In November 1997, ICMOSA entered into a three year unsecured loan agreement with a Mexican bank for short-term dollar denominated debt of up to $6.0 million. Advances under this loan agreement are 33 34 generally for a period of 60 to 90 days and are personally guaranteed by certain shareholders of the Company. At December 31, 1999, the Company had outstanding loan balances under this agreement of $6.0 million. During 1999 ICMOSA entered into a loan agreement with a Mexican bank for short-term pre-export financing. At December 31, 1999 the Company had outstanding loan balances under this agreement of $1.6 million. In addition to the above, ICMOSA also has other short-term borrowings of $0.8 million with a Mexican bank. In December 1998, GISE entered into an unsecured loan agreement with a Mexican bank for short-term dollar denominated debt in the amount of $2.5 million. This loan is personally guaranteed by certain shareholders of the Company and is scheduled to mature in 2000. At December 31, 1999, $2 million was outstanding under the agreement. The weighted-average interest rate on short-term borrowings as of December 31, 1998 and 1999 was 9.1% and 10.1%, respectively. NOTE 8 LONG-TERM DEBT Long-term debt consists of the following:
DECEMBER 31, ----------------------- 1998 1999 ---------- ---------- (IN THOUSANDS) Note payable to bank, collateralized by plant and equipment in Mexico; interest at Libor + 5% payable quarterly with annual principal payments, unpaid principal due March 2002 ............. $ 4,000 $ 3,199 Note payable to bank, collateralized by certain warehouse property and improvements; principal and interest at Prime payable monthly, unpaid principal and interest due September 2012 ............................................................ 1,997 1,931 Non-compete covenant obligations, discounted at 9%, payable monthly through May 2001 ........................................ 671 156 Note payable to bank, collateralized by plant and equipment in Mexico; principal and interest at 18.5% payable monthly; unpaid principal and interest due November 2004 ........................ 881 832 Note payable to bank; collateralized by plant and equipment in Mexico; principal and interest at Libor + 8% payable monthly; unpaid principal and interest due December 2001 ................. 490 440 Other notes payable ............................................... 557 547 ---------- ---------- 8,596 7,105 Less current portion .............................................. 763 898 ---------- ---------- $ 7,833 $ 6,207 ========== ==========
Certain of the loan contracts establish restrictions and obligations with respect to the application of funds and require maintenance of insurance of the assets and timely presentation of financial information. All long-term debt at December 31, 1999 is U.S. dollar denominated except for $832,000 that is Mexican peso denominated. Based on interest rates provided by the Company's long-term debt and the floating rates provided on its short-term borrowings, the Company believes the carrying amounts of its short and long-term debt approximate their fair value. During the year ended December 31, 1999, interest expense of $597,000 was capitalized as a portion of the Company's long-term orchard development costs. 34 35 Maturities of long-term debt are as follows:
(IN THOUSANDS) 2000........................... $ 898 2001........................... 817 2002........................... 3,240 2003........................... 324 2004........................... 337 Thereafter..................... 1,489 ------- $ 7,105 =======
NOTE 9 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 $3.4 million of outstanding debt. The Company is responsible for all raw material and operating costs and the sale of the finished goods produced at the IHMSA plant. Payments made pursuant to the operating agreement were $42,000, $470,308 and $495,924 during the years ended December 31, 1997, 1998 and 1999, respectively. The Vaquero family owns collectively an approximate 24% interest in IHMSA. Certain members of the Vaquero family are officers, shareholders and directors of the Company. Under the agreement, which has been extended to January 1, 2001, the Company has the option to buy the IHMSA facility for $4.5 million. The Company has 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, 1999 amounts due from IHMSA of $1,602,000 includes $1,481,000 that was a cash advance used to reduce IHMSA's outstanding debt. This amount will be applied to the purchase price when the Company purchases the facility pursuant to its purchase option, which is expected to occur during 2000. Effective July 1, 1995, the Company entered into a ten-year operating agreement with Empacadora de Naranjas Azteca, S.A. de C.V. ("Azteca"), to operate a processing plant in Montemorelos, Nuevo Leon, Mexico. The operating agreement provides for payments in the amount of (i) interest on existing debt of approximately $220,000 with credit institutions, (ii) asset tax and (iii) annual property tax. Prior to this time, Azteca "co-packed" chilled grapefruit sections and mango slices for the Company. The Vaquero family owns collectively an approximate 14.3% interest in Azteca. Payments made pursuant to the operating agreement were $61,000, $-0- and $-0- during the years ended December 31, 1997, 1998 and 1999, respectively. During the term of the operating agreement, the Company has the right of first refusal to buy the Azteca facility at its then fair market value. In November 1995, the Company entered into a lease agreement with Loma Bonita Partners, a Texas general partnership, for approximately 260 hectares (642 acres) of land located in Loma Bonita, Oaxaca, Mexico for the development of citrus groves. The lease commenced in December 1995 and expires after ten years. Loma Bonita Partners is 50% owned by an officer, who is also a director and shareholder of the Company. The Company believes that said lease agreement is on terms no less favorable to the Company than would be available from unrelated third parties. Rent expense on this lease was $78,000, for each of the years ended December 31, 1997, 1998 and 1999. 35 36 Receivable balances with related parties are as follows:
DECEMBER 31, ------------------ 1998 1999 -------- ------- (IN THOUSANDS) Accounts receivable: Empacadora de Naranjas Azteca, S.A. de C.V. (Azteca).............. $ 170 $ -- Industrias Horticolas de Montemorelos, S.A. de C.V. (IHMSA)....... 1,481 1,602 ------ ------ $1,651 $1,602 ====== ======
The Company operates a 144 acre grapefruit grove located close to the ICMOSA plant in Montemorelos pursuant to a ten-year operating agreement that expires in 2000. Per the agreement, the Company operates the grove and purchases all the grapefruit produced at a formula price tied to purchases from unrelated third parties. The grove is owned by a partnership that consists primarily of shareholders of Azteca. The Vaquero family owns a 14.3% interest in this partnership. The Company believes that said arrangement is on terms no less favorable to the Company than would be available from unrelated third parties. Fruit purchases from the grove were $190,000, $286,000 and $146,000 for the years ended December 31, 1997, 1998 and 1999, respectively. During 1997, 1998 and 1999, the Company paid Jakes Jordaan, PLLC (and its predecessor Jordaan and Pennington, PLLC) amounts of $179,962, $310,182 and $170,379, respectively, for legal services rendered. Mr. Jordaan, a director and, commencing in February 1998, chairman of the Company, is a member of Jakes Jordaan, PLLC. At December 31, 1999 the Company had a promissory note receivable from a certain director in the amount of $186,000. This promissory note is unsecured and bears interest at the rate of 10% per annum and is due on demand. NOTE 10 LEASES The Company leases buildings, various plant facilities, certain equipment and citrus groves under operating leases. The Isla plant lease is for a period of ten years, expiring in 2005. The San Rafael plant lease is for a period of nine years, expiring in 2003, and contains the right of first refusal to purchase the facility at its then fair market value. The lease for the Lawrence, Massachusetts plant facility is for an initial period of six years, expiring in 2002, and contains a purchase option exercisable during the term of the lease for the then fair market value of the property. The Company entered into a sublease agreement for the idle Lawrence plant facility commencing April 1, 1999 at an amount approximating its obligations under the lease. The Company has under lease approximately 926 acres of citrus groves in Mexico for periods of ten to fifteen years expiring in 2005 and 2010. As described in Note 9, the Company leases a 642 acre citrus grove from related parties. The related party citrus grove lease expires in 2005. 36 37 Future minimum payments under non-cancelable operating leases with initial terms of one year or more at December 31, 1999, consist of the following:
RELATED PARTIES OTHER TOTAL -------- --------- --------- (IN THOUSANDS) 2000............. $ 78 $ 598 $ 676 2001............. 78 391 469 2002............. 78 406 484 2003............. 78 398 476 2004............. 78 393 471 Thereafter....... 78 53 131 -------- --------- --------- $ 468 $ 2,239 $ 2,707 ======== ========= =========
Rent expense was $1,234,000, $1,382,000 and $1,543,000 for the years ended December 31, 1997, 1998 and 1999, respectively. NOTE 11 INCOME TAXES Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax assets and liabilities as of December 31, 1998 and 1999 are as follows:
