<PAGE>
Securities and Exchange Commission
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 8, 1999
------------------------------
BROTHERS GOURMET COFFEES, INC.
- -------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Delaware 0-23024 52-1681708
- -------------------------------------------------------------------------------
(State or Other Juris- (Commission File (IRS Employer
diction of Incorporation) Number) Identification No.)
2255 Glades Road
Suite 100E
Boca Raton, Florida 33431
- -------------------------------------------------------------------------------
(Address of Principal (Zip Code)
Executive Offices)
(561) 995-2600
- -------------------------------------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
Not Applicable
- -------------------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
ITEM 2. ACQUISITIONS OR DISPOSITION OF ASSETS
On Tuesday, March 9, 1999, the Registrant issued the press release attached
hereto as Exhibit 99.1, which is incorporated herein by reference. The press
release announces that:
1. On Monday, March 8, 1999, the Registrant and its affiliates
(collectively, the "Debtors"), after consultation with the Official
Unsecured Creditors' Committee, selected The Procter & Gamble Company
("P&G") as the successful bidder for Registrant's distribution assets
and signed a definitive Asset Purchase Agreement with P&G.
2. Pursuant to the Asset Purchase Agreement, P&G has agreed to purchase
certain of Registrant's finished product inventory and all of
Registrant's green coffee inventory, intellectual property, accounts
receivable, in-store equipment and other intangibles (i.e., contracts,
goodwill, etc.) for $21.5 million in cash. As part of the
transaction, P&G has agreed to assume $1.3 million of Registrant's
liabilities. The parties also have agreed to enter into a Transitional
Supply and Services Agreement, pursuant to which Registrant will agree
to roast, package and ship nine (9) million pounds of coffee for P&G
during the twelve (12) month period immediately following the closing
of the transaction in return for which P&G will pay Registrant $2.4
million in excess of Registrant's production costs. The transaction
is scheduled to close on April 30, 1999, subject to obtaining all of
the necessary approvals and consents for the transaction.
3. The Debtors will retain ownership of all of their roasting and
packaging assets located at their Houston, Texas, manufacturing
facility. The Debtors will continue to operate the Houston facility
during the term of the Transitional Supply and Services Agreement
while, at the same time, looking for a buyer for the facility. The
Transitional Supply and Services Agreement is fully assignable with
P&G's consent.
4. Based on the information currently available, the Debtors do not
believe that the combined proceeds from the sale of assets to P&G and
the anticipated proceeds from the disposition of the Houston facility
will be sufficient to repay all of their indebtedness. Accordingly,
it is not anticipated that any distributions will be made to
Registrant's stockholders.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
99.1 Press release issued Tuesday, March 9, 1999, by the Registrant (1)
announcing that, on March 8, 1999, the Registrant and its affiliates
(collectively, the "Debtors"), after consultation with the Official
Unsecured Creditors' Committee, selected The Procter & Gamble Company
("P&G") as the successful bidder for Registrant's distribution
<PAGE>
assets and signed a definitive Asset Purchase Agreement with P&G and
(2) describing the principal terms of the transaction.
99.2 The Asset Purchase Agreement between The Procter & Gamble Company and
Brothers Gourmet Coffees, Inc., dated as of March 8, 1999.
99.3 The Form of Transitional Supply and Services Agreement between
Brothers Gourmet Coffees, Inc., and The Procter & Gamble Company,
dated as of March 8, 1999.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
BROTHERS GOURMET COFFEES, INC.
(Registrant)
/s/ Barry Bilmes
---------------------------------
Date: March 12, 1999 By: Barry Bilmes
Title: Vice President Finance and Administration
<PAGE>
EXHIBIT 99.1
BROTHERS GOURMET COFFEES, INC.
FOR IMMEDIATE RELEASE
CONTACT: BARRY BILMES
VICE PRESIDENT FINANCE AND ADMINISTRATION
BROTHERS GOURMET COFFEES, INC.
(561) 995-2600
BROTHERS GOURMET COFFEES, INC.
ANNOUNCES SALE OF ASSETS TO
THE PROCTER & GAMBLE COMPANY
BOCA RATON, FLORIDA, TUESDAY, MARCH 9, 1999: Brothers Gourmet Coffees,
Inc. ("Brothers," traded on the OTCBB under the symbol "BEANQ"), announced today
that, on Monday, March 8, 1999, it and its affiliates (collectively, the
"Debtors"), after consultation with the Official Unsecured Creditors' Committee,
selected The Procter & Gamble Company ("P&G") as the successful bidder for
Brothers' distribution assets and signed a definitive Asset Purchase Agreement
with P&G.
Pursuant to the Asset Purchase Agreement, P&G has agreed to purchase
certain of Brothers' finished product inventory and all of Brothers' green
coffee inventory, intellectual property, accounts receivable, in-store equipment
and other intangibles (i.e., contracts, goodwill, etc.) for $21.5 million in
cash. As part of the transaction, P&G has agreed to assume $1.3 million of
Brothers' liabilities. The parties also have agreed to enter into a Transitional
Supply and Services Agreement, pursuant to which Brothers will agree to roast,
package and ship nine (9) million pounds of coffee for P&G during the twelve
(12) month period immediately following the closing of the transaction in return
for which P&G will pay Brothers $2.4 million in excess of Brothers' production
costs. The transaction is scheduled to close on April 30, 1999, subject to
obtaining all of the necessary approvals and consents for the transaction.
The Debtors will retain ownership of all of their roasting and packaging
assets located at their Houston, Texas, manufacturing facility. The Debtors
will continue to operate the Houston facility during the term of the
Transitional Supply and Services Agreement while, at the same time, looking for
a buyer for the facility. The Transitional Supply and Services Agreement is
fully assignable with P&G's consent.
Based on the information currently available, the Debtors do not believe
that the combined proceeds from the sale of assets to P&G and the anticipated
proceeds from the disposition of the Houston facility will be sufficient to
repay all of their indebtedness. Accordingly, it is not anticipated that any
distributions will be made to Brothers stockholders.
<PAGE>
STATEMENTS CONTAINED IN THIS NEWS RELEASE, IF NOT HISTORICAL, ARE FORWARD
LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF
1933 AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, WHICH INVOLVE RISKS
AND UNCERTAINTIES WHICH COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE
RESULTS DESCRIBED IN THE FORWARD LOOKING STATEMENTS. SUCH RISKS AND
UNCERTAINTIES INCLUDE THE EFFECT ON VENDORS, CUSTOMERS AND OTHER THIRD PARTIES
WITH WHOM THE DEBTORS DO BUSINESS OF THE DEBTORS' STATUS AS
DEBTORS-IN-POSSESSION IN A PROCEEDING UNDER CHAPTER 11 OF THE FEDERAL BANKRUPTCY
LAWS, COMPLIANCE WITH THE CONDITIONS PRECEDENT AND SUBSEQUENT IN THE ASSET
PURCHASE AGREEMENT AND TRANSITIONAL SUPPLY AND SERVICES AGREEMENT WITH THE
PROCTER & GAMBLE COMPANY, BROTHERS' DEPENDENCE ON KEY PERSONNEL, THE ABILITY OF
THE DEBTORS TO DISPOSE OF THE HOUSTON MANUFACTURING FACILITY AND THE TERMS AND
CONDITIONS OF SUCH DISPOSITION AND THE STRUCTURE AND TERMS OF ANY PLAN OF
REORGANIZATION FOR THE DEBTORS. A FURTHER DISCUSSION OF FACTORS THAT COULD
AFFECT THE COMPANY'S BUSINESS AND RESULTS OF OPERATIONS IS INCLUDED IN THE
COMPANY'S REPORTS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
EXHIBIT 99.2
EXECUTION COPY
ASSET PURCHASE AGREEMENT
BETWEEN
THE PROCTER & GAMBLE COMPANY
AND
BROTHERS GOURMET COFFEES, INC.
--------------------------------------------------------
AS OF MARCH 8, 1999
<PAGE>
<TABLE>
<S> <C>
1. DEFINITIONS...................................................................................................1
1.1 APPENDIX OF DEFINED TERMS...............................................................................1
1.2 ACCOUNTING TERMS........................................................................................1
1.3 OTHER DEFINITIONAL PROVISIONS...........................................................................1
2. THE SALE AND PURCHASE OF CERTAIN ASSETS.......................................................................2
2.1 PURCHASE OF ASSETS......................................................................................2
2.2 PURCHASE CONSIDERATION..................................................................................2
2.3 PURCHASE PRICE ADJUSTMENTS..............................................................................3
2.4 CLOSING.................................................................................................4
2.5 CLOSING DATE............................................................................................4
2.6 CLOSING DELIVERIES......................................................................................4
2.7 CERTAIN EFFECTS OF THE CLOSING..........................................................................4
2.8 ESCROW ARRANGEMENT......................................................................................5
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................................................................5
3.1 CORPORATE ORGANIZATION..................................................................................5
3.2 AUTHORIZATION...........................................................................................6
3.3 CONSENTS AND APPROVALS; NO VIOLATIONS...................................................................6
3.4 FINANCIAL STATEMENTS....................................................................................7
3.5 COMPLIANCE WITH LAW..........................................................................................8
3.6 ENVIRONMENTAL MATTERS...................................................................................8
3.7 INSURANCE...............................................................................................9
3.8 INTELLECTUAL PROPERTY..................................................................................10
3.9 REORGANIZATION PROCEEDINGS..................................................................................10
3.10 BROKERS AND FINDERS........................................................................................10
3.11 FULL DISCLOSURE............................................................................................11
3.12 OTHER..................................................................................................11
3.13 REPRESENTATIONS AND WARRANTIES ON CLOSING DATE.............................................................11
3.14 MATERIALITY OF REPRESENTATIONS AND WARRANTIES..............................................................11
4. REPRESENTATIONS AND WARRANTIES OF BUYER......................................................................11
4.1 CORPORATE STATUS............................................................................................11
4.2 AUTHORITY; CONSENTS; ENFORCEMENT; NONCONTRAVENTION..........................................................12
4.3 NO AGENT, FINDER OR BROKER..................................................................................12
4.4 COMPLETENESS OF STATEMENT; EFFECT OF REPRESENTATIONS AND WARRANTIES....................................12
5. COVENANTS OF THE PARTIES.....................................................................................13
5.1 PLAN OF REORGANIZATION AND/OR SALE MOTION...................................................................13
5.2 ACCESS TO INFORMATION AND EMPLOYEES....................................................................15
5.3 REGISTRATIONS, FILINGS, AND CONSENTS...................................................................17
5.4 EXECUTORY LEASES AND CONTRACTS.........................................................................17
5.5 CONDUCT OF BUSINESS....................................................................................18
5.6 BEST EFFORTS...........................................................................................19
5.7 NOTICE OF ACTIONS AND PROCEEDINGS......................................................................19
5.8 NOTIFICATION OF OTHER MATTERS..........................................................................19
5.9 MOTIONS BY THE COMPANY.................................................................................20
i
<PAGE>
5.10 SUPPLY AGREEMENT......................................................................................20
6. CONDITIONS TO BUYER'S OBLIGATIONS AT CLOSING.................................................................20
6.1 REPRESENTATION AND WARRANTIES..........................................................................20
6.2 CONSENTS...............................................................................................20
6.3 LITIGATION.............................................................................................20
6.4 MATERIAL ADVERSE EFFECT................................................................................21
6.5 NO AMENDMENTS..........................................................................................21
6.6 ENTRY OF THE CONFIRMATION ORDER OR THE SALE ORDER AND ASSUMPTION ORDER; CONSUMMATION OF THE PLAN.......21
6.7 ADDITIONAL PROVISIONS FOR A SALE ORDER.................................................................22
6.8 PROVISION FOR UNSECURED CREDITORS......................................................................22
6.9 COMPANY CERTIFICATE....................................................................................23
6.10 OTHER DOCUMENTS.......................................................................................23
6.11 CONSENTS..............................................................................................23
6.12 ORDERS................................................................................................23
6.13 CONDITIONS TO AMENDED PLAN............................................................................24
6.14 NO CONVERSION.........................................................................................24
6.15 CHANGE IN FINANCIAL MARKETS...........................................................................24
6.16 ASSETS.................................................................................................24
6.17 CUSTOMER AND OTHER ARRANGEMENTS.......................................................................24
6.18 EXECUTORY CONTRACTS...................................................................................25
6.19 SUPPLY................................................................................................25
6.20 SUPPLY AGREEMENT......................................................................................25
7. CONDITIONS TO THE COMPANY'S OBLIGATIONS AT CLOSING...........................................................25
7.1 REPRESENTATIONS AND WARRANTIES.........................................................................25
7.2 LITIGATION; CONSENTS...................................................................................25
7.3 HIGHEST AND BEST BIDDER................................................................................25
7.4 ENTRY OF THE CONFIRMATION ORDER OR THE SALE ORDER AND ASSUMPTION ORDER; CONSUMMATION OF THE PLAN.......26
8. AMENDMENT; TERMINATION; ASSIGNMENT; LIQUIDATED DAMAGES.......................................................26
8.1 AMENDMENT..............................................................................................26
8.2 TERMINATION............................................................................................27
8.3 RIGHTS OF TERMINATION..................................................................................28
8.4 ASSIGNMENT.............................................................................................29
8.5 LIQUIDATED DAMAGES.....................................................................................29
9. MISCELLANEOUS PROVISIONS.....................................................................................30
9.1 AMENDMENT; WAIVER......................................................................................30
9.2 BINDING EFFECT.........................................................................................30
9.3 CONSTRUCTION AND INTERPRETATION OF AGREEMENT...........................................................30
9.4 SEVERABILITY OF PROVISIONS.............................................................................30
9.5 EXHIBITS AND SCHEDULES.................................................................................31
9.6 COUNTERPARTS...........................................................................................31
9.7 ENTIRE AGREEMENT; DISCLOSURES IN WRITING...............................................................31
ii
<PAGE>
9.8 EXPENSES...............................................................................................31
9.9 FURTHER ASSURANCES.....................................................................................31
9.10 GOVERNING LAW.........................................................................................31
9.11 NOTICES...............................................................................................31
9.12 CUMULATIVE REMEDIES; SPECIFIC PERFORMANCE.............................................................33
9.13 TIME OF ESSENCE.......................................................................................33
APPENDIX OF DEFINED TERMS.........................................................................................1
iii
</TABLE>
<PAGE>
SCHEDULES
<TABLE>
<CAPTION>
SCHEDULE DESCRIPTION
<S> <C>
2.1 Assets
2.2(a) Details of the Purchase Price
3.3 Consents and Approvals; No Violations
3.5(a) Exceptions to Compliance with Laws
3.5(b) Permits, Licenses, Approvals
3.6 Environmental Matters
3.8 Intellectual Property
3.9 Reorganization Proceedings
5.4(b) Customer Contracts
5.5(g) Contracts
</TABLE>
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT dated as of March 8, 1999 is between The
Procter & Gamble Company ("Buyer"), an Ohio corporation, and BROTHERS GOURMET
COFFEES, INC., a Delaware corporation and its Subsidiaries, (collectively, with
the exception of Maryland Club Foods, Inc. referred to as "Company")
debtors-in-possession in Chapter 11 Case numbers 98-1970 (MFW), 98-1971 (MFW),
98-1973 (MFW) and 98-1974 (MFW) pending in the United States Bankruptcy Court
for the District of Delaware (the "Case"). "Company", when used in this
Agreement, includes the reorganized Company after the Amended Plan is confirmed.
RECITALS:
A. The Company is the debtor in the Case and desires to file the Amended
Plan or Sale Motion and Assumption Motion in the Chapter 11 Cases pursuant to
which Buyer will acquire some of the assets of the Company.
B. Buyer desires to purchase from the Company some of the assets of the
Company pursuant to an 11 U.S.C. Sections 105, 363 and 365 order or a
Confirmation Order.
AGREEMENT:
NOW, THEREFORE, the parties hereby agree as follows:
1. DEFINITIONS.
1.1 APPENDIX OF DEFINED TERMS. Certain terms used in this
Agreement are defined in the Appendix of Defined Terms.
1.2 ACCOUNTING TERMS. Accounting terms used in this Agreement
which are not otherwise defined shall have the meaning assigned such terms under
GAAP.
1.3 OTHER DEFINITIONAL PROVISIONS.
(a) When used in this Agreement, the word "including" shall
have its normal common meaning and any list of items that may follow such word
shall not be deemed to represent a complete list of the contents of the referent
of the subject.
(b) Unless the context otherwise requires, when used in
this Agreement, the singular shall include the plural, the plural shall include
the singular, and all nouns, pronouns and
1
<PAGE>
any variations thereof shall be deemed to refer to the masculine, feminine or
neuter, as the identity of the Person or Persons may require.
2. THE SALE AND PURCHASE OF CERTAIN ASSETS .
2.1 PURCHASE OF ASSETS. On the terms and conditions of this
Agreement, on the Closing Date the Company shall sell, transfer, assign, convey
and deliver to Buyer all of the assets on Schedule 2.1 attached hereto (all such
assets collectively referred to as "Assets"), free and clear of any liens,
claims and encumbrances. Buyer shall pay the Purchase Price to the Disbursing
Agent or the Company, pursuant to Section 2.2(b) and either the Disbursing Agent
or the trustee of the Trust or the Company shall sell the Assets to Buyer, on
the terms and subject to the conditions of this Agreement (the "Acquisition").
The mechanism for approving the transaction contemplated by this Agreement
(either through the Sale Motion and Assumption Motion or the Amended Plan) shall
be reasonably agreed by the parties.
2.2 PURCHASE CONSIDERATION.
(a) On the Closing Date, in consideration of the
Acquisition, Buyer shall pay the sum of $21,500,000 as adjusted in accordance
with Section 2.3 and the Assumed Liabilities pursuant to Section 2.7(b) (the
"Purchase Price"). Details of the components of such Purchase Price are set
forth on Schedule 2.2(a). These components shall be adjusted as appropriate and
necessary to reflect any Purchase Price Adjustment.
(b) Payment of the Purchase Price shall be made at the
Closing to the Disbursing Agent, at the option of Buyer, by (1) payment by Buyer
of the difference between the Purchase Price and the Escrow Amount by wire
transfer of immediately available funds in accordance with the Amended Plan and
the Confirmation Order or the Sale Order and release of the Escrow Amount to the
Disbursing Agent in accordance with the Escrow Agreement or (2) payment by Buyer
of the entire cash portion of the Purchase Price by wire transfer of immediately
available funds in accordance with the Amended Plan and the Confirmation Order
or the Sale Order and the simultaneous return of the Escrow Amount to the Buyer.
