SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A No. 1
(Mark One)
[x] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number: 1-13636
Mendocino Brewing Company, Inc.
(Name of small business issuer in its charter)
California 68-0318293
(State or other jurisdiction of (I.R.S. Employee Identification No.)
incorporation or organization)
13351 South Highway 101, Hopland, CA 95449
(Address of principal executive offices) (Zip code)
Issuer's telephone number: (707) 744-1015
Securities registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock, no par value The Pacific Stock Exchange
Securities registered under Section 12(g) of the Act:
Not applicable
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
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The number of shares of the issuer's common stock outstanding as of June
30, 1996 is 2,322,222.
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PART II
Item 6. Exhibits and Reports on Form 8-K.
Exhibit
Number Description of Document
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3.1 Restated Articles of Incorporation, as amended, of the Company
(Incorporated by reference from the Company's Registration
Statement dated June 15, 1994, as amended, previously filed
with the Commission, Registration No. 33-78390-LA.)
3.2 Bylaws of the Company (Incorporated by referenced from the
Company's Report on Form 10-KSB for the annual period ended
December 31, 1994 previously filed with the Commission.)
4.1 Articles 5 and 6 of the Restated Articles of Incorporation, as
amended, of the Company (Reference is made to Exhibit 3.1)
4.2 Article 10 of the Restated Articles of Incorporation, as
amended, of the Company (Reference is made to Exhibit 3.2)
19.1* Construction agreement with BDM Construction Company, Inc.
19.2* $60,000 Note payable to BDM Construction Company, Inc.
19.3* Agreement to modify note and deed of trust dated June 6, 1995
with Langley, et al.
19.4* Agreement to modify note dated June 6, 1995 with Langley, et
al.
19.5* Amendment to installment note payable to Langley, et al.
19.6* Manufacturing Business Expansion and Relocation Agreement with
the City of Ukiah
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19.7* Manufacturing Business Expansion and Relocation Agreement with
the Ukiah Redevelopment Agency
19.8* Consulting Agreement with Daniel R. Moldenhauer
19.9* Commitment Letter from the Savings Bank of Mendocino County
19.10 Business Loan Agreement with WestAmerica Bank
27* Financial Data Schedule
*(Incorporated by reference from the Company's Report on Form
10-QSB for the quarterly period ended June 30, 1996
previously filed with the Commission.)
No reports on Form 8-K were filed during the quarter for which this report
is filed.
SIGNATURE
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereto duly
authorized.
Mendocino Brewing Company, Inc.
(Registrant)
Date September 13, 1996 /s/ H. Michael Laybourn
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H. Michael Laybourn, President
Date September 13, 1996 /s/ Norman H. Franks
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Norman H. Franks, Chief Financial Officer
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BUSINESS LOAN AGREEMENT
Borrower: Lender:
MENDOCINO BREWING COMPANY, INC. WESTAMERICA BANK
P.O. BOX 400 SONOMA REGION CREDIT ADMINISTRATION
HOPLAND, CA 95449 31 D STREET SECOND FLOOR
SANTA ROSA, CA 95404
THIS BUSINESS LOAN AGREEMENT between MENDOCINO BREWING COMPANY, INC.
("borrower") and WESTAMERICA BANK ("Lender") is made and executed on the
following terms and conditions. Borrower has received prior commercial loans
from Lender or has applied to Lender for a commercial loan or loans and other
financial accommodations, including those which may be described on any exhibit
or schedule attached to this Agreement, All such loans , and financial
accommodations, together with all future loans and financial accommodations from
Lender to Borrower, are referred to in this Agreement individually as the "Loan"
and collectively as the "Loans." Borrower understands and agrees that: (a) in
granting, renewing, or extending any loan, Lender is relying upon Borrower's
representations, warranties, and agreements, as set forth in this Agreement; (b)
the granting, renewing, or extending any loan, by Lender at all times shall be
subject to Lender's sole judgment discretion; and (c) all such Loans shall be
and shall remain subject to the following terms and conditions of this
Agreement.
TERM. This Agreement shall be effective as of May 17, 1996, and shall continue
thereafter until all Indebtedness of Borrower to Lender has been performed in
full and the parties terminate this Agreement in writing.
CONDITIONS PRECEDENT TO EACH ADVANCE. Lender's obligation to make the initial
Loan Advance and each subsequent Loan Advance under this Agreement shall be
subject to the fulfillment to Lender's satisfaction of all of the conditions set
forth in this Agreement and in the Related Documents.
Loan Documents. Borrower shall provide to Lender in form satisfactory to Lender
the following documents for the Loan: (a) the Note, (b) Security Agreements
granting to Lender security interests in the Collateral, (c) Financing
Statements perfecting Lender's Security Interests; (d) evidence of insurance as
required below; and (e) any other documents required under this Agreement or by
Lender or its counsel.
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Borrower's Authorization. Borrower shall have provided in form and substance
satisfactory to Lender properly certified resolutions, duly authorizing the
execution and delivery of this Agreement, the Note and the Related Documents,
and such other authorizations and other documents and instruments as Lender or
its counsel, in their sole discretion, may require.
Payment of Fees and Expenses. Borrower shall have paid to Lender all fees,
charges, and other expenses which are then due and payable as specified in this
Agreement or any Related Document.
Representations and Warranties. The representations and warranties set forth in
this Agreement. in the Related Documents. and in ally document or certificate
delivered to Lender under this Agreement are true and correct.
No Event of Default. There shall not exist at the time of any advance a
condition which would constitute an Event of Default under this Agreement.
REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as
of the date of this Agreement, as of the date of each disbursement of Loan
proceeds, as of the date of any renewal, extension or modification of any Loan,
and at all times any Indebtedness exists:
Organization. Borrower is a corporation which is duly organized, validly
existing, and in good standing under the laws of the State of California and is
validly existing and in good standing in all states in which Borrower is doing
business. Borrower has the full power and authority to own its properties and to
transact the businesses in which it is presently engaged or presently proposes
to engage. Borrower also is duly qualified as a foreign corporation and is in
good standing in all states in which the failure to so qualify would have a
material adverse effect on its businesses or financial condition.
Authorization. The execution, delivery, and performance of this Agreement by
Borrower, to the extent to be executed, delivered or performed by Borrower, have
been duly authorized by all necessary action by Borrower; do not require the
consent or approval of any other person, regulatory authority or governmental
body; and do not conflict with, result in a violation of, or constitute a
default under (a) any provision of its articles of incorporation
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or organization, or bylaws, or any agreement or other instrument binding upon
Borrower or (b) any law, governmental regulation, court decree, or order
applicable to Borrower.
Financial Information. Each financial statement of Borrower supplied to Lender
truly and completely disclosed Borrower's financial condition as of the date of
the statement, and there has been no material adverse change in Borrower's
financial condition subsequent to the date of the most recent financial
statement supplied to Lender. Borrower has no material contingent obligations
except as disclosed in such financial statements.
Legal Effect. This Agreement constitutes, and any instrument or agreement
required hereunder to be given by Borrower when delivered will constitute,
legal, valid and binding obligations of Borrower enforceable against Borrower in
accordance with their respective terms.