DECEMBER 31, ---------------------- 1998 1999 --------- --------- (IN THOUSANDS) Deferred tax assets: Net operating loss carryforwards ............ $ 4,897 $ 8,877 Inventories ................................. 424 571 Asset tax credit ............................ 928 1,006 Credit available to offset Mexican taxes .... 237 277 Accrued expenses ............................ 145 112 Bad debt reserve ............................ 215 282 Intangible assets ........................... 345 597 Other ....................................... 329 113 --------- --------- Total deferred tax assets ..................... 7,520 11,835 Less U.S. valuation allowance ................. (3,868) (6,591) --------- --------- Net deferred tax assets ....................... $ 3,652 $ 5,244 ========= ========= Deferred tax liabilities: Depreciation ................................ $ 1,954 $ 2,076 Inventories ................................. 5,689 5,306 Other ....................................... 517 407 --------- --------- Deferred tax liabilities ...................... $ 8,160 $ 7,789 ========= =========
37 38 Loss before income taxes and extraordinary gain relating to operations in the United States and Mexico is as follows:
YEAR ENDED DECEMBER 31, ----------------------------------- 1997 1998 1999 --------- --------- --------- (IN THOUSANDS) United States ......................... $ (7,144) $ (2,466) $ (7,689) Mexico ................................ (2,640) 473 (6,431) Other ................................. -- (193) (341) --------- --------- --------- $ (9,784) $ (2,186) $ (14,461) ========= ========= =========
The components of the provision for income taxes include the following:
YEAR ENDED DECEMBER 31, ----------------------------------- 1997 1998 1999 --------- --------- --------- (IN THOUSANDS) U.S. federal - current ..................... $ (76) $ -- $ -- U.S. state - current ....................... 14 -- -- U.S. deferred .............................. 565 -- -- --------- --------- --------- 503 -- -- --------- --------- --------- Foreign - current .......................... 40 160 498 Foreign - deferred ......................... (508) 619 (1,963) --------- --------- --------- (468) 779 (1,465) --------- --------- --------- $ 35 $ 779 $ (1,465) ========= ========= =========
Principal reconciling items from income tax computed at the U.S. statutory rate of 34% are as follows:
YEAR ENDED DECEMBER 31, ----------------------------------- 1997 1998 1999 --------- --------- --------- (IN THOUSANDS) Provision at 34% statutory rate............... $ (3,327) $ (743) $ (4,883) State income tax (net of federal benefit)..... (228) (69) (233) Permanent differences and foreign taxes....... 850 782 740 Other......................................... (250) (69) 188 Change in U.S. valuation allowance............ 2,990 878 2,723 --------- --------- --------- $ 35 $ 779 $ (1,465) ========= ========= =========
The Company has a net operating loss carryforward in the United States of $13,106,000 which begins to expire in 2011 and in Mexico of $11,320,000 which begins to expire in 2006. The Mexican subsidiaries have asset tax credits totaling $1,027,000 available to offset Mexican income tax which begin to expire in 2000. One Mexican subsidiary also has a job creation credit of $277,000 available to offset income tax in Mexico, which will begin to expire in 2006. NOTE 12 STOCK OPTIONS In 1994, the Company adopted the 1994 Employee Stock Option Plan and an Outside Director Stock Option Plan (the "1994 Plans"). Under the 1994 Plans, the Company's Board of Directors were authorized to grant options to employees and consultants and to its outside directors to purchase up to 820,000 and 100,000 shares respectively, of the Company's common stock which were reserved for such purposes. The terms and vesting period for options granted under the 1994 Plans were fixed by the Board of Directors at the time of grant, provided that the exercise period was not greater than 10 years from the date of grant. The exercise price for any options granted under the 1994 Plans for employees and consultants could not be less than 100% and 85% of the fair market value of the Company's common stock on the date of the grant for Incentive and Non-statutory Stock Options, as defined, respectively. The exercise price for 38 39 options granted under the 1994 Plans for outside directors could not be less than 100% of the fair market value of the Company's common stock on the date of grant. During 1999, the Company adopted the 1999 Stock Option Plan (the "1999 Plan") under which stock options could be granted to employees, outside directors and consultants to purchase common stock of the Company. The 1999 Plan, which is similar to the 1994 Plan for employees, is for a period of ten years and has reserved 500,000 shares of the Company's common stock for stock option grants. Effective with the adoption of the 1999 Plan, the Company discontinued granting options under the 1994 Plans. A summary of the status of all of the Company's stock options at December 31, 1997, 1998 and 1999 and the changes during the periods ended are presented in the following tables.
1994 PLANS ---------- EMPLOYEE STOCK OUTSIDE DIRECTORS STOCK OPTION PLAN OPTION PLAN ------------------------- ------------------------ WEIGHTED- WEIGHTED- AVERAGE AVERAGE EXERCISE EXERCISE OPTIONS PRICE OPTIONS PRICE --------- ---------- ---------- ---------- Options outstanding, January 1, 1997 ...... 362,000 $ 4.27 68,000 $ 5.39 Granted ............................... 195,000 7.25 7,500 6.88 Exercised ............................. (37,500) 3.50 -- -- Forfeited ............................. (5,000) 3.50 -- -- --------- ---------- Options outstanding, December 31, 1997 .... 514,500 5.46 75,500 5.54 Granted ............................... 20,000 2.91 25,000 2.88 Exercised ............................. (10,000) 3.50 -- -- Forfeited ............................. (196,000) 4.56 (60,500) 4.35 --------- ---------- Options outstanding, December 31, 1998 .... 328,500 5.91 40,000 5.67 Granted ............................... 50,000 2.63 -- -- Forfeited ............................. (135,500) 4.63 (5,000) 7.25 --------- ---------- Options outstanding, December 31, 1999 .... 243,000 5.94 35,000 5.46 ========= ========== Exercisable at December 31, 1997 .................................. 181,125 4.13 75,500 5.54 1998 .................................. 142,500 4.85 40,000 5.67 1999 .................................. 189,749 5.80 35,000 5.46 Weighted-average fair value of options granted during the years ended: December 31, 1997 ..................... $ 3.10 $ 2.53 December 31, 1998 ..................... 1.22 1.01 December 31, 1999 ..................... 0.67 --
39 40
1999 PLAN --------- WEIGHTED-AVERAGE EXERCISE OPTIONS PRICE -------- ---------------- Granted............................... 250,000 $ 2.53 -------- Options outstanding, December 31, 1999.... 250,000 2.53 ======== Exercisable at December 31, 1999.......... 73,750 2.59 Weighted-average fair value of options granted during the year-ended: December 31, 1999..................... $0.39
Options outstanding at December 31, 1999 under the 1994 Plans for employees and consultants had exercise prices that ranged from $2.63 to $7.25 and a weighted average remaining contractual life of 2.6 years. At December 31, 1999 outstanding outside director options under the 1994 Plans had exercise prices that ranged from $2.875 to $17.00 and a weighted-average remaining contractual life of 2.6 years. Under the 1994 Plans, all options granted to outside directors became exercisable immediately, whereas options granted to employees during 1997 and 1998 vest ratably over four years. Options outstanding at December 31, 1999 under the 1999 Plan had exercisable prices that ranged from $2.50 to $2.938 and a weighted-average remaining contractual life of 4.9 years. Under the 1999 Plan, all options granted to outside directors become immediately exercisable and options granted to employees and consultants vest ratably over four years. The Company has elected to follow Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25) and related Interpretations in accounting for its employee and outside director stock options because, as discussed below, the alternative fair value accounting provided for under Financial Accounting Standards Board Statement No. 123, "Accounting for Stock-Based Compensation" (FASB 123), requires use of option valuation models that were not developed for use in valuing stock options. Under APB 25, because the exercise price of the Company's stock options equals or exceeds the market price of the underlying stock on the date of grant, no compensation expense is recognized. Pro forma information regarding net income and earnings per share is required by FASB 123 and has been determined as if the Company had accounted for its stock options under the fair value method of that statement. The fair value for these options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions for 1997, 1998 and 1999, respectively: risk-free interest rates of 6.2%, 4.7% and 5.4% and a weighted-average expected life of the option of 4.0, 3.6 and 2.2 years. In addition, dividend yields of 0% and volatility factors of the expected market price of the Company's common stock of .45 were assumed in 1997 and 1998 and .6 assumed in 1999. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company's stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its stock options. 40 41 For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting period. The Company's pro forma information follows (in thousands, except for per share amounts):
YEARS ENDED DECEMBER 31, -------------------------------- 1997 1998 1999 -------- -------- -------- Pro forma net loss .............. $ (9,859) $ (3,126) $(13,233) Pro forma net loss per share: Basic ....................... (1.15) (0.31) (0.98) Diluted ..................... (1.15) (0.31) (0.98)