(c) Notwithstanding the foregoing, $3,087,500 of such
Purchase Price, less any Finished Product Inventory transferred by Company to
Buyer at Closing (at the rate of $3.25 per pound), shall be put in an escrow
account at Closing, subject to an escrow agreement as reasonably agreed by the
parties, and such sum shall be released by Buyer (at the rate of $3.25 per
pound) only as Company ships Finished Product Inventory pursuant to Buyer's
Order. The parties shall agree twenty-five (25) calendar days prior to the
anticipated Closing Date, on such Order for Finished Product Inventory.
2
<PAGE>
2.3 PURCHASE PRICE ADJUSTMENTS.
(a) The Purchase Price shall be adjusted (the "Purchase
Price Adjustment") in an amount (which may be a positive or negative number)
equal to the Green Coffee Inventory Adjustment, In-Store Inventory Adjustment
and Accounts Receivable Adjustment. The parties shall estimate the Purchase
Price Adjustment at the Closing and adjust the Purchase Price to be paid at the
Closing by such estimate.
(b) The "Green Coffee Inventory Adjustment" shall be an
amount equal to (1) 653,000 pounds minus the number of pounds of Green Coffee
Inventory, such difference multiplied by $1.225. If the product is negative,
then the Green Coffee Inventory Adjustment shall be added from the amount
specified in Section 2.2. If the balance is positive, then the Green Coffee
Inventory Adjustment shall be that amount and shall be subtracted from the
amount specified in Section 2.2.
(c) The "In-Store Inventory Adjustment," the intent of
which is to prevent inventory loading, shall be an amount equal to $6.00
multiplied by the sum of (1) the amount (in pounds), for any
direct-store-delivery ("DSD") Customer, of any product inventory at such
Customer premises that is not on the store shelves (e.g., in the back room);
and (2) any product inventory (in pounds) for DSD Customers, wherever situated,
which code date expires on or before the Closing Date, but excluding any
inventory included in (1) above. Such product, the In-Store Inventory
Adjustment, shall only be subtracted from the amount specified in Section 2.2.
(d) The "Accounts Receivable Adjustment" shall be the
difference between the actual balance of all accounts receivable at the Closing
Date and $5,500,000. If such difference is positive, such difference shall be
added to the amount specified in Section 2.2(a); if such difference is negative,
such difference shall be subtracted from the amount specified in Section 2.2(a).
(e) Buyer will prepare calculations of the Green Coffee
Inventory Adjustment, In-Store Inventory Adjustment and Accounts Receivable
Adjustment and deliver such calculations to the Disbursing Agent within thirty
days after the Closing Date. If within thirty days following delivery of the
calculations of the Green Coffee Inventory Adjustment, In-Store Inventory
Adjustment and Accounts Receivable Adjustment, the Disbursing Agent has not
given Buyer notice of its objection to such calculations (such notice must
contain a statement of the basis of the Disbursing Agent's objection), then the
Green Coffee Inventory Adjustment, In-Store Inventory Adjustment and Accounts
Receivable Adjustment calculated by Buyer will be used in computing the Purchase
Price Adjustment. If the Disbursing Agent gives such notice of objection, then
the issues in dispute will be submitted to the Accountants for resolution. If
issues in dispute are submitted to the Accountants for resolution, (1) each
party will furnish to the Accountants such workpapers and other documents and
information relating to the disputed issues as the Accountants may request and
are available to that party and will be afforded the
3
<PAGE>
opportunity to present to the Accountants any material relating to the
determination and to discuss the determination with the Accountants; (2) absent
manifest error, the determination by the Accountants, as set forth in a notice
delivered to both parties by the Accountants, will be binding and conclusive on
the parties; and (3) Buyer and Company or a distribution fund to be set up in
the Amended Plan ("Distribution Fund") will each bear 50% of the fees of the
Accountants for such determination.
(f) On the tenth Business Day following the final
determination of the Purchase Price Adjustment, if the Purchase Price Adjustment
is greater than the estimated payment made at Closing, Buyer will pay the
difference to the Disbursing Agent, and if the Purchase Price Adjustment is less
than the estimated payment made at Closing, the Disbursing Agent will pay the
difference to Buyer from the Distribution Fund. No administrative expenses
shall be paid prior to making all disbursements necessary to be made from the
Distribution Fund.
2.4 CLOSING. The closing of the Acquisition ("Closing") shall
take place at the offices of Weil, Gotshal & Manges LLP, Miami, Florida at 9:00
a.m. local time.
2.5 CLOSING DATE. The Closing shall occur on a date designated
by Buyer which is not later than five (5) Business Days following the later to
occur of (1) the satisfaction, or waiver by Buyer, of all of the conditions set
forth in Section 6 hereof, (2) the satisfaction, or waiver by the Company, of
all of the conditions set forth in Section 7 hereof, and (3) the receipt of all
required Government Consents (the "Closing Date").
2.6 CLOSING DELIVERIES. At the Closing, subject to the
satisfaction of the terms and conditions set forth herein, Buyer will pay the
Purchase Price in the manner set forth in Section 2.2(b) and either the
Disbursing Agent or the trustee of the Trust or the Company will deliver the
Assets to Buyer. In addition to the foregoing, the Company and Buyer will
execute and deliver such other agreements, instruments, certificates and other
documents to be executed and delivered hereunder or as may be reasonably
requested by either party to consummate the transactions contemplated hereby,
all in form and substance reasonably satisfactory to the parties hereto and
their respective counsel.
2.7 CERTAIN EFFECTS OF THE CLOSING.
(a) Subject to Section 8.3(c) the representations and
warranties contained in this Agreement shall not survive the Closing of the
Acquisition and, after the Closing Date, the Company, its Subsidiaries and each
of their officers, directors, shareholders and affiliates shall have no further
obligations with respect thereto.
(b) At the Closing, Buyer shall assume up to $1,300,000 in
obligations accrued under the Company's Customer Contracts as of the Closing
Date in order of priority as specified by Buyer (the "Assumed Liabilities"). To
the extent that Buyer assumes less than $1,300,000 of such obligation as of the
Closing Date (not including the new King Soopers agreement), Buyer
4
<PAGE>
shall pay the difference in cash at the Closing Date as part of the Purchase
Price. Such Assumed Liabilities shall be increased pursuant to a new King
Soopers Customer Contract, as agreed by the parties, that is executed pursuant
to Section 6.15(b). Except with respect to the Assumed Liabilities, Buyer shall
not assume or be obligated for any liability or obligation of the Company,
direct or indirect, known or unknown, absolute or contingent, including but not
limited to product liability, Tax liabilities, contractual liabilities, any
employee related liabilities (including but not limited to wages, benefits,
COBRA, or other liabilities), environmental liabilities, any liabilities for
assets not purchased by Buyer, or any other liability of the Company or the
Subsidiaries arising from the operation of the Company and the Subsidiaries
prior to the Closing Date (other than any liability Buyer may have, if any,
pursuant to the Stock Purchase Agreement between Company and Buyer dated May 2,
1994 with respect to Maryland Club Foods, Inc. ("Maryland Club Agreement")).
2.8 ESCROW ARRANGEMENT. Buyer and the Company have entered into
an Escrow Agreement with the Escrow Agent (the "Escrow Agreement"), pursuant to
which Buyer has caused to be delivered to the Escrow Agent for the benefit of
the Company an irrevocable letter of credit in the amount of $500,000 (the
"Escrow Amount") to provide for a portion of the Purchase Price and to secure
payment of the liquidated damages provided for in Section 8.5.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to Buyer as follows:
3.1 CORPORATE ORGANIZATION.
(a) The Company (1) is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and (2) subject to the approval of the Amended Plan and the sale of the Assets
in the Confirmation Order and the occurrence of the effective date of the Plan
or the entry of the Sale Order and Assumption Order, has the corporate power and
corporate authority to (A) enter into this Agreement and the other agreements,
documents and instruments to be executed and delivered by the Company pursuant
hereto and (B) consummate the transactions contemplated hereby. The Company is
duly qualified and in good standing to transact business as a foreign
corporation in each jurisdiction where the ownership or use of its properties
and the conduct of its business necessitates such qualification, except such
jurisdictions, in which the failure to be so qualified will not have a Material
Adverse Effect.
(b) Each Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of their respective jurisdictions
of incorporation. Each Subsidiary is duly qualified and in good standing to
transact business as a foreign entity in each jurisdiction where the ownership
or use of its properties and the conduct of its business necessitates such
qualification except such jurisdictions in which the failure to be so qualified
will not have a Material Adverse Effect.
5
<PAGE>
(c) Neither the Company nor any Subsidiary is in material
violation of its charter or by-laws. The minute books of the Company and each
Subsidiary, contain in all material respects an accurate record of all corporate
action taken by the stockholders and Board of Directors (and the Committees of
such Board) of the Company and each Subsidiary.
3.2 AUTHORIZATION.
(a) The execution and delivery of this Agreement, the
Transition Supply and Services Agreement, the Escrow Agreement and the documents
contemplated hereby (collectively the "Company Documents") have been duly
authorized and approved by the Board of Directors of the Company. Subject to
the entry of the Confirmation Order by the Bankruptcy Court and the occurrence
of the effective date of the Amended Plan or the entry of the Sale Order and
Assumption Order by the Bankruptcy Court, (1) no other corporate proceedings or
shareholder action on the part of the Company will be necessary to authorize the
execution and delivery by the Company of this Agreement, the Escrow Agreement
and the other agreements to be executed in connection herewith and to consummate
the transactions contemplated hereby or thereby and (2) each of the Company
Documents will constitute the valid and binding agreement of the Company,
enforceable against the Company in accordance with its respective terms.
(b) Since the Bankruptcy Court has entered the Interim
Order, Sections 5.2 and 8 shall constitute valid and binding agreements of the
Company enforceable against the Company in the Case in accordance with their
respective terms.
3.3 CONSENTS AND APPROVALS; NO VIOLATIONS. Except as set forth
on Schedule 3.3 and except for the (1) Confirmation Order or the Sale Order and
Assumption Order, (2) the filing by Buyer and the Company of a pre-merger
notification with the Federal Trade Commission and the Antitrust Division of the
United States Department of Justice under the HSR Act ("Antitrust Filing"), (3)
applications for, and procurement of continuations of, licenses and/or permits,
except as set forth on Schedule 3.3, in connection with applicable state or
local law change in control statutes (the "Permits") (all of the foregoing
consents, applications, approvals and/or Permits, other than the entry of the
Confirmation Order or the Sale Order and Assumption Order, are referred to as
the "Government Consents"), neither the execution and delivery by the Company of
this Agreement and the other Company Documents nor the consummation by the
Company or any Subsidiary of the transactions contemplated hereby or thereby
will (a) violate or conflict with or result in any breach of any provision of
the certificates of incorporation, articles of incorporation or by-laws (or
similar documents) of the Company or any Subsidiary; (b) violate or conflict
with any order, injunction, decree, law, statute, rule, ordinance or regulation
applicable to the Company or any Subsidiary or by which any of their respective
properties or assets may be bound which violation or conflict, alone or in the
aggregate, would have a Material Adverse Effect; (c) require any filing with,
notification to, or permit, consent or approval of, any public, governmental or
regulatory body, agency or authority the absence of which, alone or in the
aggregate, would have a Material Adverse Effect; (d) result in a violation or
breach of, constitute a default or give rise to any right of termination,
cancellation or acceleration under an
6
<PAGE>
agreement, or result in the creation of a Lien upon any property or asset of the
Company or any Subsidiary or by which any of the Company's or any Subsidiary's
properties or assets may be bound, which violation or conflict, alone or in the
aggregate, would have a Material Adverse Effect; or (e) result in the loss of
any license, franchise or permit the loss of which would have a Material Adverse
Effect.
3.4 FINANCIAL STATEMENTS.
(a) The Company has delivered to Buyer a copy of the
following consolidated financial statements of the Company and its Subsidiaries,
each of which presents fairly the consolidated financial condition and result of
operations of the Company and its Subsidiaries (together, the "Consolidated
Company") at the dates and for the periods covered by such statements in
accordance with GAAP (subject, in the case of interim statements, to normal
recurring accruals, year end adjustments, and matters that are reflected in the
footnotes). Except as set forth on Schedule 3.4(a), GAAP has been consistently
applied in the preparation of the financial statements described below
throughout the periods covered by such statements at and for the periods ended
December 29, 1995, December 27, 1996, December 26, 1997 and June 26, 1998:
Audited Consolidated Balance Sheets as of December 26, 1997 (the "Balance
Sheet Date") and December 27, 1996, together with notes thereto, and the
related Consolidated Statements of Operations, Consolidated Statements of
Changes in Stockholders' Equity and Consolidated Statements of Cash Flows
of the Company and its Subsidiaries, together with notes thereto, for each
of the three years ended, December 29, 1995, December 27, 1996, and
December 26, 1997 examined by Ernst & Young LLP as set forth in the
Company's 10-K Report filed with the SEC.
(b) The Company has delivered to Buyer copies of all
management letters prepared by Ernst & Young LLP, and delivered to the Company
since December 31, 1993.
(c) The Company has previously delivered to Buyer accurate
and complete copies of (1) its Annual Reports to Shareholders for the years
ended December 27, 1996 and December 29, 1995, (2) its Annual Reports on Form
10-K for the years ended December 26, 1997, December 27, 1996 and December 29,
1995 (together with all exhibits thereto), (3) all Quarterly Reports on Form
10-Q and Current Reports on Form 8-K filed by the Company since January 1, 1996,
(4) all proxy statements furnished to shareholders of the Company since January
1, 1996, (5) all registration statements filed by the Company with the SEC since
January 1, 1996 and (6) all unaudited financial statements for the past six (6)
months.
7
<PAGE>
3.5 COMPLIANCE WITH LAW.
(a) Except as set forth on Schedule 3.5(a) and other than
with respect to Environmental Laws:
(1) The business of each of the Company and each
Subsidiary is not being conducted in violation of any law, ordinance,
requirement or regulation of any governmental entity, regulatory body,
court or arbitrator (including, without limitation, those relating to
occupational safety and health practices), except for such violations,
which alone and in the aggregate, would not have a Material Adverse Effect.
(2) No proceeding is pending or, to the knowledge of
the Company, threatened to revoke or limit any existing Permits except
where such revocations, alone and in the aggregate, would not have a
Material Adverse Effect.
(b) Except as set forth on Schedule 3.5(b), there are no
permits, licenses or approvals required for the Company and the Subsidiaries to
conduct their business the absence of which, either alone or in the aggregate,
would have a Material Adverse Effect.
3.6 ENVIRONMENTAL MATTERS. Except as set forth in Schedule 3.6:
(a) The Company and each Subsidiary is, and at all times
has been, in full compliance with, and has not been and is not in violation of
or liable under, any Environmental Law with respect to the Facilities. Neither
the Company nor any Subsidiary has any basis to expect, nor has any of them or,
to the knowledge of the Company, any other Person for whose conduct they are or
may be held to be responsible received any actual or threatened order, notice,
or other communication from (1) any governmental body or private citizen acting
in the public interest, or (2) the current or prior owner or operator of any
Facilities, of any actual or potential violation or failure to comply with any
Environmental Law, or of any actual or threatened obligation to undertake or
bear the cost of any Environmental, Health, and Safety Liabilities with respect
to any of the Facilities or any other properties or assets (whether real,
personal, or mixed) in which the Company or any Subsidiary has an interest, or
with respect to any Facility at or to which Hazardous Materials were generated,
manufactured, refined, transferred, imported, used, or processed by the Company,
any Subsidiary or any other Person for whose conduct they are or may be held
responsible, or from which Hazardous Materials have been transported, treated,
stored, handled, transferred, disposed, recycled, or received.
(b) There are no pending or, to the knowledge of the
Company and the Subsidiaries, threatened claims, Liens, or other restrictions of
any nature, resulting from any Environmental, Health, and Safety Liabilities or
arising under or pursuant to any Environmental Law, with respect to or affecting
any of the Facilities or any other properties and assets (whether real,
personal, or mixed) in which the Company and Subsidiary has an interest.
8
<PAGE>
(c) Neither the Company nor any Subsidiary has knowledge of
any basis to expect, nor has any of them or any other Person for whose conduct
they are or may be held responsible, received, any citation, directive, inquiry,
notice, order, summons, warning, or other communication that relates to
Hazardous Activity, Hazardous Materials, or any alleged, actual, or potential
violation or failure to comply with any Environmental Law, or of any alleged,
actual, or potential obligation to undertake or bear the cost of any
Environmental, Health, and Safety Liabilities with respect to any of the
Facilities.
(d) None of the Company, any Subsidiary, or, to the
knowledge of the Company, any other Person for whose conduct they are or may be
held responsible, has any Environmental, Health, and Safety Liabilities with
respect to the Facilities or with respect to any other properties and assets
(whether real, personal, or mixed) in which the Company or any Subsidiary (or
any predecessor), has an interest, or at any property geologically or
hydrologically adjoining the Facilities or any such other property or assets.
(e) There are no Hazardous Materials present on or in the
Environment at the Facilities or at any geologically or hydrologically
adjoining property, including any Hazardous Materials contained in barrels,
above or underground storage tanks, landfills, land deposits, dumps, equipment
(whether moveable or fixed) or other containers, either temporary or permanent,
and deposited or located in land, water, sumps, or any other part of the
Facilities or such adjoining property, or incorporated into any structure
therein or thereon. None of the Company, any Subsidiary, or, to the knowledge
of the Company, any other Person for whose conduct they are or may be held
responsible, has permitted or conducted, or is aware of, any Hazardous Activity
conducted with respect to the Facilities or any other properties or assets
(whether real, personal, or mixed) in which the Company or any Subsidiary has an
interest except in compliance with all applicable Environmental Laws.
(f) There has been no Release or, to the knowledge of the
Company, threat of Release, of any Hazardous Materials at or from the Facilities
or, to the knowledge of the Company, at any other locations where any Hazardous
Materials were generated, manufactured, refined, transferred, produced,
imported, used, or processed from or by the Facilities, or from or by any other
properties and assets (whether real, personal, or mixed) in which the Company or
any Subsidiary has an interest, or to the knowledge of the Company any
geologically or hydrologically adjoining property, whether by the Company, any
Subsidiary or any other Person.
(g) The Company has delivered to Buyer true and complete
copies and results of any reports, studies, analyses, tests, or monitoring
possessed or initiated by the Company or any Subsidiary pertaining to Hazardous
Materials or Hazardous Activities in, on, or under the Facilities, or concerning
compliance by the Company, any Subsidiary, or any other Person for whose conduct
they are or may be held responsible, with Environmental Laws.
