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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM 10-K/A-1
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 26, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM ..... TO .....
Commission file number 0-23024
BROTHERS GOURMET COFFEES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 52-1681708
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2255 GLADES ROAD
SUITE 100 E
BOCA RATON, FL 33431
(Address of principal executive offices) (Zip Code)
(561) 995-2600
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
BROTHERS GOURMET COFFEES, INC. COMMON STOCK
(SECURITIES ARE LISTED ON NASDAQ NATIONAL MARKET)
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 [ ].
The aggregate market value of the voting stock held by non-affiliates of
the registrant on December 26, 1997, was $12,878,907.
The number of shares outstanding of each of the registrant's classes of
common stock as of December 26, 1997, was 12,121,324.
-----------------------
Documents Incorporated by Reference
NONE
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SPECIAL NOTE ABOUT FORWARD LOOKING STATEMENTS
EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED IN THIS AMENDED ANNUAL REPORT ON
FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 26, 1997, CERTAIN MATTERS DISCUSSED
HEREIN CONTAIN FORWARD LOOKING STATEMENTS BASED ON MANAGEMENT'S EXPECTATIONS
REGARDING, AND EVALUATIONS OF CURRENT INFORMATION ABOUT, THE COMPANY'S BUSINESS
THAT INVOLVE RISKS AND UNCERTAINTIES, AND ARE SUBJECT TO FACTORS THAT COULD
CAUSE ACTUAL FUTURE RESULTS TO DIFFER, BOTH ADVERSELY AND MATERIALLY, FROM
CURRENTLY ANTICIPATED RESULTS, INCLUDING, WITHOUT LIMITATION, THE EFFECT OF
ECONOMIC AND MARKET CONDITIONS; INDUSTRY AND INDUSTRY SEGMENT CONDITIONS AND
DIRECTIONS; WEATHER; COFFEE CROP AND GREEN COFFEE PRICE FLUCTUATIONS; FOREIGN
LABOR PROBLEMS; FOREIGN COFFEE DELIVERY DIFFICULTIES; PRODUCTION COSTS;
COMPETITIVE PRESSURES; THE COMPANY'S OWN FINANCING CONTINGENCIES AND
RESTRICTIONS; MANAGEMENT LIMITATIONS; THE ABILITY AND WILLINGNESS OF PURCHASERS
TO COMPLETE ACQUISITIONS OF THE COMPANY'S RETAIL COFFEE BARS AND THE GLORIA
JEAN'S STORES; THE COMPANY'S ABILITY TO RESOLVE POST-CLOSING DIFFERENCES WITH
THE PURCHASERS' OF CERTAIN COMPONENTS OF THE COMPANY'S DISCONTINUED RETAIL
OPERATIONS; LEGISLATION AND REGULATIONS; RESOLUTION OF PENDING LITIGATION IN
WHICH THE COMPANY IS A DEFENDANT; THE ABILITY OF THE COMPANY TO CLOSE CONTRACTS
WITH NEW ACCOUNTS AND TO RENEW EXISTING ACCOUNTS AS SUCH ACCOUNTS COME UP FOR
RENEWAL; CHANGES IN CONSUMER TASTES AND PREFERENCES; AND THE SUCCESS OR LACK
THEREOF OF THE COMPANY'S NEW PRODUCTS, NEW PACKAGING, DISPLAY MODELS AND
PACKAGING LINES.
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INTRODUCTION
Brothers Gourmet Coffees, Inc. (the "Company"), is filing this Form
10-K/A in order to amend its Annual Report on Form 10-K for the fiscal year
ended December 26, 1997 (which was filed on April 7, 1998 -- the "1997 Form
10-K"), to add the following Part III disclosures which were not included in
the 1997 Form 10-K, as filed.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS
The following table sets forth certain information concerning the
directors of the Company:
NAME AGE POSITION(S) WITH THE COMPANY
---- --- ----------------------------
Elias F. Aburdene (2)(3)(6) 45 Director
J.P. Bolduc (2)(3)(6) 58 Director
Donald D. Breen (2)(4)(5) 39 President, Chief Executive Officer, Chief
Financial Officer, Treasurer and Director
James L. Moore, Jr. (1)(4)(6) 55 Director
Ray E. Newton, III (1)(2)(6) 34 Director
Raymond B. Rudy (3)(4) 67 Director
- -------------------
(1) Member of the Audit and Finance Committee.
(2) Member of the Executive Committee.
(3) Member of the Compensation Committee.
(4) Member of the Operating Committee.
(5) Member of the Nominating Committee.
(6) Member of the Special Committee.
At the Company's Annual Meeting of Stockholders in 1997 (the "1997
Annual Meeting"), each of the directors was elected to hold office until the
Annual Meeting of Stockholders in 1998 (the "1998 Annual Meeting") and until his
successor is duly elected and qualified. Messrs. Aburdene, Bolduc, Breen,
Moore and Rudy have been nominated to the slate of directors to be presented to
the stockholders at the 1998 Annual Meeting. Mr. Newton is resigning from
the Board effective May 14, 1998, and, accordingly, is not standing for
re-election at the 1998 Annual Meeting.
PRINCIPAL OCCUPATIONS AND DIRECTORSHIPS HELD BY THE DIRECTORS
ELIAS F. ABURDENE has been a director of the Company since November
1993. Mr. Aburdene is currently the President of (1) Rock Creek Corporation, an
investment company, (2) Aburdene & Associates, Inc., an investment management
and administration firm, and (3) Morgan Capital & Energy Corp., an investment
holding company, and an advisor and director of Franklin National Bank, a
commercial bank headquartered in Washington, D.C. Prior to joining Rock Creek
in August 1996, Mr. Aburdene served as Managing Director - International and a
director of Palmer National Bancorp, Inc., a position he assumed
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in July 1991. Prior thereto, he served as Executive Vice President of
Fairbanks Management Corporation from June 1986 to January 1991.