Properties. Except as contemplated by this Agreement or as previously disclosed
in Borrower's financial statements or in writing to Lender and as accepted by
Lender, and except for property tax liens for taxes not presently due and
payable, Borrower owns and has good title to all of Borrower's properties free
and clear of all liens and security interests, and has not executed any security
documents or financing statements relating to such properties. All of Borrower's
properties are titled in Borrower's legal name, and Borrower has not used, or
filed a financing statement under, any other name for at least the last five (5)
years.
Hazardous Substances. Except as disclosed to Lender in writing, no properly of
Borrower ever has been, or ever will be so long as this Agreement remains in
effect, used for the generation, manufacture, storage, treatment, disposal,
release or threatened release of any hazardous waste or substance, as those
terms are defined in the "CERCLA," "SARA," applicable state or Federal laws, or
regulations adopted pursuant to any of the foregoing. The representations and
warranties contained herein are based on Borrower's due diligence in
investigating the properties for hazardous waste and hazardous substances.
Borrower hereby (a) releases and waives any future claims against Lender for
indemnify or contribution in the event Borrower becomes liable for cleanup or
other costs under any such laws, and (b) agrees to indemnify and hold harmless
Lender against any and all claims and losses resulting from a breach of this
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provision of this Agreement. This obligation to indemnify shall survive the
payment of the Indebtedness and the satisfaction of this Agreement.
Commercial Purposes. Borrower intends to use the Loan proceeds solely for
business or commercial related purposes.
AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, while
this Agreement is in effect, Borrower will:
Litigation. Promptly inform Lender in writing of (a) all material adverse
changes in Borrower's financial condition, and (b) all existing and all
threatened litigation, claims, investigations, administrative proceedings or
similar actions affecting Borrower or any guarantor of the Loan which could
materially affect the financial condition of Borrower or the financial condition
of any guarantor of the Loan.
Financial Records. Maintain its books and records in accordance with accounting
principles acceptable to Lender, applied on a consistent basis, and permit
Lender to examine and audit Borrower's books and records at all reasonable
times.
Financial Statements. Furnish Lender with, as soon as available, but in no event
later than forty five (45) days after the end of each fiscal half-year,
Borrower's balance sheet and profit and loss statement for the period ended,
prepared and certified as correct to the best knowledge and belief by Borrower's
chief financial officer or other officer or person acceptable to Lender. All
financial reports required to be provided under this Agreement shall be prepared
in accordance with accounting principles acceptable to Lender, applied on a
consistent basis, and certified by Borrower as being true and correct.
Additional Information. Furnish such additional information and statements,
lists of assets and liabilities, agings of receivables and payables, inventory
schedules, budgets, forecasts, tax returns, and other reports with respect to
Borrower's financial condition and business operations as Lender may request
from time to time.
Loan Proceeds. Use all Loan proceeds solely for the following specific purposes:
ASSIST WITH EQUIPMENT INSTALLATION AT NEW BREWERY FACILITY.
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Performance. Perform and comply with all terms, conditions, and provisions set
forth in this Agreement and in the Related Documents in a timely manner, and
promptly notify Lender it Borrower learns of the occurrence of any event which
constitutes an Event of Default under this Agreement or under any of the Related
Documents.
Operations. Maintain executive and management personnel with substantially the
same qualifications and experience as the present executive and management
personnel; provide written notice to Lender of any change in executive and
management personnel; conduct Its business affairs in a reasonable and prudent
manner and in compliance with all applicable federal, state and municipal laws,
ordinances, rules and regulations respecting its properties, charters,
businesses and operations, including without limitation, compliance with the
Americans With Disabilities Act and with all minimum funding standards and other
requirements of ERISA and other laws applicable to Borrower's employee benefit
plans.
Inspection. Permit employees or agents of Lender at any reasonable time to
inspect any and all Collateral for the Loan or Loans and Borrower's other
properties and to examine or audit Borrower's books, accounts, and records and
to make copies and memoranda of Borrower's books, accounts, and records, If
Borrower now or at any time hereafter maintains any records (including without
limitation computer generated records and computer software programs for the
generation of such records) in the possession of a third party, Borrower, upon
request of Lender, shall notify such party to permit Lender free access to such
records at all reasonable times and to provide Lender with copies of any records
it may request, all at Borrower's expense.
RECOVERY OF ADDITIONAL COSTS. It the imposition of or any change in any law,
rule, regulation or guideline, or the interpretation or application of any
thereof by any court or administrative or governmental authority (including any
request or policy not having the force of law) shall impose, modify or make
applicable any taxes (except U.S. federal, state or local income or franchise
taxes imposed on Lender), reserve requirements, capital adequacy requirements or
other obligations which would (a) increase the cost to Lender for extending or
maintaining the credit facilities to which this Agreement relates, (b) reduce
the amounts payable to Lender under this Agreement or any related documents, or
(c) reduce the rate of return on Lender's capital as a
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consequence of Lender's obligations with respect to the credit facilities to
which this Agreement relates, then Borrower agrees to pay Lender such additional
amounts as will compensate Lender therefor, within five (5) days after Lender's
written demand for such payment, which demand shall be accompanied by an
explanation of such imposition or charge and a calculation in reasonable detail
of the additional amounts payable by Borrower, which explanation and
calculations shall be conclusive in the absence of manifest error.
NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this
Agreement is in effect, Borrower shall not, without the prior written consent of
Lender:
Indebtedness and Liens. (a) Except for trade debt incurred in the normal course
of business and indebtedness to Lender contemplated by this Agreement, create,
incur or assume indebtedness for borrowed money, including capital leases, (b)
except as allowed as a Permitted Lien, sell, transfer, mortgage, assign, pledge,
lease, grant a security interest in, or encumber any of Borrower's assets, or
(c) sell with recourse any of Borrower's accounts, except to Lender.
Continuity of Operations. (a) Engage in any business activities substantially
different than those in which Borrower is presently engaged, (b) cease
operations, liquidate, merge, transfer, acquire or consolidate with any other
entity, change ownership, change its name, dissolve or transfer or self
Collateral out of the ordinary course of business, (c) pay any dividends on
Borrower's stock (other than dividends payable in its stock), provided, however
that notwithstanding the foregoing, but only so long as no Event of Default has
occurred and is continuing or would result from the payment of dividends, if
Borrower is a "Subchapter S Corporation" (as defined in the Internal Revenue
Code of 1986, as amended), Borrower may pay cash dividends on its stock to its
shareholders from time to time in amounts necessary to enable the shareholders
to pay income taxes and make estimated income tax payments to satisfy their
liabilities under federal and state law which arise solely from their status as
Shareholders of a Subchapter S Corporation because of their ownership of shares
of stock of Borrower, or (d) purchase or retire any of Borrower's outstanding
shares or alter or amend Borrower's capital structure.
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Loans, Acquisitions and Guaranties. (a) Loan, invest in or advance money or
assets, (b) purchase, create or acquire any interest in any other enterprise or
entity, or (c) incur any obligation as surety or guarantor other than in the
ordinary course of business,
CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to
Borrower, whether under this Agreement or under any other agreement, Lender
shall have no obligation to make Loan advances or to disburse Loan proceeds if:
(a) Borrower or any guarantor is in default under the terms of this Agreement or
any other agreement that Borrower or any guarantor has with Lender; (b) Borrower
or any Guarantor becomes insolvent, files a petition in bankruptcy or similar
proceedings, or is adjudged a bankrupt; (c) there occurs a material adverse
change in Borrower's financial condition, in the financial condition of any
guarantor, or in the value of any collateral securing any Loan; or (d) any
guarantor seeks, claims or otherwise attempts td limit, modify or revoke such
guarantor's guaranty of the Loan or any other loan with Lender.