3.7 INSURANCE. The Company has previously provided to Buyer
copies of each insurance policy (including policies providing property,
casualty, liability, and workers'
9
<PAGE>
compensation coverage and bond and surety arrangements) to which the Company or
any Subsidiary has been a party, a named insured, or otherwise the beneficiary
of coverage at any time within the past three years along with the name,
address, and telephone number of the agent for each such policy. No notice of
cancellation or non-renewal with respect to, or disallowance of any claim under,
any such policy has been received by the Company.
3.8 INTELLECTUAL PROPERTY.
(a) Except as set forth on Schedule 3.8(a), the Company has
all material patents, trademarks, trade names, service marks, service names,
brand names, formulas, copyrights and similar intellectual property rights, that
are registered in the name of and/or owned by the Company or any Subsidiary or
are used in the conduct of the business of the Company or any Subsidiary (the
"Intellectual Property"). Schedule 3.8 lists all trademarks, trade names,
service marks, service names and brand names that are registered in the name of
the Company.
(b) Except as set forth on Schedule 3.8(b), the
Intellectual Property is duly registered or registration applied for, where
applicable, with the necessary jurisdictions. Except as set forth on Schedule
3.8(b), neither the Company nor any Subsidiary has received any notice from, and
neither the Company nor any subsidiary has knowledge of, any other Person
challenging or questioning the right of the Company or any Subsidiary to use any
Intellectual Property.
(c) The Intellectual Property comprises all of the patents,
trademarks, trade names, service marks, service names, brand names, formulas,
copyrights, UPC codes and similar intellectual property rights material to the
business of the Company or any Subsidiary.
(d) Except as set forth on Schedule 3.8(d), neither the
Company nor any Subsidiary has received any written notices alleging any
infringement or improper use of any patent, right, inventories, copyright,
trademark, service mark, trade secret, or trade name of any other person or
entity, registered or unregistered, and no claim is pending, has been made or,
to the Company's knowledge, is threatened to such effect which, if true, would
have, alone or in the aggregate, a Material Adverse Effect.
3.9 REORGANIZATION PROCEEDINGS. Except as set forth on Schedule
3.9, neither the Company nor any Subsidiary Debtor has taken any material action
prohibited by the Bankruptcy Code, the Bankruptcy Rules or order of the
Bankruptcy Court in connection with any of the Chapter 11 Cases.
3.10 BROKERS AND FINDERS. Except for Pricewaterhouse Coopers
LLP, the Company has not employed any broker, finder, consultant or intermediary
in connection with the transactions contemplated by this Agreement who would be
entitled to a broker's, finder's, consultant's or similar fee or commission in
connection therewith or upon the consummation
10
<PAGE>
thereof, or if the Closing does not occur. The Company shall bear all costs it
incurs in connection with the transaction contemplated by this Agreement unless
otherwise expressly provided herein.
3.11 FULL DISCLOSURE. No representation or warranty of the
Company contained in this Agreement or disclosed in accordance herewith,
contains an untrue statement of a material fact or omits to state a material
fact required to be stated herein or necessary to make the statements made, in
light of the circumstances under which they were made, not misleading as of the
date made or deemed made; PROVIDED, HOWEVER, that information contained in any
representation or warranty in this Agreement as of the later date, provided such
date is prior to the date hereof, shall be deemed to modify the information as
of an earlier date.
3.12 OTHER.
(a) Schedule 3.12(a) sets forth the the 10 largest Customer
Contracts of the Company and the Subsidiaries. Except as set forth on Schedule
3.12(a), other than such customer contracts, there is no contract the loss of
which would have a Material Adverse Effect.
(b) There are no Tax Liens on any of the Assets.
(c) Maryland Club Foods, Inc. has no and will have no Claims
against, loans to or encumbrances or liens against the Company.
3.13 REPRESENTATIONS AND WARRANTIES ON CLOSING DATE. The
representations and warranties contained in this Section 3 shall be true and
correct on and as of the Closing Date with the same force and effect as though
such representations and warranties had been made on and as of the Closing Date,
except (a) representations and warranties that were made as of a specific date
need be true in all respects only as of such date and (b) as expressly permitted
by this Agreement to change between the date of this Agreement and the Closing
Date.
3.14 MATERIALITY OF REPRESENTATIONS AND WARRANTIES. Matters
excluded from the representations and warranties as immaterial for any reason
(including, without limitation, the absence of a Material Adverse Effect) or as
a result of the qualification of the Company's knowledge would not, in the
aggregate, have a Material Adverse Effect after giving effect to improvements in
the Company's business, operations, properties or financial condition after the
date hereof (but without giving effect to the transactions contemplated herein)
which alone or in the aggregate, would have a favorable effect on the business,
operations, properties or financial condition of the Company and its
Subsidiaries.
4. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer hereby represents and
warrants to the Company as follows:
4.1 CORPORATE STATUS. Buyer is a corporation duly incorporated
and existing under the laws of Ohio, in good standing and is authorized to
transact business in such state. Buyer
11
<PAGE>
has, and at all times has had, full corporate power and authority to own and
lease its properties as such properties are now owned and leased and to conduct
its business as and where such businesses have and are now being conducted.
4.2 AUTHORITY; CONSENTS; ENFORCEMENT; NONCONTRAVENTION.
(a) This Agreement, the Transition Supply and Services
Agreement and the Escrow Agreement and any other document executed by Buyer in
connection herewith (collectively the "Buyer Documents") constitute the legal,
valid and binding obligations of Buyer, enforceable against Buyer in accordance
with their terms. Buyer has the absolute and unrestricted right, power,
authority, and capacity to execute and deliver this Agreement and to perform its
obligations under this Agreement. Except for the Governmental Consents, Buyer
does not need to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any governmental body in order to
consummate the Acquisition.
(b) The Buyer Documents have been duly executed and
delivered by Buyer and constitute the legal, valid and binding obligation of
Buyer, enforceable in accordance with their terms.
(c) Neither the execution and the delivery of the Buyer
Documents nor the compliance with, or the fulfillment of, the terms, conditions
and provisions hereof or thereof, will (a) violate any Legal Requirement of
Buyer, any provision of its charter or bylaws; or (b) conflict with, result in a
breach of, constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify, or cancel, or result in
the imposition of or creation of any Lien upon or with respect to any of the
assets or properties owned or used by Buyer, or (c) require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
Buyer is a party or by which it is bound or to which any of its assets or
properties are subject; or (d) require the approval, consent, authorization or
act of, or the making by Buyer of any declaration, filing or registration with,
any Person, other than Government Consents.
4.3 NO AGENT, FINDER OR BROKER. Buyer has no Liability or
obligation, contingent or otherwise, to pay any fees or commissions to any
agent, broker or finder with respect to the Acquisition.
4.4 COMPLETENESS OF STATEMENT; EFFECT OF REPRESENTATIONS AND
WARRANTIES. No representation or warranty of Buyer in this Agreement contains
any untrue statement of a material fact, omits any material fact necessary to
make such representation or warranty, under the circumstances which it was made,
not misleading, or contains any misstatement of a material fact.
12
<PAGE>
5. COVENANTS OF THE PARTIES.
5.1 PLAN OF REORGANIZATION AND/OR SALE MOTION. The Company
shall take the following actions:
(a) Not later than five (5) Business Days after this
Agreement is executed, the Company shall file an Amended Plan or the Sale Motion
and Assumption Motion with the Bankruptcy Court as agreed by the parties in
accordance with Section 2.1. The Amended Plan or the Sale Motion and Assumption
Motion shall be in form and substance satisfactory to Buyer. Prior to the
Filing Date the Company will consult with Buyer on an ongoing basis and provide
drafts of the Amended Plan or Sale Motion and Assumption Motion to Buyer in
order to achieve the goals of this Section 5.1(a).
(b) Simultaneous with the filing of the Amended Plan (if
this Acquisition is consummated pursuant to such Amended Plan), the Company
shall file with the Bankruptcy Court an Amended Disclosure Statement pursuant to
Section 1125 of the Bankruptcy Code any pleading required or desirable as
reasonably determined by the Company and its counsel in order to obtain the
Disclosure Statement Order. The Company shall use its best efforts to obtain
prompt approval by the Bankruptcy Court of the Amended Disclosure Statement.
(c) The Company shall use its best efforts to obtain and
shall refrain from taking any action that would materially impede or result in a
revocation of:
(1) the entry by the Bankruptcy Court of an Order, in
form and substance satisfactory to Buyer (the "Sale Order") approving the
Sale of Assets pursuant to Sections 105 and 363 of the Bankruptcy Code and
providing for the assumption and assignment to Buyer of the Contracts and
Leases set forth on Schedule 5.5(g) in accordance with Section 365 of the
Bankruptcy Code. In connection therewith, the Company and its counsel
shall be required, among other things, to use their best efforts to cause
the Sale Order to include findings of fact and conclusions of law which
will:
a. provide for the transfer of Assets to the
Buyer free and clear of any liens, claims,
encumbrances, liabilities, obligations,
interests, causes of action, direct or
indirect, known or unknown, absolute or
contingent, including but not limited to
product liability, contractual liability, any
employee related liabilities (including but
not limited to wages, benefits, COBRA, or
other liabilities), environmental
liabilities, tax liabilities, other tort
claims, any liabilities for assets not
purchased by Buyer, or any other liability or
potential liability of the Company or the
Subsidiaries other than the Assumed
Liabilities and any liability of Buyer (if
any) under the Maryland Club Agreement.
13
<PAGE>
b. provide that the Buyer is a good faith
purchaser and is entitled to the protections
afforded under Sections 363(m) and (n) of the
Bankruptcy Code;
c. provide for retention of jurisdiction of the
Bankruptcy Court to enforce its Sale Order;
d. provide that Buyer is not a successor and
will not be deemed a successor for any
purpose;
e. provide for a release by all claimants for
any claims, liabilities, liens, liabilities,
encumbrances, rights, interests or causes of
action they may have against the Buyer as a
result of the Acquisition;
f. provide that Contracts listed on Schedule
5.5(g) are assumed and assigned to Buyer;
g. provide for such other and further findings
of facts and conclusions of law reasonably
required by the Buyer; and
will obtain Bankruptcy Court approval of the Sale Order and Assumption
Order; or
(2) the entry by the Bankruptcy Court of an Order, in
form and substance satisfactory to Buyer, confirming the Amended Plan
pursuant to 1129 of the Bankruptcy Code, and providing for the effectuation
of a sale of the Assets of the Company to Buyer pursuant to Sections 105,
363 and 1141(c) of the Bankruptcy Code and providing for the assumption and
assignment to Buyer of the Contracts and Leases set forth on Schedule
5.5(g) in accordance with Section 365 of the Bankruptcy Code (the
"Confirmation Order"). In connection therewith, the Company and its
counsel shall be required, among other things, to (a) cause the
Confirmation Order to contain findings of fact and conclusions of law which
will be reasonably satisfactory to Buyer and will include those findings
and fact and conclusions of law as set forth in (1) above, and (b) obtain
the requisite acceptances of the Amended Plan required for entry of the
Confirmation Order or otherwise to confirm the Amended Plan pursuant to
Section 1129 (a) or (b) of the Bankruptcy Code.
(d) The Company shall comply in all material respects with
the Bankruptcy Code and all others laws, rules, regulations, decrees and orders
promulgated thereunder in connection with obtaining the Confirmation Order or
the Sale Order and Assumption Order.
(e) Buyer agrees to use its best efforts to cooperate with
the Company in its pursuit of the Confirmation Order or the Sale Order and
Assumption Order as provided in
14
<PAGE>
Section 5.1(a) through 5.1(d) including providing the Company with information
relating to Buyer and the Acquisition necessary to prepare the Amended
Disclosure Statement or Sale Motion and Assumption Motion.
(f) From and after the date hereof, neither the Company nor
any Subsidiary Debtor shall take any action, or fail to take any action, which
might (1) prevent, materially impede or result in the revocation of the
confirmation of the Plan (as provided in Section 1144 of the Bankruptcy Code),
(2) prevent or materially impede the vesting, upon the entry of the Confirmation
Order or the Sale Order and Assumption Order and consummation of the
Acquisition, of the property of the Company and its Subsidiary Debtors in the
reorganized Company and its reorganized Subsidiaries free and clear of all Liens
and claims and interests of Claimants in accordance with and to the extent
provided in the Amended Plan or the Sale Order and Assumption Order or (3)
result in the reversal, voidance, modification or staying of any of the Interim
Order and the Disclosure Statement Order.
(g) The Company shall provide actual notice of (1) any
hearing on the Amended Disclosure Statement, (2) any hearing on the Confirmation
Order and (3) any hearing on the Sale Order and Assumption Order, in each case
in form and content and to such parties as reasonably requested in writing by
Buyer and in all cases in accordance with Bankruptcy Rules 2002 and 6004.
(h) The Company agrees that the Sale Order or the
Confirmation Order will provide a carve-out from the proceeds from the
transaction contemplated by this Agreement and the Transition Supply and
Services Agreement for the benefit of the general unsecured creditors in the
Case.
5.2 ACCESS TO INFORMATION AND EMPLOYEES.
(a) From the date hereof to the Closing Date, the Company
shall, and shall cause the Subsidiaries to, permit Buyer and its representatives
to have reasonable access, during regular business hours, upon reasonable
advance notice (and without causing undue disruption to the business of the
Company or such Subsidiary), to all books and records of the Company and each
Subsidiary and to the officers and independent accountants (if retained by the
Company) and other representatives, agents and advisors of the Company and each
Subsidiary, and shall furnish or cause to be furnished, to Buyer and its
representatives any financial and operating data and other information that is
available with respect to the business and properties of Company and each
Subsidiary as Buyer shall from time to time reasonably request. The Company
shall cause the managerial and supervisory employees, independent accountants
(if retained by the Company) and other representatives, agents or advisors of
the Company and of each of the Subsidiaries to be available upon reasonable
notice to answer questions of Buyer and its representatives concerning the
business and affairs of the Company and the Subsidiaries. The Company shall
permit and shall cause each Subsidiary to permit Buyer and its representatives
access to the Company's and each Subsidiary's facilities for purposes of
inspection at all
15
<PAGE>
reasonable times, provided that such presence does not cause undue disruption to
the business of the Company or such Subsidiary. Any meetings, interviews or
other communications with the Company's customers shall occur only with a
representative of the Company present. Company shall also permit Buyer access
to Company employees to enable Buyer to interview and/or offer employment to
such employees.
(b) Buyer shall not disclose and shall keep confidential
all confidential information (if any) concerning the business and financial
condition of the Company.
(c) If this Agreement is terminated, Buyer shall maintain,
and shall cause its officers, employees, attorneys, accountants and other
representatives to maintain, the confidentiality of such information for two (2)
years from the date of such termination and shall not use such information for
any purpose; PROVIDED, HOWEVER, that nothing herein shall prevent the disclosure
or use of any information that (1) is required to be disclosed pursuant to any
requirement of law; (2) was already in Buyer's or Company's possession (as the
case may be) from sources other than the Company, its Subsidiaries or any of
their officers, attorneys or representatives prior to its disclosure by the
Company or its Subsidiaries; (3) was generally known to the public; (4) became
known to the public through no fault of non-disclosing party; or (5) was
disclosed to the party receiving the information by a third party not bound by
an obligation of confidentiality.
(d) In addition to, and not in limitation of Section
5.2(a), the Company shall provide Buyer with copies of financial statements and
all proxy statements, reports and other documents issued to its shareholders and
monthly financial statements distributed to its Board of Directors after the
date hereof and on or prior to the Closing Date, including, without limitation,
the Company's Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and
Annual Reports on Form 10-K promptly upon availability.
(e) The availability and actual delivery of information
about the Company or any of its Subsidiaries (other than as specifically
required herein and delivered in accordance with Section 9.7) shall not, except
as provided in Section 9.7 affect the representations, warranties or covenants
set forth in this Agreement; PROVIDED, that in the event the Company discloses
in writing after the date hereof, whether pursuant to Sections 5.6 or 5.7, or
otherwise, information which demonstrates that any representation or warranty
made by the Company herein was not true and correct in all material respects
when made, deemed made or to be deemed made in the future, and such written
disclosure specifies to Buyer such effect on the Company's representations and
warranties herein, Buyer shall have the right to terminate this Agreement in
accordance with Section 8.2(d) and 8.3 for a period of ten (10) Business Days
following the receipt of such disclosures from the Company. The failure to so
terminate this Agreement within such ten (10) Business Day period shall
constitute a waiver by Buyer of any breach by the Company of this Agreement as a
result of the untruth or inaccuracy of the information so disclosed, but any
termination by Buyer as a result of such disclosure shall not prejudice Buyer's
right to any other remedies to which it may be entitled hereunder as a result of
16
<PAGE>
the matters so disclosed, including, without limitation, Buyer's right to
receive payment pursuant to this Agreement.
(f) The Company shall cooperate with Buyer and Buyer shall
cooperate with the Company in the development and distribution of all news
releases and other public information disclosures with respect to the
Acquisition and this Agreement, and neither the Company nor Buyer shall make any
such disclosures without the consent of the other party (which shall not be
unreasonably withheld); PROVIDED that nothing contained herein shall prevent the
Company or Buyer from disclosing or making a public filing of any information
which its respective counsel advises is required by law; and PROVIDED, FURTHER
that, in the event such disclosure or filing is required by either party, such
party shall give such prior notice thereof to the other party hereto as is
practical under the circumstances.
(g) The Company shall not disclose and shall keep
confidential all confidential information (if any) furnished by Buyer,
including, without limitations, any information specifically designated in
writing by Buyer as confidential, subject to the exceptions and the time
limitations as set forth in the proviso in Section 5.2(c).
5.3 REGISTRATIONS, FILINGS, AND CONSENTS. The Company and Buyer
will cooperate and use their respective best efforts to make all registrations,
filings and applications, to give all notices and to obtain any governmental or
other consents (including, without limitation, the Government Consents),
transfers, approvals, orders, qualifications and waivers necessary or desirable
for the consummation of the transactions contemplated hereby. Buyer and Company
shall each pay its own expenses incurred relating to obtaining the Government
Consents. The parties shall each file the Antitrust Filing within six (6)
Business Days of executing this Agreement.
5.4 EXECUTORY LEASES AND CONTRACTS.
(a) The Company has previously disclosed in writing to
Buyer its leases and contracts. In contemplation of the Amended Plan or Sale
Motion and Assumption Motion, Buyer shall have the right to review and, in its
sole and exclusive discretion, direct the Company and any Subsidiary to assume
any prepetition executory contract or lease to which the Company or any
Subsidiary may be a party that relates to the Assets being acquired.