J.P. BOLDUC has been a director of the Company since 1990. Since
March 1995, Mr. Bolduc has served as Chairman and Chief Executive Officer of JPB
Enterprises, Inc., a diversified holding company with interests in the food,
beverage, real estate, retail and manufacturing industries. From January 1993
to March 1995, Mr. Bolduc served as President, Chief Executive Officer and a
director of W.R. Grace & Co., a publicly traded company ("W.R. Grace"). From
August 1990 to December 1992, Mr. Bolduc served as President and Chief Operating
Officer of W.R. Grace. Mr. Bolduc serves as a director of Sundstrand
Corporation, Unisys Corporation, Marshall & Ilsley Corporation, Newmont Mining
Corporation and Proudfoot, PLC.
DONALD D. BREEN has been (a) President, Chief Executive Officer and a
director of the Company since January 1996 and (b) Chief Financial Officer and
Treasurer since January 1995. From January 1995 until January 1996, Mr. Breen
served as Executive Vice President of the Company. Prior to January 1995, Mr.
Breen was Finance Director of Adolph Coors Company, a publicly traded beer
brewing company ("ACC"), from 1990 to 1994. From 1993 to 1994, Mr. Breen served
as Assistant Secretary of ACC and Assistant Treasurer of Coors Brewing Company,
a wholly-owned subsidiary of ACC. From 1988 to 1990, Mr. Breen was Investment
Manager for the Coors Retirement Plan Trusts at ACC.
JAMES L. MOORE, JR., has been a director of the Company since January
1997. Since 1987, Mr. Moore has served as President and Chief Operating Officer
of Coca Cola Bottling Co. Consolidated, a soft drink bottling and distribution
company. Mr. Moore also serves as a director of Coca Cola Bottling Co.
Consolidated and Park Meridian Bank.
RAY E. NEWTON, III, has been a director of the Company since December
1992. Mr. Newton joined J.H. Whitney & Co., in 1990, where he is a General
Partner. Prior to joining Whitney, Mr. Newton was employed by Morgan Stanley &
Co., Incorporated in New York, New York where Mr. Newton was with the Merchant
Banking Group. Mr. Newton is also a director of The Northface, Inc.
RAYMOND B. RUDY has been a director of the Company since February
1997. Since July 1995, Mr. Rudy has served as a partner and managing director
of J. W. Childs Associates, L.P., an investment limited partnership. From 1989
through June 1995, Mr. Rudy served as an independent director and management
advisor to RBR Consulting, a Greenwich, Connecticut-based consulting firm.
Prior to joining RBR, Mr. Rudy held several executive positions with companies
engaged in the food and consumer products industries such as Procter & Gamble,
Hunt Wesson, General Foods, Arnold Foods and Snapple Beverage.
COMMITTEES OF THE BOARD ("COMMITTEES") AND MEETINGS OF THE BOARD AND COMMITTEES
The Board has five standing Committees, the Audit and Finance
Committee, the Compensation Committee, the Executive Committee, the Nominating
Committee and the Operating Committee, and one Special Committee formed in
February 1998.
The Audit and Finance Committee held two (2) meetings in fiscal year
1997. The Audit and Finance Committee consists of Messrs. Newton (who is
resigning from the Audit and Finance Committee effective May 14, 1998)
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and Moore (who joined the Audit and Finance Committee in February 1997
following Mr. Aburdene's resignation therefrom). Mr. Aburdene has been
appointed to the Audit and Finance Committee, effective upon Mr. Newton's
resignation therefrom. The functions of the Audit and Finance Committee
generally include reviewing, with the Company's independent auditors, the
scope and results of their engagement, reviewing the scope and results of the
Company's internal audit function and reviewing the adequacy of the Company's
management information systems, internal accounting controls and accounting
policies and practices.
The Compensation Committee held three (3) meetings in fiscal year
1997. The Compensation Committee consists of Messrs. Aburdene (who joined the
Compensation Committee in February 1997), Bolduc and Rudy (who joined the
Compensation Committee in February 1997). The function of the Compensation
Committee is to review and approve all Company compensation matters.
The Executive Committee held no meetings in fiscal year 1997. The
Executive Committee consists of Messrs. Aburdene, Bolduc, Breen and Newton.
Mr. Newton, who joined the Executive Committee in February 1997, is resigning
from the Executive Committee effective May 14, 1998. The Executive Committee
is empowered to exercise all of the powers of the Board between meetings of
the Board, except for certain powers reserved by law or the Company's bylaws
to the Board or the stockholders.
The Operating Committee, which was formed in February 1997, held
three (3) meetings in fiscal year 1997. The Operating Committee consists of
Messrs. Breen, Moore and Rudy. The function of the Operating Committee is to
review significant operational matters pertaining to the Company, to provide
guidance regarding operational matters to the Company's senior management
team and to provide other operational assistance to the Company's senior
management team, when and as requested.
The Nominating Committee, which was formed in August 1996, held no
meetings in fiscal year 1997. The Nominating Committee consists of Mr. Breen
and at least two non-employee directors of the Company, based on the
availability from time to time of such non-employee directors to interview
potential director candidates. The functions of the Nominating Committee
generally include interviewing potential director candidates, recommending
candidates for admission to the Board and, when so requested by the Board,
recommending to the full Board the slate of directors for re-election at each
annual meeting of stockholders.
In February 1998, the Board formed a Special Committee. The Special
Committee consists of Messrs. Aburdene, Bolduc, Moore and Rudy. The purpose of
the Special Committee is to oversee the engagement of Schroder & Co, Inc.
("Schroder"), to evaluate transaction opportunities presented by Schroder, to
report the results of their evaluation(s) to the Board and to oversee the
negotiation, documentation and consummation of any transaction approved by the
Board.
The Board currently consists of Messrs. Aburdene, Bolduc, Breen,
Moore, Newton (who is resigning from the Board effective May 14, 1998)
and Rudy. The Board held four (4) scheduled meetings and four (4) special
meetings in fiscal year 1997. Each director attended at least 75% of the
aggregate number of meetings of the Board and committees on which he served
during 1997.
5
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EXECUTIVE OFFICERS
The following table sets forth certain information about the executive
officers of the Company:
NAME AGE POSITION(S) WITH THE COMPANY
---- --- ----------------------------
Donald D. Breen 39 President, Chief Executive Officer, Chief
Financial Officer, Treasurer and Director
Terry M. Olson 37 Executive Vice President - Sales and Marketing
Barry Bilmes 51 Vice President - Finance and Administration
Linda Pennington 44 Vice President - Operations
Officers of the Company are appointed by and serve at the discretion
of the Board of Directors and the Company. Mr. Breen is the only officer of the
Company with an employment agreement. See ITEM 11, "EXECUTIVE COMPENSATION --
EMPLOYMENT AGREEMENTS" below.