ADDITIONAL PROVISIONS.
1) BORROWER SHALL PROVIDE TO BANK A COPY OF BORROWER'S AGING OF ACCOUNTS
RECEIVABLE, ACCOUNTS PAYABLE, AND INVENTORY REPORT (IN FORM AND SUBSTANCE
SATISFACTORY TO BANK) WITHIN 15 DAYS OF THE END OF EACH MONTH.
EVENTS OF DEFAULT. Each of the following shall constitute an event of default
("Event of Default") under this Agreement:
Default on Indebtedness. Failure of Borrower to make any payment when due on the
Loans.
Other Defaults. Failure of Borrower to comply with or to perform when due any
other term, obligation, covenant or condition contained In this
Default in Favor of Third Parties. Should Borrower default under any loan,
extension of credit, security agreement, purchase or sales agreement, or any
other agreement, in favor of any other creditor or person that may materially
affect any of Borrower's property or Borrower's ability to repay the Loans or
perform Borrower's obligations under this Agreement or any related document.
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False Statements. Any warranty, representation or statement made or furnished to
Lender by or on behalf of Borrower is false or misleading in any material
respect at the time made or furnished, or becomes false or misleading at any
time thereafter.
Insolvency. The dissolution or termination of Borrower's existence as a going
business, the insolvency of Borrower, the appointment of a receiver for any part
of Borrower's property, any assignment for the benefit of creditors, any type of
creditor workout, or the commencement of any proceeding under any bankruptcy or
insolvency laws by or against Borrower.
Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture
proceedings, whether by judicial proceeding, self-help, repossession or any
other method, by any creditor of Borrower, any creditor of any grantor of
collateral for the Loan This includes a garnishment, attachment, or levy on or
of any of Borrower's deposit accounts with Lender.
Events Affecting Guarantor. Any of the preceding events occurs with respect to
any Guarantor of any of the Indebtedness or any Guarantor dies or becomes
incompetent, or revokes or disputes the validity of, or liability under, any
Guaranty of the Indebtedness.
Change In Ownership. Any change in ownership of twenty-five percent (25%) or
more of the common stock of Borrower.
Adverse Change. A material adverse change occurs in Borrower's financial
condition, or Lender believes the prospect of payment or performance of the
Indebtedness is impaired.
EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except where
otherwise provided in this Agreement or the Related Documents, all commitments
and obligations of Lender under this Agreement immediately will terminate
(including any obligation to make Loan Advances or disbursements), and, at
Lender's option, all Indebtedness immediately will become due and payable, all
without notice of any kind to Borrower, except that in the case of an Event of
Default of the type described in the "Insolvency" subsection above, such
acceleration shall be automatic and not optional. In addition, Lender shall have
all the rights and remedies provided in the Related
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Documents or available at law, in equity, or otherwise. Except as may be
prohibited by applicable law, all of Lender's rights and remedies shall be
cumulative and may be exercised singularly or concurrently. Election by Lender
to pursue any remedy shall not exclude pursuit of any other remedy, and an
election to make expenditures or to take action to perform all obligation of
Borrower or of any Grantor shall not affect Lender's right to declare a default
and to exercise its rights and remedies.
BORROWER ACKNOWLEDGES HAVING READ ALL, THE PROVISIONS OF THIS BUSINESS LOAN
AGREEMENT, AND BORROWER AGREES TO ITS TERMS. THIS AGREEMENT IS DATED AS OF MAY
17,1996.
BORROWER:
MENDOCINO BREWING COMPANY, INC.
By: /s/ H. Michael Laybourn By: /s/ Norman H. Franks
H. Michael Laybourn, President Norman H. Franks, Chief Financial Officer
LENDER:
WESTAMERICA BANK
By: /s/ Dwight Davenport
Authorized Officer
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PROMISSORY NOTE
Borrower: Lender:
MENDOCINO BREWING COMPANY, INC. WESTAMERICA BANK
P.O. BOX 400 SONOMA REGION CREDIT ADMINISTRATION
HOPLAND, CA 95449 31 D STREET SECOND FLOOR
SANTA ROSA, CA 95404
Principal Amount: $600,000.00 Initial Rate: 9.750% Date of Note: May 17, 1996
PROMISE TO PAY. MENDOCINO BREWING COMPANY, INC. ("Borrower") promises to pay to
WESTAMERICA BANK ("Lender"), or order, in lawful money of the United States of
America, the principal amount of Six hundred thousand & 00/100 Dollars
($600,000.00) or such as may be outstanding, together with interest on the
unpaid outstanding principal balance of each advance. Interest shall be
calculated from the date of each advance until repayment of each advance.
PAYMENT. Borrower will pay this loan on demand, or if no demand is made, in one
payment of all outstanding principal plus all accrued unpaid interest on
September 30, 1996. in addition, Borrower will pay regular monthly payments of
accrued unpaid interest beginning May 31, 1996, and all subsequent interest
payments are due on the last day of each month after that. Interest on this Note
is computed on a 365/360 simple interest basis; that is, by applying the ratio
of the annual interest rate over a year of 360 days, multiplied by the
outstanding principal balance, multiplied by the actual number of days the
principal balance is outstanding. Borrower will pay Lender at Lender's address
shown above or at such other place as Lender may designate in writing. Unless
otherwise agreed or required by applicable law, payments will be applied first
to accrued unpaid interest, then to principal, and any remaining amount to any
unpaid collection costs and late charges.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from
lime to time based on changes in an index which is the WestAmerica Bank Index
Rate (the "Index"). THE BANK'S INDEX RATE IS ESTABLISHED BY BANK IN ITS SAN
RAFAEL HEADQUARTERS OFFICE AS OF THE DATE OF THIS NOTE, AND AS OF EACH DATE THAT
BANK MAY ADJUST SUCH INDEX RATE. LOANS MAY BE MADE BY BANK AT, ABOVE OR BELOW
THE INDEX RATE. Lender will tell Borrower the current Index rate upon Borrower's
request. Borrower understands that Lender may make loans based on other rates as
well. The interest rate change will not occur more often than each Day.
The Index currently is 8.250% per annum. The interest
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rate to be applied to the unpaid principal balance of this Note will be at a
rate of 1.500 percentage points over the Index, resulting in an initial rate of
9.750% per annum. NOTICE: Under no circumstances will the interest rate on this
Note be more than the maximum rate allowed by applicable law.
PREPAYMENT; MINIMUM INTEREST CHARGE. In any event, even upon full prepayment of
this Note, Borrower understands that Lender is entitled to a minimum interest
charge of $50.00. Other than Borrower's obligation to pay any minimum Interest
charge, Borrower may pay all or a portion of the amount owed earlier than it is
due. Early payments will not, unless agreed to by Lender in writing, relieve
Borrower of Borrower's obligation to continue to make payments under the payment
schedule. Rather, they will reduce the principal balance due and may result in
Borrower's making fewer payments.
