<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 1O-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission File Number : 33-95606
MILE HIGH BREWING COMPANY
(Name of small business issuer in its charter)
OREGON 93-1145738
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2401 BLAKE STREET
DENVER, COLORADO 80205
(Address of principal executive offices and zip code)
(303) 299-0147
(Issuer's telephone number)
SECURITIES REGISTERED UNDER SECTION 12(b) OF THE EXCHANGE ACT: NONE
SECURITIES REGISTERED UNDER SECTION 12(g) OF THE EXCHANGE ACT:
COMMON STOCK, NO PAR VALUE
(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 [ ]
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of the Form 10-KSB or any
amendment to this Form 10-KSB. [ ]
Issuer's revenues for its most recent fiscal year were $1,600,915. The
aggregate market value of voting stock held by non-affiliates of the
registrant: Not applicable The number of shares outstanding of the
Registrants Common Stock as of February 28, 1997 was 4,693,787 shares.
The index to exhibits appears on page 17 of this document.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
DOCUMENTS INCORPORATED BY REFERENCE
None.
<PAGE>
MILE HIGH BREWING COMPANY
FORM 10-KSB INDEX
PART I
Page
Item 1. Description of Business 2
Item 2. Description of Property 4
Item 3. Legal Proceedings 5
Item 4. Submission of Matters to a Vote of Security Holders 5
PART II
Item 5. Market for Common Equity and Related Stockholder Matters 5
Item 6. Management's Discussion and Analysis or Plan of Operation 5
Item 7. Financial Statements 11
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 11
PART III
Item 9. Directors, Executive Officers, Promoters and Control
Persons; Compliance with Section 16(a) of the
Exchange Act 12
Item 10. Executive Compensation 13
Item 11. Security Ownership of Certain Beneficial Owners
and Management 14
Item 12. Certain Relationships and Related Transactions 14
Item 13. Exhibits and Reports on Form 8-K 17
Signatures 18
1
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
Mile High Brewing Company, inc. (the "Company" or "Mile High Brewing") was
organized in June 1994 for the purpose of developing and operating one or more
breweries in Colorado for the production of high quality, hand-crafted ales for
sale in bottle and draft. In November 1996, the Company ceased brewing its
Timberline TM Ales and is currently exploring alternatives for selling its
existing assets. To date, the Company has engaged in preliminary negotiations
with several groups interested in acquiring the Brewery. Until its assets are
sold the Company intends to utilize the Brewery to brew beer for third parties
under limited contract brewing agreements.
The Company's parent, Willamette Valley, Inc. Microbreweries Across America
("WVI") currently holds the following ownership interests in the Company and
affiliated breweries: Aviator Ales -- 51%; Mile High Brewing -- 51%; Bayhawk
Ales, Inc. ("Bayhawk Ales") -- 57%; and North Country Brewing Company, Inc.
("North Country") -- 100%. The breweries are, at times, referred to herein
collectively, without North Country, as the "Microbreweries". See also
"Management's Discussion and Analysis - Subsequent Events."
STRATEGY
In January 1996, the Company and the Company's affiliates, WVI, Aviator Ales
and Bayhawk Ales, established a strategic alliance (the "Alliance") with
Nor'Wester Brewing Company, Inc. ("Nor'Wester"). The Alliance is created
through a Strategic Alliance Agreement among the Alliance members, a General
Services Agreement between the WVI and Nor'Wester and separate Cooperative
Brewing Agreements between the Nor'Wester and each of Aviator Ales, Mile High
Brewing and Bayhawk Ales (the "Cooperative Brewers"). For a more complete
description of the agreements under the Alliance, see Item 12 "Certain
Relationships and Related Transactions."
The initial purpose of the Alliance was to develop a national market for the
Nor'Wester brand. As Nor'Wester and some of its competitors attempted to
expand their brands nationally, Nor'Wester learned that a national marketing
strategy for the Nor'Wester brand is currently not cost effective. Consumers
have shown strong support for craft beers brewed in or near their local
markets and the Company believes the appropriate strategy is to develop and
protect strong local craft beer brands. The Company further believes that
this strategy can be strengthened through the Affiliated Companies' ability
to build a network of breweries each producing their own brand with local
appeal while benefiting from operating efficiencies, the decrease in
production, marketing and distribution costs and the increase in the ability
of the Affiliated Companies to finance growth and provide shareholders with a
liquid market for their shares. Once these local brands are established, the
Affiliated Companies may expand the distribution of one or more of their beer
styles into additional selected markets.
To implement this new strategy, the Boards of Directors of the Affiliated
Companies have elected to consolidate their entities under a single entity,
United Craft Breweries, Inc. ("UCB"). Furthermore, on January 30, 1997 the
Affiliated Companies entered into a definitive investment agreement with United
Breweries of America, Inc. ("UBA") for the
2
<PAGE>
purpose of funding operations until consolidation is completed and provide
for future growth thereafter. For additional information, see "Management's
Discussion and Analysis - Subsequent Events."
Should the proposed consolidation occur, the Cooperative Brewing Agreements,
the Strategic Alliance Agreement and the General Services Agreement will
terminate.
THE INDUSTRY
The craft brewing segment of the United States brewing industry is comprised of
regional craft brewers such as the Company (i.e. brewers that produces between
15,000 and 1,000,000 barrels a year), contract brewers (i.e. companies that
formulate and market products brewed by third-party mass-production brewers),
microbrewers (i.e. brewers that produce under 15,000 barrels of craft beer a
year) and brewpubs (i.e. a combination restaurant and brewery which produces
principally for on-site consumption). Craft beers are full-flavored beers,
brewed in traditional European brewing styles with quality hops, malted barley,
yeast and water.