BUSINESS EXPERIENCE OF EXECUTIVE OFFICERS
DONALD D. BREEN -- See ITEM 10, "DIRECTORS AND EXECUTIVE OFFICERS OF
THE REGISTRANT -- PRINCIPAL OCCUPATIONS AND DIRECTORSHIPS OF DIRECTORS" above
for information concerning Mr. Breen.
TERRY M. OLSON has been Executive Vice President - Sales and Marketing
since December 1994. From 1991 to 1994, Mr. Olson served in various marketing
capacities for The Haagen-Dazs Company, Inc., a manufacturer and retailer of ice
cream and frozen desserts, the most recent of which was Director of Marketing &
Business Unit Leader for Ice Cream Products. From 1987 to 1991, Mr. Olson held
various marketing positions with Kraft General Foods, Inc., a manufacturer of
food products, the most recent of which was Brand Manager for the Specialty
Products Division.
BARRY BILMES has been Vice President - Finance and Administration
since February 1996. From October 1994 through January 1996, Mr. Bilmes served
as Controller of the Company. Prior thereto, from 1978 to 1993, Mr. Bilmes
served in various financial capacities for Weight Watchers International, Inc.,
a provider of weight loss products and services, the most recent of which was
Controller and Treasurer.
LINDA PENNINGTON has been Vice President - Operations since July 1996.
From 1994 through 1996, Ms. Pennington served as plant manager for Starbucks (a
specialty coffee retailer and retail coffee store operator) at its Seattle and
Kent, Washington, plants. From 1992 through 1994, Ms. Pennington served as
plant operations manager at Nile Spice Foods in Fife, Washington. Before
joining Nile, Ms. Pennington served as plant superintendent for Simplot in
Quincy, Washington, from 1989 through 1992.
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COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires the directors and certain
officers of the Company and beneficial owners of more than ten percent (10%) of
the Company's Common Stock to file reports of securities ownership and changes
in such ownership with the Securities and Exchange Commission. Based solely
upon a review of the copies of such forms furnished to the Company and the
representations made by such persons to the Company, the Company believes that
during fiscal year 1997 its directors, officers and ten percent beneficial
owners complied with all filing requirements under Section 16(a) of the Exchange
Act.
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table summarizes the compensation accrued/paid by the
Company during the periods indicated for services rendered to the Company and
its subsidiaries by the Company's Chief Executive Officer and the three highest
paid executive officers other than the Chief Executive Officer (the "Named
Executive Officers"). At this time, the Company only has three Named Executive
Officers other than the Chief Executive Officer and, accordingly, is only
providing compensation information with respect to these three individuals
rather than the four individuals typically required.
<TABLE>
LONG TERM COMPENSATION
---------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
---------------------------------------- ----------------------- -------
OTHER RESTRICTED SECURITIES LTIP
FISCAL ANNUAL STOCK UNDERLYING ---- ALL OTHER
YEAR SALARY BONUS COMPENSATION(6) AWARD(S) OPTIONS(7) PAYOUTS COMPENSATION(8)
---- ------ ----- --------------- -------- ---------- ------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Donald D. Breen 1997 $250,000 $ 50,000(4) -- -0- -0- -0- $ -0-
President, Chief 1996 227,176 -0- -- -0- 100,000 -0- 15,613
Executive Officer, 1995 175,000 87,500 -- -0- 75,000 -0- 35,000
Executive Vice
President, Chief
Financial Officer
and Treasurer(1)
Terry M. Olson 1997 $190,000 $ 35,000(4) -- -0- -0- -0- $ -0-
Executive Vice 1996 187,116 -0- -- -0- 75,000 -0- -0-
President - Sales 1995 160,000 80,000 -- -0- -0- -0- -0-
and Marketing
Barry Bilmes 1997 $120,000 $ 25,000(4) -- -0- -0- -0- $ -0-
Vice President - 1996 108,500 -0- -- -0- 25,000 -0- -0-
Finance and 1995 N/A N/A -- N/A N/A N/A N/A
Administration(2)
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Linda Pennington 1997 $ 99,840 $ 25,000(4) -- -0- -0- -0- $ -0-
Vice President - 1996 46,154 -- -0- 25,000(6) -0- 9,873(9)
Operations(3) 1995 N/A 8,000(5) -- N/A N/A N/A N/A
N/A
</TABLE>
- ----------------------
(1) Mr. Breen served as Executive Vice President, Chief Financial Officer and
Treasurer throughout fiscal year 1995. Mr. Breen assumed the additional
positions of President and Chief Executive Officer and resigned as
Executive Vice President on January 26, 1996.
(2) Mr. Bilmes became a Named Executive Officer for the first time in fiscal
year 1996.
(3) Ms. Pennington became a Named Executive Officer for the first time in
fiscal year 1996.
(4) Accrued in Fiscal Year 1997 and paid in March 1998.
(5) Consisting solely of a signing bonus.
(6) Consisting of (a) the Company paid matching 401K plan contribution, (b) the
Company paid portion of life insurance, health insurance, accidental death
and dismemberment and long term disability coverages and (c) in Mr. Breen's
case, a Company paid financial services reimbursement. In the case of each
Named Executive Officer, the aggregate amount of Other Annual Compensation
was less than $50,000 or 10% of the total of Annual Salary and Bonus
reported for the Named Executive Officer.
(7) See ITEM 11, "EXECUTIVE COMPENSATION - AGGREGATED STOCK OPTION EXERCISES
IN FISCAL YEAR 1997 AND STOCK OPTION VALUES AT DECEMBER 26, 1997" and
"- EMPLOYMENT AGREEMENTS" below.
(8) See ITEM 11, "EXECUTIVE COMPENSATION - RETENTION PROGRAM" below.
(9) Consisting solely of moving expenses.
