SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO.1)
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
[X] Definitive Proxy Statement Commission Only (as permitted by
[ ] Definitive Additional Materials Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to
sec.240.14a-11(c) or sec.240.14a-12
Mendocino Brewing Company, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transactions applies:
(2) Aggregate number of securities to which transactions applies:
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing party:
(4) Date filed:
<PAGE>
MENDOCINO BREWING COMPANY, INC.
----------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
May 11, 1998
----------------------
Notice is hereby given that the 1998 Annual Meeting of the Shareholders
of Mendocino Brewing Company, Inc., a California corporation (the "Company"),
will be held on Monday, May 11, 1998, at 1:00 p.m., local time, at the Ukiah
Valley Conference Center located at 200 South School Street, Ukiah, CA 95482,
for the following purposes:
1. To elect directors of the Company, each to serve until the next
Annual Meeting of Shareholders and until his successor has been
elected and qualified or until his earlier resignation or
removal. The Board of Directors intends to nominate the following
individuals for election: Vijay Mallya, H. Michael Laybourn,
R.H.B. (Bobby) Neame, Kent Price, Sury Rao Palamand, Jerome G.
Merchant, and Yashpal Singh;
2. To ratify the appointment of Moss Adams LLP as independent
auditors of the Company for the current fiscal year; and
3. To transact such other business as may properly come before the
Annual Meeting or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this notice.
Shareholders of record at the close of business on March 26, 1998 are
entitled to notice of and to vote at the Annual Meeting or any adjournment or
postponement thereof.
The majority of the Company's outstanding shares must be represented at
the Annual Meeting (in person or by proxy) to transact business. WHETHER OR NOT
YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, SIGN, AND DATE THE ACCOMPANYING
PROXY AND RETURN IT BEFORE THE MEETING IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
Your proxy will not be used if you revoke it either before or at the Annual
Meeting.
To help us in planning for the Annual Meeting, please mark the
appropriate box on the accompanying proxy if you plan to attend.
By Order of the Board of Directors
Hopland, California P.A. Murali
April 20, 1998 Secretary
<PAGE>
MENDOCINO BREWING COMPANY, INC.
Post Office Box 400
13351 South Highway 101
Hopland, California 95449
(707) 744-1015
---------------------------------------
1998 ANNUAL MEETING OF SHAREHOLDERS
PROXY STATEMENT
---------------------------------------
April 20, 1998
GENERAL INFORMATION
Time and Place of Meeting.
The accompanying proxy is solicited on behalf of the Board of Directors of
Mendocino Brewing Company, Inc., a California corporation (the "Company") for
use at the Annual Meeting of the Shareholders of the Company to be held on
Monday, May 11, 1998, at 1:00 p.m., local time, at the Ukiah Valley Conference
Center located at 200 South School Street, Ukiah, CA 95482 (the "Meeting").
Meeting and Proxy Statement Information
Only holders of record of the Company's Common Stock at the close of business on
March 26, 1998 will be entitled to vote at the Meeting. At the close of business
on March 26, 1998, the Company had 4,463,385 shares of Common Stock outstanding
and entitled to vote. A majority of the shares outstanding on the record date
will constitute a quorum for the transaction of business. This Proxy Statement
and the accompanying form of proxy were first mailed to shareholders on or about
April 20, 1998.
Voting Rights
Holders of the Company's Common Stock are entitled to one vote for each share
held as of the above record date, except that in the election of directors each
shareholder has cumulative voting rights and is entitled to a number of votes
equal to the number of shares held by such shareholder multiplied by the number
of directors to be elected. The shareholder may cast these votes all for a
single candidate or distribute the votes among any or all of the candidates. No
shareholder will be entitled to cumulate votes for a candidate, however, unless
that candidate's name has been placed in nomination before the voting and the
shareholder, or any other shareholder, has given notice at the Meeting before
the voting of an intention to cumulate votes. In such an event, the proxy holder
may allocate among the nominees the votes represented by proxies in the proxy
holder's sole discretion.