Beginning in California, Oregon and Washington and more recently in the New
England states, Colorado and other regions across the country, regional craft
brewers, contract brewers, microbrewers, and brewpubs emerged to form the
craft beer industry. Certain craft brewers, such as the Company, have been
able to grow from microbrewers into regional craft brewers by increasing the
size of their breweries, while maintaining traditional European brewing
methods. Contract brewers, who generally do not have their own brewing
facilities, have taken advantage of demand by retaining industrial brewers to
perform contract brewing at otherwise underutilized industrial brewing
facilities. Industrial brewers have also sought to appeal to this demand for
craft beers by introducing their own fuller-flavored specialty beers or by
acquiring or forming partnerships with existing craft brewers.
PRODUCTION AND PRODUCTS
The Company's Denver Brewery is not currently producing or selling any of its
own products. The Denver Brewery is, however, performing a small amount of
contract brewing for third party brewers and has a current production capacity
of 39,000 barrels.
COMPETITION
The craft beer segment is highly fragmented and competitive, especially in
the Pacific Northwest, which the Company believes is one of the most
developed craft beer markets in terms of number of breweries and consumer
awareness. The Company's breweries compete primarily with other craft
brewers, contract brewers, producers of imported beers and mass-market
industrial brewers. The principal means of competition in the craft beer
segment are product quality, taste, consistency and freshness, brand and
product differentiation, distribution methods and area coverage, promotional
methods, packaging, development of new products and, to a lesser extent,
pricing.
The craft beer industry has become saturated with numerous brands each
comprised of several beer styles. As a result, growth rates are slowing,
especially in the Pacific Northwest where there are many brands vying for
available shelf space and taps. The industry is also facing a loss of shelf
space, and therefore sales, to the industrial brewers,
3
<PAGE>
who have created fuller-flavor specialty beers and are threatening to
withdraw their business from distributors who also distribute brewery brands.
The Company expects competition among craft brewers to continue to increase,
possibly resulting in decreases in market share, growth rates and product
prices.
Many of the Company's competitors in the craft beer segment, including Pyramid
Breweries, Redhook Ale Brewery, Widmer Brewing, Full Sail Brewing and Boston
Beer Company, have greater financial and other resources than the Company.
REGULATION AND DRAM SHOP LIABILITY
The Company's business is highly regulated at federal, state and local
levels. Various permits, licenses and approvals necessary to the Company's
brewery operations and the sale of alcoholic beverages are required from
various agencies, including the U.S. Treasury Department, Bureau of Alcohol,
Tobacco and Firearms (the "BATF"); the United States Department of
Agriculture; the United States Food and Drug Administration; state alcohol
regulatory agencies in the states in which the Company sells its products;
and state and local health, sanitation, safety, fire and environmental
agencies. In addition, the beer industry is subject to substantial federal
and state excise taxes.
Management believes that the Company currently has all licenses, permits and
approvals necessary for its current operations and is in material compliance
with all applicable government regulations. However, existing permits or
licenses could be revoked if the Company fails to comply with the terms of such
permits or licenses, and additional permits or licenses could in the future be
required for the Company's existing or expanded operations. If licenses,
permits or approvals necessary for the Company's brewery operations were
unavailable or unduly delayed, or if any such permits or licenses were revoked,
the Company's ability to conduct its business could be substantially and
adversely affected.
TRADEMARKS
The Company has filed for Federal trademark protection on its flavor styles
which include, but are not limited to, "Ales With An Altitude-TM-" and White
Forest Ale-TM-". The Company's policy is to preserve registration of its marks
whenever possible and to oppose vigorously an infringement of its marks.
EMPLOYEES
At December 31, 1996, the Company had a total of 6 full time and 1 part time
employee. None of the Company's employees are covered by collective bargaining
agreements, there have been no work stoppages and the Company believes that
relations with its employees are adequate.
ITEM 2. DESCRIPTION OF PROPERTY
The Denver Brewery is located in an approximately 14,200 square foot leased
facility in lower downtown Denver, Colorado. The Company has executed a 15
year lease with the right to renew for 2 additional terms of 5 years each.
The Denver Brewery has a maximum annual production capacity of 60,000
barrels. The Denver Brewery also has a high speed Krones bottling line
capable of bottling 100 twelve-ounce bottles of beer per minute. The
4
<PAGE>
Company's assets are currently being held for sale and the Company intends to
assign the lease to the purchaser of the assets.
ITEM 3. LEGAL PROCEEDINGS
The Company and Mr. John Carter, a Vice President of the Company, are
defendants in a suit filed by United Glassware and China Company on November
5, 1996 in the District Court, City and County of Denver, Colorado. The suit
claims that the defendants owe $54,700 on an alleged promissory note for
materials supplied to Mile High Brewery. The suit is seeking damages in the
sum of $54,700 in principal and unspecified amounts for interest and attorney
fees. Mile High Brewery has asserted vigorous defenses and filed certain
counterclaims.
From time to time, the Company becomes involved in ordinary, routine or
regulatory legal proceedings incidental to its business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's shareholders during the
quarter ended December 31, 1996.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
There is no public trading market for the Company's Common Stock.