DEFAULT. Borrower will be in default it any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform when
due any other term, obligation, covenant, or condition contained in this Note or
any agreement related to this Note, or in any other agreement or loan Borrower
has with Lender. (c) Borrower defaults under any loan, extension of credit,
security agreement, purchase or sales agreement, or any other agreement, in
favor of any other creditor or person that may materially affect any of
Borrower's property or Borrower's ability to repay this Note or perform
Borrower's obligations under this Note or any of the Related Documents. (d) Any
representation or statement made or furnished to Lender by Borrower or on
Borrower's behalf is false or misleading in any material respect either now or
at the time made or furnished. (e) Borrower becomes insolvent, a receiver is
appointed for any part of Borrower's property, Borrower makes an assignment for
the benefit of creditors, or any proceeding is commenced either by Borrower or
against Borrower under any bankruptcy or insolvency laws, (f) Any creditor tries
to take any of Borrower's property on or in which Lender has a lien or security
interest. This includes a garnishment of any of Borrower's accounts with Lender.
(g) Any guarantor dies or any of the other events described in this default
section occurs with respect to any guarantor of this Note. (h) A material
adverse change occurs in Borrower's financial condition, or Lender believes the
prospect of payment or performance of the Indebtedness is impaired.
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LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, without
notice, and then Borrower will pay that amount. Upon Borrower's failure to pay
all amounts declared due pursuant to this section, including failure to pay upon
final maturity, Lender, at its option, may also, if permitted under applicable
law, increase the variable interest rate on this Note to 5.500 percentage points
over the Index. Lender may hire or pay someone else to help collect this Note it
Borrower does not pay. Borrower also will pay Lender that amount. This includes,
subject to any limits under applicable law, Lender's attorneys' fees and
Lender's legal expenses whether or not there is a lawsuit, including attorneys'
fees and legal expenses for bankruptcy proceedings (including efforts to modify
or vacate any automatic stay or injunction), appeals, and any anticipated
post-judgment collection services. Borrower also will pay any court costs, in
addition to all other sums provided by law. This Note has been delivered to
Lender and accepted by Lender in the State of California. If there is a lawsuit,
Borrower agrees upon Lender's request to submit to the jurisdiction of the court
of Marin County, the State of California. Lender and Borrower hereby waive the
right to any jury trial in any action, proceeding, or counter claim brought by
either Lender or Borrower against the other. This Note shall be governed by and
construed in accordance with the laws of the State of California.
DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $15.00 if Borrower
makes a payment on Borrower's loan and the check or pre-authorized charge with
which Borrower pays is later dishonored,
COLLATERAL. This Note is secured by THAT CERTAIN COMMERCIAL SECURITY AGREEMENT
DATED MAY 17,1996.
LINE OF CREDIT. This Note evidences a straight line of credit. Once the total
amount of principal has been advanced, Borrower is not entitled to further loan
advances. Advances under this Note may be requested orally by Borrower or by an
authorized person. Lender may, but need not, require that all oral requests be
confirmed in writing. All communications, instructions, or directions by
telephone or otherwise to Lender are to be directed to Lender's office shown
above. The following party or parties are authorized to request advances under
the line of credit until Lender receives from Borrower at Lender's address shown
above written notice of revocation of their
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authority: H. MICHAEL LAYBOURN, PRESIDENT; and NORMAN H. FRANKS, CHIEF FINANCIAL
OFFICER. Borrower agrees to be liable for all sums either: (a) advanced in
accordance with the instructions of an authorized person or (b) credited to any
of Borrower's accounts with Lender. The unpaid principal balance owing on this
Note at any time may be evidenced by endorsements on this Note or by Lender's
internal records, including daily computer print-outs. Lender will have no
obligation to advance funds under this Note if: (a) Borrower or any guarantor is
in default under the terms of this Note or any agreement that Borrower or any
guarantor has with Lender, including any agreement made in connection with the
signing of this Note; (b) Borrower or any guarantor ceases doing business or is
insolvent; (c) any guarantor seeks, claims or otherwise attempts to limit,
modify or revoke such guarantor's guarantee of this Note or any other loan with
Lender; or (d) Borrower has applied funds provided pursuant to this Note for
purposes other than those authorized by Lender.
GENERAL PROVISIONS. This Note is payable on demand. The inclusion of specific
default provisions or rights of Lender shall not preclude Lender's right to
declare payment of this Note on its demand. Lender may delay or forgo enforcing
any of its rights or remedies under this Note without losing them, Borrower and
any other person who signs, guarantees or endorses this Note, to the extent
allowed by law, waive any applicable statute of limitations, presentment, demand
for payment, protest and notice of dishonor. Upon any change in the terms of
this Note, and unless otherwise expressly slated in writing, no party who signs
this Note, whether as maker, guarantor, accommodation maker or endorser, shall
be released from liability. All such parties agree that Lender may renew or
extend (repeatedly and for any length of time) this loan, or release any party
or guarantor or collateral; or impair, fail to realize upon or perfect Lender's
security interest in the collateral; and take any other action deemed necessary
by Lender without the consent of or notice to anyone. All such parties also
agree that Lender may modify this loan without the consent of or notice to
anyone other than the party with whom the modification is made.
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PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE. BORROWER AGREES TO THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF
A COMPLETED COPY OF THE NOTE.
BORROWER:
MENDOCINO BREWING COMPANY, INC.
By: /s/ H. Michael Laybourn By: /s/ Norman H. Franks
H. Michael Laybourn, President Norman H. Franks, Chief Financial Officer
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COMMERCIAL SECURITY AGREEMENT
Borrower: MENDOCINO BREWING COMPANY, INC. Lender: WESTAMERICA BANK
P.O. BOX 400 SONOMA REGION CREDIT ADMINISTRATION
HOPLAND, CA 95449 31 D STREET SECOND FLOOR
SANTA ROSA, CA 95404
THIS COMMERCIAL, SECURITY AGREEMENT is entered into between MENDOCINO BREWING
COMPANY, INC. (referred to below as "Grantor"); and WESTAMERICA BANK (referred
to below as "Lender"). For valuable consideration, Grantor grants to Lender a
security interest in the Collateral to secure the Indebtedness and agrees that
Lender shall have the rights stated in this Agreement with respect to the
Collateral, in addition to all other rights which Lender may have by law.
DEFINITIONS. The following words shall have the following meanings when used in
this Agreement. Terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code. All references
to dollar amounts shall mean amounts in lawful money of the United States of
America.
Agreement. The word "Agreement" means this Commercial Security Agreement, as
this Commercial Security Agreement may be amended or modified from time to time,
together with all exhibits and schedules attached to this Commercial Security
Agreement from time to time.
Collateral. The word "Collateral" means the following described property of
Grantor, whether now owned or hereafter acquired, whether now existing or
hereafter arising, and wherever located:
All inventory, chattel paper, accounts, equipment and general intangibles
In addition, the word "Collateral" includes all the following, whether now owned
or hereafter acquired, whether now existing or hereafter arising, and wherever
located:
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(a) All attachments, accessions, accessories, tools, parts, supplies,
increases, and additions to and all replacements of and substitutions for any
property described above.
