Exhibit 99-1
FORBEARANCE AGREEMENT
THIS FORBEARANCE AGREEMENT (this "Agreement"), dated as of May 15,
1997, is by and between BROTHERS GOURMET COFFEES, INC., a Delaware corporation,
as Borrower (the "Borrower"), SANWA BUSINESS CREDIT CORPORATION, a Delaware
Corporation, as Agent and Lender, and the other Lenders signatory to the Loan
and Security Agreement from time to time.
RECITALS
A. WHEREAS, Borrower, Agent and Lenders, are parties to that certain Loan
and Security Agreement, dated as of May 29, 1996 (as from time to time amended,
restated, supplemented or otherwise modified the "Loan Agreement"), pursuant to
which Lenders have made and may hereafter make loans and advances and other
extensions of credit to Borrower;
B. WHEREAS, Borrower and Dilmun Financial Services, an unlimited Irish
company ("Dilmun"), are parties to that certain Senior Subordinated Note
Agreement, dated as of December 27, 1996 (as from time to time amended,
restated, supplement and modified, the "Dilmun Agreement") pursuant to which
Dilmun has made certain loans to Borrower.
C. WHEREAS, Sanwa Business Credit Corporation, as a Senior Lender and as
Agent under the Sanwa Documents for other Senior Lenders, Dilmun, and BIB
Holdings (Bermuda) Ltd., a Bermuda corporation ("BIB"), are parties to that
certain Subordination Agreement dated as of December 27, 1996, as amended from
time to time, (the "Subordination");
D. WHEREAS, this Agreement, the Dilmun Agreement and the Subordination
shall constitute a Financing Agreement and these recitals shall be construed as
a part of this Agreement;
E. WHEREAS, an Event of Default has occurred in that Borrower has failed
to perform, keep or observe the Cash Flow Coverage Covenant contained at section
7.11 of the Loan Agreement (the "Current Default");
F. WHEREAS, Agent and Lenders have not expressly or impliedly waived the
Current Default and as a result of the occurrence of the Current Default, Agent
and Lenders have the right to accelerate the Obligations and demand immediate
payment thereof and the right to foreclose upon, and take possession of, and
liquidate all Collateral and Borrower has no setoff, defense or counterclaim
based thereon or related thereto;
G. WHEREAS, Borrower has requested that Agent and Lenders forbear in the
exercise and enforcement of their rights, powers and remedies under the
Financing Agreements or now existing at law or in equity or by statute; and
H. WHEREAS, Agent and Lenders are willing to forbear, for the time period
expressly set forth herein, in the exercise and enforcement of such rights,
powers and remedies, but only upon full and complete compliance and fulfillment
by Borrower of the terms and conditions set forth herein in the manner hereafter
stated.
NOW, THEREFORE, in consideration of the terms and conditions contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. DEFINITIONS. Unless otherwise defined herein, capitalized terms
used herein shall have the meanings ascribed to such terms in the Loan
Agreement. In addition, the following terms shall have the
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following meanings (such meanings to be equally applicable to both the
singular and plural forms of the terms defined):
"Commitment" shall have the meaning set forth in Section 5.5.
"Current Default" - See RECITALS.
"Forbearance Event of Default" shall have the meaning set forth in
Section 9.
"Forbearance Period" means the period commencing on and as of March
28, 1997 and ending on the earliest to occur of (i) the date of the termination
of the Forbearance Period pursuant to Sections 3(b), 9 or otherwise, (ii) the
date on which all of the Obligations have been paid in full and the Loan
Agreement has been terminated, or (iii) the Forbearance Termination Date.
"Forbearance Termination Date" means August 15, 1997, or such later
date solely as provided at Section 3(c).
"Loan Agreement" - See RECITALS.
"Payment Blockage Notice" shall have the meaning ascribed thereto in
subsection 2(b) of the Subordination.
"Section" means a numbered section of this Agreement, unless another
document is specifically referenced.