Because FASB 123 is applicable only to options and stock-based awards granted subsequent to December 31, 1994, its pro forma effect is not fully reflected in the information for years prior to 1998. NOTE 13 SHAREHOLDERS' EQUITY Effective May 1, 1998, the Company issued an additional 23,993 common shares to the former owner of Les Produits Deli-Bon Inc. pursuant to the price protection provisions of the January 3, 1996 acquisition agreement. On June 29, 1998 an arbitration award was issued against the Company in its proceedings with the former shareholders of Simply Fresh Fruit, Inc. ("Simply Fresh") regarding the price protection provisions of the May 9, 1996 acquisition agreement and related issues. Pursuant to the award, on August 5, 1998 the Company paid in cash to the former Simply Fresh shareholders (i) $1,005,036 in settlement of the common stock price protection issues, (ii) $67,391 in interest on the price protection settlement amount and (iii) $110,000 in settlement of related employment contract issues. On July 17, 1998, the Company sold 3,305,500 newly issued shares of common stock at a purchase price of $4.5375 per share, for an aggregate purchase price of $14,998,706, to M & M Nominee L.L.C. ("M & M"). In connection with the transaction, the Company granted M & M options to acquire an additional 2,000,000 shares of common stock at a purchase price of $4.5375 per share, representation on the Company's Board of Directors and certain veto rights regarding financial and corporate matters. 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 an additional 2,000,000 shares of common stock at a purchase price of $4.5375 per share issued to them in July, 1998. Under the terms of its loan agreements with a bank, the Company may not declare or pay any dividends on its shares without the bank's prior written consent. NOTE 14 EXTRAORDINARY GAIN In May 1997, ICMOSA retired certain outstanding long-term debt with Union de Credito Allende, a Mexican credit union, at a discount of 50% granted pursuant to provisions of Mexican law and through the participation of Nacional Financiera, a Mexican development bank, to help provide liquidity to the Mexican credit unions. The debt reduction amounted to $2.0 million pesos or approximately US $248,000. Provisions for Mexican income taxes and statutory employee profit sharing of 34% and 10%, respectively, have been provided on these gains from debt forgiveness. 41 42 NOTE 15 COMMITMENTS AND CONTINGENCIES 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 Supply Contract, 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 2013. The status of the Lemon Project as of December 31, 1999 is as follows:
Hectares Acres -------- ------- Land - Acquired 3,032 7,489 Unpurchased or subcontracted 468 1,156 Preparation and Planting - Prepared and planted 2,340 5,780 Prepared but not planted 460 1,136 Acquired land to be prepared and planted 232 573 Expenditures - Total projected expenditures $18.5 million Incurred since inception 10.5 million Projected for year 2000 and beyond 8.0 million
In December 1996, the Company entered into a deposit, operation and stock purchase agreement with the owners of Frutalamo, S.A. de C.V. ("Frutalamo") for the operation of the Frutalamo juice processing plant. Pursuant to the terms of the agreement, the Company has paid a non-refundable deposit of $1.9 million for the right to purchase all the issued and outstanding shares of stock of Frutalamo from its existing shareholder. The agreement also required the Company to pay a contractual penalty of $1.0 million to the owner of Frutalamo in the event a purchase of the shares is not completed. The Company subsequently has entered into a letter of intent to purchase the shares which applies the previous deposits paid to Frutalamo as the down payment and waives the contractual penalty of $1.0 million. 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. During the term of the operating agreement, which has been extended to January 1, 2001, the Company has the option to buy the IHMSA facility for $4.5 million. Since, under the terms of the operating agreement, the Company would benefit from the reduction of IHMSA's debt, the Company elected to advance funds to IHMSA to retire certain of its outstanding debt. At December 31, 1999 amounts due from IHMSA of $1,602,000 includes $1,481,000 that was a cash advance used to reduce IHMSA's outstanding debt. This amount will be applied to the purchase price when the Company elects to purchase the facility pursuant to its purchase option, which is expected to occur during 2000. NOTE 16 SEGMENT AND GEOGRAPHIC INFORMATION The Company has two reportable segments: packaged fruit and juice and oil. The Company's packaged fruit division consists of two operating units that sell hand-processed tropical and citrus fruit products directly to retail supermarkets and warehouse clubs, foodservice providers and distributors, and to industrial food and beverage processors. This division also operates the Company's pineapple and citrus orchards. The Company's juice and oil division consists of one operating unit which produces frozen 42 43 concentrate orange juice and other citrus juices that it sells directly to juice bottlers. This division also extracts essential oils from citrus fruits which it sells directly to commercial users and is developing the Company's lemon orchards. The Company evaluates segment performance and allocates resources based on profit or loss from operations before income taxes and does not allocate corporate general and administrative expenses and amortization of intangibles to its segments. The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies. Inter-segment sales and transfers are recorded at cost; there is no intercompany profit or loss on inter-segment sales or transfers. The Company's reportable segments are business units that offer different products. The reportable segments are each managed separately because they process and distribute distinct products with different production processes.
PACKAGED JUICE FRUIT & OIL TOTAL ---------- ---------- ---------- YEAR ENDED DECEMBER 31, 1999 Revenues from external customers ....... $ 54,070 $ 12,153 $ 66,223 Inter-segment revenues ................. 381 -- 381 Interest expense ....................... 2,637 373 3,010 Interest revenue ....................... 212 97 309 Depreciation & amortization expense .... 2,792 459 3,251 Impairment loss ........................ 714 -- 714 Segment loss ........................... (8,179) (2,488) (10,667) Segment assets ......................... 78,846 31,936 110,782 Expenditures for long-lived assets ..... 996 4,959 5,955 YEAR ENDED DECEMBER 31, 1998 Revenues from external customers ....... $ 50,140 $ 22,171 $ 72,311 Inter-segment revenues ................. 350 14 364 Interest expense ....................... 2,491 1,564 4,055 Interest revenue ....................... 39 94 133 Depreciation & amortization expense .... 2,540 358 2,898 Impairment loss ........................ 1,840 -- 1,840 Segment income (loss)................... (3,156) 2,919 (237) Segment assets ......................... 93,255 27,923 121,178 Expenditures for long-lived assets ..... 1,108 4,582 5,690 YEAR ENDED DECEMBER 31, 1997 Revenues from external customers ....... $ 51,748 $ 13,679 $ 65,427 Inter-segment revenues ................. 1,098 100 1,198 Interest expense ....................... 2,048 1,217 3,265 Interest revenue ....................... 273 158 431 Depreciation & amortization expense .... 2,553 246 2,799 Segment loss ........................... (5,884) (1,842) (7,726) Segment assets ......................... 82,157 26,490 108,647 Expenditures for long-lived assets ..... 7,219 4,488 11,707
The following are reconciliations of reportable segment revenues, profit or loss, and assets to the Company's consolidated totals. 43 44
YEARS ENDED DECEMBER 31, ----------------------------------- 1997 1998 1999 --------- --------- --------- REVENUES Total external revenues for reportable segments ... $ 65,427 $ 72,311 $ 66,223 Inter-segment revenues for reportable segments .... 1,198 364 381 Elimination of inter-segment revenues ............. (1,198) (364) (381) --------- --------- --------- Total consolidated revenues ...... $ 65,427 $ 72,311 $ 66,223 ========= ========= ========= PROFIT OR LOSS Total profit or loss for reportable segments ...... $ (7,726) $ (237) $ (10,667) Increase in intercompany profit in inventory ...... (173) -- -- Subsidiary acquisition costs recognized in consolidation ................................... (283) (283) (283) Unallocated corporate general and administrative expenses ........................................ (1,123) (1,788) (1,867) --------- --------- --------- Loss before disposal of certain operations, income taxes and extraordinary gain ......... $ (9,305) $ (2,308) $ (12,817) ========= ========= ========= ASSETS Total assets for reportable segments .............. $ 121,178 $ 110,782 Other assets ...................................... 53,338 65,505 Elimination of intercompany profits in inventory .. (548) (548) Elimination of intercompany receivables ........... (62,991) (61,295) Allocation of acquisition costs of subsidiaries recorded in consolidation ....................... (15,319) (28,958) Reclassification of deferred tax assets recorded in consolidation ................................... (2,145) (3,132) --------- --------- Total consolidated assets ... $ 93,513 $ 82,352 ========= =========
OTHER SIGNIFICANT ITEMS
SEGMENT CONSOLIDATED TOTALS ADJUSTMENTS TOTALS --------- ----------- ------------ Year ended December 31, 1999: Interest expense...................... $ 3,010 $ 3 $ 3,013 Depreciation & amortization expense... 3,251 23 3,274 Expenditures for long-lived assets.... 5,955 -- 5,955 Year ended December 31, 1998: Interest expense...................... $ 4,055 $ 32 $ 4,087 Depreciation & amortization expense... 2,898 723 3,621 Expenditures for long-lived assets.... 5,690 185 5,875 Year ended December 31, 1997: Interest expense...................... $ 3,265 $ (45) $ 3,220 Depreciation & amortization expense... 2,799 666 3,465 Expenditures for long-lived assets.... 11,707 391 12,098
The reconciling item to adjust expenditures for segment assets is the amount of acquisitions by the corporate office which are not allocated to operating segments. The reconciling item to adjust depreciation and amortization expense relates to amortization of goodwill and depreciation of assets recorded in 44 45 consolidation as well as depreciation of corporate assets. None of the other adjustments to consolidated totals are significant. The following geographic information attributes revenues to countries based on the location of the customers.