The approximate number of shareholders of record on December 31, 1996 was
2,594. There were no cash dividends declared or paid in fiscal years 1996 or
1995. The Company does not anticipate declaring such dividends in the
foreseeable future.
The Company issued a total of 3,620 unregistered shares of its Common Stock at
various times throughout July, August and October 1996 to various employees.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
FORWARD-LOOKING STATEMENTS
This Management's Discussion and Analysis of Financial Condition and Results
of Operation and other sections of this Form 10-KSB contain forward-looking
statements within the meaning of the Private Securities Litigation Reform Act
of 1995. These forward-looking statements involve risks and uncertainties
that are based on current expectations, estimates and projections about the
Company's business, management's beliefs and assumptions made by management.
Words such as "expects," "anticipates," "intends," "plans," "believes,"
"seeks," "estimates" and variations of such words and similar expressions are
intended to identify such forward-looking statements. Therefore, actual
outcomes and results may differ materially from what is expressed or
forecasted in such forward-looking statements due to numerous factors,
including, but not limited to,
5
<PAGE>
availability of financing for operations and payment of past due creditors,
ability to sell the Company's assets on favorable terms, successful
completion of the planned consolidation of the Affiliated Companies, and
other risks detailed below as well as those discussed elsewhere in this Form
10-KSB and from time to time in the Company's Securities and Exchange
Commission filings and reports, including but not limited to the Company's
Prospectus dated June 9, 1996. Copies of the Prospectus are available from
the Company. In addition, such statements could be affected by general
industry and market conditions and growth rates, and general domestic
economic conditions.
RESULTS OF OPERATIONS
The following table reflects selected data from the Company's statements of
operations stated as a percentage of net sales:
YEAR ENDED DECEMBER 31,
-----------------------
1996 1995
---------- ----------
Gross sales 105.6% 101.8%
Less excise taxes 5.6 1.8
---------- ----------
Net sales 100.0 100.0
Cost of goods sold 125.7 103.8
Selling, general and administrative expenses 52.2 342.5
---------- ----------
Operating loss (77.9) (346.3)
---------- ----------
Loss before income taxes (179.5) (314.5)
---------- ----------
Net loss (179.5)% (314.5)%
========== ==========
GROSS SALES. The Company began brewing and selling beer in August 1995, with
gross revenues from beer and retail products totaling $1,600,915 for the year
ended December 31, 1996 and $216,498 for the year ended December 31, 1995. The
increase is primarily attributable to the fact that the Company did not start
selling beer until late August 1995 and the addition of the sale of $796,549
(50 percent of gross sales) of Nor'Wester brand beer under the Cooperative
Brewing Agreement during 1996. The Company ceased operations in November
1996 and is researching various options for the disposal of its assets.
During this time, the Company is performing a limited amount of contract
brewing for third party entities.
The Company's facility has a current annual production capacity of 39,000
barrels and sold 9,932 barrels and 658 barrels during 1996 and 1995,
respectively.
EXCISE TAXES. Excise taxes increased to $85,426 (5.3 percent of gross sales)
for the year ended December 31, 1996 from $3,917 (1.8 percent of gross sales)
for the year ended December 31, 1995. The increase as a percent of gross sales
is a result of increased sales of beer products in relation to retail items
during 1996.
COST OF GOODS SOLD. Cost of goods sold totaled $1,905,335 (126 percent of net
sales) for the year ended December 31, 1996 compared to $220,656 (104 percent
of net sales) for the year ended December 31, 1995. The cost of goods sold
percentage continues to reflect the disproportionate cost of production for
goods sold during a period when the facility was operating at less than its
maximum designed capacity. In addition, the Company achieved lower margins
on products produced and sold under the Cooperative Brewing Agreement during
1996.
6
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
("SG&A") expenses increased to $790,615 (52 percent of net sales) for the year
ended December 31, 1996 from $728,021 (342 percent of net sales) for the year
ended December 31, 1995. SG&A expenses reflect operating management and
administrative services provided by the Company's parent, WVI, as well as
direct charges such as selling and administrative salaries and advertising
expenses. The increase in SG&A expenses is primarily attributable to eleven
months of operations in 1996 and increased shipping costs as the Company
introduced its products into surrounding states, offset in part by higher
costs incurred during the first months of the Company's operations in late
1995.
OTHER. Other expenses, net of $194,974 represents the write off of legal and
accounting fees related to the Company's discontinued public offering.
Loss on disposition of business of $1,306,879 resulted from the write down of
the Company's assets held for sale to net realizable value.
NET LOSS. Net loss increased to $2,720,272 for the year ended December 31,
1996 from $668,481 for the year ended December 31, 1995 as a result of the
individual line items discussed above.
LIQUIDITY AND CAPITAL RESOURCES
In June 1996, the Company embarked upon its second direct public stock offering
to sell up to 1,053,000 shares of Common Stock at $1.85 per share, generating
estimated net proceeds of approximately $1,948,050. The offering has failed to
raise the minimum escrow amount of $750,000. Furthermore, the terms of the
Investment Agreement with UBA prohibits the Company from selling any of its
securities without the approval of UBA. In October 1996, the Company elected
to terminate the offering and return funds held in escrow to investors.
Cash and cash equivalents decreased $349,371 to $30,320 at December 31, 1996
from $379,691 at December 31, 1995. The decrease is primarily a result of
$662,434 net cash used for operating activities including $1,306,879 write down
of assets held for sale to net realized value, $385,712 used for capital
expenditures and $698,775 net cash provided by financing activities, including
$763,933 in net borrowings from WVI and affiliated companies.