(b) All products and produce of any of the property described in this Collateral
section.
(c) All accounts, general intangibles, instruments, rents, monies, payments, and
all other rights, arising out of a sale, lease, or other disposition of any of
the property described in this Collateral section.
(d) All proceeds (including insurance proceeds) from the sale, destruction,
loss, or other disposition of any of the properly described in this Collateral
section.
(e) All records and data relating to any of the property described in this
Collateral section, whether in the form of a writing, photograph, microfilm,
microfiche, or electronic media, together with all of Grantor's right, title,
and interest in and to all computer software required to utilize, create,
maintain, and process any such records or data on electronic media.
Event of Default. The words "Event of Default" mean and include without
limitation any of the Events of Default set forth below in the section titled
"Events of Default."
Grantor. The word "Grantor" means MENDOCINO BREWING COMPANY, INC., its
successors and assigns
Guarantor. The word "Guarantor" means and includes without limitation each and
all of the guarantors, sureties, and accommodation parties in connection with
the Indebtedness.
Indebtedness. The word "Indebtedness" means the indebtedness evidenced by the
Note, including all principal and interest, together with all other indebtedness
and costs and expenses for which Grantor is responsible under this Agreement or
under any of the Related Documents. In addition, the word "Indebtedness"
includes all other obligations, debts and liabilities, plus interest thereon, of
Grantor, or any one or more of them, to Lender, as well as all claims by Lender
against Grantor, or any one or more of them, whether
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existing now or later; whether they are voluntary or involuntary, due or not
due, direct or indirect, absolute or contingent, liquidated or un-liquidated;
whether Grantor may be liable individually or jointly with others; whether
Grantor may be obligated as guarantor, surety, accommodation party or otherwise;
whether recovery upon such indebtedness may be or hereafter may become barred by
any statute of limitations; and whether such indebtedness may be or hereafter
may become otherwise unenforceable.
Lender. The word "Lender" means WESTAMERICA BANK, its successors and assigns.
Note. The word "Note" means the note or credit agreement dated May 17, 1996, in
the principal amount of $600,000.00 from MENDOCINO BREWING COMPANY, INC. to
Lender, together with all renewals of, extensions of, modifications of,
refinancings of, consolidations of and substitutions for the note or credit
agreement.
Related Documents. The words "Related Documents" mean and include without
limitation all promissory notes, credit agreements, loan agreements,
environmental agreements, guaranties, security agreements, mortgages, deeds of
trust, and all other instruments, agreements and documents, whether now or
hereafter existing, executed in connection with the Indebtedness.
OBLIGATIONS OF GRANTOR. Grantor warrants and covenants to Lender as follows:
Perfection of Security Interest. Grantor agrees to execute such financing
statements and to take whatever other actions are requested by Lender to perfect
and continue Lender's security interest in the Collateral. Upon request of
Lender, Grantor will deliver to Lender any and all of the documents evidencing
or constituting the Collateral, and Grantor will note Lender's interest upon any
and all chattel paper it not delivered to Lender for possession by Lender.
Grantor hereby appoints Lender as its irrevocable attorney-in-fact for the
purpose of executing any documents necessary to perfect or to continue the
security interest granted in this Agreement. Lender may at any time, and without
further authorization from Grantor, file a carbon, photographic or other
reproduction of any financing statement or of this Agreement for use as a
financing statement. Grantor will reimburse Lender for all expenses for the
perfection and the continuation of the perfection of Lender's security interest
in the Collateral. Grantor promptly will notify Lender before any change in
Grantor's name including any change to
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the assumed business names of Grantor. This is a continuing Security Agreement
and will continue in effect even though all or any part of the Indebtedness is
paid in full and even though for a period of time Grantor may not be indebted to
Lender.
No Violation. The execution and delivery of this Agreement will not violate any
law or agreement governing Grantor or to which Grantor is a party, and its
certificate or articles of incorporation and bylaws do not prohibit any term or
condition of this Agreement.
Enforceability of Collateral. To the extent the Collateral consists of accounts,
chattel paper, or general intangibles, the Collateral is enforceable in
accordance with its terms, is genuine, and complies with applicable laws
concerning form, content and manner of preparation and execution, and all
persons appearing to be obligated on the Collateral have authority and capacity
to contract and are in fact obligated as they appear to be on the Collateral. At
the time any account becomes Subject to a security interest in favor of Lender,
the account shall be a good and valid account representing an undisputed, bona
fide indebtedness incurred by the account debtor, for merchandise held subject
to delivery instructions or theretofore shipped or delivered Pursuant to a
contract of sale, or for services theretofore performed by Grantor with or for
the account debtor; there shall be no setoffs or counterclaims against any such
account; and no agreement under which any deductions or discounts may be claimed
shall have been made with the account debtor except those disclosed to Lender in
writing.
Location of the Collateral. Grantor, upon request of Lender, will deliver to
Lender in form satisfactory to Lender a schedule of real properties and
Collateral locations relating to Grantor's operations, including without
limitation the following: (a) all real property owned or being purchased by
Grantor; (b) all real properly being rented or leased by Grantor; (c) all
storage facilities owned, rented, leased, or being used by Grantor; and (d) all
other properties where Collateral is or may be located. Except in the ordinary
course of its business, Grantor shall not remove the Collateral from its
existing locations without the prior written consent of Lender.
Removal of Collateral. Grantor shall keep the Collateral (or to the extent the
Collateral consists of intangible property such as accounts, the records
concerning the Collateral) at Grantor's address shown above, or at such other
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locations as are acceptable to Lender. Except in the ordinary course of its
business, including the sales of inventory, Grantor shall not remove the
Collateral from its existing locations without the prior written consent of
Lender. To the extent that the Collateral consists of vehicles, or other titled
property, Grantor shall not take or permit any action which would require
application for certificates of title for the vehicles outside the State of
California, without the prior written consent of Lender. Transactions Involving
Collateral. Except for inventory sold or accounts collected in the ordinary
course of Grantor's business, Grantor shall not sell, offer to sell, or
otherwise transfer or dispose of the Collateral. While Grantor is not in default
under this Agreement, Grantor may sell inventory, but only in the ordinary
course of its business and only to buyers who quality as a buyer in the ordinary
course of business. A sale in the ordinary course of Grantor's business does not
include a transfer in partial or total satisfaction of a debt or any bulk sale,
Grantor shall not pledge, mortgage, encumber or otherwise permit the Collateral
to be subject to any lien, security interest, encumbrance, or charge, other than
the security interest provided for in this Agreement, without the prior written
consent of Lender. This includes security interests even if junior in right to
the security interests granted tinder this Agreement. Unless waived by Lender,
all proceeds from any disposition of the Collateral (for whatever reason) shall
be held in trust for Lender and shall not be commingled with any other funds;
provided however, this requirement shall not constitute consent by Lender to any
sale or other disposition. Upon receipt, Grantor shall immediately deliver any
such proceeds to Lender.
Title. Grantor represents and warrants to Lender that it holds good and
marketable title to the Collateral, free and clear of all lions and encumbrances
except for the lien of this Agreement. No financing statement covering any of
the Collateral is on file in any public office other than those which reflect
the security interest created by this Agreement or to which Lender has
specifically consented. Grantor shall defend Lender's rights in the Collateral
against the claims and demands of all other persons.