YEARS ENDED DECEMBER 31, --------------------------------- 1997 1998 1999 --------- --------- --------- REVENUES United States .......................... $ 58,285 $ 52,548 $ 48,493 Japan .................................. 3,393 4,144 9,633 Mexico ................................. 1,943 1,831 6,919 Europe ................................. 1,806 13,350 1,178 Canada ................................. -- 438 -- --------- --------- --------- Consolidated total .... $ 65,427 $ 72,311 $ 66,223 ========= ========= ========= LONG-LIVED ASSETS United States .......................... $ 11,435 $ 7,536 Mexico ................................. 38,601 39,835 Other foreign countries ................ 1,018 -- --------- --------- Consolidated total .... $ 51,054 $ 47,371 ========= =========
NOTE 17 SUBSEQUENT EVENTS On February 21, 2000, the Company entered into a $5.1 million (48,000,000 Mexican pesos) nine year term financing agreement (the "Agreement") with Fondo de Capitalizacion e Inversion del Sector Rural ("FOCIR"), a public Trust of the Mexican Federal Government that invests in agricultural projects with long-term viability. Under the terms of the Agreement, FOCIR will provide up to $5.1 million to fund additional Lemon Project costs, which will include land preparation, planting, equipment, irrigation systems and grove maintenance. This financing represents the purchase of an equity interest in GISE of approximately 17.6%. Amounts advanced under this agreement will be classified outside equity due to mandatory redemption provisions. The terms of the Agreement provide for the calculation and accrual of annual accretion using one of two alternative methods. The first method determines accretion by multiplying the years Mexican inflation index rate plus 4.2% by the FOCIR balance. The second method determines annual accretion by multiplying GISE's shareholders equity, using Mexican generally accepted accounting principles, at the end of the year by a factor of 1.036 and then multiplying by the FOCIR equity interest percent. The calculation that results in the greater amount will be the annual accretion amount. Accretion accumulates annually over the nine-year period of the Agreement and is paid only upon expiration or early termination of the Agreement. The Agreement also contains, among other, certain provisions relating to GISE's future financial performance, the establishment of an irrevocable trust guaranteeing the FOCIR loan, which includes transferring to the trust common shares that represent 33.4% of GISE's outstanding shares and the governance of GISE. On April 17, 2000, the Company entered into a Stand-by Funding Commitment (the "Commitment") with its largest shareholder (the "Shareholder") to sell, at the Company's option, on or before July 1, 2000, a $2.5 million 12% Convertible Subordinated Debenture (the "Debenture") subject to certain terms and conditions. The Shareholder, upon purchase, has the option at anytime during the a five year period to convert the Debenture into Company common stock at 75% of the average closing prices for the Company's common stock over a thirty-day period prior to exercise. The Commitment will terminate upon completion of specified future financial transactions by the Company. 45 46 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. Not applicable. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. The information required by this Item is incorporated by reference from the section "Directors and Executive Officers" in the Company's 2000 Proxy Statement. ITEM 11. EXECUTIVE COMPENSATION. The information required by this Item is incorporated by reference from the sections "Compensation of Executive Officers" and "Compensation of Directors" in the Company's 2000 Proxy Statement. Information in the section and subsection titled "Report of the UniMark Group, Inc. Board of Directors Compensation Committee" and "Performance Graph" is not incorporated by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The information required by this Item is incorporated by reference from the section "Security Ownership of Principal Shareholders, Directors and Management" in the Company's 2000 Proxy Statement. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The information required by this Item is incorporated by reference from the sections "Compensation of Executive Officers", "Compensation of Directors" and "Certain Transactions" in the Company's 2000 Proxy Statement. ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. (1) FINANCIAL STATEMENTS: See Index to Financial Statements (Item 8). (2) FINANCIAL STATEMENT SCHEDULES: All schedules have been omitted since they are either not applicable or the information is contained elsewhere in "Item 8. Financial Statements and Supplementary Data." (3) EXHIBITS
NUMBER EXHIBIT EXHIBIT ------- ------- 3.1 Articles of Incorporation of The UniMark Group, Inc., as amended(1) 3.2 Amended and Restated Bylaws of The UniMark Group, Inc.(1) 3.3 Articles of Exchange of The UniMark Group, Inc.(1) 4.1 Specimen Stock Certificate(1) 10.1 The UniMark Group, Inc. 1994 Employee Stock Option Plan(1)
46 47 10.2 The UniMark Group, Inc. 1994 Stock Option Plan for Directors(1) 10.3 Stock Exchange Agreement between The UniMark Group, Inc. and the stockholders of Industrias Citricolas de Montemorelos, S.A. de C.V.(1) 10.4 Citrus Grove Lease Agreement(1) 10.5 Asset Operating Agreement between the Registrant and Industrias Horticolas de Montemorelos, S.A. de C.V.(2) 10.6 Lease agreement among Hector Gerardo Castagne Maitret, Carlos Courturier Arellano, Mauro Alberto Salazar Rangel, Miguel Angel Salazar Rangel, Alejandrina Trevino Garcia, Gerardo Trevino Garcia, Jorge Maitret and Industrias Citricolas de Montemorelos, S.A. de C.V.(2) 10.7 Contract of Purchase and Sale between Empacadora Tropifrescos, Sociedad Anonima de Capital Variable and Industrias Citricolas de Montemorelos, S.A. de C.V.(2) 10.8 Lease Agreement between Industrias Citricolas de Montemorelos, S.A. de C.V. and Valpak, S.A. de C.V. dated July 1, 1995(3) 10.9 Asset Operating Agreement between Industrial Citricolas de Montemorelos, S.A. de C.V. and Empacadora de Naranjas Azteca, S.A. de C.V. dated July 1, 1995(3) 10.10 Contract for Operation, Administration, and Purchase and Sale of Fruit between Industrial Citricolas de Montemorelos, S.A. de C.V. and Mr. Jorge Croda Manica ("Las Tunas") dated July 1, 1995(3) 10.11 Lease Contract between Industrial Citricolas de Montemorelos, S.A. de C.V. and Mr. Mauro Alberto Salazar Rangel and Mr. Miguel Angel Salazar Rangel ("Huerta Loma Bonita") dated 1995(3) 10.12 Unilateral Recognition of Indebtedness and Granting of Revolving Collateral between Industrial Citricolas de Montemorelos, S.A. de C.V. and Rabobank Curacao N.V. dated September 20, 1995(3) 10.13 Amended and Restated Stock Purchase Agreement among The UniMark Group, Inc., 9029-4315 Quebec Inc., Michel Baribeau and Gestion Michel Baribeau Inc. dated January 3, 1996(4) 10.14 Lease Agreement between Loma Bonita Partners and UniMark Foods, Inc. dated November 28, 1995(3) 10.15 Lease Agreement between The UniMark Group, Inc. and Grosnez Partners dated January 1, 1996(3) 10.16 Rural Property Sublease Agreement between Industrial Citricolas de Montemorelos, S.A. de C.V. and Lorenzo Uruiza Lopez dated October 23, 1995(3) 10.17 Purchase Agreement between Industrial Citricolas de Montemorelos, S.A. de C.V. and Jose Enrique Alfonso Perez Rodriquez dated October 23, 1995(3) 10.18 Stock Purchase Agreement between The UniMark Group, Inc. and the stockholders of Grupo Industrial Santa Engracia dated April 30, 1996(6) 10.19 Stock Purchase Agreement between The UniMark Group, Inc., UniMark Foods, Inc., Sam Perricone Children's Trust 1972, Sam Perricone and Mark Strongin dated May 9, 1996(6) 10.20 Employment Agreement by and between Grupo Industrial Santa Engracia, S.A. de C.V. and Ing Jose Ma. Martinez Brohez dated as of May 9, 1996(7) 10.21 Lease Agreement by and among Ralphs Grocery Company, Simply Fresh Fruit, Inc. and Davalon Sales, Inc. dated as of March 1, 1994(7) 10.22 Revolving Credit Agreement by and among UniMark Foods, Inc., The UniMark Group, Inc., UniMark International, Inc., Simply Fresh Fruit, Inc. and Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A. dated February 12, 1997.(9) 10.23 Supply Contract between The Coca-Cola Export Corporation and Grupo Industrial Santa Engracia, S.A. de C.V. dated October 7, 1996.(9) 10.24 Loan Agreement made between Industrias Citricolas de Montemorelos, S.A. de C.V., Grupo Industrial Santa Engracia, S.A. de C.V., Agromark, S.A. de C.V., as borrowers; The UniMark Group, Inc., as guarantor, and Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A. "Rabobank Nederland", as lender, dated May 29, 1997.(10)