Working capital deficit was $2,950,424 at December 31, 1996 compared to a
working capital deficit of $89,510 at December 31, 1995. The current ratio
decreased to .04:1 at December 31, 1996 from .87:1 at December 31, 1995.
Accounts payable increased $672,914 to $816,664 at December 31, 1996 from
$143,750 at December 31, 1995. At December 31, 1996 and currently, the Company
was past due on $722,284 and $781,574, respectively, of its accounts payable.
During 1995, the Company's parent loaned $800,000 to the Company for the
purpose of paying for leasehold improvements, the purchase of capital assets
and for funding working capital. When issued, the note was unsecured and
carried no interest, however, upon termination of the Company's offering in
October 1996, the note converted into an installment note at 10 percent per
annum and was secured by all assets of the Company. The note was due in
monthly installments of $5,300, with the remaining principal balance
7
<PAGE>
due 18 months after the issuance of the note. Because management intends to
merge the Company into a new company and dispose of all of the assets of the
Company, the entire balance is considered to be payable currently. The
Company expects to repay a portion of the loan with the proceeds it expects
to receive from disposal of assets and any remaining payables to WVI or to
Nor'Wester will be considered in the conversion of the Company's shares into
shares of the new company to be formed. See "Subsequent Events" below.
In November 1996 the Company ceased operations, except for a small amount of
contract brewing for third party brewers and is currently researching various
options for liquidating the Company's assets.
SUBSEQUENT EVENTS
PENDING CONSOLIDATION, BRIDGE LOANS, SUBSEQUENT INVESTMENT AND RENEGOTIATION OF
THE TERMS
On January 30, 1997, the Company, Nor'Wester, WVI, Aviator Ales, and Bayhawk
Ales (together the "Affiliated Companies"), entered into a definitive
Investment Agreement (the "Investment Agreement") with United Breweries of
America, Inc. ("UBA"). Under the terms of the Investment Agreement, UBA has
agreed to invest $8.63 million in the form of bridge loans and cash at
closing in exchange for a 45% equity interest in the consolidated businesses
of the Affiliated Companies. UBA, an affiliate of The UB Group of Bangalore,
India, was formed for the purpose of investing in the U.S. craft beer
industry. The UB Group is a diversified multi-national corporation whose
major operations consist of the production and sale of beer and spirits
through affiliated companies which operate in 20 countries on four
continents.
Under the terms of the Investment Agreement, the Affiliated Companies have each
agreed to consolidate under the ownership of a new entity, United Craft
Brewers, Inc. ("UCB"). UCB will serve as a holding company for companies
which operate each of the five affiliated breweries--the Portland Brewery,
the Saratoga Springs Brewery, the Seattle Brewery, the Denver Brewery and the
Southern California Brewery. The proposed consolidation is a condition to
receipt of UBA's investment which will be made directly in UCB.
CONSOLIDATION. Under the proposed consolidation each of the Affiliated
Companies will become a wholly-owned subsidiary of UCB pursuant to a merger and
share exchange by which newly registered shares of UCB will be issued in
exchange for outstanding shares of the Affiliated Companies based on the share
exchange rates described below. The merger and share exchange has been
unanimously approved by the Boards of Directors of each of the Affiliated
Companies but remains subject to approval by shareholders of each Affiliated
Company. Following completion of the consolidation, shareholders of each
Affiliated Company will hold shares in UCB, which is intended to be listed for
trading on the Nasdaq National Market System under the symbol "ALES". The
consolidation is primarily an administrative step designed to simplify the
ownership structure of the Affiliated Companies, increase the operating
efficiencies of each brewery, decrease the production, marketing and
distribution costs of each brewery, increase the ability of the combined
breweries to finance operations and possible growth and provide all
shareholders with a liquid market for their shares.
8
<PAGE>
The outstanding shares of each of the Affiliated Companies will be exchanged
for shares in UCB according to the following exchange ratios which are based
on the average closing price of Nor'Wester's Common Stock for the 20 trading
days immediately preceding January 30, 1997, the date of execution of the
Investment Agreement:
COMPANY EXCHANGE RATIO
----------------- --------------
Nor'Wester 1:1
WVI 1.99159:1
Aviator Ales 2.98739:1
Bayhawk Ales 1.99159:1
Mile High Brewing 2.98739:1
BRIDGE LOANS. Under the Investment Agreement, UBA is obligated to provide
Nor'Wester with up to $2.75 million in bridge loans as interim financing during
the consolidation phase. Advances under the bridge loan are expected to be
used by Nor'Wester to help cover operating expenses and pay existing
creditors of the Affiliated Companies until closing of the investment, at
which time the balance of UBA's $8.6 million investment is expected to be
made. Of the $2.75 million, $1.5 million has already been advanced and
spent as of the date of this report. All bridge loans are made pursuant to a
Credit Agreement between Nor'Wester and UBA, the principal terms of which are
as follows:
(1) The bridge loans will be made at times and in amounts mutually
determined by UBA and Nor'Wester based on a periodic review of the cash
flow needs and creditor demands of the Affiliated Companies;
(2) Interest on the bridge loan accrues at 11.25% per annum and is
payable to UBA in cash at closing of UBA's investment.