(b) The Company will, and will cause the appropriate
Subsidiary to, with respect to, those prepetition licenses and prepetition
executory contracts and leases to which the Company or any Subsidiary may be a
party and which Buyer has indicated in writing to the Company, prior to the
filing of the Sale Motion and Assumption Motion or the Amended Plan that
assumption should be sought, cure or provide adequate assurance that any default
thereunder will be cured at or prior to the Closing Date or such other date on
or by which such cure or adequate assurance is required by the Bankruptcy Court,
and to the extent any licenses, executory contracts or leases (whether
prepetition or postpetition) to be assumed would terminate as a result
17
<PAGE>
of Buyer's Acquisition take such action as is necessary to allow the Company to
continue to have the rights and benefits thereof.
5.5 CONDUCT OF BUSINESS. From the date hereof to the Closing
Date, and except as set forth on Schedule 5.5 or as otherwise contemplated in
this Agreement, the Company covenants and agrees that, without Buyer's prior
written consent, which may be given or withheld in Buyer's sole and exclusive
discretion and which consent shall be deemed given if Buyer does not expressly
withhold its consent within three (3) Business Days after a request therefor by
the Company:
(a) Except as may otherwise be approved by the Bankruptcy
Court, the Company shall and shall cause each Subsidiary to operate its
respective business only in the ordinary course and in a manner consistent with
past post-petition practice (including, without limitation, shipping/delivering
inventory to customers in amounts consistent with past practices and customer
requirements) and shall use, and cause its Subsidiaries to use, their joint
reasonable efforts to preserve the properties, business and relationships with
employees, suppliers, customers and other persons with whom the Company or any
Subsidiary has commercial dealings;
(b) The Company shall not, nor shall it permit any
Subsidiary to: (1) merge or consolidate with or into any other Person; (2) other
than in the ordinary course of business and in a manner consistent with past
practice, acquire or dispose of any material asset of the Company or any
Subsidiary which would be material to the Consolidated Company; or (3) settle or
otherwise enter into any consent or other arrangements with respect to any
material claim, action, proceeding or investigation; except for such settlement,
consents or other arrangements as are authorized by orders of the Bankruptcy
Court with respect to prepetition claims, actions or proceedings and which
provide for each settlement not in excess of $500 each;
(c) The Company shall not, nor shall it permit any
Subsidiary to: (1) hire any officer or create any new position with salary and
benefits which have a value in excess of $75,000 per year; or (2) establish,
adopt, enter into or amend any collective bargaining, bonus, profit sharing,
thrift, compensation, stock options, restricted stock, pension, retirement,
deferred compensation, employment, termination, severance or other plan,
agreement, trust, fund, policy or arrangement for the benefit of any directors,
officers or employees;
(d) The Company shall not, nor shall it permit any
Subsidiary to, enter into: (1) any agreement relating to the supply of coffee
beans which matures after September 30, 1999; (2) any agreement for sales to
customers having a term of more than one year which provides for aggregate
payments to or from the Company or any Subsidiary in excess of $250,000 per year
during the contractual term of such agreement; or (3) any other agreement having
a term of more than one year which provides for aggregate payments to or from
the Company or any Subsidiary in excess of $100,000 during the contractual term
of such agreement;
18
<PAGE>
(e) The Company shall not, nor shall it permit any
Subsidiary to: (1) change any of its accounting methods; (2) write-up the book
value of any material current asset; or (3) transfer, dispose of, lease and/or
sell any Assets to any third party or transfer such Assets from their current
location;
(f) The Company shall not, nor shall it permit any
Subsidiary to: (1) make any single capital expenditure or series of related
capital expenditures in excess of $100,000 or (2) agree to do any other things
prohibited or restricted in this Section 5.4;
(g) The Company shall not, nor shall it permit any
Subsidiary to: (1) permit any executory contract or lease referenced in Schedule
5.5(g) ("Contracts") to expire or lapse; (2) alter any of the terms of any of
the Contracts; or (3) default on any of the terms of any of the Contracts.
5.6 BEST EFFORTS. Upon the terms and subject to the conditions
herein provided, each of the Company and Buyer agrees to use its best efforts to
take, or cause to be taken, any action, and to do, or cause to be done, all
thing necessary, proper or advisable under applicable laws and regulations, to
consummate and make effective the transactions contemplated by this Agreement
at the earliest practical date.
5.7 NOTICE OF ACTIONS AND PROCEEDINGS. The Company shall
promptly notify Buyer of any claims, actions, proceedings or investigations
commenced or, to the best of its knowledge, threatened, involving or affecting
the Company or any Subsidiary or any of their respective property or assets
which could have Material Adverse Effect or which could adversely affect the
consummation of the Acquisition. Buyer shall notify the Company of any claims,
actions, proceedings or investigations commenced or, to the best of its
knowledge threatened, involving or affecting Buyer or any of its property or
assets, or, to the best of Buyer's knowledge, which could adversely affect the
consummation of the Acquisition. As used in this Agreement, the term
"knowledge" of (a) the Company shall mean the knowledge of those persons holding
the offices of the Company or any Subsidiary, listed under the heading
"Executive Officers of Registrant" in the Company's most recent Annual Report on
Form 10-K filed with the SEC pursuant to the Exchange Act and (b) Buyer shall
mean knowledge of Harry Kangis or Charles Bergh.
5.8 NOTIFICATION OF OTHER MATTERS. The Company shall give
prompt notice to Buyer of: (a) any knowledge or notice of, or any communication
relating to, a default or event which, with notice or lapse of time or both,
would become a default, received by the Company or any Subsidiary prior to the
Closing Date, under any material agreement, indenture or instrument relating to
any of the Assets to be purchased; (b) any notice or other communication from
any third party alleging that the consent of such third party is or may be
required in connection with the transactions contemplated by this Agreement; (c)
any notice or other communication from any regulatory authority in connection
with the transactions contemplated hereby; (d) the occurrence or non-occurrence
of any event which would have caused any representation or
19
<PAGE>
warranty contained in this Agreement to be untrue or inaccurate; (e) any failure
of the Company to comply with or satisfy in any respect any covenant, condition
or agreement to be complied with or satisfied by it hereunder; and (f) the
discovery of any information indicating that a representation or warranty
contained in this Agreement is untrue or incorrect; PROVIDED, HOWEVER, except as
provided in Section 5.2(e) (in the case of a failure to terminate this
Agreement), the delivery of any notice pursuant to this Section 5.10 shall not
prejudice Buyer's right to any remedies to which it may be entitled hereunder.
5.9 MOTIONS BY THE COMPANY. The Company shall file the Sale
Motion and Assumption Motion or Amended Plan with the Bankruptcy Court within
five (5) Business Days after this Agreement is executed, or on such later date
to which Buyer and the Company may reasonably agree, keeping in mind that time
is of the essence with respect to this Agreement.
5.10 SUPPLY AGREEMENT. The TS Agreement shall be in full force
and effect as of the Closing Date.
6. CONDITIONS TO BUYER'S OBLIGATIONS AT CLOSING. The obligations of
Buyer to consummate the Acquisition at the Closing as contemplated by this
Agreement shall be subject to the satisfaction or waiver by Buyer in writing on
or prior to the Closing Date of each of the following conditions:
6.1 REPRESENTATION AND WARRANTIES. Each of the representations
and warranties of the Company contained in this Agreement shall be true and
correct in all respects when made and as of the Closing Date, with the same
effect as though such representations and warranties had been made on and as of
the Closing Date (except representations and warranties that are made as of a
specific date need be true and correct in all respects only as of such date) and
each of the covenants and agreements of the Company and each Subsidiary to be
performed on or prior to the Closing Date shall have been duly performed in all
respects.
6.2 CONSENTS. All the Government Consents shall have been
received on or prior to the Closing Date (except for Government Consents
relating to Permits, the absence of which will, alone and in the aggregate, not
have a Material Adverse Effect on or after the Closing) and any waiting period
(and any extension thereof) with respect to the HSR Act shall have expired or
been terminated.
6.3 LITIGATION. There shall not be pending or threatened any
action or proceeding before any federal, state or foreign court or governmental,
administrative or regulatory authority or agency by any federal, state or
foreign legislative body, court, government or governmental, administrative or
regulatory authority or agency which shall have remained in effect and which
shall have had the effect of: (a) making illegal, materially delaying or
otherwise directly or indirectly restraining or prohibiting the Acquisition; (b)
prohibiting or materially limiting the ownership or operation by the Company,
Buyer or any of their respective subsidiaries of all of the Assets of the
Company or any of its Subsidiaries, or compelling the Company, Buyer or any
20
<PAGE>
of their respective subsidiaries to dispose of or hold separate any of the
Assets of the Company, Buyer or any of their respective subsidiaries, as a
result of the transactions contemplated hereby; (c) requiring divestiture by
Buyer of any Assets of the Company; or (d) having a Material Adverse Effect.
6.4 MATERIAL ADVERSE EFFECT. Since the date hereof, there shall
not have been any Material Adverse Effect with respect to the Company or the
Assets.
6.5 NO AMENDMENTS. The Amended Plan or Sale Motion and
Assumption Motion shall not have been amended, supplemented or modified in any
manner which is not reasonably satisfactory to Buyer.
6.6 ENTRY OF THE CONFIRMATION ORDER OR THE SALE ORDER AND
ASSUMPTION ORDER; CONSUMMATION OF THE PLAN.
(a) The Amended Plan shall have been confirmed by the
Bankruptcy Court and, as confirmed, shall be in form and substance reasonably
satisfactory to Buyer and the Confirmation Order shall have become a Closing
Order; or the Sale Order and Assumption Order shall have been entered by the
Bankruptcy Court, and, as ordered, shall be in form and substance satisfactory
to Buyer, and the Sale Order and Assumption Order shall have become a Closing
Order.
(b) (i) The Confirmation Order shall not have been
modified, amended, dissolved, revoked or rescinded, shall be in full force and
effect on the Closing Date and, without the necessity of any further action or
proceedings by the Company, any Subsidiary or the Bankruptcy Court shall have
(1) as of the Closing Date, effected a full and complete discharge and release
of, and thereby extinguished, all debts of the Company and each Subsidiary (to
the fullest extent possible under Section 1141(d)(1) of the Bankruptcy Code) to
the extent specified in the Amended Plan, (2) extinguished all Existing Shares
and Existing Equity Rights, (3) at and as of the Closing, effected the issuance
to either the Disbursing Agent or the trustee of the Trust for transfer to Buyer
of the Assets, free and clear of all claims and interests of Claimants and Liens
in accordance with Section 1141(c) and in accordance with the Amended Plan and
the Confirmation Order and (4) as of the Closing Date, effectuated a release by
all claimants for any claims, liens, encumbrances, liabilities, rights, causes
of action, obligations, or interests they may have against Buyer as a result of
the Acquisition; or
(ii) The Sale Order and Assumption Order shall not have
been amended, dissolved, revoked or rescinded, shall be in full force and effect
on the Closing Date and, without the necessity of any further action or
proceedings by the Company, any Subsidiary or the Bankruptcy Court shall have:
a. as of the Closing Date, effected a full and
complete conveyance of assets free and clear of
all liens, claims, encumbrances, liabilities,
21
<PAGE>
rights, interests, obligations, causes of action,
direct or indirect, known or unknown, absolute or
contingent, including but not limited to product
liability, contractual liability, any employee
related liabilities (including but not limited to
wages, benefits, COBRA, or other liabilities),
Environmental, Health and Safety Liabilities, Tax
Liabilities, other tort claims, any liabilities
for assets not purchased by Buyer, or any other
liability or potential liability of the Company or
the Company's affiliates other than the Assumed
Liabilities and any liability of Buyer (if any)
pursuant to the Maryland Club Agreement;
b. as of the Closing Date, effectuated a release by
all claimants for any claims, liens, encumbrances,
liabilities, rights, causes of action,
obligations, or interests they may have against
Buyer as a result of the Acquisition;
c. as of the Closing Date, effected an assumption and
assignment to Buyer of all Contracts listed on
Schedule 5.5(g).
6.7 ADDITIONAL PROVISIONS FOR A SALE ORDER. The Sale Order will
further provide that:
(a) With respect to the remaining assets of the Company and
the Subsidiaries, the Company and its Subsidiaries will not seek the benefit of
any provisions of Section 363, 105 or 1141(c) of the Bankruptcy Code with
respect to any of Buyer's claims, interests, rights, and encumbrances, if any,
under this Agreement or the Transitional Supply and Services Agreement ("TS
Agreement");
(b) Any claim of Buyer will survive confirmation of any
plan and will not be discharged;
(c) The Assignment / Change of Control paragraph in the TS
Agreement shall not be affected in a plan or later sale and shall survive
confirmation of a plan;
(d) Any amounts due and owing to Buyer as a result of a
breach of this Agreement or the TS Agreement, will be offset against any monies
owing to Supplier (or the Company) under the TS Agreement; and
(e) Buyer would have paid substantially less consideration
if it were not buying the Assets free and clear of any claims specifically
including claims of successor liability.
6.8 PROVISION FOR UNSECURED CREDITORS. If the transaction
contemplated by this Agreement is accomplished through the Sale Order instead of
the Amended Plan, then the Company shall:
22
<PAGE>
(a) Set aside $100,000 of the proceeds in a separate
account to be earmarked for the funding of distributions to or for the benefit
of the unsecured creditors trust under a plan; and
(b) Confirm a plan of reorganization on or before October
31, 1999 (the "Creditor Plan") which Creditor Plan will:
(i) provide for a distribution pursuant to Section
6.8(a); and
(ii) provide for some value to the unsecured
creditors: (a) from the assets of the Company which Buyer chose to leave behind
for the unsecured creditors, and (b) from the TS Agreement whereby Buyer is
providing a continuing stream of income to the Company and its creditors
post-Closing.
6.9 COMPANY CERTIFICATE. Buyer shall have received a
certificate, dated the Closing Date, signed on behalf of the Company by an
officer of the Company certifying the fulfillment by the Company of the
conditions stated in Sections 6.1, 6.3, 6.4 and 6.5.
6.10 OTHER DOCUMENTS. Buyer shall have received from the
Company any other documents required to be delivered to Buyer pursuant to the
provisions of this Agreement.
6.11 CONSENTS. With respect to any licenses or executory
contracts or Contracts listed on Schedule 5.5(g) that are material to the
Company shall have either obtained (1) the consents of the parties thereto
required to permit the Company to continue to have the rights and benefits
thereof or (2) a Final Order authorizing the assumption and assignment of such
licenses or executory contracts or Contracts to Buyer under Section 365(a), (b)
and (f) of the Bankruptcy Code.
6.12 ORDERS.
(a) After the date hereof, neither the United States
Supreme Court nor the United States Court of Appeals for the Third Circuit shall
have entered an order or issued an opinion, nor shall the Bankruptcy Code have
been amended in such a manner, that Buyer could reasonably conclude that, as a
result of such order, opinion or amendment, the benefits and protection that
would be provided to the Company, Buyer or any of their respective subsidiaries,
or affiliates by the discharge of the Company and the Subsidiaries or any of
them under the Amended Plan or by the protections afforded Buyer in the Sale
Order and Assumption Order would be less protective in any material respect than
under current law as to have a Material Adverse Effect on any of the Company,
Buyer or any of their respective subsidiaries or affiliates.
(b) The Bankruptcy Court shall not have issued any orders
with respect to the conduct of the Company's and the Subsidiaries' businesses
that are not reasonably satisfactory to Buyer.
23
<PAGE>
6.13 CONDITIONS TO AMENDED PLAN. Unless a Sale Order is entered
and is a Closing Order, all conditions precedent to the confirmation and
consummation of the Amended Plan shall have been satisfied or waived by all
necessary parties.
6.14 NO CONVERSION. No motion to convert any of the Cases to a
proceeding under Chapter 7 of the Bankruptcy Code shall have been filed against
any Subsidiary Debtor, which motion is not dismissed within sixty (60) days
after filing thereof and which, if not dismissed, would have a Material Adverse
Effect.
6.15 CHANGE IN FINANCIAL MARKETS. There shall not exist at the
time of Closing (1) a general suspension of trading in, or limitation on prices
for, securities on any national securities exchange or in the over-the-counter
market, (2) a declaration of a mandatory banking moratorium or any mandatory
suspension of payments in respect of banks in the United States, (3) any decline
in the Standard & Poor's Index of 400 Industrial Companies by an amount in
excess of twenty-five percent (25%) measured from the date hereof, (4) a war,
armed hostilities or other international or national calamity directly or
indirectly involving the United States that has significantly adversely affected
the United States financial markets, or (5) a mandatory material limitation by
any United States governmental authority or agency on the extension of credit by
banks or other financial institutions.
6.16 ASSETS.
(a) The Assets shall be in substantially the same or better
condition as of the Closing Date than when last inspected by Buyer. There shall
have been no material depletion of the Assets.
(b) Upon consummation of the Closing, Buyer shall receive good
and marketable title to the Assets, free and clear of any Lien.
6.17 CUSTOMER AND OTHER ARRANGEMENTS.
(a) Representatives of the Company and Buyer shall have held a
meeting with purchasing executives of Publix, King Soopers, Ahold, Fred Meyer,
and the U.S. Military, as soon as possible after the execution of this
Agreement; and Buyer shall not have notified the Company in writing within 72
hours of the last of such meetings that Buyer is dissatisfied with the results
of such meetings.
(b) None of the Contracts listed in Schedule 5.5(g) shall have
expired prior to or at the Closing Date. Further, the Company must extend the
King Soopers contract for four (4) months from the Closing Date upon the same
terms as the current contract or make some other arrangement that is acceptable
to the Buyer prior to Closing, such that Buyer waives this Section 6.17(b).
24
<PAGE>
6.18 EXECUTORY CONTRACTS. The Company shall have obtained a
Final Order satisfactory to Buyer assuming and assigning those Contracts listed
in Schedule 5.5(g) to Buyer.
6.19 SUPPLY. Nothing has come to the Buyer's attention, prior
to Closing, that would indicate that the Company will not be able to perform its
obligations under the TS Agreement, that shall be executed upon the signing of
this Agreement.
6.20 SUPPLY AGREEMENT. The TS Agreement shall be in full force
and effect as of the Closing Date.
7. CONDITIONS TO THE COMPANY'S OBLIGATIONS AT CLOSING. The
obligation of Company to consummate the Acquisition at the Closing as
contemplated by this Agreement shall be subject to the satisfaction or waiver in
writing by Company on or prior to the Closing Date of each of the following
conditions:
7.1 REPRESENTATIONS AND WARRANTIES. Each of the representations
and warranties of Buyer contained in this Agreement shall be true and correct in
all respects when made and as of the Closing Date, with the same effect as
though such representations and warranties of Buyer had been made on and as of
the Closing Date (except (a) representations and warranties that are made as of
a specific date need be true and correct in all respects only as of such date
and (b) as expressly permitted by this Agreement to change between the date of
this Agreement and the Closing Date); each of the covenants and agreements of
Buyer to be performed on or prior to the Closing Date shall have been duly
performed in all respects; and the Company shall have received at the Closing a
certificate to the effect of the foregoing dated as of the Closing Date and
executed on behalf of Buyer by Chip Bergh.