47 48 10.25 Revolving Loan Agreement with Security Interest by and between Industrias Citricolas de Montemorelos, S.A. de C.V., as borrower, Grupo Industrial Santa Engracia, S.A. de C.V. "Gise", Agromark, S.A. de C.V. "Agromark", and Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A. "Rabobank Nederland" New York Branch dated April 10, 1997.(10) 10.26 Revolving Loan Agreement with Security Interest by and between Grupo Industrial Santa Engracia, S.A. de C.V. "Gise", as borrower, Industrias Citricolas de Montemorelos, S.A. de C.V. "Icmosa", Agromark, S.A. de C.V. "Agromark", and Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A. "Rabobank Nederland" New York Branch dated April 10, 1997.(10) 10.27 First 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 October 7, 1997.(10) 10.28 Second 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 November 12, 1997.(10) 10.29 Third 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 22, 1998.(14) 10.30 Fourth 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 December 31, 1998.(14) 10.31 Letter given by Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A., "Rabobank Nederland", New York Branch to UniMark Foods, Inc., the borrower, and The UniMark Group, Inc., UniMark International, Inc., Simply Fresh Fruit, Inc., the guarantors, and Industrias Citricolas de Montemorelos, S.A. de C.V., Grupo Industrial Santa Engracia, S.A. de C.V., and Agromark, S.A. de C.V. regarding the renewal of financing.(14) 10.32 Articles of Association of Gisalamo, S.A. de C.V.(11) 10.33 Deposit, Operation, Exploitation and Stock Purchase Option Agreement by and among The UniMark Group, Inc. and Mr. Francisco Domenech Tarrago and Mr. Francisco Domenech Perusquia dated December 17, 1996(11) 10.34 Gratuitous Loan Agreement by and among Gisalamo, S.A. de C.V. and Frutalamo, S.A. de C.V. dated December 17, 1996(11) 10.35 Non-Competition Agreement by and among The UniMark Group, Inc. and Jorn Budde dated February 18, 1998(12) 10.36 Supply Agreement between the Coca-Cola Export Corporation and Grupo Industrial Santa Engracia, S.A. de C.V. dated April 2, 1998 (13) 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 Cooperative Centrale Raiffeisen-Boerenleenbank B.A., "Rabobank Nederland", New York Branch dated May 17, 1999(14) 10.38 The UniMark Group, Inc. 1999 Stock Option Plan(14) 10.39 Employment Agreement by and among The UniMark Group, Inc. and Charles Horne dated as of March 31, 1999(14) 10.40 Employment Agreement by and among The UniMark Group, Inc. and Roman Shumny dated as of November 20, 1998(14) 10.41 Sixth 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 January 3, 2000(15) 10.42 Seventh 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.,
48 49 the guarantors, and Cooperatieve Centrale Raiffeisen- Boerenleenbank B.A., "Rabobank Nederland", New York Branch dated March 1, 2000(15) 10.43 Standby Funding Commitment by and among The UniMark Group, Inc. and Promecap, S.C. dated April 17, 2000(15) 21 Subsidiaries of the Registrant(11) 23 Consent of Ernst & Young LLP(15) 27 Financial Data Schedule, year ended December 31, 1999(15) 27.1 Financial Data Schedule, restated, year ended December 31, 1998 (15) 27.2 Financial Data Schedule, restated, year ended December 31, 1997 (15)
- --------------------- (1) Previously filed as an Exhibit to the Registrant's Registration Statement on Form SB-2, as amended, SEC Registration No. 33-78352-D. (2) Previously filed as an Exhibit to the Registrant's Annual Report on Form 10-KSB for the fiscal year ended December 31, 1994. (3) Previously filed as an Exhibit to the Registrant's Quarterly Report on Form 10-QSB for the fiscal quarter ended September 30, 1995. (4) Previously filed as an Exhibit to the Registrant's Current Report on Form 8-K dated January 16, 1995. (5) Previously filed as an Exhibit to the Registrant's Annual Report on Form 10-KSB for the fiscal year ended December 31, 1995. (6) Previously filed as an Exhibit to the Registrant's Current Report on Form 8-K dated May 10, 1996. (7) Previously filed as an Exhibit to the Registrant's Registration Statement on Form S-1, as amended, SEC Registration No. 333-3539. (8) Previously filed as an Exhibit to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1996. (9) Previously filed as an Exhibit to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1996. (10) Previously filed as an Exhibit to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 1997. (11) Previously filed as an Exhibit to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1997. (12) Previously filed as an Exhibit to the Registrant's Current Report on Form 8-K dated February 18, 1998. (13) Previously filed as an Exhibit to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1998. (14) Previously filed as an Exhibit to the Registrant's Quarterly Report on Form 10Q for the fiscal quarter ended June 30, 1999. (15) Filed herewith. (4) REPORTS ON FORM 8-K Reports on Form 8-K during the fourth quarter ended December 31, 1999. On October 26, 1999 the company filed a current report on Form 8-K announcing that on October 11, 1999 the Company had sold all the issued and outstanding shares of capital stock of Les Produits Deli-Bon Inc., a Quebec corporation to Francois Gravil - Guy Picard ("Buyers"), in trust for the company to be owned and operated by the Buyers. On November 18, 1999, the Company filed a current report on Form 8-K announcing that on November 2, 1999 Simply Fresh Fruit, Inc., a California corporation and wholly-owned subsidiary of the Company ("SFFI"), had sold substantially all of SFFI's assets (the "Assets") to SFFI Company, Inc., a California corporation ("Buyer"), for approximately $3.6 million in cash and notes. 49 50 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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) By: /s/ Soren Bjorn -------------------------------------- Soren Bjorn President and Chief Executive Officer Dated: April 17, 2000 Pursuant to the requirements of the Securities Exchange Act of 1934, this report was signed below by the following persons on behalf of the registrant and in the capacities and on the dates stated:
SIGNATURE TITLE DATE --------- ----- ---- /s/ Jakes Jordaan Director, Chairman April 17, 2000 -------------------------------------- Jakes Jordaan /s/ Soren Bjorn President, Chief Executive Officer and April 17, 2000 -------------------------------------- Director (Principal Executive Officer) Soren Bjorn /s/ Charles A. Horne Chief Financial Officer (Principal April 17, 2000 -------------------------------------- Financial and Accounting Officer) Charles A. Horne /s/ Rafael Vaquero Bazan Director April 17, 2000 -------------------------------------- Rafael Vaquero Bazan /s/ Eduardo Vaquero Bazan Director April 17, 2000 -------------------------------------- Eduardo Vaquero Bazan /s/ Federico Chavez Peon Director April 17, 2000 -------------------------------------- Federico Chavez Peon /s/ Luis A. Chico Pardo Director April 17, 2000 -------------------------------------- Luis A. Chico Pardo /s/ Jose I. De Abiega Pons Director April 17, 2000 -------------------------------------- Jose I. De Abiega Pons /s/ Fernando Camacho Casas Director April 17, 2000 -------------------------------------- Fernando Camacho Casas /s/ Jerry W. Johnson Director April 17, 2000 -------------------------------------- Jerry W. Johnson
50 51 INDEX TO EXHIBITS
NUMBER EXHIBIT EXHIBIT ------- ------- 3.1 Articles of Incorporation of The UniMark Group, Inc., as amended(1) 3.2 Amended and Restated Bylaws of The UniMark Group, Inc.(1) 3.3 Articles of Exchange of The UniMark Group, Inc.(1) 4.1 Specimen Stock Certificate(1) 10.1 The UniMark Group, Inc. 1994 Employee Stock Option Plan(1) 10.2 The UniMark Group, Inc. 1994 Stock Option Plan for Directors(1) 10.3 Stock Exchange Agreement between The UniMark Group, Inc. and the stockholders of Industrias Citricolas de Montemorelos, S.A. de C.V.(1) 10.4 Citrus Grove Lease Agreement(1) 10.5 Asset Operating Agreement between the Registrant and Industrias Horticolas de Montemorelos, S.A. de C.V.(2) 10.6 Lease agreement among Hector Gerardo Castagne Maitret, Carlos Courturier Arellano, Mauro Alberto Salazar Rangel, Miguel Angel Salazar Rangel, Alejandrina Trevino Garcia, Gerardo Trevino Garcia, Jorge Maitret and Industrias Citricolas de Montemorelos, S.A. de C.V.(2) 10.7 Contract of Purchase and Sale between Empacadora Tropifrescos, Sociedad Anonima de Capital Variable and Industrias Citricolas de Montemorelos, S.A. de C.V.(2) 10.8 Lease Agreement between Industrias Citricolas de Montemorelos, S.A. de C.V. and Valpak, S.A. de C.V. dated July 1, 1995(3) 10.9 Asset Operating Agreement between Industrial Citricolas de Montemorelos, S.A. de C.V. and Empacadora de Naranjas Azteca, S.A. de C.V. dated July 1, 1995(3) 10.10 Contract for Operation, Administration, and Purchase and Sale of Fruit between Industrial Citricolas de Montemorelos, S.A. de C.V. and Mr. Jorge Croda Manica ("Las Tunas") dated July 1, 1995(3) 10.11 Lease Contract between Industrial Citricolas de Montemorelos, S.A. de C.V. and Mr. Mauro Alberto Salazar Rangel and Mr. Miguel Angel Salazar Rangel ("Huerta Loma Bonita") dated 1995(3) 10.12 Unilateral Recognition of Indebtedness and Granting of Revolving Collateral between Industrial Citricolas de Montemorelos, S.A. de C.V. and Rabobank Curacao N.V. dated September 20, 1995(3) 10.13 Amended and Restated Stock Purchase Agreement among The UniMark Group, Inc., 9029-4315 Quebec Inc., Michel Baribeau and Gestion Michel Baribeau Inc. dated January 3, 1996(4) 10.14 Lease Agreement between Loma Bonita Partners and UniMark Foods, Inc. dated November 28, 1995(3) 10.15 Lease Agreement between The UniMark Group, Inc. and Grosnez Partners dated January 1, 1996(3) 10.16 Rural Property Sublease Agreement between Industrial Citricolas de Montemorelos, S.A. de C.V. and Lorenzo Uruiza Lopez dated October 23, 1995(3) 10.17 Purchase Agreement between Industrial Citricolas de Montemorelos, S.A. de C.V. and Jose Enrique Alfonso Perez Rodriquez dated October 23, 1995(3) 10.18 Stock Purchase Agreement between The UniMark Group, Inc. and the stockholders of Grupo Industrial Santa Engracia dated April 30, 1996(6) 10.19 Stock Purchase Agreement between The UniMark Group, Inc., UniMark Foods, Inc., Sam Perricone Children's Trust 1972, Sam Perricone and Mark Strongin dated May 9, 1996(6) 10.20 Employment Agreement by and between Grupo Industrial Santa Engracia, S.A. de C.V. and Ing Jose Ma. Martinez Brohez dated as of May 9, 1996(7) 10.21 Lease Agreement by and among Ralphs Grocery Company, Simply Fresh Fruit, Inc. and Davalon Sales, Inc. dated as of March 1, 1994(7)