(3) All principal and interest is secured by the assets of North Country
Joint Venture, LLC (owner and operator of the Saratoga Springs Brewery)
and by Nor'Wester's ownership interest in the joint venture LLC. Repayment
of all principal and interest is guaranteed personally by Jim Bernau.
(4) As a condition to each advance under the bridge loan, neither Jim
Bernau nor any of the Affiliated Companies shall be in breach of any
representation, warranty or covenant under the credit documents or the
Investment Agreement and there shall not be any "material adverse effect"
in the businesses of the Affiliated Companies as a whole.
(5) Unless converted at closing, all advances under the bridge loan
mature 60 days after termination of the Investment Agreement or the
occurrence of certain events of default under the credit documents
(including the breach by an Affiliated Company or Mr. Bernau of any
representation, warranty or covenant under the Investment Agreement),
except that the bridge loan becomes due immediately if a "material
adverse effect" occurs in the businesses of the Affiliated Companies as a
whole or there is a breach by any Affiliated Company or Mr. Bernau of any
representation, warranty or covenant under the credit documents.
9
<PAGE>
INVESTMENT. Following completion of the consolidation and assuming all closing
conditions have been met as required under the Investment Agreement, UBA will
invest an additional $5.88 million in cash combined with the conversion of the
$2.75 million bridge loan in exchange for a 45 percent equity interest in UCB.
Closing of the proposed investment remains subject to (i) approval by the
shareholders of each of the Affiliated Companies, (ii) achievement of certain
aggregate operating results by the breweries, (iii) maintenance of certain
operating conditions and covenants, including that there shall be no "material
adverse change" in the businesses of the Affiliated Companies taken as a whole,
(iv) approval by the U.S. Bureau of Alcohol, Tobacco and Fire Arms and
applicable state liquor control commissions, (v) registration with the U.S.
Securities and Exchange Commission of the UCB shares to be exchanged in the
consolidation; (vi) extension of Nor'Wester's $1.0 million line of credit
through September 30, 1997, the bank shall have waived any defaults under the
line of credit agreement and the line of credit shall have been converted to a
term loan and (vii) such other customary conditions for transactions of this
type.
As a further condition to UBA's investment, Jim Bernau has agreed to transfer
to UBA 1,124,195 of the UCB shares he receives in the consolidation (or
approximately 46% of his total UCB shares at consolidation). This transfer,
for which Mr. Bernau will receive no cash consideration, is being done
principally to provide UBA with the necessary equity interest in UCB (45%)
to cause UBA to make the investment.
Following completion of the consolidation and closing of UBA's investment, the
approximate ownership interests in UCB will be as follows: (i) UBA -- 45.0%,
(ii) Jim Bernau -- 10%, and (iii) the public shareholders of each Affiliated
Company will own the following interests: Nor'Wester--21.6%, WVI--7.1%,
Aviator Ales--6.7%, Mile High Brewing--5.9%, and Bayhawk Ales--3.7%. The
initial Board of Directors of UCB will be composed of 7 members consisting of
(i) one person appointed by Jim Bernau, (ii) four persons appointed by UBA
(one of whom shall be Vijay Mallya, Chairman of The UB Group, who shall be
chairman) and (iii) two outside Directors who shall be mutually satisfactory
to Jim Bernau and UBA. The initial Board will serve until the next regular
meeting of shareholders. At that time, UBA, with its 45% interest, will be
in a position to effectively elect all members of the Board of Directors and
thereby control UCB and in turn its subsidiary breweries.
Subject to completion or waiver of all closing conditions, closing of UBA's
investment will occur as soon as practicable following approval of the
consolidation by the shareholders of each of the Affiliated Companies which is
currently expected to occur in or about July 1997. In the event that the
investment is not closed by August 31, 1997, either party may terminate the
transaction and repayment of any outstanding bridge loan is due 60 days
thereafter.
While the Company is dependent upon the receipt of further loans under the
credit facility and closing of the UBA investment, the Company does not control
the business or operations of the other Affiliated Companies and can not assure
that it or another Affiliated Company will not violate one or more covenants in
the Investment Agreement or that a closing condition will not be met.
Accordingly, there can be no assurance that the
10
<PAGE>
Company will receive further bridge loan amounts or that the investment will
ultimately close or will close on the terms set forth in the Investment
Agreement.
RENEGOTIATION OF THE TERMS OF THE UBA INVESTMENT. In light of lower than
anticipated 1996 results, lower than anticipated first quarter 1997 sales and
other operating results and adverse conditions within the craft beer industry
in general, representatives of UBA and management and the investment bankers
of the Affiliated Companies are in the process of renegotiating the terms of
the UBA investment. The renegotiation will reflect a significantly lower
valuation for the Affiliated Companies, a reduction in the amount of cash to
be invested by UBA to $5.5 million and a reduction of UBA's percentage
ownership position in UCB to 40% following the consolidation. It is not
anticipated that the $2.75 million bridge loan amount will be reduced. The
existing shareholders in the Affiliated Companies would retain a 60% interest
in UCB. The exact distribution of ownership interests among shareholders of
the Affiliated Companies has not yet been determined. Management will soon
seek Board approval by each of the Affiliated Companies of any renegotiated
terms. Failure of the parties to reach a mutually agreeable renegotiated
Investment Agreement could lead to a loss of the bridge loans and the
remainder of the UBA investment which would materially and adversely affect
the Company's financial condition and results of operations.