2. ACKNOWLEDGMENTS. The Borrower hereby acknowledges that (a) each
Recital set forth hereinabove is complete, accurate and not subject to dispute,
(b) the Current Default has occurred and is continuing, (c) Agent and Lenders
have not heretofore expressly or impliedly waived the Current Default, (d)
pursuant to and in accordance with section 8.20(d) of the Loan Agreement,
Borrower is prohibited from making any prepayment, or any other acts described
therein, with respect to the Subordinated Note and that such prohibition remains
in affect until the Obligations are paid in full, (e) all conduct of, and
requirements made by, the Agent and Lenders as set forth herein are authorized
by and undertaken pursuant to and in accordance with the terms of the Financing
Agreements, (f) Borrower has no grounds for disputing the validity or
enforceability of the Financing Agreements or any of its obligations thereunder,
or the validity, priority, enforceability or extent of Lender's security
interest in or lien against any item of Collateral in any judicial,
administrative or other proceeding, either during or following the termination
or expiration of the Forbearance Period, and (g) absent the effectiveness of
this Agreement, Agent and Lenders would have the right to accelerate and
immediately enforce payment of all Obligations and, in connection therewith, to
immediately enforce its security interest in and liens on the Collateral and
exercise all other rights, powers and remedies provided to Agent and Lenders
under the Financing Agreements or at law or in equity or by statute.
3. LIMITED FORBEARANCE.
(a) During the Forbearance Period, so long as no Forbearance Event of
Default shall have occurred and be continuing and subject to strict
compliance by Borrower with each and every term and condition of each and
every of the Financing Agreements, Agent and Lenders hereby agree that they
shall forbear in the exercise of their rights, powers and remedies afforded
under the Financing Agreements or at law or in equity or by statute, except
that Agent specifically reserves its rights under section 3.5 of the Loan
Agreement to issue and deliver Redirection Notices and under section
2(b)(ii) of the Subordination to issue a Payment Blockage Notice, during
the Forbearance Period. The foregoing forbearance shall not be construed
to impair the ability of Agent and Lenders to enforce any such rights,
powers or remedies
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after the Forbearance Period regardless of whether or not such
enforcement relates to actions taken or payments received during the
Forbearance Period.
(b) Upon the occurrence of any Forbearance Event of Default under
this Agreement, any Default or Event of Default under any of the Financing
Agreements, Agent and Lenders, at their option, may terminate the
Forbearance Period and their forbearance hereunder. As more fully set
forth at Section 9(b), upon such termination, all Obligations shall be due
and payable and Agent and Lenders shall have the undisputed and absolute
right to exercise and enforce all other rights, powers and remedies which
may exist pursuant to the Financing Agreements, or at law, in equity or by
statute, all without further demand or notice or legal process of any kind,
all of which are hereby waived by Borrower.
(c) Unless earlier terminated in accordance with the terms of this
Agreement, Agent and Lenders' forbearance, as provided herein, shall
immediately cease without notice on the Forbearance Termination Date and
Borrower at that time shall be obligated to comply with and perform all
terms, conditions and provisions of each and every Financing Agreement
without giving effect to the forbearance set forth herein; provided,
however, in the event that, prior to the Forbearance Termination Date (i)
no Forbearance Event of Default shall have occurred, and (ii) the
Consultant's report referenced in Section 5.4 unequivocally states that the
Borrower's business plan is likely to be achieved, then, upon the written
request of Borrower, Agent and Lenders shall amend this Agreement to define
Forbearance Termination Date as through and including November 14, 1997 on
such terms and conditions as Agent and Lender may reasonably require
including, without limitation, an increase in the applicable interest rate
or rates.
4. CONDITIONS TO EFFECTIVENESS. The effectiveness of this Agreement
is subject to the following conditions precedent:
(a) DOCUMENTATION. Borrower shall have delivered to Agent all of the
following documents, each dated the date hereof, in form and substance
satisfactory to Agent:
(i) FORBEARANCE. An executed counterpart of this Agreement; and
(ii) OTHER DOCUMENTS. All other documents, certificates and
agreements as Agent may reasonably request to accomplish the purposes
of this Agreement.
(b) NO DEFAULT. As of the date hereof, (i) no Default or Event of
Default under any of the Financing Agreements shall have occurred and be
continuing other than the Current Default; and (ii) no Default or Event of
Default shall have occurred and be continuing under the Subordinated Debt
that has not been waived or is the subject of an extension of time or
forbearance.
5. AMENDMENTS, COVENANTS AND WARRANTIES.
5.1 REDUCTION OF CURRENT ASSET BASE ADVANCE RATE FOR ELIGIBLE
ACCOUNTS. Section 2.1(a)(1) of the Loan Agreement is hereby amended by deleting
from the text therein "Eighty percent (80%)" and replacing it with "Seventy
percent (70%)."