52 10.22 Revolving Credit Agreement by and among UniMark Foods, Inc., The UniMark Group, Inc., UniMark International, Inc., Simply Fresh Fruit, Inc. and Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A. dated February 12, 1997. (9) 10.23 Supply Contract between The Coca-Cola Export Corporation and Grupo Industrial Santa Engracia, S.A. de C.V. dated October 7, 1996. (9) 10.24 Loan Agreement made between Industrias Citricolas de Montemorelos, S.A. de C.V., Grupo Industrial Santa Engracia, S.A. de C.V., Agromark, S.A. de C.V., as borrowers; The UniMark Group, Inc., as guarantor, and Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A. "Rabobank Nederland", as lender, dated May 29, 1997. (10) 10.25 Revolving Loan Agreement with Security Interest by and between Industrias Citricolas de Montemorelos, S.A. de C.V., as borrower, Grupo Industrial Santa Engracia, S.A. de C.V. "Gise", Agromark, S.A. de C.V. "Agromark", and Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A. "Rabobank Nederland" New York Branch dated April 10, 1997. (10) 10.26 Revolving Loan Agreement with Security Interest by and between Grupo Industrial Santa Engracia, S.A. de C.V. "Gise", as borrower, Industrias Citricolas de Montemorelos, S.A. de C.V. "Icmosa", Agromark, S.A. de C.V. "Agromark", and Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A. "Rabobank Nederland" New York Branch dated April 10, 1997. (10) 10.27 First 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 October 7, 1997. (10) 10.28 Second 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 November 12, 1997. (10) 10.29 Third 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 22, 1998. (14) 10.30 Fourth 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 December 31, 1998. (14) 10.31 Letter given by Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A., "Rabobank Nederland", New York Branch to UniMark Foods, Inc., the borrower, and The UniMark Group, Inc., UniMark International, Inc., Simply Fresh Fruit, Inc., the guarantors, and Industrias Citricolas de Montemorelos, S.A. de C.V., Grupo Industrial Santa Engracia, S.A. de C.V., and Agromark, S.A. de C.V. regarding the renewal of financing. (14) 10.32 Articles of Association of Gisalamo, S.A. de C.V. (11) 10.33 Deposit, Operation, Exploitation and Stock Purchase Option Agreement by and among The UniMark Group, Inc. and Mr. Francisco Domenech Tarrago and Mr. Francisco Domenech Perusquia dated December 17, 1996 (11) 10.34 Gratuitous Loan Agreement by and among Gisalamo, S.A. de C.V. and Frutalamo, S.A. de C.V. dated December 17, 1996 (11) 10.35 Non-Competition Agreement by and among The UniMark Group, Inc. and Jorn Budde dated February 18, 1998 (12) 10.36 Supply Agreement between the Coca-Cola Export Corporation and Grupo Industrial Santa Engracia, S.A. de C.V. dated April 2, 1998 (13) 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 Cooperative Centrale Raiffeisen-Boerenleenbank B.A., "Rabobank Nederland", New York Branch dated May 17, 1999 (14) 10.38 The UniMark Group, Inc. 1999 Stock Option Plan (14) 10.39 Employment Agreement by and among The UniMark Group, Inc. and Charles Horne dated as of March 31, 1999 (14)
53 10.40 Employment Agreement by and among The UniMark Group, Inc. and Roman Shumny dated as of November 20, 1998 (14) 10.41 Sixth 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 January 3, 2000 (15) 10.42 Seventh 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 March 1, 2000 (15) 10.43 Standby Funding Commitment by and among The UniMark Group, Inc. and Promecap, S.C. dated April 17, 2000 (15) 21 Subsidiaries of the Registrant (11) 23 Consent of Ernst & Young LLP (15) 27 Financial Data Schedule, year ended December 31, 1999 (15) 27.1 Financial Data Schedule, restated, year ended December 31, 1998 (15) 27.2 Financial Data Schedule, restated, year ended December 31, 1997 (15)
- --------------------- (1) Previously filed as an Exhibit to the Registrant's Registration Statement on Form SB-2, as amended, SEC Registration No. 33-78352-D. (2) Previously filed as an Exhibit to the Registrant's Annual Report on Form 10-KSB for the fiscal year ended December 31, 1994. (3) Previously filed as an Exhibit to the Registrant's Quarterly Report on Form 10-QSB for the fiscal quarter ended September 30, 1995. (4) Previously filed as an Exhibit to the Registrant's Current Report on Form 8-K dated January 16, 1995. (5) Previously filed as an Exhibit to the Registrant's Annual Report on Form 10-KSB for the fiscal year ended December 31, 1995. (6) Previously filed as an Exhibit to the Registrant's Current Report on Form 8-K dated May 10, 1996. (7) Previously filed as an Exhibit to the Registrant's Registration Statement on Form S-1, as amended, SEC Registration No. 333-3539. (8) Previously filed as an Exhibit to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1996. (9) Previously filed as an Exhibit to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1996. (10) Previously filed as an Exhibit to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 1997. (11) Previously filed as an Exhibit to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1997. (12) Previously filed as an Exhibit to the Registrant's Current Report on Form 8-K dated February 18, 1998. (13) Previously filed as an Exhibit to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1998. (14) Previously filed as an Exhibit to the Registrant's Quarterly Report on Form 10Q for the fiscal quarter ended June 30, 1999. (15) Filed herewith. EX-10.41 2 6TH AMEND. TO REVOLVING CREDIT AGREEMENT 1 EXHIBIT 10.41 SIXTH AMENDMENT TO REVOLVING CREDIT AGREEMENT This Sixth Amendment to Revolving Credit Agreement (the "SIXTH AMENDMENT") made as of January 3, 2000, 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 INDUSTRLAS 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"), the Fifth Amendment to Revolving Credit Agreement dated as of May 17, 1999 (the "FIFTH 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 January 3, 2000, and is evidenced by the Third Renewal Revolving Note dated as of May 17, 1999 (the "NOTE"). 2 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 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, and which uncommitted revolving loan facility was reduced in principal amount effective November 12, 1999 to $4,250,000 (Four Million Two Hundred Fifty Thousand Dollars, currency of the United States of America). D. ICMOSA, as borrower, and the Lender executed a Revolving Loan Agreement with Security Interest on Apri1 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, and which uncommitted revolving loan facility was reduced in principal amount effective November 12, 1999 to $3,632,000 (Three Million Six Hundred Thirty Two Thousand Dollars, currency of the United States of America). 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"). 2 3 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, the 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. L. Pursuant to that Fifth Amendment to Revolving Credit Agreement dated as of May 17, 1999, Lender, among other things, renewed and extended to January 3, 2000, the revolving loan extended to Borrower under the Credit Agreement and evidenced by the Note. M. Group and its Subsidiaries, including the Borrower, and the Lender did execute and deliver Waiver of Defaults dated as of November 12, 1999 by the terms of which the Lender did waive certain defaults existing under the Loan Agreements and did consent to the sale of substantially all of the assets of Simply Fresh Fruit, Inc., a wholly-owned Subsidiary of Borrower, in accordance with the terms and conditions contained in that Asset Purchase Agreement dated October 18, 1999, and to the sale of 100% of the issued and outstanding shares of Les Products Deli-Bon, Inc., a wholly owned Subsidiary of Group, in accordance with the terms and conditions of that Stock Purchase Agreement dated as of October 11, 1999. N. 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 May 17, 1999, which Note matures on January 3, 2000. O. The Lender has agreed to renew and extend the revolving loan now outstanding under the Credit Agreement and evidenced by the Note, subject to the terms and conditions hereinafter provided. 3 4 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, the Fifth Amendment this Sixth Amendment to Revolving Credit Agreement ("SIXTH 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 Sixth 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 March 31, 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 Fourth Renewal Revolving Note of even date herewith shall be substituted in verbatim therefor: "Revolving Note" means the completed and executed Fourth Renewal Revolving Note payable to the Lender in the form attached hereto as Exhibit 2.2E and any renewals, extensions, rearrangements or restatements thereof and any substitutions or replacements therefor." c. Exhibit 2.2D, Form of Renewal Revolving Note, shall be wholly replaced by Exhibit 2.2E, Form of Third Renewal Revolving Note, which is attached hereto as Exhibit 2.2E and incorporated herein by reference. 