7.2 LITIGATION; CONSENTS.
(a) Other than an appeal of the Confirmation Order, the
Sale Order or Assumption Order as contemplated in Section 6.6 hereof, there
shall be no order or preliminary or permanent injunction issued by any court or
governmental or regulatory body, restraining, modifying or preventing the
carrying out of the transactions contemplated hereby.
(b) All the Government Consents shall have been received on
or prior to the Closing Date, except for Government Consents the absence of
which will not have a Material Adverse Effect on Claimants or their rights under
the Amended Plan or Sale Order and Assumption Order.
7.3 HIGHEST AND BEST BIDDER. The Bankruptcy Court shall have
entered an order finding Buyer to be the highest and best bidder for the
Company.
25
<PAGE>
7.4 ENTRY OF THE CONFIRMATION ORDER OR THE SALE ORDER AND
ASSUMPTION ORDER; CONSUMMATION OF THE PLAN.
(a) The Plan shall have been confirmed by the Bankruptcy Court
and the Confirmation Order shall have been entered. The time allowed for
appeals of the Confirmation Order shall have expired without any appeal having
been taken or, if the Confirmation Order shall have been appealed, either (a) no
stay of the Confirmation Order shall be in effect or (b) if such a stay has been
granted by a court of competent jurisdiction, then (1) the stay shall have been
dissolved or (2) the Confirmation Order shall have become a Final Order. The
Confirmation Order shall not have been modified, amended, dissolved, revoked or
rescinded, shall be in full force and effect on the Closing Date and, without
the necessity of any further action or proceedings by the Company or any
Subsidiary, the Bankruptcy Court shall have (x) as of the Closing Date, effected
a full and complete discharge and release of, and thereby extinguish, all debts
of the Company and each Subsidiary (to the fullest extent possible under Section
1141(d)(1) of the Bankruptcy Code) to the extent specified in the Plan, (y)
extinguished all Existing Shares and Existing Equity Rights, and (z) at and as
of the Closing, effected the issuance to Buyer of the Assets, free and clear of
all claims and interests of Claimants in accordance with 1141(c) and the Amended
Plan and the Confirmation Order and as of the Closing Date, effectuated a
release by all claimants for any claims, liens, encumbrances, liabilities,
rights, causes of action, obligations, or interests they may have against Buyer
as a result of the Acquisition; or
(b) The Sale Motion and Assumption Motion shall have been
approved by the Bankruptcy Court and the Sale Order and Assumption Order shall
have been entered. The time allowed for appeals of the Sale Order and
Assumption Order shall have expired without having been taken or shall have
become a Final Order. The Sale Order and Assumption Order shall not have been
modified, amended, dissolved, revoked or rescinded and shall be in full force
and effect as of the Closing Date, and without the necessity of any further
action or proceedings by the Company or any Subsidiary, the Bankruptcy Court
shall have at and as of the Closing effected the issuance to Buyer of the
Assets, free and clear of all claims and interests of Claimants in accordance
with the Sale Order and Assumption Order.
7.5 SUPPLY. The Transition Supply and Services Agreement shall
be executed at the same time this Agreement is signed.
8. AMENDMENT; TERMINATION; ASSIGNMENT; LIQUIDATED DAMAGES.
8.1 AMENDMENT. This Agreement may be amended by the written
agreement of the Company and Buyer at any time prior to the Closing Date.
26
<PAGE>
8.2 TERMINATION. This Agreement may be terminated as follows:
(a) By the mutual consent of the Company and Buyer at any
time prior to the confirmation by the Bankruptcy Court of the Amended Plan or
the entry of the Sale Order and Assumption Order;
(b) By Buyer if any of the conditions precedent to the
Closing set forth in Section 6 (other than Section 6.2, with respect to
Government Consents which are required to be complied with solely by Buyer and
other than those Government Consents necessary for HSR clearance) have not been
fulfilled in all respects by April 30, 1999;
(c) By the Company if it has become aware that Buyer has
materially breached this Agreement or if any of the conditions precedent to the
Closing set forth in Section 7 hereof (other than Section 7.2, with respect to
Government Consents which are required to be complied with solely by the Company
but excluding those consents needed for the Antitrust Filing) have not been
fulfilled in all respects by April 30, 1999;
(d) By Buyer if the Company refuses or otherwise fails to
perform its obligation to consummate the Acquisition if, after the conclusion of
the auction, Buyer is selected as the highest and best bidder;
(e) By Buyer if it has become aware pursuant to Sections
5.2(e), 5.7, 5.8, or otherwise, that the Company has materially breached this
Agreement (it being understood that any breach of a representation or warranty
that constitutes a Material Adverse Effect is a material breach of this
Agreement) or that the Company will be unable to comply with Section 6 hereof
(other than Section 6.2 with respect to Government Consents which are required
to be complied with solely by Buyer and other than those Government Consents
necessary for HSR clearance) by April 15, 1999;
(f) By the Company or Buyer in the event an acquisition
proposal, other than a proposal(s) involving Buyer, ("Acquisition Proposal") is
approved by the Bankruptcy Court or any sale order and assumption order or any
plan of reorganization other than the Amended Plan or the Sale Order and
Assumption Order is confirmed by the Bankruptcy Court (in either such event,
this Agreement will automatically be deemed terminated without the necessity of
providing written notice notwithstanding any provision to the contrary herein);
(g) By Buyer, if the Company's Board of Directors, or the
Board of Directors of a Subsidiary, shall propose a plan of reorganization other
than the Amended Plan or accept an Acquisition Proposal, including executing a
letter of intent or other agreement with respect thereto whether or not such
Acquisition Proposal was accepted in violation of the provisions contained in
Section 9.1 of this Agreement;
27
<PAGE>
(h) By Buyer (1) if the Sale Motion and Assumption Motion
or the Amended Plan and Amended Disclosure Statement shall not have been filed
with the Bankruptcy Court on the dates required in Section 5.1 or (2) in the
event Buyer has not, within five (5) Business Days prior to such deadline,
complied with Section 5.1(e), if the Amended Disclosure Statement shall not have
been so filed within five (5) Business Days after Buyer's compliance with
Section 5.1(e);
(i) By Buyer if, after approval, the Sale Order, Disclosure
Statement Order or Assumption Order has been reversed, revoked, voided,
substantively modified or stayed by an order of a court of competent
jurisdiction;
(j) By Buyer if the Confirmation Order, Sale Order or
Assumption Order shall not have been approved by the Bankruptcy Court and
entered on the legal docket of the Chapter 11 Cases by the Clerk's Office of the
Bankruptcy Court prior to or on April 19, 1999;
(k) By Buyer, if the Sale Order, Confirmation Order or
Assumption Order is not a Final Order by April 30, 1999;
(l) By Buyer if the Amended Plan or Sale Motion and
Assumption Motion filed with the Bankruptcy Court pursuant to Section 5.1 or as
amended, supplemented or modified is not reasonably satisfactory to Buyer;
(m) By the Company if Buyer notifies the Company pursuant
to Section 6.15 that Buyer is dissatisfied with the results of its meeting with
such customers;
(n) By the Company if the Government Consents needed with
respect to the Antitrust Filing have not been received by April 30, 1999; or
(o) By Buyer if the Government Consents needed with respect
to the Antitrust Filing have not been received by June 30, 1999.
8.3 RIGHTS OF TERMINATION.
(a) The right of termination hereunder may be exercised by
Buyer or the Company, as the case may be, only by giving written notice, signed
on behalf of such party by its duly authorized officer to the other party;
PROVIDED, HOWEVER, that in the event of written notice of termination by Buyer
pursuant to Section 8.2(d), or the Company pursuant to Section 8.2(c), if the
breach of this Agreement or inability to comply with Section 6 or Section 7,
respectively, is susceptible to cure within a thirty (30) day period, but in any
event prior to the termination date otherwise provided in Section 8.2(b), in the
case of a breach by the Company, or Section 8.2(c) (in each case, the "Cure
Date") in the case of a breach by Buyer, the breaching party shall, provided it
gives notice to the other party of its attempt to do so within four (4) Business
Days of receipt of the breaching party's notice of termination, have until the
earlier of (1) thirty (30) days
28
<PAGE>
after delivery to the other party of such notice or (2) the applicable Cure
Date, to cure such breach or noncompliance, and in the event such breach or
noncompliance is cured within the applicable time period, then such notice of
termination shall be inoperative.
(b) No exercise by either party of its right to terminate
this Agreement pursuant to Section 8.2 shall prejudice that party's rights and
remedies against the other for breach of obligations under this Agreement
including, without limitation, the Company's right to liquidated damages in
accordance with Section 8.5(b).
(c) The provisions of Sections 2.8, 5.2(b), 5.2(c), 5.2(f),
5.2(g), 6.7, 6.8, 8.5 and Article 3, to the extent that such representation made
under that Article 3 affect the Company's performance or ability to perform
under the Transition Supply and Services Agreement, shall survive the
termination of this Agreement. Further, in addition to the provisions of
Section 6.7, any damages associated with Company's breach of this Agreement
shall become an administrative claim under Section 503(b) of the Bankruptcy
Code.
8.4 ASSIGNMENT. Except as otherwise contemplated in Section 2.1
and the Amended Plan with respect to the assignment of rights and obligations of
the Company hereunder to the Disbursing Agent, neither party may assign this
Agreement or any of its rights, privileges, duties or obligations thereto
without the prior written consent of the other party to this Agreement.
Notwithstanding the foregoing, Buyer may, at its option, assign any or all
rights, privileges, duties or obligations it may have under this Agreement to
any of its wholly-owned subsidiaries so long as Buyer also remains responsible
for such duties and obligations.
8.5 LIQUIDATED DAMAGES. In the event that the Acquisition is
not consummated as a result of Buyer's material breach of this Agreement or
Buyer's failure to meet any material condition set forth herein (including
Buyer's failure to pay the Purchase Price due at Closing upon the Company's
compliance with the conditions in Section 6), the Company shall be entitled to
liquidated damages in the amount of One Million and 00/100 Dollars ($1,000,000).
In such event, the Company may (1) instruct the Escrow Agent, which instruction
Buyer shall join in or (2) if Buyer refuses to join in such instruction, obtain
an order of the Bankruptcy Court instructing the Escrow Agent to pay the full
Escrow Amount to the Company in accordance with the Escrow Agreement. The
amounts payable by Buyer pursuant to this Section prior to the confirmation of
this Acquisition shall constitute the Company's liquidated damages for Buyer's
breach of this Agreement or any other Buyer Document and the Company's right to
such damages shall constitute its sole and exclusive remedy for any and all such
breaches prior to the confirmation of this Acquisition. Notwithstanding the
foregoing, it shall not be considered a breach of this Agreement if, after
making Antitrust Filings pursuant to this Agreement, the parties do not receive
clearance pursuant to the HSR Act.
29
<PAGE>
9. MISCELLANEOUS PROVISIONS.
9.1 AMENDMENT; WAIVER. This Agreement may be amended, modified
or superseded only by a written instrument signed by all of the parties to this
Agreement. No party shall be deemed to have waived compliance by another party
of any provision of this Agreement unless such waiver is contained in a written
instrument signed by the waiving party and no waiver that may be given by a
party will be applicable except in the specific instance for which it is given.
The failure of any party to enforce at any time any of the provisions of this
Agreement or to exercise any right or option contained in this Agreement or to
require at any time performance of any of the provisions of this Agreement, by
any of the other parties shall not be construed to be a waiver of such
provisions and shall not affect the validity of this Agreement or any of its
provisions or the right of such party thereafter to enforce each provision of
this Agreement. No course of dealing shall operate as a waiver or modification
of any provision of this Agreement or otherwise prejudice such party's rights,
powers and remedies.
9.2 BINDING EFFECT. No assigning party shall be relieved of its
obligations arising under this Agreement. Subject to the foregoing, all the
provisions of this Agreement shall be binding upon and shall inure to the
benefit of and be enforceable by the parties to this Agreement and their
respective heirs, legal representatives, successors and assigns.
9.3 CONSTRUCTION AND INTERPRETATION OF AGREEMENT.
(a) Section titles or captions in this Agreement are
included for purposes of convenience only and shall not be considered a part of
the Agreement in construing or interpreting any of its provisions. All
references in this Agreement to Sections shall refer to Sections of this
Agreement unless the context clearly otherwise requires.
(b) The parties have participated jointly in the
negotiation and drafting of this Agreement. If any ambiguity or question of
intent or interpretation arises, no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any of the
provisions of this Agreement.
(c) The parties do not intend that this Agreement shall
confer on any third party any right, remedy or benefit or that any third party
shall have any right to enforce any provision of this Agreement.
9.4 SEVERABILITY OF PROVISIONS. If a court in any proceeding
holds any provision of this Agreement or its application to any person or
circumstance invalid, illegal or unenforceable, the remainder of this Agreement,
or the application of such provision to persons or circumstances other than
those to which it was held to be invalid, illegal or unenforceable, shall not be
affected, and shall be valid, legal and enforceable to the fullest extent
permitted by law, but only if and to the extent such enforcement would not
materially and adversely frustrate the parties' essential objectives as
expressed in this Agreement. Furthermore, in lieu of any such invalid or
30
<PAGE>
unenforceable term or provision, the parties intend that the court add to this
Agreement a provision as similar in terms to such invalid or unenforceable
provision as may be valid and enforceable, so as to effect the original intent
of the parties to the greatest extent possible.
9.5 EXHIBITS AND SCHEDULES. All Exhibits and Schedules to this
Agreement shall constitute part of this Agreement and shall be deemed to be
incorporated in this Agreement by reference and made a part of this Agreement as
if set out in full at the point where first mentioned.
9.6 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original copy of this
Agreement and all of which, when taken together, shall be deemed to constitute
one and the same agreement.
9.7 ENTIRE AGREEMENT; DISCLOSURES IN WRITING. This Agreement
embodies the entire agreement and understanding of the parties related to its
subject matter and supersedes all prior proposals, understandings, agreements,
correspondence, arrangements and contemporaneous oral agreements relating to
subject matter of this Agreement. No representation, promise, inducement or
statement of intention has been made by any party which has not been embodied in
this Agreement. Any statement in this Agreement that a matter has been
disclosed previously to Buyer in writing shall not be effective as to any
disclosure by the Company unless such disclosure is described on the disclosure
schedule delivered to Buyer prior to the execution of this Agreement,
acknowledged in writing by Buyer, specifying the purpose (including a reference
to the Section or Sections of this Agreement) for which it has been disclosed
and, once so disclosed, such disclosure shall be deemed (a) incorporated herein
by reference and (b) to modify the Section or Sections referenced and any
representation, warranty or covenant contained in such Section or Sections for
all purposes of this Agreement.
9.8 EXPENSES. Except as otherwise expressly provided for in
this Agreement, each party will bear its own expenses incurred in connection
with the preparation, execution and performance of its obligations under this
Agreement, including all fees and expenses of agents, representatives, counsel
and accountants.
9.9 FURTHER ASSURANCES. Each party shall execute and deliver
such additional documents or take such additional actions as may be requested by
another party to this Agreement if such requested document or action is
reasonably necessary to effect the transactions described in this Agreement.
9.10 GOVERNING LAW. This Agreement shall be governed by, and
shall be construed and enforced in accordance with, the laws of Delaware,
without giving effect to any conflict of law rule or principle of such state.
9.11 NOTICES. All notices, requests, consents, approvals,
waivers, demands and other communications required or permitted to be given or
made under this Agreement shall be in
31
<PAGE>
writing and shall be deemed delivered to the parties (a) on the date of personal
delivery or transmission by facsimile transmission, (b) on the first Business
Day following the date of delivery to a nationally recognized overnight courier
service, or (c) or the third Business Day following the date of deposit in the
United States Mail, postage prepaid, by certified mail, in each case, addressed
as follows, or to such other address, person or entity as any party may
designate by notice to the others in accordance herewith:
If to the Company: Brothers Gourmet Coffees, Inc.
2255 Glades Road, Suite 100E
Boca Raton, Florida 33431
Attn: Donald D. Breen, President and CEO
Facsimile: (561) 241-6690
Copy to: Brownstein Hyatt Farber & Strickland, P.C.
Twenty-Second Floor
410 Seventeenth Street
Denver, Colorado 80202
Attn: John L. Ruppert, Esq.
Facsimile: (303) 623-1956
and Weil, Gotshal & Manges LLP
701 Brickell Avenue, Suite 2100
Miami, Florida 33131
Attn: Oscar R. Cantu, Esq.
Facsimile: (305) 374-7159
and White & Case
200 S. Biscayne Blvd., Suite 4900
Miami, FL 33131
Attn: Thomas E Lauria
Facsimile: (305) 358-5744
(until the unsecured creditors Committee has been
disbanded)
If to Buyer: The Procter & Gamble Company
1 Procter & Gamble Plaza
Cincinnati, OH 45202
Attn: General Manager - Coffee
Facsimile:
Copy to: Dinsmore & Shohl
1900 Chemed Center
32
<PAGE>
255 East Fifth Street
Cincinnati, Ohio 45202
Attn: Kim Martin Lewis, Esq.
Facsimile: (513) 977-8141
9.12 CUMULATIVE REMEDIES; SPECIFIC PERFORMANCE. NO right or
remedy conferred upon or reserved to any of the parties under the terms of this
Agreement is intended to be, nor shall it be deemed, exclusive of any other
right or remedy provided in this Agreement or by law or equity, but each shall
be cumulative of every other right or remedy. The parties understand and
acknowledge that a party would be damaged irreparably by reason of a failure of
another party to perform any obligation under this Agreement. Accordingly, if
any party attempts to enforce the provisions of this Agreement by specific
performance (including preliminary or permanent injunctive relief), the party
against whom such action or proceeding is brought waives the claim or defense
that the other party has an adequate remedy at law.
9.13 TIME OF ESSENCE. Time is of the essence to the performance
of the obligations set forth in this Agreement.
33
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
The Procter & Gamble Company
By:
--------------------------------------
Title:
-----------------------------------
("Buyer")
BROTHERS GOURMET COFFEES, INC.
By:
--------------------------------------
Title:
-----------------------------------
(the "Company")
BROTHERS RETAIL CORP.