If a broker indicates on a proxy that it does not have discretionary authority
as to certain shares to vote on a particular matter, those shares will not be
considered present and entitled to vote with respect to that matter.
Solicitation of Proxies
The expenses of soliciting proxies in the form accompanying this Proxy Statement
will be paid by the Company. Following the original mailing of the proxies and
other soliciting materials, the Company and/or its agents may also solicit
proxies by mail, telephone, facsimile, or in person. The Company will request
that brokers, custodians, nominees, and other record holders of the Company's
Common Stock forward copies of the proxy and other soliciting materials to
persons for whom they hold shares of Common Stock and request authority for the
exercise of proxies. In such cases, the Company, upon the request of the record
holders, will reimburse such holders for their reasonable expenses. The Company
has no present plans to specially engage any employee or paid solicitor to
solicit proxies.
<PAGE>
Revocability of Proxies
Any person signing a proxy in the form accompanying this Proxy Statement has the
power to revoke it before the Meeting or at the Meeting before the vote pursuant
to the proxy. A proxy may be revoked by (a) a writing delivered to the Company
stating that the proxy is revoked, (b) a subsequent proxy executed by the person
executing the prior proxy and presented at the Meeting, or (c) attendance at the
Meeting and voting in person. Please note, however, that if a shareholder's
shares are held of record by a broker, bank, or other nominee and that
shareholder wishes to vote at the Meeting, the shareholder must bring to the
Meeting a letter from the broker, bank, or other nominee confirming that
shareholder's beneficial ownership of the shares.
PROPOSAL NO. 1 -- ELECTION OF DIRECTORS
At the Meeting, shareholders will elect directors to hold office until the next
Annual Meeting of Shareholders and until their respective successors have been
elected and qualified or until such directors' earlier resignation or removal.
The size of the Company's Board of Directors (the "Board") is currently set at
seven members. Accordingly, seven nominees will be elected at the Meeting to be
the seven directors of the Company. Shares represented by the accompanying proxy
will be voted for the election of the seven nominees recommended by the Board
unless the proxy is marked in such a manner as to withhold authority so to vote.
If any nominee for any reason is unable to serve or for good cause will not
serve, the proxies may be voted for such substitute nominee as the proxy holder
may determine. The Company is not aware of any nominee who will be unable to or
for good cause will not serve as a director.
Directors/Nominees
The names of the nominees, their ages as of April 20, 1998, and certain
information about them are set forth below:
Director
Name of Nominee Age Position Since
- --------------------------- --- ------------------------------------ -----
Vijay Mallya, Ph.D.++ 42 Chairman and Chief Executive Officer 1997
H. Michael Laybourn++ 60 President and Director 1993
R.H.B. (Bobby) Neame 64 Director 1998
Kent D. Price* 51 Director 1998
Sury Rao Palamand, Ph.D.*++ 67 Director 1998
Jerome G. Merchant* 36 Chief Financial Officer and Director 1997
Yashpal Singh 52 Chief Operating Officer and Director 1997
- ----------
* Member of the Audit Committee
++ Member of the Compensation Committee
Vijay Mallya, Ph.D., became Chairman of the Board and Chief Executive Officer of
the Company in October 1997. Dr. Mallya has been the Chairman of The UB Group
since 1983. The UB Group is one of Asia's leading beer and spirits companies
with annual sales in excess of (US) $1 Billion. Dr. Mallya also is Chairman of
UBICS, Inc., United Breweries Limited, UB Engineering Limited, Mangalore
Chemicals and Fertilisers Ltd., Herbertsons Limited, McDowell & Co. Ltd., and
other UB Group companies. He also sits on boards of several foreign companies
and organizations including companies comprising the UB Group, The Institute of
Economic Studies (India), and the Federation of the Indian Chamber of Commerce
and Industries. Dr. Mallya holds a Bachelor of Commerce degree from the
University of Calcutta in India and an honorary Doctorate in Business
Administration from the University of California, Irvine.