Collateral Schedules and Locations. As often as Lender shall require, and
insofar as the Collateral consists of accounts and general Intangibles, Grantor
shall deliver to Lender schedules of such Collateral, including such information
as Lender may require, including without limitation names and
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addresses of account debtors and agings of accounts and general intangibles.
Insofar as the Collateral consists of inventory and equipment, Grantor shall
deliver to Lender, as often as Lender shall require, such lists, descriptions,
and designations of such Collateral as Lender may require to identify the
nature, extent, and location of such Collateral. Such information shall be
submitted for Grantor and each of its subsidiaries or related companies.
Maintenance and Inspection of Collateral. Grantor shall maintain all tangible
Collateral in good condition and repair. Grantor will not commit or permit
damage to or destruction of the Collateral or any part of the Collateral, Lender
and its designated representatives and agents shall have the right at all
reasonable times to examine, inspect, and audit the Collateral wherever located.
Grantor shall immediately notify Lender of all cases involving the return,
rejection, repossession, loss or damage of or to any Collateral; of any request
for credit or adjustment or of any other dispute arising with respect to the
Collateral: and generally of all happenings and events affecting the Collateral
or the value or the amount of the Collateral.
Taxes, Assessments and Liens. Grantor will pay when due all taxes, assessments
and liens upon the Collateral, its use or operation, upon this Agreement, upon
any promissory note or notes evidencing the Indebtedness, or upon any et the
other Related Documents, Grantor may withhold any such payment or may elect to
contest any lien if Grantor is in good faith conducting an appropriate
proceeding to contest the obligation to pay and so long as Lender's interest in
the Collateral is not jeopardized in Lender's sole opinion. If the Collateral is
subjected to a lien which is not discharged within fifteen (15) days, Grantor
shall deposit with Lender cash, a sufficient corporate surety bond or other
security satisfactory to Lender in an amount adequate to provide for the
discharge of the lien plus any interest, costs, attorneys' fees or other charges
that could accrue as a result of foreclosure or sale of the Collateral. In any
contest Grantor shall defend itself and Lender and shall satisfy any final
adverse judgment before enforcement against the Collateral. Grantor shall name
Lender as an additional obligee under any surety bond furnished in the contest
proceedings.
Compliance With Governmental Requirements. Grantor shall comply promptly with
all laws, ordinances, rules and regulations of all governmental authorities, now
or hereafter in effect, applicable to the ownership, production,
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disposition, or use of the Collateral. Grantor may contest in good faith any
such law, ordinance or regulation and withhold compliance during any proceeding,
including appropriate appeals, so long as Lender's interest in the Collateral,
In Lender's opinion, Is not jeopardized.
Hazardous Substances. Grantor represents and warrants that the Collateral never
has been, and never will be so long as this Agreement remains a lien on the
Collateral, used for the generation, manufacture, storage, transportation,
treatment, disposal, release or threatened release of any hazardous waste or
substance, as those terms are defined in the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Section
9601, et seq. ("CERCLA), the Superfund Amendments and Reauthorization Act of
1986, Pub. L. No. 99-499 ("SARA"), the Hazardous Materials Transportation Act,
49 U.S.C. Section 1801, et seq., the Resource Conservation and Recovery Art, 42
U.S.C. Section 6901, et seq., Chapters 6.5 through 7.7 of Division 20 of the
California Health and Safety Code, Section 25100, et seq., or other applicable
state or Federal laws, rules, or regulations adopted pursuant to any of the
foregoing. The terms "hazardous waste" and "hazardous substance" shall also
include, without limitation, petroleum and petroleum by-products or any fraction
thereof and asbestos. The representations and warranties. contained herein are
based on Grantor's due diligence in investigating the Collateral for hazardous
wastes and substances. Grantor hereby (a) releases and waives any future claims
against Lender for indemnity or contribution in the event Grantor becomes liable
for cleanup or other costs under any such laws, and (b) agrees to indemnity and
hold harmless Lender against any and all claims and losses resulting from a
breach of this provision of this Agreement. This obligation to indemnity shall
survive the payment of the Indebtedness and the satisfaction of this Agreement.
Maintenance of Casualty Insurance. Grantor shall procure and maintain all risks
insurance, including without limitation fire, theft and liability coverage
together with such other insurance as Lender may require with respect to the
Collateral, in form, amounts, coverages and basis reasonably acceptable to
Lender and issued by a company or companies reasonably acceptable to Lender.
Grantor, upon request of Lender, ,will deliver to Lender from time to time the
policies or certificates of insurance in form satisfactory to Lender, including
stipulations that coverages will not be canceled or diminished without at least
thirty (30) days' prior written notice to Lender and not
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including any disclaimer of the insurer's liability for failure to give such a
notice. Each insurance policy also shall include an endorsement providing that
coverage in favor of Lender will not be impaired in any way by any act, omission
or default of Grantor or any other person. In connection with all policies
covering assets in which Lender holds or is offered a security interest, Grantor
will provide Lender with such loss payable or other endorsements as Lender may
require. If Grantor at any time fails to obtain or maintain any insurance as
required under this Agreement, Lender may (but shall not be obligated to) obtain
such insurance as Lender deems appropriate, including if it so chooses "single
interest insurance," which will cover only Lender's Interest in the Collateral.
Application of Insurance Proceeds. Grantor shall promptly notify Lender of any
loss or damage to the Collateral. Lender may make proof of loss if Grantor fails
to do so within fifteen (15) days of the casualty. All proceeds of any insurance
on the Collateral, including accrued proceeds thereon, shall be held by Lender
as part of the Collateral. If Lender consents to repair or replacement of the
damaged or destroyed Collateral, Lender shall, upon satisfactory proof of
expenditure, pay or reimburse Grantor from the proceeds for the reasonable cost
of repair or restoration. If Lender does not consent to repair or replacement of
the Collateral, Lender shall retain a sufficient amount of the proceeds to pay
all of the Indebtedness, and shall pay the balance to Grantor. Any proceeds
which have not been disbursed within six (6) months after their receipt and
which Grantor has not committed to the repair or restoration of the Collateral
shall be used to prepay the Indebtedness.
Insurance Reserves. Lender may require Grantor to maintain with Lender reserves
for payment of insurance premiums, which reserves shall be created by monthly
payments from Grantor of a sum estimated by Lender to be sufficient to produce,
at least fifteen (15) days before the premium due date, amounts at least equal
to the insurance premiums to be paid. It fifteen (15) days before payment is
due, the reserve funds are insufficient, Grantor shall upon demand pay any
deficiency to Lender. The reserve funds shall be held by Lender as a general
deposit and shall constitute a non-interest-bearing account which Lender may
satisfy by payment of the insurance premiums required to be paid by Grantor as
they become due. Lender does not hold the reserve funds in trust for Grantor,
and Lender is not the agent of Grantor for payment of the insurance premiums
required to be paid by Grantor. The responsibility for the payment of premiums
shall remain Grantor's sole responsibility.