By:
--------------------------------------
Title:
-----------------------------------
(SUBSIDIARY OF THE COMPANY)
BROTHERS COFFEE BARS, INC.
By:
--------------------------------------
Title:
-----------------------------------
(SUBSIDIARY OF THE COMPANY)
MARYLAND CLUB FOODS, INC.
By:
--------------------------------------
Title:
-----------------------------------
(SUBSIDIARY OF THE COMPANY)
34
<PAGE>
APPENDIX OF DEFINED TERMS
"ACCOUNTANTS" means Arthur Andersen & Co., LLP, certified public accountants.
"ACCOUNTS RECEIVABLE ADJUSTMENT" shall have the meaning as set forth in Section
2.3(d).
"ACQUISITION" has the meaning set forth in Section 2.1.
"ACQUISITION PROPOSAL" shall have the meaning set forth in Section 8.2(f).
"AGREEMENT" means this Agreement and the Exhibits and Schedules.
"AMENDED DISCLOSURE STATEMENT" means the Disclosure Statement with respect to
the Amended Plan of Reorganization under Chapter 11, Title 11, United States
Code for Brother Gourmet Coffees Inc. and its Affiliated Debtors, which will be
reviewed and must be satisfactory in form and substance to Buyer and Buyer's
counsel with respect to incorporating the Acquisition.
"AMENDED PLAN" means the Plan of Reorganization to be filed by Debtors with The
Bankruptcy Court which will be reviewed and must be satisfactory in form and
substance to Buyer and Buyer's counsel with respect to incorporating the
Acquisition.
"ANTITRUST FILING" SHALL HAVE THE MEANING SET FORTH IN SECTION 3.3.
"ASSUMED LIABILITIES" SHALL HAVE THE MEANING SET FORTH IN SECTION 2.7(b).
"ASSUMPTION MOTION" means the motion to be filed by the Debtors which will be in
form and substance satisfactory to Buyer and Buyer's counsel seeking an order
assuming and assigning those contracts, licenses and/or leases listed on
Schedule 5.5(g) to this Agreement (which contracts, leases and/or licenses can
be changed prior to the entry of the Assumption Order) pursuant to 5.1 of this
Agreement.
"ASSUMPTION ORDER" means the order to be entered by The Bankruptcy Court
assuming and assigning those contracts, licenses and/or leases listed on
Schedule 5.5(g) to this Agreement (which contracts, leases and/or licenses can
be changed prior to the entry of this order), which order will be in form and
substance satisfactory to Buyer and Buyer's counsel.
"AVERAGE NET SALES" means the six (6) weeks' average net sales (in pounds) of
In-Store Inventory as measured from August 1, 1998 to January 31, 1999, as
calculated for each Customer separately.
"BALANCE SHEET DATE" shall have the meaning set forth in Section 3.4(a).
-1-
<PAGE>
"BANKRUPTCY CODE" means Title I of the Bankruptcy Reform Action of 1978, as
amended and codified in Title 11 of the United States Code.
"BANKRUPTCY COURT" means the Bankruptcy Court unit of the United States District
Court for the District of Delaware, or such other court having jurisdiction over
the Chapter 11 Cases or any proceeding relating thereto.
"BANKRUPTCY RULES" means the Federal Rules of Bankruptcy Procedure, as the same
are applicable to the Chapter 11 Cases.
"BUSINESS DAY" means a day of the year on which banks are not authorized to be
closed in the City of New York.
"BUYER" means The Procter & Gamble Company.
"BUYER DOCUMENTS" shall have the meaning set forth in Section 4.2(a).
"CASE" shall have the meaning set forth in the Preamble to this Agreement.
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980.
"CHAPTER 11 CASES" means the cases commenced under Chapter 11 of the Bankruptcy
Code by Debtors on the Petition Date by the filing of Chapter 11 petitions with
the Bankruptcy Court.
"CLAIMANT" means all creditors, claimants and interest holders having claims
against or interests in the Consolidated Estates.
"CLOSING" shall have the meaning set forth in Section 2.4.
"CLOSING DATE" shall have the meaning set forth in Section 2.5.
"CLOSING ORDER" means, with respect to the Confirmation Order, Sale Order or
Assumption Order, either the Confirmation Order, Sale Order or Assumption Order
shall have become a Final Order.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COMPANY" shall have the meaning set forth in the Preamble to this Agreement.
"COMPANY DOCUMENTS" shall have the meaning set forth in Section 3.2(a).
-2-
<PAGE>
"CONFIRMATION ORDER" shall have the meaning set forth in Section 5.1(c)(2).
"CONSOLIDATED COMPANY" shall have the meaning set forth in Section 3.4(a).
"CONTINGENT" means, with reference to a Claim, a Claim that has not accrued or
is not otherwise payable and the accrual of which or the obligation to make
payment on which is dependent upon a future event that may or may not occur.
"CONTRACTS" shall have the meaning set forth in Section 5.5(g).
"CURE DATE" shall have the meaning set forth in Section 8.3(a).
"CUSTOMER" means the customers listed in Schedule 2.1 under "Customer
Contracts."
"DEBTORS" means one or more of the Company, and any or all of its Subsidiaries,
in their capacities as prepetition, post-petition or post-confirmation debtors
and as singular, consolidated, merged or reorganized entities, depending upon
the context.
"DISBURSING AGENT" means the person appointed by the Bankruptcy Court, and if no
Disbursing Agent is appointed, the Company, pursuant to the Amended Plan or Sale
Order.
"DISCLOSURE STATEMENT ORDER" means an order of the Bankruptcy Court, in form and
substance reasonably satisfactory to Buyer and its counsel, approving, pursuant
to Section 1125 of the Bankruptcy Code, the Amended Disclosure Statement for
solicitations of acceptances and rejections of the Plan, setting forth voting
procedures and scheduling a confirmation hearing.
"DISTRIBUTION FUND" shall have the meaning set forth in Section 2.3(e).
"DOLLARS"; "$" means lawful currency of the United States of America.
"EFFECTIVE DATE" means the Closing Date.
"ENVIRONMENT" means soil, land surface or subsurface strata, surface waters
(including navigable waters, ocean waters, streams, ponds, drainage basins, and
wetlands), groundwaters, drinking water supply, stream sediments, ambient air
(including indoor air), plant and animal life, and any other environmental
medium or natural resource.
"ENVIRONMENTAL, HEALTH, AND SAFETY LIABILITIES" means any cost, damages,
expense, liability, obligation, or other responsibility arising from or under
Environmental Law or Occupational Safety and Health Law and consisting of or
relating to:
-3-
<PAGE>
(a) any environmental, health, or safety matters or conditions
(including on-site or off-site contamination, occupational safety and health,
and regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements, legal or
administrative proceedings, damages, losses, claims, demands and response,
investigative, remedial, or inspection costs and expenses arising under
Environmental Law or Occupational Safety and Health Law;
(c) financial responsibility under Environmental Law or Occupational
Safety and Health Law for cleanup costs or corrective action, including any
investigation, cleanup, removal, containment, or other remediation or response
actions ("Cleanup") required by applicable Environmental Law or Occupational
Safety and Health Law (whether or not such Cleanup has been required or
requested by any Governmental Body or any other Person) and for any natural
resource damages; or
(d) any other compliance, corrective, investigative, or remedial
measures required under Environmental Law or Occupational Safety and Health Law.
The terms "removal," "remedial," and "response action," include the types
of activities covered by CERCLA.
"ENVIRONMENTAL LAW" means any Legal Requirement that requires or relates to:
(a) advising appropriate authorities, employees, and the public of
intended or actual releases of pollutants or hazardous substances or materials,
violations of discharge limits, or other prohibitions and of the commencements
of activities, such as resource extraction or construction, that could have
significant impact on the Environment;
(b) preventing or reducing to acceptable levels the release of
pollutants or hazardous substances or materials into the Environment;
(c) reducing the quantities, preventing the release, or minimizing the
hazardous characteristics of wastes that are generated;
(d) assuring that products are designed, formulated, packaged, and
used so that they do not present unreasonable risks to human health or the
Environment when used or disposed of;
(e) protecting resources, species, or ecological amenities;
(f) reducing to acceptable levels the risks inherent in the
transportation of hazardous substances, pollutants, oil, or other potentially
harmful substances;
-4-
<PAGE>
(g) cleaning up pollutants that have been released, preventing the
threat of release, or paying the costs of such clean up or prevention; or
(h) making responsible parties pay private parties, or groups of them,
for damages done to their health or the Environment, or permitting
self-appointed representatives of the public interest to recover for injuries
done to public assets.
"EQUITY INTERESTS" shall mean any ownership interest or a share of capital stock
in the Company or any Subsidiary, as the case may be (including any Equity
Rights), whether or not transferable, preferred, common, voting or denominated
"stock," or a similar security.
"EQUITY RIGHTS" shall mean all options, warrants, subscriptions, calls,
contracts, demands, commitments, convertible securities or other agreements or
arrangements of any character or nature, whatsoever under which the Company or
any Subsidiary, as the case may be, is or may become obligated to vote, issue,
purchase, sell, return, redeem, assign, pledge or transfer any shares of its
capital stock, or rights or warrants to acquire, or securities convertible into
shares of its capital stock,
"ESCROW AGENT" means Weil, Gotshal & Manges LLP in its capacity as escrow agent
pursuant to the Escrow Agreement.
"ESCROW AGREEMENT" shall have the meaning set forth in Section 2.8.
"ESCROW AMOUNT" shall have the meaning set forth in Section 2.8.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"FACILITIES" means any real property, leaseholds or other real property
interests owned or leased by the Company or any Subsidiary, and any buildings,
plants, structures, or equipment (including motor vehicles), that are owned or
leased both as of the date hereof and as of the Closing Date.
"FINAL ORDER" means an order, judgment, ruling or other decree issued and
entered by the Bankruptcy Court (as entered on the docket in the Chapter 11
Cases), or any state or federal court or other tribunal located in one of the
states, territories, or possessions of the United States of America or the
District of Columbia, which judgment, order or other decree has not been
reversed, stayed, modified or amended, and as to which (x) the time to appeal or
to seek review, rehearing or certiorari has expired and as to which no appeal or
petition for review, rehearing or certiorari is pending or has been timely filed
or (y) any appeal that has been or may be taken or any petition for certiorari
that has been or may be filed has been resolved by the highest court to which
the order or judgment was appealed or from which certiorari was sought.
-5-
<PAGE>
"FINISHED PRODUCT INVENTORY" means (a) 950,000 pounds of unadulterated,
packaged, ready to be shipped (in cartons or totes) whole bean or ground 100%
premium or specialty grade arabica coffee of merchantable quality; (b) under the
BROTHERS trademark or as specified by Buyer; (c) such product being no more than
seven (7) months older than its manufacture date on the package for pre-pack
products, and no more than ninety (90) days on bulk products, at the time of
delivery to Buyer; and (d) of such combination as specified by Buyer.
"GAAP" means generally accepted accounting principles in effect in the United
States consistently applied.
"GOVERNMENT CONSENTS" shall have the meaning set forth in Section 3.3.
"GREEN COFFEE INVENTORY" shall mean all green coffee that Company owns, which is
fresh and from the current green coffee crop (1998 / 1999 season), of good
quality and free of flavor defects, at the Closing Date. In no event shall
Green Coffee Inventory be used for Finished Product Inventory unless, there is a
corresponding price decrease ($1.53 per pound) to the Finished Product
Inventory, as agreed by Buyer.
"GREEN COFFEE INVENTORY ADJUSTMENT" shall have the same meaning set forth in
Section 2.3(b).
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.
"HAZARDOUS ACTIVITY" means the distribution, generation, handling, importing,
management, manufacturing, processing, production, refinement, Release, storage,
transfer, transportation, treatment, or use (including any withdrawal or other
use of groundwater) of Hazardous Materials in, on, under, about, or from the
Facilities or any part thereof into the Environment, and any other act,
business, operation, or thing that increases the danger, or risk of danger, or
poses an unreasonable risk of harm to persons or property on or off the
Facilities, or that may affect the value of the Facilities or the Company or any
Subsidiary.
"HAZARDOUS MATERIALS" means any waste or other substance that is listed,
defined, designated, or classified as, or otherwise determined to be, hazardous,
radioactive, or toxic or a pollutant or a contaminant under or pursuant to any
Environmental Law, including any admixture or solution thereof, and specifically
including petroleum and all derivatives thereof or synthetic substitutes
therefor and asbestos or asbestos-containing materials.
"IN-STORE INVENTORY" shall mean all Finished Product Inventory (as if it were
in-store), and all other inventory sold or otherwise distributed by Company that
is not under the BROTHERS trademark, as of the Closing Date (as measured in
pounds) that Company sells or otherwise provides to each Customer that is (a) on
the shelves of such Customer's stores, (b) on such Customer's premises, whether
in a store, warehouse or elsewhere or (c) at a wholesaler/distributor's premises
which is intended to be shipped to the Customer.
-6-
<PAGE>
"IN-STORE INVENTORY ADJUSTMENT" shall have the meaning set forth in Section
2.3(c).
"INTELLECTUAL PROPERTY" shall have the meaning set forth in Section 3.9(a).
"INTERIM ORDER" means the Order entered by the Bankruptcy Court on January 15,
1999 styled "Order Approving Proposed Bidding Procedures, with Respect to the
Sale of Debtor's Business and Approving Certain Terms of the Stock Purchase
Agreement. "
"IRS" means the Internal Revenue Service.
"LEGAL REQUIREMENT" means any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution, law,
ordinance, principle of common law, regulation, statute, or treaty.
"LIEN" means any lien, claim, encumbrance, security interest, option, mortgage
note, deed of trust, easement, license, leasehold interest, right of way, title
defect, charge, restriction or right of any third party of any kind.
"MATERIAL ADVERSE EFFECT" means any condition, change or event that would
materially and adversely affect the Assets.
"MARYLAND CLUB AGREEMENT" shall have the meaning set forth in Section 2.7(b).
"OSHA" means Occupational Safety and Health Act.
"OCCUPATIONAL SAFETY AND HEALTH LAW" means any Legal Requirement designed to
provide safe and healthful working conditions and to reduce occupational safety
and health hazards, and any program, whether governmental or private (including
those promulgated or sponsored by industry associations and insurance
companies), designed to provide safe and healthful working conditions.
"PERMITS" shall have the meaning set forth in Section 3.3.
"PERSON" means any individual, corporation, partnership, firm, joint venture,
association, joint-stock company, trust, unincorporated organization,
governmental or regulatory body or other entity.
"PETITION DATE" means August 27, 1998, the date on which Debtors commenced the
Chapter 11 Cases.
-7-
<PAGE>
"PLAN" means the Plan of Reorganization dated January 15, 1999 and filed with
the Bankruptcy Court pursuant to Section 5.1.
"PURCHASE PRICE" shall have the meaning set forth in Section 2.2(a).
"PURCHASE PRICE ADJUSTMENT" shall have the meaning set forth in Section 2.3(a).
"RCRA" means the Resource Conservation and Recovery Act.
"RELEASE" means any spilling, leaking, emitting, discharging, depositing,
escaping, leaching, dumping, or other releasing into the Environment, whether
intentional or unintentional.
"SALE MOTION" means the motion to be filed by the Debtors with The Bankruptcy
Court pursuant to 5.1 of this Agreement in accordance with Section 105 and 363
of The Bankruptcy Code.
"SALE ORDER" shall have the meaning set forth in Section 5.1(c)(1).
"SEC" means the Securities and Exchange Commission.
"SUBSIDIARIES" shall mean Brothers Gourmet Coffees, Inc., Brothers Retail Corp.,
Brothers Coffee Bars, Inc., and Maryland Club Foods, all wholly owned
subsidiaries of Company.
"TAX" means any taxes, however denominated, including income tax, capital gains
tax, value-added tax, sales tax, property tax, gift tax, estate tax, capital
stock, franchise, profits, withholding, social security (or similar),
unemployment, disability, sales, use, transfer, registration, alternative or
add-on minimum, estimated, or other tax of any kind whatsoever and any related
charge or amount (including any fine, penalty, interest or addition to tax),
imposed, assessed or collected by or under the authority of any Governmental
Body or payable pursuant to any tax-sharing agreement or any other arrangement
relating to the sharing or payment of any such tax, levy, assessment, tariff,
duty, deficiency or fee, including any interest, penalty, or addition thereto,
whether disputed or not.
"TRUST" means the creditors' trust, if any, for the benefit of the Claimants
established pursuant to the Plan.
-8-
<PAGE>
EXHIBIT 99.3
EXECUTION COPY
TRANSITIONAL SUPPLY AND SERVICES AGREEMENT
This is a TRANSITIONAL SUPPLY AND SERVICES AGREEMENT ("TS Agreement"), dated
March 8, 1999, between Brothers Gourmet Coffees, Inc., a Delaware corporation as
debtor in possession ("Brothers") or their successors or assigns (collectively
referred to as "Supplier"), and The Procter & Gamble Company, an Ohio
corporation, ("P&G") and its Subsidiaries (collectively referred to as "Buyer").
Supplier and Buyer are sometimes collectively referred to herein as "parties"
and individually "party."
RECITALS
Brothers is the debtor in the Case and desires to file the Amended Plan or Sale
Motion and Assumption Motion in the Chapter 11 Cases, pursuant to which P&G will
acquire the Assets in accordance with the Asset Purchase Agreement between
Brothers and P&G, dated March 8, 1999 ("Purchase Agreement"), which is subject
to Bankruptcy Court Approval; and
In connection with the acquisition, Buyer wishes that Supplier Manufacture
Products and provide Services for the period(s) set forth herein;
NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants, agreements and conditions contained herein, the parties hereto agree
as follows:
ARTICLE I
CERTAIN DEFINITIONS
1.1 GENERAL. Any capitalized term used but not defined herein will have the
meaning as set forth in the Purchase Agreement.
1.2 "CGMP" means Current Good Manufacturing Practices as promulgated under the
FDCA.
1.3 "DATE OF MANUFACTURE" shall mean the Product Unit's date of Manufacture as
imprinted on the Product Unit's packaging pursuant to the Specifications.
1.4 "FDCA" means the Federal Food, Drug and Cosmetic Act, as amended, including
the regulations promulgated thereunder, and when applicable, any
corresponding state and/or local statutes, rules, laws, orders,
regulations, ordinances and/or similar matters.
1.5 "MANUFACTURING" means the sourcing and warehousing of raw and packaging
materials, compounding, component preparation, incoming and outgoing
quality
1
<PAGE>
control, fabrication (including, without limitation, roasting, flavoring
and grinding), filling, inspecting, labeling, packing, packaging, storage,
handling and/or warehousing of any Product Unit, or any part thereof, as
well as associated activities, in accordance with the Specifications and
the terms and conditions of this TS Agreement, in each case, by Supplier.