H. Michael Laybourn, co-founder of the Company, has served as the Company's
President since its inception in 1982 and as its Chief Executive Officer from
inception through October 1997. Mr. Laybourn was elected a director in November
1993 when the Company began the process of converting from a limited partnership
to a corporation and served as Chairman of the Board from June 1994 through
October 1997. Mr. Laybourn is a Vice President of the California Small Brewers
Association and Chairman of the Board of Directors of the Brewers Association of
America. Mr. Laybourn holds a Bachelor of Fine Arts degree from Arizona State
University.
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<PAGE>
R.H.B. (Bobby) Neame became a director in January 1998. Mr. Neame has served as
the Chairman and Chief Executive Officer of Shepherd Neame Ltd. for more than
five years. Shepherd Neame Ltd. has operated as a brewery in England for 300
years, making it England's oldest continuously operating brewery.
Kent Price became a director in January 1998. Mr. Price has been employed by IBM
Banking, Finance and Securities Industries since August 1994, currently as
General Manager of Securities and Capital Markets. From 1993 through August 1994
he served as Chairman and Chief Executive Officer of the Bank of San Francisco.
He currently serves as a director of The San Francisco Company, which is the
holding company for the Bank of San Francisco. Mr. Price received a Bachelor of
Arts in history and politics and a Master of Arts in Slavic studies from the
University of Montana and attended Oxford University as a Rhodes Scholar.
Sury Rao Palamand, Ph.D., became a director in January 1998. Dr. Palamand is the
President of Summit Products, Inc., a beverage development firm serving the
beverage industry; President of the Old 66 Brewery & Restaurant, a
brewery-restaurant in St. Louis, Missouri; and Managing Director of Atlantic
Beverages Ltd., a product development firm serving the United Kingdom. From 1966
- - 1989, Dr. Palamand served as Director, Beer and New Product Development for
Anheuser-Busch Companies, Inc. Dr. Palamand holds a Master of Science in
Chemistry from the University of Bombay, India, and a Master of Science and
Doctorate in Food and Flavor Technology from Ohio State University.
Jerome G. Merchant became a director in October 1997 and Chief Financial Officer
in November 1997. Mr. Merchant is currently the Strategic Planning Consultant,
U.S.A. for The UB Group and has served in such capacity since July 1996. Since
April 1992, Mr. Merchant has also served as President of J.G.M. Strategic
Alliances, Ltd., a business consulting firm. Between 1989 and April 1992, Mr.
Merchant was the Regional Vice President for Equus Capital Corporation, an
investment company with assets in excess of $500 million. In his position at
Equus Capital Corporation, Mr. Merchant provided equity investment capital,
financial advice, and marketing for numerous investments in equity-oriented
management-led acquisitions. Mr. Merchant received his Bachelor of Science
degree in Managerial Economics-Finance from the University of California, Davis.
Yashpal Singh became a director in October 1997 and Chief Operating Officer in
November 1997. Since 1997, Mr. Singh has served as Executive Vice President -
Operations for United Breweries of America ("UBA"), an affiliate of The UB
Group. In this capacity, he is responsible for the U.S. brewing operations of
UBA. Between 1992 and 1997, Mr. Singh served as Senior Vice President of
Operations for The UB Group, where he was responsible for the operations of 12
breweries. Mr. Singh holds degrees in Chemistry, Botany, and Zoology from Punjab
University in India. Mr. Singh also holds the designation of AMI of Brewing,
London.
THE BOARD RECOMMENDS A VOTE FOR THE
ELECTION OF EACH NOMINEE
Board of Directors' Meetings and Committees
The Company's Board of directors met four times during 1997. No director
attended fewer than 75% of the aggregate of the total number of meetings of the
Board (held during the period for which he was a director) and the total number
of meetings held by all committees of the Board on which he served (during the
period that he served).
The Board has a standing Audit Committee and a standing Compensation Committee.