5.2 TERMINATION OF LENDER GUARANTY OBLIGATIONS. Subsection 2.1(c) of
the Loan Agreement is amended hereby by deleting it in its entirety including
all subsections thereof. Each reference to Lender Guaranty in the Financing
Agreements is hereby deleted, together with any text thereof which is solely and
expressly related to such reference, and all remaining text of each Financing
Agreement is hereby modified to the extent necessary so as to remain
grammatically correct after such amendment.
5.3 ADDITIONAL REPORTING. Pursuant to and in accordance with clause
(x) of section 7.1 of the Loan Agreement, during the Forbearance Period Borrower
shall deliver to Agent within ten (10) business days of the first day of each
calendar month (thirty (30) days for any comparative information), by facsimile
and/or
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overnight delivery service, (i) statements of projected cash flow for the
next succeeding month, and commencing with the second such statement, the
statement will contain comparisons of actual cash flows to projected; (ii)
statements reporting, for the prior calendar month, all purchases and/or leases
of equipment, and for each subsequent calendar month, all purchases and/or
leases of equipment proposed to be made or entered during such month and
commencing with the second such statement, a comparison of actual purchase
and/or leases to those previously proposed, all such reports to include whether
such purchase is subject to a purchase money security interest and setting forth
the holder thereof; (iii) statements listing all off-site locations at which
Collateral is stored including, without limitation, a listing of the DSD
Warehouse Locations, DSD Vehicle Locations, Leases Storage Locations and Retail
Locations, and those locations identified in Exhibit 8.6 of the Loan Agreement
and any other location at which Collateral is stored, all to be up-dated to show
locations thereof, names of the landlords, lessors and/or bailees thereof and
the amounts due to each with a listing of all such amounts that are past due,
(iv) a report listing (z) all Equipment currently owned by Borrower and its
location and, to the extent such listing varies from that set forth in the
Appraisal (Equipment), a notation specifying the change, deletion or addition,
(y) all items of equipment currently held and/or leased by Borrower and its
location, and (x) all items of equipment against which a Lien is asserted and
asserted to be superior or prior to that granted to Agent and Lenders, and (v) a
complete and detailed list of all contra Accounts, such list to include name and
address of each such Account Debtor, and the amount owed by the Borrower to the
Account Debtor along with a certification by an authorized officer of Borrower
that during the last 6 months, no contra Account was included in Borrower's
determination of its Eligible Accounts.
5.4 On or before May 22, 1997, Borrower shall engage a business
consultant ("Consultant"), the qualifications and experience of which shall be
reasonably satisfactory to Agent. On or before June 2, 1997, Borrower shall
provide Agent a copy of a written engagement agreement between Borrower and
Consultant. The engagement agreement between Borrower and Consultant shall
contain the following minimal provisions and shall not contain any provisions
inconsistent with such provisions:
(a) The engagement's objectives shall be to independently review,
inspect and critique Borrower's operations, financial structure (including
safeguards regarding expenses and revenues) and business plan and
Borrower's working assumptions which serve as the basis thereof and, to the
extent such critique identifies unreasonable or invalid assumptions and
deficiencies in operations, financing and business plan, Consultant will
set forth what it believes to be valid and reasonable working assumptions
and will make independent recommendations for corrective actions (the
"Engagement Objectives");
(b) To achieve the Engagement Objectives, Consultant will, to the
extent Consultant deems it reasonably necessary, (i) review Borrower's
books and records, (ii) inspect each of Borrower's facilities, (iii)
interview officers, employees and the professionals of Borrower with
respect to operations, finances and business plan, and (iv) evaluate the
working assumptions underlying, means of implementation and likelihood of
success of Borrower's business plan including, without limitation, a review
of Borrower's financial forecasts, bidding procedures and sales strategies;
(c) On or before June 22, 1997, Consultant will produce and deliver a
written report which (i) contains Consultant's independent evaluation and
critique of Borrower's operations, finances and business plan and
Borrower's working assumptions which serves as the basis thereof, (ii)
contains Consultant's independent assessment of whether the Borrower's
business plan is likely to be achieved and the basis for such assessment,
and (iii) contains independent recommendations regarding revising the
working assumptions, operational changes, financial control safeguards
regarding expenses and revenues and what changes, if any, to each such
matter may be required to assure the Borrower's business plan is reasonably
achievable;
(d) Consultant will deliver all of its written reports including,
without limitation, all drafts to Borrower and (after consultation with
Borrower and reasonable consideration of Borrower's comments on such
reports and drafts to ensure accuracy thereof, but in no event later than 2
days after delivery to Borrower) to Agent; and
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(e) Borrower shall authorize Consultant to communicate, whether in
writing or orally, directly with representatives of Agent and Lenders and
waive all right to confidentiality of such communication.