The terms "MANUFACTURE" or "MANUFACTURED" will have the appropriate
derivative meanings.
1.6 "PRODUCTS" mean, except where specifically qualified in this TS Agreement,
all of the SKUs produced by or on behalf of Brothers as of the Closing
Date, Manufactured after the Closing Date, together with any Alterations
and/or Additional Modifications. Notwithstanding the foregoing, Products
shall not include Finished Product Inventory that Buyer purchases pursuant
to the Purchase Agreement.
1.7 "PRODUCT UNIT" means the particular type of Product, as set forth on
Schedule 1.7, as may be amended from time to time upon notice by Buyer.
1.8 "SKUS" mean stock keeping units.
1.9 "SPECIFICATIONS" mean the written methods, procedures, requirements,
formula(e), tests and test protocols, and standards related to Products
employed by or on behalf of Supplier, in conformity with CGMP, as of the
Closing Date, and as may be amended pursuant to this TS Agreement.
1.10 "SUPPLIER'S PLANT" means Brothers' plant on Old Katy Road in Houston, Texas
or any subsequent Manufacturing facility that is approved by Buyer pursuant
to Section 3.4.
1.11 "TERM" means for the Manufacture of Product Units, that period commencing
on the Closing Date and ending twelve (12) months thereafter, unless
terminated earlier pursuant to Section 12.2 or 12.3, and for the
Pre-Closing and Post-Closing Services, from the date of execution of this
TS Agreement to the time set forth in Section 2.2, unless terminated
earlier pursuant to Section 12.2.
1.12 OTHER DEFINITIONS. Other terms defined in this Agreement, and the location
where they are defined, are:
<TABLE>
<S> <C>
"ADDITIONAL MODIFICATIONS".......................Section 6.2
"AFFECTED PARTY".................................Section 13.4
"ALTERATIONS"....................................Section 6.1
"BROTHERS".......................................Preamble
"BUYER"..........................................Preamble
"BUYER PROPERTY".................................Section 4.3(d)
"CHANGE OF CONTROL"..............................Section 13.11
"FIFO"...........................................Section 5.2
"FORECAST".......................................Section 3.1(d)
2
<PAGE>
"MONTHLY PAYMENT"................................Schedule 8.1
"NON-AFFECTED PARTY".............................Section 13.4
"NON-DEFAULTING PARTY"...........................Section 12.2
"OTHER PARTY"....................................Section 12.2
"ORDER"..........................................Section 3.1
"P&G"............................................Preamble
"POST-CLOSING SERVICES"..........................Section 2.1(b)
"PRE-CLOSING SERVICES"...........................Section 2.1(a)
"PURCHASE AGREEMENT".............................Recitals
"SHIPPING PERIOD"................................Section 5.1
"SUPPLIER".......................................Preamble
"TERM"...........................................Section 12.1
"TERMINATION DATE"...............................Section 12.2
"TS AGREEMENT"...................................Preamble
</TABLE>
ARTICLE II
TRANSITION SERVICES
2.1 PRE-CLOSING SERVICES. At such time or times prior to the Closing Date as
the parties hereto may reasonably agree, Supplier shall provide to Buyer
the following services ("Pre-Closing Services"): (a) Supplier shall permit
reasonable access (with Supplier giving due regard for Buyer's transition
work to be completed prior to the Closing Date) to all of Supplier's
employees and data in all areas of Supplier's business to assist Buyer in
developing transition plans; (b) Buyer shall accompany Supplier on all
Customer calls (excluding customary and ordinary shelf re-sets) that could
reasonably be expected to affect the terms and conditions of existing
Customer Contracts or commit Supplier and/or Buyer to future obligations
and Buyer shall reasonably approve all of Supplier's communications with
its Customers regarding the transition of Supplier's business to Buyer; and
(c) without limiting the generality of the foregoing, Supplier shall
provide the specific services as set forth in Schedule 2.1.
2.2 POST-CLOSING SERVICES. During the two weeks after the Closing Date,
Supplier shall provide to Buyer, as Buyer may request from time to time,
the services as set forth in Schedule 2.2 (collectively "Post-Closing
Services"). At Buyer's request, Supplier will use its best efforts to
extend any or all of such Post-Closing Services to the date(s) specified by
Buyer at a mutually agreeable price.
2.3 REPORTS; RECORDS. Supplier shall provide reports to Buyer on a timely basis
with respect to the Pre-Closing Services and Post-Closing Services that it
prepared on a regular basis prior to the Closing Date. In addition,
Supplier shall provide Buyer special / custom reports that Buyer reasonably
requests with respect to such Pre-Closing and Post-Closing Services at
Buyer's expense. Supplier shall maintain
3
<PAGE>
complete records of all Pre-Closing and Post-Closing Services and such
records will be made available to Buyer upon request.
2.4 REIMBURSEMENT TO SUPPLIER; VACATION. Buyer shall reimburse Supplier for up
to $100,000 for retention bonuses Supplier pays under its retention program
to employees who accept Buyer's offer of employment. To the extent
practicable, Buyer shall communicate with Supplier regarding Supplier's
employees who accept Buyer's employment offer upon their acceptance, so as
to assist Supplier in determining when Supplier is entitled to
reimbursement of all or any portion of such $100,000. Buyer shall reimburse
Supplier up to an aggregate amount of $100,000, but make payments to
Supplier no more often than two (2) times per month after Buyer receives
Supplier's proof of payment of such retention bonuses. Furthermore, Buyer
shall credit or otherwise compensate each employee of Supplier who becomes
an employee of Buyer within thirty (30) calendar days of the Closing Date,
for such employee's accrued vacation, as per Supplier's books and records.
Notwithstanding the foregoing, Buyer shall not make any offers of
employment to Supplier's employees who work at Supplier's Plant during the
Term without Supplier's consent.
ARTICLE III
SUPPLY ORDERS / LOCATIONS
3.1 ORDERS.
(a) QUANTITY / ORDERS. During the Term, the combined Product Units
purchased shall be nine million (9,000,000) pounds; such amount shall
be covered by a blanket purchase order. In the event that the Term
shall expire and Buyer shall not have ordered at least nine million
(9,000,000) pounds of Product Units, Buyer shall pay to Supplier the
difference (in pounds) of nine million (9,000,000) and Product Units
ordered, multiplied by the Manufacturing Charge (as defined in
Schedule 8.1) within twenty (20) days after the end of the Term. Buyer
or Customer shall specify in their sole discretion, the specific
Product Unit mix and production timing by an order from Buyer or a
Customer ("Order"), which Supplier shall fulfill by the date specified
on such Order, such date being no less than seven (7) calendar days
from the date of Order, unless otherwise agreed by the parties.
Supplier shall use its reasonable efforts to fulfill Orders in excess
of thirty percent (30%) of the current month's forecast for total
Product Units or by Individual Product Units (e.g., Prepack, Whole
Bean 10 - 12 ounce, etc.), but in no event shall Supplier's
non-fulfillment of such excess constitute a failure to supply pursuant
to Section 3.4.
(b) FORECASTING. Buyer shall provide to Supplier a non-binding, rolling
four-month forecast, broken down by month and Product Unit
("Forecast"). The
4
<PAGE>
first Forecast shall be delivered to Supplier on or about sixty (60)
days after the Closing Date and on or about the first day of each
month thereafter. For the first sixty (60) days, the Forecast shall be
mutually agreed prior to the Closing Date. Notwithstanding the
foregoing, the Forecast for the last four (4) months of the Term shall
become binding with respect to raw or packaging materials Supplier
purchases pursuant to such Forecast; accordingly, Buyer shall pay
Supplier its actual cost for such materials.
3.2 REPORTS BY SUPPLIER; RECORDS. If requested by Buyer, Supplier will provide
Buyer with monthly raw material, packing material and finished Product
reports reflecting Manufacturing, shipments, inventories, costs and
projections related thereto. These reports will be issued during the first
ten (10) Business Days of the month following the date of the request,
provided the request is received by the twenty-fifth (25th) calendar day of
the previous month. In addition, Supplier shall maintain complete records
of all Manufacturing and such records will be made available to Buyer upon
request.
3.3 RELOCATION OF MANUFACTURING. Supplier will notify Buyer at least ninety
(90) calendar days prior to relocation of any Manufacturing facility(ies)
different from Supplier's Plant. Buyer must reasonably approve of such new
facility for the Manufacture of Product Units, otherwise Buyer may
terminate this Agreement pursuant to Section 12.2.
3.4 FAILURE TO SUPPLY; CAPACITY ALLOCATION.
(a) SUPPLIER NOTICE. In the event that Supplier, upon receiving an Order
anticipates that it will be unable to meet such Order, either in whole
or in part, due to any reason, Supplier shall give written notice of
such inability to Buyer within five (5) Business Days of receipt of
such Order or upon Supplier's reasonable belief that it cannot fulfill
the Order, if such date is after such five (5) Business Day period. If
such inability is partial, Supplier shall fulfill Orders with such
quantities of Product Units as are available. Notwithstanding the
foregoing, Supplier's inability to supply Product Units due to the
lack of or a failure to timely supply any materials sourced by Buyer
shall not constitute a failure to supply or a breach of this Agreement
by Supplier.
(b) SUPPLY ALTERNATIVES. The parties shall meet within ten (10) Business
Days of such written notice to consider and, if appropriate, pursue
alternative arrangements for meeting Buyer's requirements for Product
Units that Buyer deems necessary in its sole discretion, including
without limitation termination of this TS Agreement pursuant to
Section 12.2. Any alternative arrangements entered into pursuant to
this Section 3.4(b) shall in no way act as a waiver of any other
rights or remedies which Buyer may have under this TS Agreement or
otherwise.
5
<PAGE>
(c) SUPPLY TOLERANCES. For purposes of this Section 3.4 and subject to
Section 3.1(a), Supplier shall not be considered to have failed to
supply Product Units, so long as Supplier ships at least ninety-nine
percent (99%) average of the amounts specified on the Order for a
rolling six (6) month period, but in no event shall Supplier ship less
than ninety-seven percent (97%) of the amounts specified on the Order
for any calendar month.
ARTICLE IV
MATERIALS AND EQUIPMENT
4.1 SOURCES OF MATERIALS.
(a) SOURCING AGREEMENTS. Supplier will source or arrange for the sourcing
of all raw and packaging materials required for Manufacturing Product
Units from vendors reasonably selected by or on behalf of Supplier
consistent with Supplier's ordinary past practices, of good quality,
and in quantities reasonably calculated to meet Buyer's orders in a
cost-effective manner. Notwithstanding the foregoing, Buyer shall
source green coffee, unless it notifies Supplier otherwise (with four
(4) months' notice), and may source any other raw and/or packaging
materials at any time for any reason, upon reasonable notice to
Supplier, so long as such sourced materials are compatible with
Supplier's Manufacturing process. In addition, Supplier shall not
order any raw and packaging materials that will constitute more than a
four (4) month supply, unless agreed to by Buyer.
(b) EFFECT OF SOURCING ARRANGEMENTS. To the extent that Buyer's sourcing
arrangements set forth in Section 4.1(a) render Supplier unable to use
any raw or packaging materials for Product Units, Supplier shall
invoice Buyer for its actual cost of such unused material. The
Manufacturing Cost shall also be reduced by a corresponding amount
with respect to the materials sourced, as agreed by the parties.
Notwithstanding the foregoing, the parties shall use their best
efforts to estimate the costs associated with such sourcing prior to
Buyer's decision to source.
4.2 REPAIR AND REPLACEMENT OF EQUIPMENT. Supplier will be responsible for all
repairs and replacement of equipment, tooling and/or facilities used in the
Manufacture of Product Units. Supplier shall keep all equipment, tooling
and facilities used in the Manufacture of Product Units in good operating
condition at all times. For the purposes of the previous sentence,
Supplier's Plant was in good operating condition as of February 1, 1999.
Supplier agrees that Buyer's equipment and tooling (if provided) will be
identified as the property of Buyer and where possible will be stored
separately from other materials at Supplier's Plant, kept in good operating
condition, and will not be encumbered in any way such as through security
liens or pledges. Supplier agrees that in the event of Buyer's cancellation
pursuant to the
6
<PAGE>
terms of this TS Agreement, or Supplier's default, or, other than with
respect to the Case, in the event of Supplier's insolvency, the appointment
of a receiver to oversee Supplier's assets or the filing by or against
Supplier of a petition under Federal bankruptcy laws, Supplier will make
available for Buyer's removal any property of Buyer then under Supplier's
control.
4.3 CONTROLS.
(a) LOSS ALLOWANCES. Supplier shall be responsible for any losses of all
raw and packaging materials supplied by Supplier. Loss allowances (if
any) of any raw and packaging materials supplied by or on behalf of
Buyer will be agreed by the parties.
(b) INVENTORY PROTECTION AND CONTROL. To enable Buyer to maintain
inventory control, Supplier agrees that it will not Manufacture or
ship Product Units in the absence of instructions from Buyer or
contrary thereto. Buyer shall furnish Manufacturing and shipping
instructions during the Term in accordance with this TS Agreement.
(c) SECURITY PRECAUTIONS. Supplier agrees to take any reasonable security
precautions requested by Buyer, including, without limitation,
prohibiting visitors in the Manufacturing area during production runs.
(d) BUYER'S PROPERTY. Supplier will, to the extent possible, identify all
the components of Product Units, Product Units and equipment (to which
Buyer has title) as the property of Buyer, as well as Finished Product
Inventory and Green Coffee Inventory ("Buyer's Property") where
appropriate and will segregate Buyer's property from other materials
in its warehouse. Supplier agrees not to encumber Buyer's Property in
any way such as through security liens or pledges and agrees that in
the event of Supplier's breach or insolvency, Buyer may enter
Supplier's premises and reclaim all such Buyer's Property. Buyer may
file and Supplier agrees to cooperate to the extent necessary in
assisting Buyer in obtaining a consignment interest or other
appropriate security interest or notice filing as Buyer deems
necessary in any or all of Buyer's Property.
ARTICLE V
SHIPPING AND USE OF MATERIALS
5.1 SHIPPING. Supplier will arrange for the shipment, load and complete
documentation for Product Units in quantities as specified by the Buyer (on
common carriers selected by Buyer), with such freight charges at Buyer's
expense (including without
7
<PAGE>
limitation any duties payable with respect to any shipment) and risk of
loss from the Supplier's Plant (i.e., F.O.B. Supplier's Plant).
5.2 ORDER OF USE FOR RAW AND PACKAGING MATERIALS AND INVENTORY BY SUPPLIER.
Supplier will physically use raw and packaging materials on a first-in,
first-out basis ("FIFO") consistent with ordinary business practices.
5.3 COMMON CARRIER CLAIMS. All claims by or to common carriers in connection
with Product Units will be the responsibility of Buyer, except to the
extent that any such claim by a common carrier results from the negligence,
gross negligence or intentional misconduct of, or breach of this TS
Agreement by, Supplier.
5.4 PALLETS. Products will be shipped to Buyer or Buyer's designee on GMA spec
pallets.
5.5 WAREHOUSE SPACE. At no additional cost, Supplier will provide warehouse
capacity for raw and packaging materials and Product Units consistent with
past practices, to support an annual volume of nine (9) million pounds of
Product Units.
ARTICLE VI
CHANGES TO SPECIFICATIONS
6.1 ALTERATIONS. Subject to Section 6.2, upon two (2) months' prior written
notice to Supplier, Buyer may alter the Specifications for artwork and/or
label copy of the Product Units ("Alterations") without the consent of
Supplier; provided that Buyer will be responsible at the time of the notice
for:
(a) providing new Specifications and any other materials or equipment
required or prudent for implementation of such Alterations, including,
without limitation, artwork and cylinders;
(b) having secured from any government approvals that may be necessary or
advisable in connection with any Alteration;
(c) any resulting increases in costs (such increased costs being agreed by
the parties prior to implementation);
(d) all liabilities, costs or expenses, including, without limitation,
those of third parties, arising out of or related to Alterations,
including without limitation, those related to the failure or alleged
failure of the Alterations to comply with applicable laws and
regulations; and
(e) all scrapping costs associated with any Alterations (such costs being
agreed by the parties prior to scrapping).
6.2 ADDITIONAL MODIFICATIONS. All changes to Specifications, other than
Alterations, and the inclusion in this TS Agreement of any new Product
Units or Product Units discontinued by Supplier prior to the termination or
expiration of this TS Agreement (collectively "Additional Modifications"),
require prior written consent of both parties,
8
<PAGE>
which shall not be unreasonably withheld. Buyer will be responsible for
Additional Modifications, including costs and expenses thereof (such costs
and expenses being agreed upon by the parties prior to implementation), to
the same extent Buyer is responsible for Alterations. Notwithstanding the
foregoing, the costs associated with any Additional Modifications that are
required to bring the Specifications (such definition excluding "in
conformity with CGMP" for purposes of this sentence only) at the Closing
Date and thereafter in compliance with CGMP shall be borne by Supplier.
ARTICLE VII
QUALITY ASSURANCE
7.1 SUPPLIER TESTS. Supplier will perform or cause to be performed quality
control tests and assays on raw and packaging materials and Product Units
in accordance with the Specifications.
7.2 BUYER INSPECTIONS. Supplier will permit Buyer's designated representatives
to inspect and visit from time to time Supplier's Plant for the purpose of
determining compliance with this TS Agreement. Such inspections will occur
during regular business hours after reasonable notice to Supplier and shall
not unreasonably interfere with the operation of Supplier's Plant.
Notwithstanding the foregoing, upon Buyer's request, Supplier shall permit
any of Buyer's employees to be at Supplier's Plant on a permanent or
semi-permanent basis during the Term.
7.3 BUYER TESTS. At Buyer's request, Supplier will cause to be sent, at Buyer's
expense, a reasonable number of Product Unit samples to Buyer for
examination and testing, in a timely manner and at Buyer's expense, to
assure conformity with Specifications.
7.4 REJECTED GOODS / SHORTAGES.
(a) NOTICE; REPLACEMENT. Buyer shall notify Supplier in writing of any
claim relating to the Product Units that fail to meet the
Specifications prior to shipment of such Product Units from Supplier's
Plant or any shortage in quantity of any shipment of Product Units.