The Board does not have a nominating committee or a committee performing similar
functions.
Messrs. Merchant, Price, and Palamand presently serve as the members of the
Audit Committee. Former directors Eric Bradley and Daniel Moldenhauer served as
the members of the Audit Committee during 1997, which met twice and acted twice
by written consent. The Audit Committee reviews, acts on, and reports to the
Board of Directors with respect to various auditing and accounting matters,
including the selection of the Company's auditors, the scope of the annual
audits, fees to be paid to the auditors, the performance of the Company's
auditors, the accounting practices of the Company. In accordance with the rules
of the Pacific Exchange, the committee also recommended approval of an
Investment Agreement with UBA in October 1997 without a shareholder vote.
Messrs. Mallya, Laybourn, and Palamand presently serve as the members of the
Compensation Committee. Former directors Bradley and Moldenhauer served as the
members of the Compensation Committee during 1997, which did
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<PAGE>
not meet but acted twice by written consent. The Compensation Committee
considers all matters of compensation with respect to the chief executive
officer, president, and any vice president and makes recommendations to the
Board regarding the compensation of such persons. The Compensation Committee
also makes determinations with respect to the granting of stock options with
respect to directors who are also employees of the Company.
Director Compensation
The Company does not presently have in place any arrangement for compensating
its directors for their service as such. During 1997, outside directors received
compensation of $600 per meeting and were reimbursed for certain expenses of
attending meetings. No additional fees were paid for attending Audit or
Compensation Committee meetings.
Significant Employees
Don Barkley, 44, joined the Company in 1983 as Master Brewer and has served in
that capacity continuously since then. In 1993 Mr. Barkley was the President and
representative to the national board of governors of the Master Brewers
Association of the Americas, Northern California District. Mr. Barkley holds a
Bachelor of Science degree in fermentation science from the University of
California, Davis.
P.A. Murali, 40, joined the Company in November 1997 as Controller and
Secretary. For more than five years before joining the Company, Mr. Murali
served as General Manager of Finance and Accounts of the Brewery Division of The
UB Group in Bangalore, India. Mr. Murali holds a Bachelor of Commerce degree
from the University of Madras in India and is a Chartered Accountant.
PROPOSAL NO. 2 RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Company has appointed Moss Adams LLP as its independent auditors to perform
the audit of the Company's financial statements, and the shareholders are being
asked to ratify such appointment. Moss Adams LLP audited the Company's financial
statements for fiscal 1997. Representatives of Moss Adams LLP are expected be
present at the Meeting, will have an opportunity to make a statement at the
Meeting if they desire to do so, and are expected to be available to respond to
appropriate questions. Ratification of the appointment of Moss Adams LLP
requires the vote of a majority of the shares of the Company's Common Stock
present in person or represented by a proxy at the Meeting and entitled to vote.
Abstentions have no effect.
THE BOARD RECOMMENDS A VOTE IN FAVOR OF THE
RATIFICATION OF THE APPOINTMENT OF MOSS ADAMS LLP
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<PAGE>
SHARE OWNERSHIP OF MANAGEMENT
The following table sets forth certain information known to the Company
regarding the beneficial ownership of the Company's Common Stock and Series A
Preferred Stock as of April 7, 1998, for (a) each shareholder known by the
Company to own beneficially 5% or more of the outstanding shares of its Common
Stock or Series A Preferred Stock; (b) each director and nominee; and (c) all
directors and executive officers of the Company as a group. Except as noted, the
Company believes that the beneficial owners of the Common Stock and Series A
Preferred Stock listed below, based on information furnished by such owners,
have sole investment and voting power with respect to such shares, subject to
community property laws where applicable.