STOCK OPTION GRANTS DURING FISCAL YEAR 1997
There were no stock option grants to Named Executive Officers
during fiscal year 1997. However, in March 1998, the Named Executive
Officers received the following stock option grants, all of which were
granted under the Brothers Gourmet Coffees, Inc. Second Amended and
Restated Stock Option Plan: (1) Mr. Breen - options covering 30,000 shares
of Common Stock; (2) Mr. Olson - options covering 20,000 shares of Common
Stock; (3) Mr. Bilmes - options covering 20,000 shares of Common Stock; and
(3) Ms Pennington - options covering 20,000 shares of Common Stock. All of
these stock options (a) were granted on March 11, 1998, (b) have an
exercise price of $1.0625 per share, (3) have ten-year terms and (d) are
evidenced by the Company's standard form of written stock option
agreement. One-third of the stock options granted in 1998 vested on the
grant date, another one-third will vest on February 25, 1999 and the last
one-third will vest on February 25, 2000.
AGGREGATED STOCK OPTION EXERCISES IN FISCAL YEAR 1997 AND STOCK OPTION
VALUES AT DECEMBER 26, 1997
The following table sets forth information concerning options to
purchase Common Stock held by each of the Named Executive Officers during
fiscal year 1997 and the value of their unexercised options at December 26,
1997. None of the Named Executive Officers exercised any options to
purchase Common Stock during fiscal year 1997.
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<TABLE>
NUMBER OF SECURITIES VALUE OF
UNDERLYING UNEXERCISED
SHARES UNEXERCISED IN-THE-MONEY
ACQUIRED OPTIONS AT OPTIONS AT
ON VALUE DECEMBER 26, 1997 DECEMBER 26, 1997(5)
EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
-------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Donald D. Breen(1) 0 0 100,000 0 $0 $0
Terry M. Olson(2) 0 0 75,000 0 $0 $0
Barry Bilmes(3) 0 0 5,000 20,000 $0 $0
Linda Pennington(4) 0 0 5,000 20,000 $0 $0
</TABLE>
- -------------
(1) Effective as of January 18, 1996, in connection with his appointment to the
positions of President and Chief Executive Officer of the Company, and in
accordance with the terms of his Employment Agreement, Mr. Breen
surrendered his existing option to acquire 75,000 shares of Common Stock
(which had a remaining term of approximately nine (9) years and an exercise
price of $10.25 per share) to the Company for cancellation and received a
replacement option to acquire 100,000 shares of Common Stock, which vested
in full on the grant date, has a term of ten years from the grant date and
has a new exercise price of $3.75 per share. See ITEM 11, "EXECUTIVE
COMPENSATION - EMPLOYMENT AGREEMENTS" below for information about
additional options Mr. Breen could earn during the term of his Employment
Agreement.
(2) Effective as of January 18, 1996, Mr. Olson surrendered his existing option
to acquire 75,000 shares of Common Stock (which had a remaining term of
approximately nine (9) years and an exercise price of $11.25 per share) to
the Company for cancellation and received a replacement option to acquire
75,000 shares of Common Stock, which vested in full on the grant date, has
a term of ten years from the grant date and has a new exercise price of
$3.75 per share.
(3) On May 16, 1997, the Company granted to Mr. Bilmes an option to acquire
25,000 shares of Common Stock. The option has a ten-year term, is
exercisable in five equal 20% annual tranches (the first tranche of which
vested on the grant date) and has an exercise price of $3.625 per share.
The second through fifth tranches of Mr. Bilmes' option will vest only if
certain annual Company-level performance targets are met. The target for
the second tranche was not met in fiscal year 1997 and, accordingly, none
of Mr. Bilmes' second tranche options vested in fiscal year 1997.
(4) On July 8, 1996, the Company granted to Ms. Pennington an option to acquire
25,000 shares of Common Stock. The option has a ten-year term, is
exercisable in five equal 20% annual tranches (the first tranche of which
vested on the grant date) and has an exercise price of $3.56 per share.
The second through fifth tranches of Ms. Pennington's option will vest only
if certain annual Company-level performance targets are met. The target
for the second tranche was not met in fiscal year 1997 and, accordingly,
none of Ms. Pennington's second tranche options vested in fiscal year 1997.
(5) The value of unexercised in-the-money options at December 26, 1997 is based
upon the closing trading price for the Common Stock as reported on the
Nasdaq Stock Market at December 26, 1997 ($1.0625), less the exercise price
per share of the options. All of the options listed in the table have
exercise prices in excess of $1.0625 per share.
COMPENSATION OF DIRECTORS
Each non-employee director ("Non-Employee Director") is paid the
following compensation by the Company: (1) $2,000 for each meeting of the Board
that such director attends ("Board Meeting Fees"), (2) $500 for each special
meeting of each Board Committee that such director attends ("Committee Meeting
Fees"), and (3) reimbursement of all reasonable out-of-pocket expenses incurred
by such director in connection with attending Board Meetings and Committee
Meetings. Effective as of July 1, 1996, each Non-Employee Director (other than
Mr. Moore and Mr. Rudy, who were not directors at the time) received a stock
option grant covering 25,000 shares of
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Common Stock (the "Director Options"). Each Director Option , which was
granted under the Company's Second Amended and Restated Stock Option Plan
(the "Stock Option Plan"), is subject to the following vesting schedule: (a)
Director Options covering 5,000 shares vested on December 31, 1996, (b)
Director Options covering another 10,000 shares vested on December 31, 1997
and (c) Director Options covering another 10,000 shares are scheduled to vest
on December 31, 1998, for each Non-Employee Director who is serving as a
director on that date. On January 1, 1997, Mr. Moore received a Director
Option covering 20,000 shares of Common Stock (10,000 shares of which vested
on December 31, 1997) at an exercise price of $2.625 per share. On February
27, 1997, Mr. Rudy received a Director Option grant covering 18,384 shares of
Common Stock (8,384 shares of which vested on December 31, 1997) at an
exercise price of $3.75 per share. Each Director Option has a term of ten
(10) years and an exercise price of $3.375 per share ($2.625 per share for
Mr. Moore's Director Option and $3.75 per share for Mr. Rudy's Director
Option).