Provided that the parties agree that the Product Units are defective
or that there is a shortage, Supplier shall replace the defective
Product Units or make up the shortage as soon as reasonably possible
after receiving such notice, at no additional cost to Buyer. Buyer
shall make arrangements with Supplier for the return or disposal of
any rejected Product Units; the costs of such return or disposal shall
be paid by Supplier. In the event that only a limited supply of
Product Units is available at the time of such rejection or shortage,
then Supplier shall ship to Buyer such quantities of Product Units as
are available and Buyer
9
<PAGE>
shall be promptly reimbursed or credited against future orders, at
Buyer's option, for amounts paid for the remaining quantity of
rejected Product Units.
(b) DISPUTES. If Supplier disagrees with Buyer's claim that the Product
Units fail to meet the Specifications, the parties shall attempt to
resolve such dispute. If the parties cannot resolve such dispute
within five (5) Business Days, a sample of such Product Unit shall be
submitted by Supplier to Buyer for confirmatory testing against the
Specifications and the test results obtained shall be final and
controlling. The fees and expenses of such testing shall be borne
entirely by the party whose initial Product Unit analysis was in
error. In the event the test results indicate that the Product Units
in question do not conform to the Specifications, Supplier shall
replace such Product Units at no additional cost to Buyer as soon as
reasonably possible after receipt of such results. In the event that
the test results indicate that the Product Units in question do
conform to the Specifications, Buyer shall pay all additional costs
incurred as a result of the disagreement.
7.5 THIRD PARTY COMMUNICATIONS - SUPPLY. Supplier shall supply Buyer all
reasonable cooperation and assistance in Buyer's investigation and response
to a third party, including without limitation a federal, state or local
health authority ("Health Authority") complaint and/or inquiry. Supplier
shall have written procedures that are acceptable to Buyer for handling any
inquiry and/or complaint from a Health Authority. Supplier shall promptly
inform Buyer of any such complaint, inquiry or request for investigation of
which it becomes aware. In addition, Supplier shall promptly notify Buyer
of any Health Authority inquiry or finding relating to any product or
process handled by Supplier that could, in Supplier's reasonable judgment,
jeopardize Supplier's ability to supply Product Units to Buyer in
accordance with the terms of this TS Agreement.
7.6 PRODUCT UNIT RECALLS. Product Unit recalls and retrievals shall be handled
by Buyer, pursuant to any procedures agreed to by the parties. Supplier
shall bear all costs associated with such recalls and retrievals.
ARTICLE VIII
PRICE AND PAYMENT
8.1 SUPPLY PRICING. Schedule 8.1 sets forth the price Buyer will pay Supplier
for Product Units as well as the Monthly Payment (as defined in Schedule
8.1). If Buyer sources any raw or packaging materials pursuant to Section
4.1, the price for such Product Unit shall be decreased by an amount
directly corresponding to the materials sourced as agreed by the parties.
8.2 SUPPLY INVOICING AND PAYMENT. Supplier will send Buyer an invoice for the
weekly shipments of Product Units. All invoices will be based upon the bill
of lading
10
<PAGE>
describing the Product Units and quantity of Product Units shipped to
Buyer. Monthly Payments shall be invoiced the last day of each month of
Manufacture. Buyer will be responsible for paying each invoice within
twenty (20) calendar days after its receipt of such invoice. Payment will
be made in U.S. dollars and be sent to the location designated in advance
by Supplier.
ARTICLE IX
SUPPLIER'S WARRANTIES AND ADDITIONAL COVENANTS
9.1 WARRANTIES.
(a) TITLE; MERCHANTIBILITY. Supplier warrants that it will pass to Buyer
good and marketable title to Product Units, free and clear of all
Liens, and that the components of such Product Units shall be free and
clear of all Liens at all times. Further, the Product Units will be of
merchantible quality.
(b) COMPLIANCE WITH SPECIFICATIONS. Supplier warrants that the Product
Units will be in compliance with Specifications at the time such
Product Units are delivered to the common carrier for shipment to
Buyer.
(c) COMPLIANCE WITH LEGAL REQUIREMENTS. Supplier warrants that it will
comply with all Legal Requirements, including without limitation,
those Legal Requirements relating to labor and employment, taxation,
competition, intellectual property, FDCA, Environmental Laws, health,
safety, customs and Manufacturing.
(d) SERVICE QUALITY. Supplier warrants that it will provide Services in a
professional, workman-like manner.
(e) PAYMENT OF DEBTS. Supplier warrants that it will pay its debts and
other financial obligations as they become due, other than the debts
and other financial obligations that arose prior to the commencement
of the Case.
(f) YEAR 2000 WARRANTY. Supplier warrants that its facilities, equipment,
operations, information systems and all other systems and processes
currently utilized or expected to be utilized in fulfillment of this
TS Agreement either already are or will be Year 2000 compliant and
that Supplier will be able to fulfill its obligations, representations
and warranties included herein.
(g) INTELLECTUAL PROPERTY. Supplier warrants that it is and will not
infringe Buyer's or a third party's intellectual property rights,
including without limitation, trademarks, trade dress, copyright,
patents, processes and trade secrets.
11
<PAGE>
(h) DAMAGES UNDER THIS TS AGREEMENT.
(1) With respect to the remaining assets of the Company and the
Subsidiaries, the Company and its Subsidiaries will not seek the
benefit of any provisions of Section 363, 105 or 1141(c) of the
Bankruptcy Code with respect to any of Buyer's claims, interests,
rights, and encumbrances, if any, under this TS Agreement or the
Purchase Agreement;
(2) Any claims of P&G will survive confirmation of any plan and will
not be discharged; and
(3) Any claims of P&G for breach of this TS Agreement or the Purchase
Agreement shall be offset against any amounts due to Supplier
from P&G under this Agreement.
(i) LIMITATION OF WARRANTIES. Supplier makes no warranty, other than the
warranties set forth herein or in the Purchase Agreement. The
warranties set forth herein and therein are in lieu of all other
warranties, express or implied.
9.2 ADDITIONAL COVENANTS.
(a) INSURANCE. Supplier shall maintain adequate insurance coverage for all
activities that relate to Pre-Closing Services, Post-Closing Services
and Manufacturing for the applicable Transition Period in the same
amounts (or such increased amounts as reasonably requested by Buyer at
Buyer's expense) as it had prior to the Closing Date. Such amounts and
policies are set forth on Schedule 9.2(a).
(b) CONFIDENTIALITY. All proprietary, experimental, technical,
Manufacturing, financial and/or other information disclosed by Buyer
to Supplier pursuant to this TS Agreement are considered by Buyer to
be highly confidential. Supplier agrees to take all reasonable
precautions to prevent disclosure to third parties. Supplier shall
hold in confidence Buyer's interest in specific materials and any
technical or business information Supplier may learn, observe or
otherwise obtain concerning Buyer incident to Supplier's performance
under the terms of this TS Agreement. These restrictions upon
disclosure shall cease to apply as to any specific portion of such
information which is or becomes available to the public generally, not
due to the fault of Supplier.
(c) PERMITS AND LICENSES. Supplier shall maintain all permits and licenses
that are necessary, advisable, consistent with past practice and
legally required to provide all services under this Agreement during
the applicable Transition Period.
12
<PAGE>
ARTICLE X
INDEMNIFICATION
10.1 BUYER'S INDEMNIFICATION. Buyer will defend, indemnify, and hold Supplier
harmless from and against all claims, losses, liabilities, damages, costs
and expenses (including without limitation reasonable fees and expenses of
attorneys incurred in investigation or defense of any third-party action,
but excluding fees, costs and expenses of attorneys, accountants,
consultants or other experts or witnesses incurred in the investigation of
any non-third party action) (collectively "Demands"), arising out of or
related to Product Units, Services or breach of this TS Agreement by Buyer,
except to the extent such Demand is subject to Section 10.2.
10.2 SUPPLIER'S INDEMNIFICATION. Subject to Section 10.1, Supplier will defend,
indemnify and hold Buyer harmless from and against any Demand arising out
of or relating to Environmental, Health and Safety Liabilities, Supplier's
negligence, gross negligence or intentional or willful misconduct, or the
breach of this TS Agreement by Supplier.
10.3 NOTICE; CONTROL OF LITIGATION. The party who is seeking indemnification
shall promptly send written notice to the other party, stating in detail
the basis for indemnification. If there is a third party action, the party
not seeking indemnification shall assume the defense of such action. If
both parties are seeking indemnification from the other, they shall
reasonably cooperate with one another with respect to assuming the defense
of such action. Notwithstanding the foregoing, either party may at its
option and expense retain counsel to participate in such action. In no
event shall either party admit liability with respect to the other party,
unless such party consents in writing.
ARTICLE XI
PROPERTY
11.1 OWNERSHIP OF INTELLECTUAL PROPERTY. All intellectual property owned by
either party will at all times be and remain the exclusive property of the
owner thereof, and this TS Agreement will not constitute a license, except
to the extent required to fulfill each party's obligations hereunder.
11.2 BOOKS AND RECORDS. During the Term with respect to any Product Unit,
Supplier will be permitted to retain and use any books and records
transferred to the Buyer pursuant to the Purchase Agreement to the extent
necessary or advisable for Supplier to fulfill its obligations under this
TS Agreement.
13
<PAGE>
ARTICLE XII
TERM AND TERMINATION
12.1 TERM. This TS Agreement will be effective for the Term.
12.2 NOTICE OF TERMINATION. In addition to any other rights or remedies Buyer or
Supplier may have at law or in equity, a party not in default under this TS
Agreement ("Non-Defaulting Party") may terminate this TS Agreement by
giving written notice to the other party ("Other Party") of its intention
to terminate this TS Agreement or any Transition Period upon the occurrence
of any or all of the following events:
(a) a material breach by the Other Party of any of its obligations
hereunder; without limiting the generality of the foregoing, a Force
Majeure pursuant to Section 13.4, a relocation of Manufacturing
facility pursuant to Section 3.3, a failure to supply pursuant to
Section 3.4 or a Change of Control pursuant to Section 13.11 shall
constitute a material breach; and
(b) the filing by or against the Other Party of a petition in bankruptcy
(other than the Case), or any appointment of a receiver for the Other
Party or any substantial part of its assets, or any assignment for the
benefit of the Other Party's creditors;
Such notice will identify a date for termination of this TS Agreement or
any Term, which date shall not be sooner than ten (10) Business Days after
receipt of such notice by the Other Party ("Termination Date"). If the
event on which the notice is based is not cured prior to the Termination
Date, then this TS Agreement or any Term will terminate on the Termination
Date pursuant to such notice.
12.3 MUTUAL TERMINATION. Either party may terminate this TS Agreement with
thirty (30) days' notice to the other party after the nine million
(9,000,000) pounds of Product Units have been supplied pursuant to Section
3.1.
12.4 SURVIVAL. Sections 3.1, 7.4, 8.1, 8.2, 9.1 and 9.2(b) shall survive the
termination or expiration of this TS Agreement.
12.5 UNSHIPPED PRODUCT UNITS AND MATERIALS. Subject to 3.1(b) upon the
termination or expiration of this TS Agreement, Buyer may, at its option,
purchase (a) any unshipped Product Units not already committed by an Order
at the purchase price pursuant to Section 8.1; and/or (b) any unused but
usable raw and packaging materials directly related to the Product Units at
actual cost. Buyer will be responsible for paying for the shipment of, and
will bear the risk of loss for, such shipments to the designated
location(s).
14
<PAGE>
ARTICLE XIII
MISCELLANEOUS
13.1 ENTIRE AGREEMENT. The Buyer Documents shall constitute the entire agreement
between Supplier and Buyer with respect to, among other things, the
Manufacture of the Product Units. In the event of any inconsistency between
the Buyer Documents and any subsequently issued document, including without
limitation, an Order, the Buyer Documents will prevail.
13.2 TAXES. Buyer and Supplier agree to pay all Taxes assessed on materials,
excluding Product Units, to which each of them has title.
13.3 SUPPLIER'S INDEPENDENT CONTRACTOR STATUS. Supplier is acting pursuant to
this TS Agreement as an independent contractor, and as such Supplier's
employees will not be deemed to be Buyer's employees for any purpose,
including without limitation, Buyer's employee benefit plans. Supplier
assumes sole responsibility for the direction and control of its employees
involved in performing services pursuant to this TS Agreement and such
employees shall remain for all purposes employees of Supplier.
13.4 FORCE MAJEURE. Neither party (the "Affected Party") will be liable to the
other (the "Non-Affected Party") for failure to perform any part of this TS
Agreement if such failure results from an act of God, war, revolt,
revolution, sabotage, actions of a governmental entity, Legal Requirements,
embargo, fire, strike, other labor trouble or any cause beyond the Affected
Party's control. Upon the occurrence of any such event which results in, or
will result in, delay or failure to perform according to the terms of this
TS Agreement, the Affected Party will promptly give notice to the
Non-Affected Party of such occurrence and the effect and/or anticipated
effect of such occurrence. The Affected Party will use its reasonable
efforts to minimize disruptions in its performance and to resume
performance of its obligations under this TS Agreement as soon as
practicable. Notwithstanding the foregoing, the Non-Affected Party may
terminate this TS Agreement if the Affected Party is unable to fulfill its
material obligations under this TS Agreement for longer than ten (10)
Business Days from the Non-Affected Party's receipt of such notice.
13.5 NOTICES. All notices required to permitted to be given under this TS
Agreement will be in writing and will be deemed to be properly given when
actually received by the Person entitled to receive the notice at the
address stated below, or such other address as Supplier or Buyer may
provide by notice to the other:
15
<PAGE>
If to the Company: Brothers Gourmet Coffees, Inc.
2255 Glades Road, Suite 100E
Boca Raton, Florida 33431
Attn: Donald D. Breen, President and CEO
Facsimile: (561) 241-6690
Copy to: Brownstein Hyatt Farber & Strickland, P.C.
Twenty-Second Floor
410 Seventeenth Street
Denver, Colorado 80202
Attn: John L. Ruppert, Esq.
Facsimile: (303) 623-1956
and Weil, Gotshal & Manges LLP
701 Brickell Avenue, Suite 2100
Miami, Florida 33131
Attn: Oscar R. Cantu, Esq.
Facsimile: (305) 374-7159
and White & Case
200 S. Biscayne Blvd., Suite 4900
Miami, FL 33131
Attn: Thomas E. Lauria
Facsimile: (305) 358-5744
(until the unsecured creditors has been
disbanded)
If to Buyer: The Procter & Gamble Company
1 Procter & Gamble Plaza
Cincinnati, OH 45202
Attn: General Manager - Coffee
Facsimile: (513) 983-6415
Copy to: Associate General Counsel - Food & Beverage
Procter & Gamble Legal Division
1 Procter & Gamble Plaza
Cincinnati, OH 45201
Fax: (513) 983-2611
13.6 AMENDMENT; WAIVER. This TS Agreement may be amended, modified or
superseded only by a written instrument signed by all of the parties to
this TS Agreement. No party shall be deemed to have waived compliance by
another party
16
<PAGE>
of any provision of this TS Agreement unless such waiver is expressly
contained in a written instrument signed by the waiving party and no
waiver that may be given by a party will be applicable except in the
specific instance for which it is given. The failure of any party to
enforce at any time any of the provisions of this TS Agreement or to
exercise any right or option contained in this TS Agreement or to require
at any time performance of any of the provisions of this Agreement, by any
of the other parties shall not be construed as a waiver of such provisions
and shall not affect the validity of this TS Agreement or any of its
provisions or the right of such party thereafter to enforce each provision
of this Agreement. No course of dealing shall operate as a waiver or
modification of any provision of this Agreement or otherwise prejudice
such party's rights, powers and remedies.
13.7 GOVERNING LAW. This TS Agreement shall be governed by, and shall be
construed and enforced in accordance with the laws of Ohio, without giving
effect to any conflict of law, rule or principle of such state.
13.8 FURTHER ASSURANCES. Each party shall execute and deliver such additional
documents or take such additional actions as may be requested by another
party to this TS Agreement if such requested document or action is
reasonably necessary to effect the transactions described in this TS
Agreement.
13.9 EQUAL EMPLOYMENT OPPORTUNITY. Some of the material or services covered by
this TS Agreement is to be used on a contract with the Federal Government
to which the provisions of Section 202 of Executive Order 11246, Section
402 of The Vietnam Era Veterans Readjustment Act of 1974 and Section 503
of The Rehabilitation Act of 1973 apply, and consequently the provisions
of Section 202, Section 402 and 503 will become binding upon Supplier upon
acceptance of this TS Agreement, if this TS Agreement exceeds $10,000 in
one year with respect to Sections 202 and 402, and $2500 with respect to
Section 503. Regulations under the Executive Order, The Vietnam Era
Readjustment Act and the Rehabilitation Act may require Supplier to
develop an Affirmative Action Compliance Program, to file an Employee
Information Report EEO-1 or other reports as prescribed, and to certify
that its facilities are not segregated on the basis of race, color,
religion or national origin. (See 41 CFR 60.)
13.10 SEVERABILITY OF PROVISIONS. If a court in any proceeding holds any
provision of this TS Agreement or its application to any person or
circumstances invalid, illegal or unenforceable, the remainder of this TS
Agreement, or the application of such provision to persons or
circumstances other than those to which it was held to be invalid, illegal
or unenforceable, shall not be affected, and shall be valid, legal and
enforceable to the fullest extent permitted by law, but only if and to the
extent such enforcement would not materially and adversely frustrate the
parties' essential objectives as expressed in this TS Agreement.
Furthermore, in lieu of any such invalid or unenforceable term or
provision, the parties intend that the court add to this TS Agreement a
provision as similar in terms to such invalid or unenforceable
17
<PAGE>
provision as may be valid and enforceable, so as to effect the original
intent of the parties to the greatest extent possible.
13.11 ASSIGNMENT; CHANGE OF CONTROL. This TS Agreement may not be assigned by
either party without the written consent of the other party, which consent
shall not unreasonably be withheld. In the event of a change of control of
Supplier, which shall mean an individual, entity or group purchases a
controlling interest of Supplier ("Change of Control"), Buyer may consent
to continue this TS Agreement upon thirty (30) days' notice to Supplier,
which consent shall not be unreasonably withheld. Notwithstanding the
foregoing, a Change of Control shall not be deemed to occur if there is a
distribution of equity to the creditors of Supplier or an entity owned or
controlled by such creditors pursuant to a plan of reorganization. This
Change of Control Provision shall not be affected in a plan of
reorganization or later sale of some or all of the remaining assets of the
Supplier.
13.12 BANKRUPTCY COURT APPROVAL. This TS Agreement is subject to Bankruptcy
Court Approval which shall be received no later than April 19, 1999.
18
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this TS Agreement as of the
date first written above.
THE PROCTER & GAMBLE COMPANY
By:
--------------------------------
Title:
--------------------------------
BROTHERS GOURMET COFFEES, INC.
By:
--------------------------------
Title:
--------------------------------
19