<TABLE>
COMMON STOCK:
<CAPTION>
Shares Approximate
Beneficially Percentage
Name and Address Owned(1) Owned(1)
---------------- -------- --------
<S> <C> <C>
United Breweries of America, Inc.+ ................................................... 2,149,647(2) 48.2%
Vijay Mallya, Ph.D.+ ................................................................. 2,149,647(3) 48.2%
H. Michael Laybourn++ ................................................................ 292,867(4) 6.5%
John Scahill++ ....................................................................... 252,309(5) 5.6%
Norman H. Franks ..................................................................... 245,512(6) 5.5%
2141 Arroyo Drive
Ukiah, CA 95449
R.H.B. (Bobby) Neame ................................................................. -- --
Shepherd-Neame
17 Court St.
Faversham, Kent ME13 3AX UK
Kent Price ........................................................................... -- --
IBM
425 Market St.
San Francisco, CA 94105
Sury Rao Palamand, Ph.D. ............................................................. -- --
50 Crestwood Executive Center, Suite 207
St. Louis, MO 63126
Jerome G. Merchant+ .................................................................. -- --
Yashpal Singh++ ...................................................................... -- --
All directors and executive officers as a group (7 persons) .......................... 2,442,514(7) 54.5%
SERIES A PREFERRED STOCK:
Shares Approximate
Beneficially Percentage
Name and Address Owned Owned
---------------- -------- --------
H. Michael Laybourn............................................... 6,100 2.7%
All directors and executive officers as a group (8 persons)....... 6,100 2.7%
<FN>
--------------------------
+ Three Harbor Drive, Suite 115
Sausalito, CA 94965
++ 13351 Hwy. 101 South
Hopland, CA 95449
(1) Applicable percentage of ownership is based on 4,463,385 shares of Common
Stock outstanding. Beneficial ownership is determined in accordance with
the rules of the Securities and Exchange Commission, and includes voting
and investment power with respect to such shares. Shares of Common Stock
subject to a contract of purchase or options currently exercisable or
exercisable within 60 days after the date of this Proxy Statement are
deemed outstanding for computing the percentage ownership of the person
obligated to purchase the shares or holding the options but are not deemed
outstanding for computing the percentage of any other person.
(2) Does not include 932,281 outstanding shares, and 26,500 shares subject to
options which are presently exercisable or will be exercisable within 60
days, all held by Messrs. Laybourn, Scahill, and Franks and two other
shareholders pursuant to a Shareholders' Agreement which requires the
parties thereto to vote for four directors designated
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<PAGE>
by UBA and two additional independent directors who are acceptable to UBA,
and which grants UBA a right of first refusal with respect to such shares.
(3) Dr. Mallya may be deemed to be a beneficial owner of UBA because the shares
of UBA are owned by a foreign corporation, the shares of which are
controlled by fiduciaries who may exercise discretion in Dr. Mallya's favor
amongst others. Dr. Mallya is the Chairman and Chief Executive Officer of
UBA.
(4) Includes 19,500 shares subject to options which are presently exercisable
or will be exercisable within 60 days. Does not include 2,808,561
outstanding shares and 7,000 shares subject to options which are presently
exercisable or will be exercisable within 60 days, held by UBA, Messrs.
Scahill and Franks, and two other shareholders, all of which are subject to
a Shareholders' Agreement which requires the parties thereto to vote for
one director designated by Mr. Laybourn.
(5) Includes 3,500 shares subject to options which are presently exercisable or
will be exercisable within 60 days.
(6) Does not include 175 shares owned by Mr. Franks's wife. Mr. Franks
disclaims any beneficial ownership of shares held in the name of his wife.
(7) Includes 19,500 shares subject to options which are presently exercisable
or will be exercisable within 60 days. Does not include 658,914 outstanding
shares, and 7,000 shares subject to options which are presently exercisable
or will be exercisable within 60 days, all held by Messrs. Scahill and
Franks and two other shareholders pursuant to a Shareholders' Agreement
which requires the parties thereto to vote for four directors designated by
UBA, one director designated by Mr. Laybourn, and two additional
independent directors who are acceptable to UBA, and which grants UBA a
right of first refusal with respect to such shares.