During fiscal year 1997, the Non-Employee Directors received the
following compensation: (1) Mr. Aburdene - $12,000 in Board Meeting Fees and
$1,500 in Committee Meeting Fees, and 10,000 Director Options vested
(bringing the total number of vested Director Options held by Mr. Aburdene
to 15,000); (2) Mr. Bolduc - $12,000 in Board Meeting Fees and $1,000 in
Committee Meeting Fees, and 10,000 Director Options vested (bringing the
total number of vested Director Options held by Mr. Bolduc to 15,000); (3)
Mr. Castleman (who was a director for a portion of fiscal year 1997, but
resigned from the Board and the Executive and Compensation Committees prior
to the 1997 Annual Meeting) - $0 in Board Meeting Fees and $0 in Committee
Meeting Fees (Mr. Castleman waived his Board Meeting Fees, Committee Meeting
Fees and his Director Option grant); (4) Mr. Moore - $6,000 in Board Meeting
Fees and $1,500 in Committee Meeting Fees and 10,000 Director Options vested
(bringing the total number of vested Director Options held by Mr. Moore to
10,000); (5) Mr. Newton - $0 in Board Meeting Fees and $0 in Committee
Meeting Fees (Mr. Newton waived his Board Meeting Fees, Committee Meeting
Fees and his Director Option grant); and (6) Mr. Rudy -$12,000 in Board
Meeting Fees and $1,500 in Committee Meeting Fees and 8,384 Director Options
vested (bringing the total number of vested Director Options held by Mr. Rudy
to 8,334). Mr. Breen is an employee of the Company, and, as such, was not
eligible to participate under the Director Compensation Policy.
During fiscal year 1997, the directors earned, but did not receive
payment of, the following compensation: (1) Mr. Aburdene - $4,000 in Board
Meeting Fees and $500 in Committee Meeting Fees; (2) Mr. Bolduc - $4,000 in
Board Meeting Fees and $500 in Committee Meeting Fees; (3) Mr. Castleman - $0
in Board Meeting Fees and $0 in Committee Meeting fees; (4) Mr. Moore -
$4,000 in Board Meeting Fees and $1,000 in Committee Meeting Fees; (5) Mr.
Newton - $0 in Board Meeting Fees and $0 in Committee Meeting Fees; and (6)
Mr. Rudy - $0 in Board Meeting Fees and $1,500 in Committee Meeting Fees.
During fiscal year 1997, Dr. Boyer, a former director and officer,
received payments totaling $133,333.33 in accordance with the terms of Dr.
Boyer's consulting arrangement with the Company. See ITEM 11 "EXECUTIVE
COMPENSATION -- CONSULTING ARRANGEMENTS" and ITEM 13, "CERTAIN RELATIONSHIPS
AND RELATED TRANSACTIONS" below.
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EMPLOYMENT AGREEMENTS
Mr. Breen assumed the positions of President and Chief Executive
Officer on January 26, 1996. Mr. Breen and the Company executed Mr. Breen's
Employment Agreement, effective as of January 18, 1996.
Mr. Breen's Employment Agreement inadvertently terminated on
January 17, 1998. In February 1998, the Board, effective retroactively to
January 17, 1998, amended and renewed Mr. Breen's Employment Agreement
(referred to herein as the "Amended Agreement") for an additional twelve
months though January 17, 1999. At the same time, the Board exercised its
right (pursuant to the one-year evergreen renewal provision in the Amended
Agreement) to extend the term of the Amended Agreement for a second twelve
months through January 17, 2000.
Pursuant to the Amended Agreement, Mr. Breen is to be paid an
annual base salary of $250,000, subject to review by the Board, plus
potential annual incentive bonuses and long-term incentive compensation if
certain performance targets are achieved. Pursuant to Mr. Breen's Employment
Agreement, on January 18, 1996, the Company granted Mr. Breen (1) an option
to purchase 100,000 shares of Common Stock at a purchase price of $3.75 per
share (the "1996 Option"), (b) the right to receive an option to purchase an
additional 75,000 shares of Common Stock in January 1997 (the "1997 Option")
and (c) the right to receive an option to purchase an additional 75,000
shares of Common Stock in January 1998 (the "1998 Option"). The 1996 Option
has a ten-year term and is fully vested. The Company did not grant the 1997
and 1998 Options to Mr. Breen. The Amended Agreement also provides for other
benefits, including life and medical insurance, long-term incentive
compensation arrangements, a leased automobile, annual tax planning services,
additional term life and disability income insurance and payment of business
expenses. Mr. Breen's Amended Agreement contains severance arrangements and
change of control arrangements which provide for payment to Mr. Breen of an
amount equal to two times Mr. Breen's annual base salary, the vesting of
certain unvested options and bonus payments prorated through the date of his
termination of employment in the event of termination of Mr. Breen's
employment with the Company other than for cause, Mr. Breen's death or Mr.
Breen's disability. Mr. Breen's Amended Agreement also contains provisions
restricting Mr. Breen's use of the Company's confidential information,
requiring assignment of inventions and patents to the Company and
indemnifying Mr. Breen under specified circumstances.
In fiscal year 1997, Mr. Breen received $250,000 of base salary and
no bonus. In November 1997, the Compensation Committee reviewed Mr. Breen's
base salary and determined not to increase it at that time. In March 1998,
Mr. Breen received a 1997 year-end bonus of $50,000.
SEVERANCE ARRANGEMENTS
In 1997, the Company paid $135,923 of deferred severance payments to
one former executive officer (who was not a Named Executive Officer during
fiscal year 1997) pursuant to
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severance arrangements entered into with such executive officer in fiscal
year 1995. The Company does not have a formal severance policy for executive
officers.
CONSULTING ARRANGEMENTS
In accordance with the terms of his Employment Agreement with the
Company, on July 20, 1995, Dr. Dennis Boyer, a former Named Executive Officer,
exercised his right to convert his status with the Company from executive
officer to consultant. In connection therewith, the Company agreed to retain
Dr. Boyer, and Dr. Boyer agreed, to provide certain consulting services to the
Company through December 31, 1997. The Company agreed to pay Dr. Boyer
$133,333.33 per year for such consulting services, plus reimbursement of
reasonable out-of-pocket expenses incurred by Dr. Boyer in performing such
services. During fiscal year 1997, the Company paid Dr. Boyer $133,333.33 for
consulting services rendered by him. All of Dr. Boyer's remaining options to
acquire Common Stock (which had been granted to him in connection with his
employment with the Company) expired on December 31, 1997, without being
exercised.