If for any reason, the Company is unable to pay past due creditors and finance
working capital requirements through an investment by UBA, alternative methods
of financing would have to be obtained. No assurance can be given that
alternative methods of financing would be obtained. No assurance can be given
that alternative methods of financing would be available on terms acceptable to
the Company, or at all. Having to develop alternative means of financing would
likely slow development of the existing breweries and such alternative
financing may be costly. The inability of the Company to obtain additional
capital would adversely affect the Company's business and results of
operations.
ITEM 7. FINANCIAL STATEMENTS
The information required by this item begins on page F-1 of this report.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
11
<PAGE>
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTOR
The name and age of the Company's Director is as follows:
NAME AGE POSITION(S) WITH COMPANY DIRECTOR SINCE
- ----------------------------------------------------------------------------
James W. Bernau 43 Sole Director, President and 1994
Secretary
Mr. Bernau has been the Sole Director, President and Secretary since the
Company's inception in June 1994. Mr. Bernau is also the President and
Chairperson of the Board of Directors of five other public companies and has
held these positions since the dates indicated: Willamette Valley Vineyards,
Inc. ("WVV") since May 1988, Nor'Wester since December 1992, WVI, the
Company's parent, since December 1993 and two other majority owned
subsidiaries of WVI, Bayhawk Ales since February 1994 and Aviator Ales since
February 1994. Mr. Bernau also serves as one of the three Managers of the
North Country Joint Venture LLC, a wholly owned subsidiary of Nor'Wester. Mr.
Bernau began this alliance of consumer/investor owned companies by first
co-founding WVV in 1988 with Donald Voorhies. From 1981 to September 1989,
Mr. Bernau was Director of the Oregon Chapter of the National Federation of
Independent Businesses (NFIB), an association of 15,000 independent
businesses in Oregon. While at NFIB, his responsibilities primarily involved
communicating with association members and lobbying the Oregon state
legislature regarding issues impacting the members.
EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
The names, ages and positions of the Company's executive officers are as
follows:
NAME AGE CURRENT POSITION(S) WITH COMPANY SINCE
- -------------------------------------------------------------------------------
James W. Bernau 43 Chairperson of the Board, President 1994
and Secretary
John Carter 28 Vice President, Rocky Mountain/Midwest
Regional Leader 1996
For information on the business background of Mr. Bernau see "Director" above.
Mr. Carter joined the Company in September 1996 as General Manager. From 1994
until 1996, Mr. Carter served as Regional Sales Manager of Southern and
Northern California for the Nor'Wester/WVI Alliance. From 1991 until 1994,
Mr. Carter served as a manager in the hospitality industry while also
attending school. Mr. Carter has a B.A. from Oregon State University and has
completed everything except his thesis for his Master of Arts, also from
Oregon State University.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's executive officers and Directors, and persons who own
more than ten percent of a registered class of the Company's equity securities
to file reports of ownership and changes in ownership with the Securities and
Exchange Commission ("SEC") and the National Association of Securities Dealers,
Inc. Executive officers, Directors and greater
12
<PAGE>
than ten percent stockholders are required by SEC regulation to furnish the
Company with copies of all Section 16(a) forms they file. Based solely on its
review of the copies of such forms received by it, or written representations
from certain reporting persons, the Company believes that, for the fiscal
year ended December 31, 1996, all executive officers, Directors and greater
than 10% shareholders complied with all applicable filing requirements,
except in one instance, Mr. Carter, an executive officer of the Company,
failed to timely file a Statement of Initial Beneficial Ownership of Form 3.
ITEM 10. EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table provides certain summary information concerning
compensation awarded to, earned by or paid to the Company's Chief Executive
Officer and other executive officers of the Company whose total annual salary
and bonus exceeded $100,000 (collectively, the "named executive officers")
for fiscal years 1996, 1995 and 1994.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation
-------------------
Name and Principal
Position (A) Year Employer Salary($) Bonus($)
- ------------------ ---- ------------------------------ --------- --------
<S> <C> <C> <C> <C>
James W. Bernau (B) 1996 Mile High Brewing Company 4,305 --
Chairperson of the 1996 All affiliated companies except 81,788
Board, President and Mile High Brewing Company
Secretary 1995 Mile High Brewing Company 7,440 --
1995 All affiliated companies except
Mile High Brewing Company 88,560 10,882
</TABLE>
(A) Other than Mr. Bernau, no other individuals earned more than $100,000 in
1996, 1995 or 1994.
(B) Mr. Bernau serves as the President of the Company, WVV, WVI, Nor'Wester,
Bayhawk Ales, Mile High Brewing and North Country. Each of these
companies pays a pro rata portion of Mr. Bernau's monthly salary based
on the amount of time which Mr. Bernau has devoted to the respective
company's business in that month.
STOCK OPTION GRANTS
No stock options were granted to Mr. Bernau during 1996.
OPTION EXERCISES AND HOLDINGS
No options were exercised by Mr. Bernau during 1996 and no options are held by
Mr. Bernau at December 31, 1996.
COMPENSATION OF DIRECTORS OF THE COMPANY
Directors of the Company are not compensated for acting in such capacity.
13
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of Common Stock of the Company as of February 28, 1997 as to (i) each
person who is known by the Company to own beneficially 5% or more of the
outstanding shares of Common Stock, (ii) each Director of the Company,
(iii) each of the executive officers named in the Summary Compensation Table
above and (iv) all Directors and executive officers as a group. Except as
otherwise noted, the Company believes the persons listed below have sole
investment and voting power with respect to the Common Stock owned by them.