</FN>
</TABLE>
Change in Control Arrangements
On October 24, 1997, Mendocino Brewing entered into a series of agreements with
UBA. The agreements included an Investment Agreement with UBA whereby the
Company issued 2,117,647 shares of common stock to UBA at a purchase price of
$4.25 per share in exchange for $4,000,000 cash and $5,000,000 in assets in the
form of 100% of the outstanding interests of Releta Brewing Company LLC, a
limited liability company formed by UBA for the purpose of acquiring a brewery
in Saratoga Springs, New York. The foregoing shares were in addition to 2,000
shares the Company issued to UBA on October 24, 1997, pursuant to a Refundable
Deposit Agreement with The UB Group dated May 2, 1997, in consideration of a
$250,000 refundable deposit toward the purchase of the foregoing securities. UBA
subsequently acquired an additional 30,000 shares from a shareholder in a
private transaction.
The Investment Agreement also granted UBA the following rights, among others:
(a) a right of first offer with respect to future sales of Company securities to
ensure that UBA may purchase a number of shares offered by the Company
sufficient to maintain UBA's percentage of ownership on a fully-diluted basis at
45%; (b) a prohibition on the issuance by the Company of securities that would
enable any other party to exceed the percentage ownership of the voting
securities owned by UBA; (c) a prohibition on issuing senior securities without
the consent of UBA; and (d) prohibitions on purchases or sales of assets in
amounts in excess of 50% of the book value of the Company's assets. The
restrictions terminate when UBA's share ownership falls below certain levels as
specified in the Investment Agreement.
In connection with, and as a condition to, UBA's investment in the Company, (a)
the Board of Directors increased the size of the Board from five to seven
persons as permitted by the bylaws of the Company; (b) Norman H. Franks and
Michael F. Lovett resigned from the Board of Directors; (c) Vijay Mallya, O'Neil
Nalavadi, Jerome G. Merchant, and Yashpal Singh were appointed to fill the
resulting vacancies on the Board of Directors; (d) Eric G. Bradley and Daniel R.
Moldenhauer agreed to resign as directors effective December 31, 1997; and (e)
Dr. Mallya was elected Chairman of the Board and Chief Executive Officer of the
Company. Messrs. Nalavadi, Bradley, and Moldenhauer subsequently resigned from
the Board of Directors and Messrs. Neame, Price, and Palamand were appointed to
fill the resulting vacancies.
Also in connection with, and as a condition to, UBA's investment in the Company,
UBA, Messrs. Laybourn, Scahill, Franks, and two other shareholders entered into
a Shareholders' Agreement that requires the parties to vote their shares in any
election of Company directors in favor of four individuals designated by UBA,
two independent directors acceptable to UBA, and one individual selected by
Michael Laybourn. The Shareholders' Agreement also grants UBA a right of first
refusal with respect to any sale of the Company's capital stock by the other
parties to the Agreement. The Shareholders' Agreement expires on December 31,
2004.
Immediately before the transaction, the Company's officers, directors, and
founders and their spouses owned, in the aggregate, 963,926 shares of the
Company's outstanding Common Stock, which represented 41.1% of the
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<PAGE>
outstanding Common Stock. Upon completion of the transaction, UBA owned
2,119,647 shares representing 47.5% of the outstanding shares of Common Stock.
UBA's subsequent acquisition of an additional 30,000 shares from a shareholder
in a private transaction increased UBA's percentage of share ownership to 48.2%.
The cash used by UBA to make the investment was generated by contributions to
capital from UBA's shareholder and its affiliates. The shares of UBA are owned
by a foreign corporation, the shares of which are controlled by fiduciaries who
may exercise discretion in Dr. Mallya's favor amongst others. Dr. Mallya is the
Chairman and Chief Executive Officer of UBA.
EXECUTIVE COMPENSATION
The following table sets forth the annual compensation, including salary,
bonuses, and certain other compensation, paid by the Company to its Chief
Executive Officer during each of the fiscal years ended December 31, 1995, 1996,
and 1997. None of the Company's other executive officers received total
compensation in excess of $100,000 in any of those years.