RETENTION PROGRAM
In February 1998, the Company retained the investment banking firm of
Schroder & Co., Inc. ("Schroder") to help it evaluate the Company's brand,
business and growth strategy and to identify potential methods and opportunities
to enhance shareholder value. On March 2, 1998, the Company issued a press
release announcing that it had engaged Schroder. At the same time, the Company
formed a special committee of the Board to evaluate potential transactions and
opportunities (collectively, "Transactions") presented by Schroder. At this
time, the Company is exploring possible transactions and has not entered into,
and is not obligated to enter into, any agreement with any third party to
proceed with any transaction.
The Company considers it essential to foster the continuous employment
of senior management and other key personnel of the Company. In this regard,
in February 1998, the Company entered into retention arrangements with
Messrs. Breen (the President and Chief Executive Officer), Olson (the
Executive Vice President Sales and Marketing), Bilmes (Vice President Finance
and Administration) and Ms. Pennington (the Vice President - Operations) (the
"Senior Management Program"). Under the Senior Management Program, (a) Mr.
Breen may receive a retention payment of up to 2.0 times his 1998 base
salary, (b) Mr. Olson may receive a retention payment of up to 1.75 times
his 1998 base salary, (c) Mr. Bilmes may receive a retention payment of up to
1.5 times his 1998 base salary and (d) Ms. Pennington may receive a retention
payment of up to .5 times her 1998 base salary. The purposes of the Senior
Management Program are to (1) alleviate concerns of senior management that
may arise as a result of the Company's consideration of various Transactions,
(2) encourage senior management to work toward the successful completion of a
Transaction and (3) encourage senior management to remain in the employ of
the Company up to, and for a period of time following, consummation of a
Transaction. Retention payments will be paid to senior management under the
Senior Management Program only if a Transaction is completed by June 30,
1998, or a definitive agreement to consummate a Transaction is executed on or
before that date and such Transaction is ultimately consummated.
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee during fiscal year 1997
were Messrs. Castleman and Bolduc through February 1997 and Messrs.
Aburdene, Bolduc and Rudy thereafter. None of the executive officers of the
Company serves or served on the compensation committee of another entity or
on any other committee of the board of directors of another entity performing
similar functions during fiscal year 1997, and no executive officer of the
Company serves or served as a director of another entity who has or had an
executive officer serving on the Board.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of shares of Common Stock as of April 1, 1998, by (i) each
person (or group of affiliated persons) known by the Company to be the
beneficial owner of more than five percent (5%) of the outstanding shares of
Common Stock, (ii) each of the Company's directors, (iii) each Named Executive
Officer (as defined in ITEM 11, "EXECUTIVE COMPENSATION -- SUMMARY COMPENSATION
TABLE") and (iv) all directors and executive officers as a group.
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<TABLE>
NUMBER OF
NAME AND ADDRESS OF BENEFICIAL OWNER(1) SHARES(2) PERCENT(2)
--------------------------------------- --------- ----------
<S> <C> <C>
Whitney Subordinated Debt Fund, L.P.(3)(4) 1,083,234 8.08%
Rashed Abdul Rahman Al-Rashed & Sons 1,032,585 8.38%
Company (5)
First Union Corporation (6) 839,332 6.38%
Whitney 1990 Equity Fund, L.P. (3)(7) 1,083,234 8.08%
J.H. Whitney & Co. (3)(8) 1,083,234 8.08%
Elias F. Aburdene (9) 16,000 0.13%
J.P. Bolduc (10) 399,667 3.22%
Donald D. Breen (11) 122,150 1.00%
James L. Moore, Jr. (12) 17,500 0.14%
Ray E. Newton, III (3)(13) 1,083,234 8.08%
Raymond B. Rudy (14) 8,384 0.07%
Barry Bilmes (15) 12,667 0.10%
Terry M. Olson (16) 88,667 0.71%
Linda Pennington (17) 15,667 0.13%
All Executive Officers and Directors as a 1,763,936 13.05%
Group (8 persons)
</TABLE>
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(1) Unless otherwise indicated, the address of each of the persons named above
is c/o Brothers Gourmet Coffees, Inc., 2255 Glades Road, Suite 100E, Boca
Raton, Florida 33431.
(2) The total number of shares of Common Stock issued and outstanding at
December 31, 1997, was 12, 121,324.
A person is deemed to be the beneficial owner of securities that can be
acquired by such person within 60 days from the date hereof upon the
exercise of options or warrants. Each beneficial owner's number of shares
is determined by assuming that options or warrants that are held by such
person (but not those held by any other person) and that are exercisable
within 60 days from the date hereof have been exercised. The total
outstanding shares used to calculate each beneficial owner's percentage
includes such exercisable options and warrants of that person only. Unless
otherwise noted, the Company believes that all persons named in the table
have sole voting and investment power with respect to all shares of Common
Stock beneficially owned by them.
(3) The business address of Whitney Subordinated Debt Fund, L.P. ("Whitney Debt
Fund"), Whitney 1990 Equity Fund, L.P. ("Whitney Equity Fund"), J. H.
Whitney & Co. ("Whitney") and Ray E. Newton, III, is c/o J.H. Whitney &
Co., 177 Broad Street, 15th Floor, Stamford, Connecticut 06901. Whitney,
the Whitney Equity Fund and the Whitney Debt Fund are limited partnerships
in which Ray E. Newton, III, a director of the Company, is a general
partner. Accordingly, each of these entities and Mr. Newton may be deemed
to be the beneficial owner of the shares owned by each of such other such
entities.
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<PAGE>
(4) Consisting of (a) a warrant, which is immediately exercisable, to acquire
1,031,421 shares of Common Stock at a price of $8.67 per share, (b) a
warrant, which is immediately exercisable by Whitney Equity Fund, to
acquire 41,450.5 shares of Common Stock at a price of $3.88 per share and
(c) a warrant, which is immediately exercisable by Whitney, to acquire
10,362.5 shares of Common Stock at a price of $3.88 per share . The
Whitney Debt Fund disclaims beneficial ownership of any shares owned by
Whitney, the Whitney Equity Fund and Mr. Newton.