COMMON STOCK
--------------------------
NAME AND ADDRESS SHARES APPROXIMATE
BENEFICIALLY PERCENTAGE
OWNED (1) OWNED
- ------------------------------------------------ --------------------------
Willamette Valley, Inc. Microbreweries Across
America
66 SE Morrison Street
Portland, Oregon 97214 2,391,985 51%
James W. Bernau (2)
66 SE Morrison Street
Portland, Oregon 97214 2,391,985 51%
All Directors and executive officers as a
group (2 people) 2,391,985 51%
- --------------
Less than 1%
(1) Applicable percentage of ownership is based on 4,693,787 shares of Common
Stock outstanding as of February 28, 1997. 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.
(2) Mr. Bernau is deemed to be the beneficial owner of all of the 2,391,985
shares of the Company's Common Stock owned by WVI as a result of his
ownership of approximately 62 percent of the outstanding Common Stock of
WVI. Mr. Bernau does not own any shares of the Company's Common Stock
directly.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
GENERAL
Each of Nor'Wester, WVI, Aviator Ales and Bayhawk Ales is affiliated with the
Company in that James W. Bernau, the Company's founder, President and
Chairperson of the Board of Directors, is also President and Chairperson of the
Board of Directors of each such affiliated company. Mr. Bernau is also a
significant equity owner of each affiliated company either directly, as in the
case of Nor'Wester, in which Mr. Bernau owns approximately 25% of the
outstanding capital stock, or indirectly through his controlling interest in
WVI (62%), which in turn owns a controlling interest in each of Aviator Ales
(51%), Bayhawk Ales (57%) and Mile High Brewing (51%). As a result of certain
arrangements between the Company and its affiliates, as well as Mr. Bernau's
positions and/or ownership interests in each of these companies, inherent
conflicts of interest exist with respect to the pricing of services, the
sharing of resources and the allocation of the Company president's time.
14
<PAGE>
TRANSACTIONS WITH WVI
During 1995, the Company's parent loaned $800,000 to the Company for the
purpose of paying for leasehold improvements, the purchase of capital assets
and for funding working capital. Such note was originally unsecured and
carried no interest. Upon termination of the Company's offering in October
1996, such note converted into an installment note at 10 percent per annum
and was secured by all assets of the Company. The note was due in monthly
installments of $5,300, with the remaining principal balance due 18 months
after the issuance of the note. Because management intends to merge the
Company into a new company and dispose of all of the assets of the Company,
the entire balance is considered to be payable currently. The Company
expects to repay a portion of the loan with the proceeds it expects to
receive from disposal of assets and any remaining payables to WVI or to
Nor'Wester will be considered in the conversion of the Company's shares into
shares of the new company to be formed. See "Management's Discussion and
Analysis - Subsequent Events" above.
STRATEGIC ALLIANCE
In January 1996, the Company established a strategic alliance with WVI, Aviator
Ales, Bayhawk Ales and Nor'Wester (the "Alliance"). The Alliance is created
through a Strategic Alliance Agreement among the Alliance members, a General
Services Agreement between WVI and Nor'Wester and separate Cooperative Brewing
Agreements between Nor'Wester and each of Aviator Ales, Mile High Brewing and
Bayhawk Ales (the "Cooperative Brewers").
The terms of the Strategic Alliance Agreement, the Cooperative Brewing
Agreements and the General Services Agreement are four years, unless earlier
terminated under limited circumstances. However, due to the fact that
Nor'Wester's Portland Brewery is not currently operating at capacity as well as
the fact that Nor'Wester has changed its strategy and is not currently
attempting to develop other regional markets for its products, the Cooperative
Brewing Agreement is not being utilized. Certain other aspects of the
Strategic Alliance Agreement are also not being utilized due to industry and
individual company circumstances that have changed since the Strategic
Alliance Agreement was put in place.
In addition, should the consolidation occur as described under "Subsequent
Events", all such agreements will terminate.
Details of the agreements are as follows (although, as indicated, many of the
terms are no longer applicable):
STRATEGIC ALLIANCE AGREEMENT. Under the terms of the Strategic Alliance
Agreement, each Alliance member has agreed to (i) support the expansion of the
Nor'Wester's products into the Alliance member's market by cooperatively
brewing Nor'Wester's beer and facilitating Nor'Wester's access to local
distributors; (ii) employ at least one Nor'Wester trained brewer at all times
during the term of the Agreement; and (iii) use the services, expertise and
personnel available within the Alliance before obtaining such resources from
outside sources. The Strategic Alliance Agreement does not preclude an
Alliance member from promoting its products in markets served by other
Alliance members. The Agreement provides that no Alliance member will use
the proprietary information or technology of another Alliance member to
produce any beer with a flavor profile or appearance of such
15
<PAGE>
other Alliance member's beer. With the consent of all Alliance members,
additional entities owning and/or operating brewing facilities may be added
as parties to the Alliance.
COOPERATIVE BREWING AGREEMENTS. Under the terms of the Cooperative Brewing
Agreements, each of the Cooperative Brewers has agreed to produce Nor'Wester's
beer, in the amounts and packaged as specified in firm orders submitted by the
Nor'Wester on a periodic basis. All orders made by Nor'Wester are subject to
certain volume limits. The Cooperative Brewer's production of Nor'Wester beer
must comply with Nor'Wester's specifications concerning recipes, quality
control procedures, flavor profile and appearance. Nor'Wester has a right to
reject beer not meeting its specifications. Pricing for the purchase of beer
produced under Cooperative Brewing Agreements are at the lesser of cost plus
10% or Nor'Wester's average cost of production at its Portland Brewery, plus
a mark-up of 10%. The Agreement provides that no Alliance Member will use
the proprietary information or technology of another Alliance Member to
produce any beer with a flavor profile or appearance that is substantially
similar to such Alliance Member's beer.