Annual Compensation
Fiscal -------------------- All Other
Name and Principal Position Year Salary Bonus Compensation*
- --------------------------- ---- ------ ----- -------------
Vijay Mallya** .................... 1997 $ 0 $ 0 $ 0
Chief Executive Officer
H. Michael Laybourn** ............. 1997 90,307 0 4,182
Chief Executive Officer ...... 1996 89,016 0 7,053
1995 89,016 22,255 9,804
- ----------
* Includes an allowance for health insurance, life insurance, disability
insurance, and participation in the Company's profit sharing retirement
plan (annual discretionary contributions by the Company of up to 15% of
gross compensation).
** Dr. Mallya became Chief Executive Officer in October 1997, at which time
Mr. Laybourn ceased serving as Chief Executive Officer although remaining
President of the Company.
<TABLE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
(Individual Grants)
<CAPTION>
Percent Of
Number Of Total Options/
Securities SARs Granted
Underlying To Employees Exercise Or
Options/ SARs In Fiscal Base Price
Name Granted (#) Year ($/Sh) Expiration Date
(a) (b) (c) (d) (e)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
H. Michael Laybourn 12,500 $8.80 09/18/01
44.2%
H. Michael Laybourn 20,000 $9.2125 10/16/01
</TABLE>
Employment Agreement
The Company has entered into an employment agreement with President Michael
Laybourn. The agreement provides for minimum salary of $120,000. The term of the
employment agreement expires December 24, 1998. Upon any termination of Mr.
Laybourn's employment, other than "for cause" as defined in the agreement, Mr.
Laybourn is entitled to continue to receive his base compensation through the
term of the agreement. The agreement also provides that if Mr. Laybourn's
employment is terminated by the Company at any time without cause, he may
receive up to six months of salary continuation, subject to certain limitations.
Except as stated above, the agreement
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<PAGE>
does not provide for any benefits as a result of resignation or retirement,
whether as a result of a change in control or otherwise.
CERTAIN TRANSACTIONS
On October 11, 1996, in recognition of Mr. Laybourn's personal guaranty of an
equipment lease, the Company agreed to grant President Michael Laybourn a 5-year
option to purchase 12,500 shares of Common Stock of the Company at an exercise
price of $8.80 per share. Mr. Laybourn's guaranty has now terminated in
accordance with its terms. The option was granted in January 1997.
On October 24, 1997, in connection with UBA's initial investment in the Company,
the Company acquired from UBA 100% of the outstanding interests of Releta
Brewing Company LLC ("Releta"), a limited liability company formed by UBA for
the purpose of acquiring a brewery in Saratoga Springs, New York. The brewery
was approximately one year old, and was built at an original investment of $8.7
million. The Company paid UBA $5 million in Common Stock valued at $4.25 per
share for the interests in Releta. UBA represented to the Company that the $5
million represented UBA's actual combined out of pocket costs incurred in taking
possession of the brewery and in connection with certain related transactions.
UBA has agreed in principle to provide the Company with a credit facility of up
to $2 million, to be funded in installments of up to $300,000 each. The advances
are to be secured by the Company's brewery in Saratoga Springs, New York. The
advances are to bear interest at prime plus 1.5% and are to be due and payable
18 months after the date of the advance. The advances are convertible into
unregistered shares of the Company's common stock at a rate of $1.50 per share.
The arrangement was approved by a committee consisting of director Michael
Laybourn (the President of the Company) and independent directors Kent Price and
Sury Rao Palamand on February 19, 1998. Although formal documentation of the
arrangement is pending, UBA has advanced $305,000 to the Company as of April 11,
1998.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Based solely upon a review of Forms 3, 4, and 5 and amendments thereto furnished
to the Company during fiscal 1997, no person who, at any time during fiscal 1997
was a director, officer, beneficial owner of more than 10 percent of the Common
Stock of the Company failed to file on a timely basis, as disclosed in the above
forms, reports required by Section 16(a) of the Securities Exchange Act of 1934
during the most recent fiscal year or prior fiscal years.