5.5 PREPAYMENT PENALTIES. Borrower agrees to use reasonable efforts
to refinance the Obligations. In the event that during the Forbearance Period
Borrower obtains a written and enforceable commitment for financing in such
amounts and at such times as to pay in full and otherwise retire all Obligations
(a "Commitment"), Agent shall waive all prepayment penalties associated with
prepayment arising out of such commitment, provided that payment of the
Obligations takes place within 60 days of the date of Borrower's receipt of such
Commitment.
5.6 NON-INTERFERENCE WITH CONSULTANT. Borrower hereby covenants and
agrees that it will take no action, and give no instruction, which will impede
or impair Consultant's engagement.
5.7 EFFECT OF ACKNOWLEDGMENTS. Any and all acknowledgments contained
in Section 2 are intended to be and may construed to be affirmative covenants,
representations and warranties of Borrower.
6. REFERENCE TO AND EFFECT ON FINANCING AGREEMENTS.
6.1 RATIFICATION. Except as specifically amended herein, the
Financing Agreements shall remain in full force and effect and are each hereby
ratified and confirmed. To the extent that this Agreement conflicts with the
provisions of the Loan Agreement, the provisions of this Agreement shall govern.
6.2 NO WAIVER. The execution, delivery and effectiveness of this
Agreement shall not operate as a waiver of any right, power or remedy of Lenders
or Agent under the Financing Agreements, nor shall it constitute a waiver of any
provision of the Financing Agreements or impose upon Lender any obligation,
express or implied, to consent to any amendment or further modification of the
Financing Agreements and Lender hereby expressly reserves all rights, powers and
remedies specifically given to it under the Financing Agreements or now or
hereafter existing at law or in equity or by statute.
7. REPRESENTATIONS AND WARRANTIES. All of Borrower's
representations and warranties contained in this Agreement shall survive the
execution, delivery and acceptance of this Agreement by the parties hereto.
Borrower expressly reaffirms that each of the representations and warranties set
forth in section 6 of the Loan Agreement continues to be accurate and complete
in all material respects, and hereby remakes and incorporates herein by
reference each such representation and warranty as though made on the date of
this Agreement except for any representation or warranty limited by its terms to
a specific date. In addition, Borrower warrants and represents to Agent and
Lenders as follows:
(a) The execution and delivery of this Agreement and the performance
by Borrower of its obligations hereunder are within Borrower's corporate
powers and authority, have been duly authorized by all necessary corporate
action and do not and will not contravene or conflict with the articles of
incorporation or by-laws of Borrower. This Agreement has been duly
executed and delivered by Borrower, and constitutes the legal, valid and
binding obligation of such Person, enforceable against such Person in
accordance with its terms.
(b) No consent, order, qualification, validation, license, approval
or authorization of, or filing, recording, registration or declaration
with, or other action in respect of, any governmental body, authority,
bureau or agency or other Person is required in connection with the
execution, delivery or performance of, or the legality, validity, binding
effect or enforceability of, this Agreement.
(c) The execution, delivery and performance of this Agreement by
Borrower do not and will not violate any law, governmental regulation,
judgment, order or decree applicable to and do not and will not violate the
provisions of, or constitute a default or any event of default under, or
result in the creation of any security interest or lien upon any property
of such Person pursuant to any indenture, mortgage,
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instrument, contract, agreement or other undertaking to which such Person
is a party or is subject or by which such Person or any of such Person's
real or personal property may be bound.
(d) Except for the Current Default, no Default or Event of Default
has occurred and is continuing.
8. RELEASE. Borrower, for itself and any other Person who may claim
an interest through such Person, hereby releases and discharges, with prejudice,
Lender, its directors, officers, agents, attorneys and employees from any and
every claim, right, cause, action, cause of action, damage, liability and other
matter or proceeding arising from, relating to or in connection with any acts or
omissions of Lender, its directors, officers, agents, attorneys and employees
prior to the date of execution of this Agreement. This provision shall survive
and continue in full force and effect whether or not (i) Borrower shall satisfy
all other provisions of the Financing Agreements, including payment in full by
Borrower of all Obligations, (ii) this Agreement otherwise is terminated, or
(iii) Lender's forbearance ceases or is withdrawn.