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Insurance Reports. Grantor, upon request of Lender, shall furnish to Lender
reports on each existing policy of insurance showing such information as Lender
may reasonably request including the following: (a) the name of the insurer; (b)
the risks insured; (c) the amount of the policy; (d) the property insured; (e)
the then current value on the basis of which insurance has been obtained and the
manner of determining that value; and (D the expiration dale of the policy. In
addition, Grantor shall upon request by Lender (however not more often than
annually) have an independent appraiser satisfactory to Lender determine, as
applicable, the cash value or replacement cost of the Collateral.
GRANTOR'S RIGHT TO POSSESSION AND TO COLLECT ACCOUNTS. Until default and except
as otherwise provided below with respect to accounts, Grantor may have
possession of the tangible personal property and beneficial use of all the
Collateral and may use it in any lawful manner not Inconsistent with this
Agreement or the Related Documents, provided that Grantor's right to possession
and beneficial use shall not apply to any Collateral where possession of the
Collateral by Lender is required by law to perfect Lender's security interest in
such Collateral. Until otherwise notified by Lender, Grantor may collect any of
the Collateral consisting of accounts. Al any time and even though no Event of
Default exists, Lender may exercise Its rights to collect the accounts and to
notify account debtors to make payments directly to Lender for application to
the Indebtedness. If Lender at any time has possession of any Collateral,
whether before or after an Event of Default, Lender shall be deemed to have
exercised reasonable care in the custody and preservation of the Collateral it
Lender takes such action for that purpose as Grantor shall request or as Lender,
in Lender's sole discretion, shall deem appropriate under the circumstances, but
failure to honor any request by Grantor shall not of itself be deemed to be a
failure to exercise reasonable care. Lender shall not be required to take any
steps necessary to preserve any rights in the Collateral against prior parties,
nor to protect, preserve or maintain any security interest given to secure the
Indebtedness.
EXPENDITURES BY LENDER. It not discharged or paid when due, Lender may (but
shall not be obligated to) discharge or pay any amounts required to be
discharged or paid by Grantor tinder this Agreement, including without
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limitation all taxes, liens, security interests, encumbrances, and other claims,
at any time levied or placed on the Collateral. Lender also may (but shall not
be obligated to) pay all costs for insuring, maintaining and preserving the
Collateral. All such expenditures incurred or paid by Lender for such purposes
will then bear interest at the rate charged under the Note from the date
incurred or paid by Lender to the date of repayment by Grantor. All such
expenses shall become a part of the Indebtedness and, at Lender's option, will
(a) be payable on demand, (b) be added to the balance of the Note and be
apportioned among and be payable with any installment payments to become due
during either (i) the term of any applicable insurance policy or (ii) the
remaining term of the Note, or (c) be treated as a balloon payment which will be
due and payable at the Note's maturity. This Agreement also will secure payment
of these amounts. Such right shall be in addition to all other rights and
remedies to which Lender may be entitled upon the occurrence of an Event of
Default.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement:
Default on Indebtedness. Failure of Grantor to make any payment when due on the
Indebtedness.
Other Defaults. Failure of Grantor to comply with or to perform any other term,
obligation, covenant or condition contained in this Agreement or in any of the
Related Documents or in any other agreement between Lender and Grantor.
Default in Favor of Third Parties. Should Borrower or any Grantor default under
any loan, extension of credit, security agreement, purchase or sales agreement,
or any other agreement, in favor of any other creditor or person that may
materially affect any of Borrower's property or Borrower's or any Grantor's
ability to repay the Loans or perform their respective obligations under this
Agreement or any of the Related Documents.
False Statements. Any warranty, representation or statement made or furnished to
Lender by or on behalf of Grantor under this Agreement, the Note or the Related
Documents is false or misleading in any material respect, either now or at the
time made or furnished.
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Defective Collateralization. This Agreement or any of the Related Documents
ceases to be in full force and effect (including failure of any collateral
documents to create a valid and perfected security interest or lien) at any time
and for any reason.
Insolvency. The dissolution or termination of Grantor's existence as a going
business, the insolvency of Grantor, the appointment of a receiver for any part
of Grantor's property, any assignment for the benefit of creditors, any type of
creditor workout, or the commencement of any proceeding under any bankruptcy or
insolvency laws by or against Grantor.
Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture
proceedings, whether by judicial proceeding, self-help, repossession or any
other method, by any creditor of Grantor or by any governmental agency against
the Collateral or any other collateral securing the Indebtedness. This Includes
a garnishment of any of Grantor's deposit accounts with Lender,
Events Affecting Guarantor. Any of the preceding events occurs with respect to
any Guarantor of any of the Indebtedness or such Guarantor dies or becomes
incompetent.
Adverse Change. A material adverse change occurs in Grantor's financial
condition, or Lender believes the prospect of payment or performance of the
Indebtedness is impaired.
RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs under this
Agreement, at any time thereafter, Lender shall have all the rights of a secured
party under the California Uniform Commercial Code. In addition and without
limitation, Lender may exercise any one or more of the following rights and
remedies:
Accelerate Indebtedness. Lender may declare the entire Indebtedness, including
any prepayment penalty which Grantor would be required to pay, immediately due
and payable, without notice.
Assemble Collateral. Lender may require Grantor to deliver to Lender all or any
portion of the Collateral and any and all certificates of title and other
documents relating to the Collateral. Lender may require Grantor to assemble
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the Collateral and make it available to Lender at a place to be designated by
Lender. Lender also shall have full power to enter upon the property of Grantor
to take possession of and remove the Collateral. If the Collateral contains
other goods not covered by this Agreement at the time of repossession, Grantor
agrees Lender may take such other goods, provided that Lender makes reasonable
efforts to return them to Grantor after repossession.
Sell the Collateral. Lender shall have full power to sell, lease, transfer, or
otherwise deal with the Collateral or proceeds thereof in its own name or that
of Grantor. Lender may sell the Collateral at public auction or private sale.
Unless the Collateral threatens to decline speedily in value or is of a type
customarily sold on a recognized market, Lender will give Grantor reasonable
notice of the time after which any private sale or any other intended
disposition of the Collateral is to be made. The requirements of reasonable
notice shall be met if such notice is given at least ten (10) days, or such
lesser time as required by state law, before the time of the sale or
disposition. All expenses relating to the disposition of the Collateral,
including without limitation the expenses of retaking, holding, insuring,
preparing for sale and selling the Collateral, shall become a part of the
Indebtedness secured by this Agreement and shall be payable on demand, with
interest at the Note rate from date of expenditure until repaid.
Appoint Receiver. To the extent permitted by applicable law, Lender shall have
the following rights and remedies regarding the appointment of a receiver: (a)
Lender may have a receiver appointed as a matter of right, (b) the receiver may
be an employee of Lender and may serve without bond, and (c) all fees of the
receiver and his or her attorney shall become part of the Indebtedness secured
by this Agreement and shall be payable on demand, with interest at the Note rate
from date of expenditure until repaid.
Collect Revenues, Apply Accounts. Lender, either itself or through a receiver,
may collect the payments, rents, income, and revenues from the Collateral.
