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 & Xxxxxx 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
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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:
"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)
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"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
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
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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
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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.
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(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
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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
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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,
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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
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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 xxxx
of lading
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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, xxxxxxx-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.
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(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.
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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.
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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).
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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:
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If to the Company: Brothers Gourmet Coffees, Inc.
0000 Xxxxxx Xxxx, Xxxxx 000X
Xxxx Xxxxx, Xxxxxxx 00000
Attn: Xxxxxx X. Xxxxx, President and CEO
Facsimile: (000) 000-0000
Copy to: Xxxxxxxxxx Hyatt Xxxxxx & Xxxxxxxxxx, P.C.
Twenty-Second Floor
000 Xxxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
Attn: Xxxx X. Xxxxxxx, Esq.
Facsimile: (000) 000-0000
and Weil, Gotshal & Xxxxxx LLP
000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxx, Xxxxxxx 00000
Attn: Xxxxx X. Xxxxx, Esq.
Facsimile: (000) 000-0000
and White & Case
000 X. Xxxxxxxx Xxxx., Xxxxx 0000
Xxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxx
Facsimile: (000) 000-0000
(until the unsecured creditors has been
disbanded)
If to Buyer: The Procter & Xxxxxx Company
0 Xxxxxxx & Xxxxxx Xxxxx
Xxxxxxxxxx, XX 00000
Attn: General Manager - Coffee
Facsimile: (000) 000-0000
Copy to: Associate General Counsel - Food & Beverage
Procter & Xxxxxx Legal Division
0 Xxxxxxx & Xxxxxx Xxxxx
Xxxxxxxxxx, XX 00000
Fax: (000) 000-0000
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
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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
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.
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IN WITNESS WHEREOF, the parties have duly executed this TS Agreement as of the
date first written above.
THE PROCTER & XXXXXX COMPANY
By:
--------------------------------
Title:
--------------------------------
BROTHERS GOURMET COFFEES, INC.
By:
--------------------------------
Title:
--------------------------------
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