(5) According to Amendment No. 1 to a statement on Schedule 13G filed by Rashed
Abdul Rahman Al-Rashed & Sons Company with the SEC on February 8, 1995.
The business address of such person is P.O. Box 550, Riyadh, Saudi Arabia
11421.
(6) Represents shares of non-voting Class B Common Stock which are convertible
into shares of Common Stock ("Class B Common Stock"). The business address
of First Union is One First Union Center, 301 South College Street,
Charlotte, North Carolina 28288.
(7) Consisting of (a) a warrant, which is immediately exercisable, to acquire
41,450.5 shares of Common Stock at a price of $3.88 per share, (b) a
warrant, which is immediately exercisable by Whitney Debt Fund, to acquire
1,031,421 shares of Common Stock at a price of $8.67 per share and (c) a
warrant, which is immediately exercisable by Whitney, to acquire 10,362.5
shares of Common Stock at a price of $3.88 per share. The Whitney Equity
Fund disclaims beneficial ownership of any shares owned by Whitney, the
Whitney Debt Fund and Mr. Newton.
(8) Consisting of (a) a warrant, which is immediately exercisable, to acquire
10,362.5 shares of Common Stock at a price of $3.88 per share, (b) a
warrant, which is immediately exercisable by Whitney Equity Fund, to
acquire 41,450.5 shares of Common Stock at a price of $3.88 per share and
(c) a warrant, which is immediately exercisable by Whitney Debt Fund, to
acquire 1,031,421 shares of Common Stock at a price of $8.67 per share.
Whitney disclaims beneficial ownership of any shares owned by the Whitney
Equity Fund, the Whitney Debt Fund and Mr. Newton.
(9) Includes (a) 1,000 shares of Common Stock and (b) 15,000 shares of Common
Stock (at an exercise price of $3.375 per share) issuable upon the exercise
of a stock option. Does not include 10,000 shares of Common Stock which
are issuable upon the exercise of stock options that are not exercisable
within 60 days of the date hereof.
(10) Includes (a) 332,854 shares of Common Stock, (b) 15,000 shares of Common
Stock (at an exercise price of $3.375 per share) issuable upon the exercise
of a stock option and (c) a warrant, which is immediately exercisable, to
acquire an additional 51,813 shares of Common Stock at an exercise price of
$3.88 per share. Does not include (a) 10,000 shares of Common Stock
issuable upon the exercise of stock options that are not exercisable within
60 days of the date hereof and (b) 26,568 shares owned by trusts for the
benefit of relatives of Mr. Bolduc. Mr. Bolduc has neither voting nor
investment power with respect to securities held by the trust, and,
accordingly, disclaims beneficial ownership of such securities.
(11) Includes (a) 12,150 shares of Common Stock, (b) 100,000 shares of Common
Stock (at an exercise price of $3.75 per share) issuable upon the exercise
of stock options and (c) 10,000 shares of Common Stock (at an exercise
price of $1.0625 per share) issuable upon the exercise of stock options.
Does not include (a) 20,000 shares of Common Stock issuable upon the
exercise of stock options that are not earned or exercisable within 60 days
of the date hereof and (b) 31,200 shares of Common Stock owned by family
members and a retirement account for the benefit of a relative of Mr. Breen
over which Mr. Breen holds a power-of-attorney (Mr. Breen disclaims
beneficial ownership of such securities).
(12) Includes (a) 7,500 shares of Common Stock and (b) 10,000 shares of Common
Stock (at an exercise price of $2.63 per share) issuable upon the exercise
of a stock option. Does not include 10,000 shares of Common Stock issuable
upon the exercise of stock options that are not exercisable within 60 days
of the date hereof.
(13) Consisting of (a) a warrant, which is immediately exercisable, to acquire
10,362.5 shares of Common Stock at a price of $3.88 per share, (b) a
warrant, which is immediately exercisable by Whitney Equity Fund, to
acquire 41,450.5 shares of Common Stock at a price of $3.88 per share and
(c) a warrant, which is immediately exercisable by Whitney Debt Fund, to
acquire 1,031,421 shares of Common Stock at a price of $8.67 per share. Mr.
Newton disclaims beneficial ownership of any shares owned by the Whitney
Equity Fund, the Whitney Debt Fund and Whitney, except to the extent of his
proportionate interest therein.
(14) Includes 8,384 shares of Common Stock (at an exercise price of $3.75 per
share) issuable upon the exercise of a stock option. Does not include
10,000 shares of Common Stock issuable upon the exercise of stock options
that are not exercisable within 60 days of the date hereof.
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<PAGE>
(15) Includes (a) 1,000 shares of Common Stock, (b) 5,000 shares of Common Stock
(at an exercise price of $3.625 per share) issuable upon the exercise of a
stock option and (c) 6,667 shares of Common Stock (at an exercise price of
$1.0625 per share) issuable upon the exercise of stock options. Does not
include 13,333 shares of Common Stock issuable upon the exercise of stock
options that are not exercisable within 60 days of the date hereof.
(16) Includes (a) 7,000 shares of Common Stock, (b) 75,000 shares of Common
Stock (at an exercise price of $3.75 per share) issuable upon the exercise
of stock options and (c) 6,667 shares of Common Stock (at an exercise price
of $1.0625 per share) issuable upon the exercise of stock options. Does not
include 13,333 shares of Common Stock issuable upon the exercise of stock
options that are not exercisable within 60 days of the date hereof.
(17) Includes (a) 4,000 shares of Common Stock, (b) 5,000 shares of Common Stock
(at an exercise price of $3.56 per share) issuable upon the exercise of a
stock option and (c) 6,667 shares of Common Stock (at an exercise price of
$1.0625 per share) issuable upon the exercise of stock options. Does not
include 13,333 shares of Common Stock issuable upon the exercise of stock
options that are not exercisable within 60 days of the date hereof.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
PAYMENTS TO FORMER DIRECTORS AND OFFICERS
In July 1995, Dr. Boyer resigned as President and Chief Executive
Officer of the Company and converted to a consultant. See the Section entitled
"EXECUTIVE COMPENSATION--CONSULTING ARRANGEMENTS" for more information
concerning Dr. Boyer's consulting arrangement with the Company, which terminated
as of December 31, 1997. The Company believes that the consulting fees paid to
Dr. Boyer were fair, reasonable and consistent with the terms of transactions
the Company would have otherwise entered into with third party non-affiliated
persons/entities for comparable consulting services.