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): 4 5 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. 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 5 6 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) 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 title 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. 6 7 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. 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 Sixth Amendment executed by Borrower, each Guarantor, ICMOSA, GISE and Agromark. b. The Lender shall have received the Third Renewal Revolving Note dated as of January 3, 2000 and executed by Borrower, such Third Renewal Revolving Note to be in renewal and extension of the unpaid principal balance of the Second Renewal Revolving Note dated as of May 17, 1999. c. Corporate resolutions of each of Borrower, Guarantor, ICMOSA, GISE and Agromark authorizing the execution, delivery and performance of this Sixth 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 Sixth 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 Sixth 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. 7 8 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 Sixth Amendment or any of the other Loan Documents on behalf of International executed by the President and by the Secretary of International; such certification maybe 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. 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 Sixth 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 Sixth 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 Sixth 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 thereq11irementsspecified 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 Sixth 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 Sixth 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. 8 9 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 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 anyone 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. 9 10 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. 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 here of 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 the 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: --------------------------------------- 10 11 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: ----------------------------------------------- ROBERT STEVENS, VICE PRESIDENT BY: ------------------------------------------------ NAME: ---------------------------------------------- TITLE: --------------------------------------------- OTHER OBLIGATED PARTIES: THE UNIMARK GROUP, INC. BY: ------------------------------------------------ NAME: ---------------------------------------------- TITLE: --------------------------------------------- 11 12 UNIMARK INTERNATIONAL, INC. BY: ------------------------------------------------ NAME: ---------------------------------------------- TITLE: --------------------------------------------- SIMPLY FRESH FRUIT, INC. BY: ------------------------------------------------ NAME: ---------------------------------------------- TITLE: --------------------------------------------- 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: --------------------------------------------- 12 EX-10.42 3 7TH AMEND. TO REVOLVING CREDIT AGREEMENT 1 EXHIBIT 10.42 SEVENTH AMENDMENT TO REVOLVING CREDIT AGREEMENT This Seventh Amendment to Revolving Credit Agreement (the "SEVENTH AMENDMENT") made as of March 1, 2000, 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 INDUSTRLAS 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"), the Fifth Amendment to Revolving Credit Agreement dated as of May 17, 1999 (the "FIFTH AGREEMENT"), the Sixth Amendment to Revolving Credit Agreement dated as of January 3, 2000 (the "SIXTH 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 March 1, 2000, and is evidenced by the Third Renewal Revolving Note dated as of January 3, 2000 (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 2 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 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, and which uncommitted revolving loan facility was reduced in principal amount effective November 12, 1999 to $4,250,000 (Four Million Two Hundred Fifty Thousand Dollars, currency of the United States of America). D. ICMOSA, as borrower, and the Lender executed a Revolving Loan Agreement with Security Interest on Apri1 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, and which uncommitted revolving loan facility was reduced in principal amount effective November 12, 1999 to $3,632,000 (Three Million Six Hundred Thirty Two Thousand Dollars, currency of the United States of America). 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"). 2 3 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, the 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. L. Pursuant to that Fifth Amendment to Revolving Credit Agreement dated as of May 17, 1999, Lender, among other things, renewed and extended to January 3, 2000, the revolving loan extended to Borrower under the Credit Agreement and evidenced by the Note. M. Group and its Subsidiaries, including the Borrower, and the Lender did execute and deliver Waiver of Defaults dated as of November 12, 1999 by the terms of which the Lender did waive certain defaults existing under the Loan Agreements and did consent to the sale of substantially all of the assets of Simply Fresh Fruit, Inc., a wholly-owned Subsidiary of Borrower, in accordance with the terms and conditions contained in that Asset Purchase Agreement dated October 18, 1999, and to the sale of 100% of the issued and outstanding shares of Les Products Deli-Bon, Inc., a wholly owned Subsidiary of Group, in accordance with the terms and conditions of that Stock Purchase Agreement dated as of October 11, 1999. N. Pursuant to that Sixth Amendment to Revolving Credit Agreement dated as of January 3, 2000, Lender, among other things, renewed and extended to March 1, 2000, the revolving loan extended to Borrower under the Credit Agreement and evidenced by the Note. 3 4 O. 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, which Note matures on March 1, 2000. P. The Lender has agreed to renew and extend the revolving loan now outstanding under the Credit Agreement and evidenced by the Note, 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: 3. 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. 4. 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, the Fifth Amendment the Sixth Amendment and this Seventh Amendment to Revolving Credit Agreement ("SEVENTH AMENDMENT" and as the same shall hereafter be amended from time to time. 4. AMENDMENTS TO CREDIT AGREEMENT. Effective as of the date above, the following changes shall be made to the Credit Agreement: b. The definition of "EXPIRATION DATE" in the Appendix of the Credit Agreement as previously amended pursuant to the terms of the Sixth 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 March 31, 2000, or any other date on which the Commitment terminates pursuant to the terms hereof." b. In Section 2. 1 (ii), $9,500,000 shall be changed to $8,000,000. 4 5 c. 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 Fourth Renewal Revolving Note of even date herewith shall be substituted in verbatim therefor: "Revolving Note" means the completed and executed Fourth Renewal Revolving Note payable to the Lender in the form attached hereto as Exhibit 2.2F and any renewals, extensions, rearrangements or restatements thereof and any substitutions or replacements therefor." d. Exhibit 2.2E, Form of Renewal Revolving Note, shall be wholly replaced by Exhibit 2.2F, Form of Fourth Renewal Revolving Note, which is attached hereto as Exhibit 2.2F and incorporated herein by reference. e. Exhibit 5.9(b), Borrowing Base Certificate, shall be wholly replaced by Exhibit 5.9(b)B, Restated Borrowing Base Certificate, which is attached hereto as Exhibit 5.9(b)B and incorporated herein by reference. 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. 5 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. 6 7 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) 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 title 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. 7 8 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. 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 Seventh Amendment executed by Borrower, each Guarantor, ICMOSA, GISE and Agromark. b. The Lender shall have received the Fourth Renewal Revolving Note dated as of March 1, 2000 and executed by Borrower, such Fourth Renewal Revolving Note to be in renewal and extension of the unpaid principal balance of the Third Renewal Revolving Note dated as of January 3, 2000. c. Corporate resolutions of each of Borrower, Guarantor, ICMOSA, GISE and Agromark authorizing the execution, delivery and performance of this Seventh 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 Seventh 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 Seventh 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 8 9 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 Seventh Amendment or any of the other Loan Documents on behalf of International executed by the President and by the Secretary of International; such certification maybe 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. 