9. FORBEARANCE EVENTS OF DEFAULT.
(a) A Forbearance Event of Default shall mean the occurrence of any
one or more of the following events:
(i) Borrower shall fail to pay any of the Obligations when due
under the Financing Agreements (taking into account any extension of
time, forbearance or waiver as evidenced by a writing expressly so
stating and signed by Agent and Borrower with respect thereto);
(ii) Borrower shall fail to observe or perform any term, covenant
or agreement binding on it contained in any of the Financing
Agreements;
(iii) A material adverse change in the business, properties,
prospects, condition (financial or otherwise), assets or results of
operation of Borrower shall have occurred since the date hereof;
(iv) An Event of Default, other than the Current Default, shall
have occurred and be continuing;
(v) Borrower impedes the work of the Consultant as reasonably
determined by the Consultant and/or terminates the Consultant prior to
it achieving the Engagement Objectives;
(vi) Any instrument, document, report, schedule, agreement,
representation or warranty, oral or written, made or delivered to
Lender by Borrower in connection with this Agreement is untrue or
incorrect in any material respect when made or delivered.
(b) Upon the occurrence of any Forbearance Event of Default described
in Section 9(iv) with respect to an Event of Default under subsection (f),
(g) or (h) of the definition of "Event of Default" in the Loan Agreement,
the Forbearance Period shall automatically terminate and all Obligations
shall automatically become immediately due and payable, without notice or
demand of any kind. Borrower hereby waives all notice and cure periods
including, without limitation, under the definition of "Event of Default"
with respect to any Forbearance Event of Default and agrees Agent and
Lender shall be immediately entitled to the benefits of the Financing
Agreements. Borrower acknowledges that it shall have no claim for damages
or otherwise against Lender with respect to any such termination of this
Agreement or acceleration of the Obligations in accordance with the terms
of the Financing Agreements. Upon the termination or expiration of this
Agreement, Lender shall be entitled to exercise all of its rights and
remedies under this Agreement, the Financing Agreements and at law or in
equity or by statute including, without limitation, the right to declare
all of the Obligations to be immediately due and payable and to
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enforce its liens on, and security interests in, the Collateral. The
occurrence of any Forbearance Event of Default shall constitute an Event
of Default under the Loan Agreement.
10. MISCELLANEOUS.
10.1 SUCCESSORS AND ASSIGNS. This Agreement shall be binding on and
shall inure to the benefit of Borrower, Agent, Lenders and their respective
successors and assigns. The terms and provisions of this Agreement are for the
purpose of defining the relative rights and obligations of Borrower, Agent and
Lenders with respect to the transactions contemplated hereby and there shall be
no third party beneficiaries of any of the terms and provisions of this
Agreement.
10.2 ENTIRE AGREEMENT. This Amendment constitutes the entire
agreement of the parties hereto with respect to the subject matter hereof and
supersedes all other understandings, oral or written, with respect to the
subject matter hereof.
10.3 FEES AND EXPENSES. Borrower agrees to pay on demand all fees,
costs and expenses incurred by Agent and Lenders in connection with the
preparation, execution and delivery of this Agreement and Borrower agrees to pay
on demand all fees, costs and expenses arising from or associated with the
Consultant, collateral audit charges and any action which Agent reasonably
believes to be required to protect and preserve the Collateral. Nothing
contained in this Section 10.3 is intended to abrogate, diminish or waive any of
Borrower's obligations under section 10.2 of the Loan Agreement, but is intended
to be in addition thereto.
10.4 HEADINGS. Section headings in this Agreement are included herein
for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose and should not be considered in interpreting any
provision hereof.
10.5 COUNTERPARTS AND FACSIMILE SIGNATURES. This Agreement may be
executed in any number of separate original counterparts and by the different
parties on separate counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one agreement. A
party to this Agreement may execute and deliver its signature page hereto by
facsimile. Each party thereto agrees to be bound by its own facsimile signature
page and to accept, as if it were a fully executed manual signature page, the
facsimile signature page of any other party hereto.
10.6 INCORPORATION OF LOAN AGREEMENT. The provisions contained in
sections 10.7 and 10.8 of the Loan Agreement are incorporated herein by
reference to the same extent as if reproduced herein in their entirety.
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IN WITNESS WHEREOF, this Forbearance Agreement has been duly executed
as of the date first written above.
BROTHERS GOURMET COFFEES, INC.
By:_____________________________
Title:__________________________
SANWA BUSINESS CREDIT CORPORATION,
as Agent and Lender
By:_____________________________
Title:__________________________
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