SHAREHOLDER PROPOSALS TO BE PRESENTED AT NEXT ANNUAL MEETING
Proposals of shareholders that are intended to be presented by such shareholders
at the Company's 1999 Annual Meeting must be received by the Company no later
than November 30, 1998.
AVAILABILITY OF FORM 10-KSB
The Company will provide without charge to any shareholder, upon written
request, a copy of the Company's Annual Report on Form 10-KSB. Such written
requests should be made to the Company at Mendocino Brewing Company, Inc., Attn:
Sarah T. McDaniel, Shareholder Relations, Post Office Box 400, 13351 South
Highway 101, Hopland, California 95449 (800) 733-3871. A copy of Form 10-KSB is
included in the Company's Annual Report to Shareholders distributed with this
proxy statement.
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<PAGE>
OTHER BUSINESS
The Board does not presently intend to present matters other than the foregoing
for action by the shareholders at the Meeting, and, so far as is known to the
Board, no matters are to be brought before the Meeting except as specified in
the notice of the Meeting. As to any business that may properly come before the
Meeting, however, it is intended that proxies, in the form accompanying this
Proxy Statement, will be voted in accordance with the judgment of the persons
voting such proxies.
By Order of the Board of Directors
Hopland, California P.A. Murali
April 20, 1998 Secretary
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<PAGE>
SKU 3680-PS-98
<PAGE>
APPENDIX A
Front of proxy card:
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
MENDOCINO BREWING COMPANY, INC.
The undersigned shareholder of MENDOCINO BREWING COMPANY, INC., a
California corporation (the "Company") hereby acknowledges receipt of the Notice
of Annual Meeting of Shareholders and Proxy Statement each dated April 20, 1998,
and appoints Vijay Mallya, Michael Laybourn, Robert Neame, Kent Price, Sury Rao
Palamand, Jerome Merchant and Yashpal Singh, and each of them, as proxy of the
undersigned with power of substitution and revocation, to represent the
undersigned at the Annual Meeting of the Shareholders of the Company, to be held
on Monday, May 11, 1998 at 1:00 p.m. at the Ukiah Valley Conference Center
located at 200 South School Street, Ukiah, CA 95482, and at any adjournment
thereof, and to vote all shares of Common Stock which the undersigned would be
entitled to vote as if the undersigned were present and voting the shares.
This proxy will be voted in the manner directed herein by the
undersigned shareholder. If no direction is made, this proxy will be voted FOR
the election of the nominees named and FOR Proposal 2. In their discretion the
Proxies are authorized to vote upon such other business as may properly come
before the meeting.
SEE REVERSE SIDE. If you wish to vote in accordance with the Board of
Directors' recommendations, just sign on the reverse side. You do not need to
mark any boxes.
SEE REVERSE SIDE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE
<PAGE>
Back of proxy card:
/X/ Please mark
votes as in
this example.
The Board of Directors recommends a vote FOR Proposals 1 and 2.
1. Election of all 7 Directors (or if any nominee is not available for
election, such substitute as the Board of Directors may designate).
Nominees: Vijay Mallya, Michael Laybourn, Robert Neame, Kent Price,
Sury Rao Palamand, Jerome Merchant, Yashpal Singh
FOR ALL WITHHOLD FOR ALL
/_/ /_/
/_/ ----------------------------------------
To withhold authority to vote for any individual nominee write that nominee's
name in the space provided above and mark box.
2. To ratify the selection of Moss Adams FOR AGAINST ABSTAIN
as the Company's independent auditors. /_/ /_/ /_/
MARK HERE MARK HERE
FOR ADDRESS IF YOU PLAN
CHANGE AND /_/ TO ATTEND /_/
NOTE AT LEFT THE MEETING
Please sign exactly as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such.
Signature: Date: ---------------------------------- --------------
Signature: Date: ---------------------------------- --------------