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 Seventh 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 Seventh 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 Seventh 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 thereq11irementsspecified by Lender. k. 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 Seventh 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 Seventh Amendment and any other documents in connection therewith. 9 10 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 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 anyone 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. 17. 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. 18. 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. 10 11 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. 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 here of 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 the 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: -------------------------------- 11 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: --------------------------------------- ROBERT STEVENS, 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: ------------------------------------ GISE: GRUPO INDUSTRIAL SANTA ENGRACIA, S.A. DE C.V. A MEXICAN CORPORATION BY: --------------------------------------- NAME: ------------------------------------- TITLE: ------------------------------------ 12 13 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: ------------------------------------ 13 EX-10.43 4 STANDBY FUNDING COMMITMENT DATED 4/17/00 1 EXHIBIT 10.43 THE UNIMARK GROUP, INC. 124 MCMAKIN ROAD BARTONVILLE, TEXAS 76226 April 17, 2000 Promecap, S.C. Bosque de Alisos No. 47A, 3er piso Colonia Bosques de las Lomas C.P. 05120 Mexico, D.F. Mexico Attention: Fernando Chico Pardo RE: The UniMark Group, Inc.-- Stand-by Funding Commitment Dear Fernando: This letter confirms the firm commitment of Promecap, S.C., either directly or through one or more affiliated or related entities (collectively, "Promecap"), to purchase, at the election of The UniMark Group, Inc. ("UniMark"), on or before July 1, 2000, $2,500,000 of convertible subordinated debentures (the "Convertible Debenture"), subject only to the terms and conditions outlined below. 1. Terms of the Convertible Debentures. The terms of the Convertible Debentures are outlined in Exhibit"A" hereto. 2. Subscription Agreement. Promecap's purchase of the Convertible Debenture will be consummated pursuant to a Subscription Agreement with UniMark, which will contain customary terms and provisions. 3. Consents. It is understood that Promecap's obligation to purchase the Convertible Debenture will be subject only to UniMark receiving the necessary consents, approvals and authorizations required in connection with the issuance of the Convertible Debentures and subject to paragraph 4 below. 4. Termination of Funding Commitment. This Agreement shall automatically terminate upon the earlier of: a) If, prior to July 1, 2000, or the purchase of the Convertible Debenture as provided herein, there shall be (i) a merger or consolidation of UniMark, or either of UniMark's two primary subsidiaries, with or into another corporation, (ii) the sale of all, or substantially all, of the properties or assets or stock of either of UniMark's two primary business segments, or (iii) a joint venture with any other entity involving all or substantially all of the assets of, or revenue from, either of UniMark's two primary business segments (collectively, an "Extraordinary Transaction"); or b) if, prior to July 1, 2000 or the purchase of the Convertible Debenture as provided herein, UniMark sells equity securities (common stock, preferred stock, convertible debt securities or subordinated debt) with gross proceeds to UniMark in excess of $2.5 million (a "Significant Equity Financing"); or 2 c) if, UniMark refinances all of its outstanding indebtedness with Cooperatieve Centrale Raiffeisen-Boerenleenbank, B.A., "RaboBank Nederland," New York Branch ("Refinancing"). 5. Closing: In the event that neither an Extraordinary Transaction, a Significant Equity Financing nor a Refinancing has occurred on or before May 31, 2000, the purchase and sale of the Debenture shall occur within 5 business days after UniMark gives Promecap written notice of its election to sell the Convertible Debenture to Promecap. It is agreed that UniMark will not give such notice until May 31, 2000. 6. No Obligation To Sell: It is expressly understood and agreed that UniMark, in its sole discretion, may elect not to sell the Convertible Debenture to Promecap and nothing set forth herein creates an obligation on behalf of UniMark to sell the Convertible Debenture Promecap. 7. Facility Fee: UniMark will pay Promecap a facility fee of $100,000 as consideration for facilitating this Stand-by Funding Commitment, out of available and unrestricted cash flow. 8. Governing Law: This Agreement will be governed by and construed in accordance with the laws of the State of Texas, without regard to principles of conflicts of laws. 9. Counterparts: This Agreement may be executed by the parties hereto in one or more counterparts, and such counterparts, taken together, shall constitute one and the same agreement of such parties. Any facsimile signature of any party will constitute an original. If the foregoing is acceptable to you, please execute and return the enclosed copy of this Agreement to me by 5:00 P.M. on Monday, April 17, 2000. Very truly yours, THE UNIMARK GROUP, INC. By: Soren Bjorn Chief Executive Officer AGREED AND ACCEPTED AS OF THE DATE FIRST ABOVE WRITTEN: PROMECAP, S.C. By: Fernando Chico Pardo Title: President 2 3 EXHIBIT A --------- CONVERTIBLE SUBORDINATED DEBENTURE TERM SHEET Issuer: The UniMark Group, Inc. (Nasdaq NMS: UNMG) ("UniMark"). Issue: $2,500,000 principal amount of 12% Convertible Subordinated Debenture (the "Debenture"). Closing Date: As soon as possible after UniMark gives Promecap written notice of its intention to sell to Promecap the Convertible Debentures. Maturity Date of Debentures: 3 years from date of issuance. Interest Payment Dates: The Debenture bears interest at a rate of 12% per annum, payable annually in arrears in cash. Conversion Feature: At any time, the purchaser may convert the Debenture into common stock at the Conversion Price in effect. Conversion Price: 75% of the average of the closing sales prices for the UNMG Common Stock for the thirty (30) consecutive trading days ending the trading day before UniMark gives Promecap written notice of its intention to sell to Promecap the Convertible Debenture. Anti-dilution Protection: Proportional adjustments for splits, dividends, recapitalization, rights offerings and the like. Optional Redemption: At any time, UniMark may redeem the Debenture, at its option, in whole or in part, with 20 trading days notice, at the following redemption prices: (a) Through the first anniversary date of the issuance, at 113% of the principal amount of the Debenture outstanding. (b) After the second anniversary date through the third anniversary date of the issuance, at 108% of the principal amount of the Debenture outstanding. Payment for redemption of the Debenture will include amounts due for accrued and unpaid interest, if any, to the date of redemption. Ranking of Debenture: The Debenture will be a general unsecured obligations, fully and completely subordinated in right and payment to all existing and future senior debt of UniMark, including all principal, interest, fees, expenses, penalties, overdrafts and swap obligations, under a subordination agreement satisfactory in form and content to the holder of the senior debt.
4 Voting Rights: No voting rights until conversion. Registration Rights: UniMark will grant Promecap one demand registration and unlimited number of customary piggyback registration rights with respect to shares of UNMG common stock underlying the Debenture. Indemnification: Normal indemnification.
EX-23 5 CONSENT OF ERNST & YOUNG LLP 1 EXHIBIT 23 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 33-78352-D) pertaining to The UniMark Group, Inc. 1994 Employee Stock Option Plan and The UniMark Group, Inc. 1994 Stock Option Plan for Directors of our report dated April 19, 2000, with respect to the financial statements of The UniMark Group, Inc. included in this Annual Report on Form 10-K for the year ended December 31, 1999. ERNST & YOUNG LLP Dallas, Texas April 19, 2000 EX-27 6 FINANCIAL DATA SCHEDULE
5 YEAR DEC-31-1999 JAN-01-1999 DEC-31-1999 4,068 0 8,045 378 15,521 30,591 50,359 8,972 82,352 35,454 6,207 0 0 139 40,691 82,352 66,223 66,223 58,593 58,593 3,650 189 3,013 (14,461) (1,465) (12,996) 0 0 0 (12,996) (0.97) (0.97)
EX-27.1 7 RESTATED FINANCIAL DATA SCHEDULE - 12/31/98
5 YEAR DEC-31-1998 JAN-01-1998 DEC-31-1998 4,247 0 9,927 657 22,320 39,443 49,347 8,000 93,513 36,968 7,833 0 0 119 48,712 93,513 72,311 72,311 56,163 56,163 0 84 4,087 (2,186) 779 (2,965) 0 0 0 (2,965) (0.29) (0.29)
EX-27.2 8 RESTATED FINANCIAL DATA SCHEDULE - 12/31/97
5 YEAR DEC-31-1997 JAN-01-1997 DEC-31-1997 1,237 0 12,284 685 24,152 41,621 44,931 5,227 94,616 47,723 8,626 0 0 86 38,166 94,616 65,427 65,427 52,023 52,023 0 542 3,220 (9,784) 35 (9,819) 0 139 0 (9,680) (1.13) (1.13)
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