Lender may at any time in its discretion transfer any Collateral into its own
name or that of its nominee and receive the payments, rents, income, and
revenues therefrom and hold the same as security for the Indebtedness or apply
it to payment of the Indebtedness in such order of preference as Lender may
determine. Insofar as the Collateral consists of accounts, general intangibles,
insurance policies, instruments, chattel paper,
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choses in action, or similar property, Lender may demand, collect, receipt for,
settle, compromise, adjust, sue for, foreclose, or realize on the Collateral as
Lender may determine, whether or not Indebtedness or Collateral is then due. For
these purposes, Lender may, on behalf of and in the name of Grantor, receive,
open and dispose of mail addressed to Grantor; change any address to which mail
and payments are to be sent; and endorse notes, checks, drafts, money orders,
documents of title, instruments and items pertaining to payment, shipment, or
storage of any Collateral. To facilitate collection, Lender may notify account
debtors and obligors on any Collateral to make payments directly to Lender.
Obtain Deficiency. If Lender chooses to sell any or all of the Collateral,
Lender may obtain a judgment against Grantor for any deficiency remaining on the
Indebtedness due to Lender after application of all amounts received from the
exercise of the rights provided in this Agreement. Grantor shall be liable for a
deficiency even if the transaction described in this subsection is a sale of
accounts or chattel paper.
Other Rights and Remedies. Lender shall have all the rights and remedies of a
secured creditor under the provisions of the Uniform Commercial Code, as may be
amended from time to time. In addition, Lender shall have and may exercise any
or all other rights and remedies it may have available at law, in equity, or
otherwise.
Cumulative Remedies. All of Lender's rights and remedies, whether evidenced by
this Agreement or the Related Documents or by any other writing, shall be
cumulative and may be exercised singularly or concurrently. Election by Lender
to pursue any remedy shall not exclude pursuit of any other remedy, and an
election to make expenditures or to take action to perform an obligation of
Grantor under this Agreement, after Grantor's failure to perform, shall not
affect Lender's right to declare a default and to exercise its remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:
Amendments. This Agreement, together with any Related Documents, constitutes the
entire understanding and agreement of the parties as to the matters set forth in
this Agreement. No alteration of or amendment to this Agreement
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shall be effective unless given in writing and signed by the party or parties
sought to be charged or bound by the alteration or amendment.
Applicable Law. This Agreement has been delivered to Lender and accepted by
Lender in the State of California. If there is a lawsuit, Grantor agrees upon
Lender's request to submit to the jurisdiction of the courts of MARIN County,
State of California. Lender and Grantor hereby waive the right to any jury trial
in any action, proceeding, or counterclaim brought by either Lender or Grantor
against the other. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
Attorneys' Fees; Expenses. Grantor agrees to pay upon demand all of Lender's
costs and expenses, including attorneys' fees and Lender's legal expenses,
incurred in connection with the enforcement of this Agreement. Lender may pay
someone else to help enforce this Agreement, and Grantor shall pay the costs and
expenses of such enforcement. Costs and expenses include Lender's attorneys'
fees and legal expenses whether or not there Is a lawsuit, including attorneys'
fees and legal expenses for bankruptcy proceedings (and Including efforts to
modify or vacate any automatic stay or injunction), appeals, and any anticipated
post-judgment collection services. Grantor also shall pay all court costs and
such additional fees as may be directed by the court.
Caption headings. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the provisions of
this Agreement.
Multiple Parties; Corporate Authority. All obligations of Grantor under this
Agreement shall be joint and several, and all references to Grantor shall mean
each and every Grantor. This means that each of the Borrowers signing below is
responsible for all obligations in this Agreement.
Notices. All notices required to be given under this Agreement shall be given in
writing, may be sent by telefacsimilie, and shall be effective when actually
delivered or when deposited with a nationally recognized overnight courier or
deposited in the United States mail, first class, postage prepaid, addressed to
the party to whom the notice is to be given at the address shown above. Any
party may change its address for notices under this Agreement by
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giving formal written notice to the other parties, specifying that the purpose
of the notice is to change the party's address. To the extent permitted by
applicable law, if there is more than one Grantor, notice to any Grantor will
constitute notice to all Grantors. For notice purposes, Grantor will keep Lender
informed at all times of Grantor's current address(es).
Power of Attorney. Grantor hereby appoints Lender as its true and lawful
attorney-in-fact, Irrevocably, with full power of substitution to do the
following: (a) to demand, collect, receive, receipt for, sue and recover all
sums of money or other property which may now or hereafter become due, owing or
payable from the Collateral; (b) to execute, sign and endorse any and all
claims, instruments, receipts, checks, drafts or warrants issued in payment for
the Collateral; (c) to settle or compromise any and all claims arising under the
Collateral, and, in the place and stead of Grantor, to execute and deliver its
release and settlement for the claim; and (d) to file any claim or claims or to
take any action or institute or take part In any proceedings, either in its own
name or in the name of Grantor, or otherwise, which in the discretion of Lender
may seem to be necessary or advisable. This power is given as security for the
Indebtedness, and the authority hereby conferred is and shall be irrevocable and
shall remain in full force and effect until renounced by Lender.
Preference Payments. Any monies Lender pays because of an asserted preference
claim in Borrower's bankruptcy will become a part of the Indebtedness and, at
Lender's option, shall be payable by Borrower as provided above in the
"EXPENDITURES BY LENDER" paragraph.
Severability. If a court of competent jurisdiction finds any provision of this
Agreement to be invalid or unenforceable as to any person or circumstance, such
finding shall not render that provision invalid or unenforceable as to any other
persons or circumstances. If feasible, any such offending provision shall be
deemed to be modified to be within the limits of enforceability or validity;
however, it the offending provision cannot be so modified, it shall be stricken
and all other provisions of this Agreement in all other respects shall remain
valid and enforceable.
Successor Interests. Subject to the limitations set forth above on transfer of
the Collateral, this Agreement shall be binding upon and inure to the
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benefit of the parties, their successors and assigns.
Waiver. Lender shall not be deemed to have waived any rights under this
Agreement unless such waiver is given in writing and signed by Lender. No delay
or omission on the part of Lender in exercising any right shall operate as a
waiver of such right or any other right. A waiver by Lender of a provision of
this Agreement shall not prejudice or constitute a waiver of Lender's right
otherwise to demand strict compliance with that provision or any other provision
of this Agreement. No prior waiver by Lender, nor any course of dealing between
Lender and Grantor, shall constitute a waiver of any of Lender's rights or of
any of Grantor's obligations as to any future transactions. Whenever the consent
of Lender is required under this Agreement, the granting of such consent by
Lender iii any instance shall not constitute continuing consent to subsequent
instances where such consent is required and in all cases such consent may be
granted or withheld in the sole discretion of Lender.
Waiver of Co-obligor's Rights. It more than one person is obligated for the
Indebtedness, Borrower irrevocably waives, disclaims and relinquishes all claims
against such other person which Borrower has or would otherwise have by virtue
of payment of the Indebtedness or any part thereof, specifically including but
not limited to all rights of indemnity, contribution or exoneration.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS COMMERCIAL, SECURITY
AGREEMENT, AND GRANTOR AGREES TO ITS TERMS. THIS AGREEMENT IS DATED MAY 17,1996.
GRANTOR:
MENDOCINO BREWING COMPANY, INC.
By: /s/ H. Michael Laybourn By: /s/ Norman H. Franks
H. Michael Laybourn, President Norman H. Franks, Chief Financial Officer
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