PAYMENTS TO LAW FIRMS
During fiscal year 1997, the Company paid approximately $508,000 for
legal services and reimbursement of out-of-pocket costs to the law firm of
Brownstein Hyatt Farber & Strickland, P.C. ("Brownstein Hyatt"), the Company's
general outside counsel . John L. Ruppert, the Secretary of the Company and
Special Counsel to the Board, is a shareholder of Brownstein Hyatt. The Company
believes that the fees paid to Brownstein Hyatt were fair, reasonable and
consistent with the terms of transactions the Company would have otherwise
entered into with third party non-affiliated law firms entities for comparable
legal services.
SIENA WARRANT
In September 1996, the Company and Siena Capital Partners, L.P.
("Siena"), an affiliate of Dabney Resnick Imperial, LLC, the Company's exclusive
debt placement agent ("DRI"), entered into a $3 million Securities Purchase
Agreement (the "Bridge Facility"). In December 1996, the Company repaid the
full amount of the Bridge Facility. In connection with the closing of the
Bridge Facility, the Company issued to Sienna four warrants with varying
effective and vesting dates. The first warrant, covering 100,000 shares of
Common Stock (the "Siena Warrant"), is fully
16
<PAGE>
vested. The second, third and fourth warrants expired without vesting. The
Siena Warrant (a) has a 7-year term and (b) had an original exercise price of
$2.89 per share. On December 9, 1997, Goldman Sachs Credit Partners, L.P.
("GSCP") acquired 100% of the Company's loans under its revolving credit
facility, and the Company and GSCP amended and restated the loan agreement
(the "Amended Credit Facility"). In connection therewith, the Company agreed
to reduce the exercise price of the Siena Warrant to $1.5625 per share as
compensation, in part, for the services provided by DRI in connection with
the negotiation and closing of the Amended Credit Facility. The Company
believes that the adjustment to the exercise price of the Siena Warrant was
fair, reasonable and consistent with the terms of transactions the Company
would have otherwise entered into with third party non-affiliated entities
for comparable services.
BWH WARRANT
In December 1996, the Company and Dilmun Financial Services
("Dilmun") entered into a $15 million Senior Subordinated Note Agreement (the
"Subordinated Debt Facility"). In connection with the closing of the
Subordinated Debt Facility, the Company issued to Brothers Warrant Holdings I,
an affiliate of DRI, a warrant, entitling DRI to acquire up to 400,000 shares of
Common Stock at an exercise price of $3.4375 per share of Common Stock (the "BWH
Warrant"). The BWH Warrant, which has a 7-year term, is fully vested. As
discussed above, on December 9, 1997, the Company and GSCP entered into the
Amended Credit Facility. In connection therewith, the Company agreed to reduce
the exercise price of the BWH Warrant to $1.5625 per share as compensation, in
part, for the services provided by DRI in connection with the negotiation and
closing of Amended Credit Facility. The Company believes that the adjustment to
the exercise price of the BWH Warrant was fair, reasonable and consistent with
the terms of transactions the Company would have otherwise entered into with
third party non-affiliated entities for comparable services.
GSCP WARRANT
In connection with the closing of the Amended Credit Facility, the
Company granted GSCP a warrant (the "GSCP Warrant") to acquire up to 400,000
shares of Common Stock at an exercise price of $1.50 per share. The term of the
GSCP Warrant is five years. The GSCP Warrant has standard anti-dilution
protection. In addition, at GSCP's election, GSCP may require the Company to,
and the Company has agreed to, redeem the GSCP Warrant at a redemption price of
$0.75 per GSCP Warrant share upon the occurrence of (a) a change of control of
the Company, (b) an early termination of the Amended Credit Facility or (c) at
any time within thirty days prior to the expiration of the GSCP Warrant. The
Company believes that the grant of the GSCP Warrant to GSCP was fair, reasonable
and consistent with the terms of transactions the Company would have otherwise
entered into with third party non-affiliated lenders for comparable services.
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<PAGE>
BIB WARRANT
In connection with the closing of the Subordinated Debt Facility, the
Company granted BIB Holdings (Bermuda) Ltd., an affiliate of Dilmun, a warrant
(the "BIB Warrant") to acquire up to 1,245,000 shares of Common Stock at an
exercise price of $.25 per share. The term of the BIB Warrant is ten years.
265,600 BIB Warrants vested on December 27, 1996. Another 265,600 BIB Warrants
vested on December 27, 1997. The remaining 713,800 BIB Warrants will vest
according to the following schedule: (1) 182,600 BIB Warrants will vest on
December 27, 1998, if the Subordinated Debt Facility is not paid in full on or
before that date, (2) another 166,000 BIB Warrants will vest on December 27,
1999, if the Subordinated Debt Facility is not paid in full on or before that
date, (3) another 182,600 BIB Warrants will vest on December 27, 2000 if the
Subordinated Debt Facility is not paid in full on or before that date and (4)
another 182,600 BIB Warrants will vest on December 27, 2001 if the Subordinated
Debt Facility is not paid in full on or before that date.
CONTRIBUTION OF SHARES TO THE COMPANY
In December 1997, the Whitney 1990 Equity Fund, L.P.., the Whitney
Subordinated Debt Fund, L.P., and J.H. Whitney & Co. (collectively, the "Whitney
Entities") contributed 131,136, 2,086 and 32,784 shares of Common Stock,
respectively, to the Company in connection with the settlement of the
Shareholder Class Action, and the parties simultaneously entered into a mutual
settlement and release agreement. The Company believes that the terms of this
transaction were fair, reasonable and consistent with the terms of transactions
the Company would have otherwise entered into with third party non-affiliated
entities in a comparable situation.
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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.
BROTHERS GOURMET COFFEES, INC.
By: /s/ BARRY BILMES
------------------------------------
Barry Bilmes, Vice President
Finance and Administration
(signing on behalf of the registrant
and as principal financial officer
of the registrant)
Date: April 24, 1998
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