GENERAL SERVICES AGREEMENT. The General Services Agreement requires that WVI
perform for Nor'Wester and WVI's subsidiaries certain services relating to (i)
human resources support; (ii) stock transfer and (iii) investor relations.
Under the General Services Agreement, Nor'Wester is to provide WVI and its
subsidiaries certain services relating to (i) accounting and finance support;
(ii) sales and marketing management; (iii) executive services; and (iv)
production management; (v) point of sale and advertising services; and (vi)
centralization and coordination among the Alliance members of certain
operational and purchasing matters. Nor'Wester, in turn subcontracts with WVV
for point of sale and advertising services and certain sales and marketing
management support services.
The Company was charged by Nor'Wester and WVI $51,500 and $56,025,
respectively,
for such services during 1996.
LOANS FROM NOR'WESTER
In 1995 and 1996, Nor'Wester loaned or advanced funds to the Company for
purchases of capital assets and for working capital needs. Nor'Wester also
paid certain bills on behalf of the Company and provided the Company with
services under the General Services Agreement. As a result, at December 31,
1996, the Company owed Nor'Wester $703,446. This amount is unsecured, does
not bear interest, is payable on Nor'Wester's demand and is reflected in
"payables to affiliated company" on the Company's balance sheet.
ARMS-LENGTH TRANSACTIONS
The Company believes that the transactions set forth above were made on terms
no less favorable to the Company than could have been obtained from
unaffiliated third parties. All future transactions between the Company and
its officers, directors, principal shareholders and affiliates will be
approved by a majority of the independent outside members of the Company's
Board of Directors who do not have an interest in the transactions, and will
be on terms no less favorable to the Company than could be obtained from
unaffiliated third parties.
16
<PAGE>
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits included herein:
Number Description
------ -----------
3.1 Certificate of Incorporation of Mile High Brewing Company and
all amendments thereto (1)
3.2 Bylaws of Mile High Brewing Company (1)
10.1 Lease Agreement between Mile High Brewing Company and
Willamette Valley, Inc. Microbreweries Across America, dated
July 22, 1994 (1)
10.2 Sublease Agreement between Mile High Brewing Company and
Columbine Cellars, Ltd., dated September 15, 1995 (1)
10.3 Management Agreement between Mile High Brewing Company and
Willamette Valley, Inc. Microbreweries Across America, dated
July 22, 1994 (1)
10.4 Licensing Agreement between Mile High Brewing Company and
Willamette Valley, Inc. Microbreweries Across America, dated
July 22, 1994 (1)
10.5 Form of Director Indemnity Agreement between Mile High
Brewing Company and James W. Bernau (1)
10.6 Mile High Brewing Company 1995 Stock Incentive Plan (1)
10.7 Loan Agreement between Mile High Brewing Company and
Willamette Valley, Inc. Microbreweries Across America, dated
September 21, 1995 (1)
10.8 Security Agreement between Mile High Brewing Company and the
CIT Group/Equipment Financing, Inc., dated January 5, 1996 (1)
10.9 Strategic Alliance Agreement between the Company, Nor'Wester
Brewing Company, Inc., Willamette Valley, Inc. Microbreweries
Across America, Aviator Ales, Inc., Bayhawk Ales, Inc. and North
Country Joint Venture, LLC (1)
10.10 Cooperative Brewing Agreement between the Company and
Nor'Wester Brewing Company, Inc. (1)
10.11 Investment Agreement dated as of January 30, 1997 by and
among Nor'Wester Brewing Company, Inc., North Country Joint
Venture, LLC, Willamette Valley, Inc. Microbreweries Across
America, Aviator Ales, Inc., Bayhawk Ales, Inc., Mile High
Brewing Company, Inc., James W. Bernau and United Breweries of
America, Inc., which includes the Credit Agreement between
Nor'Wester Brewing Company, Inc. and United Breweries of
America, Inc.
27 Financial Data Schedule
99.1 Form of Impound Escrow Agreement between Mile High Brewing
Company and First Interstate Bank of California (1)
99.2 Founder's Escrow Agreement among Mile High Brewing Company,
Willamette Valley, Inc. Microbreweries Across America and First
Interstate Bank of Oregon, N.A., dated October 27, 1994 (1)
(1) Incorporated by reference to Exhibits to Registrant's Registration
Statement on Form SB-2, as amended and declared effective by the
Securities and Exchange Commission on May 3, 1996 (Commission
Registration No. 33-95606).
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the quarter ended
December 31, 1996.
17
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Dated: March 25, 1997
MILE HIGH BREWING COMPANY
By: /s/ JAMES W. BERNAU
----------------------------------
James W. Bernau
Chairperson of the Board, President
and Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in their capacities on March 25, 1997:
Signature Title
- --------- -----
/s/ JAMES W. BERNAU Chairperson of the Board, President,
- ------------------- General Manager and Secretary
James W. Bernau (Principal Executive Officer and Principal
Financial and Accounting Officer)
18
<PAGE>
MILE HIGH
BREWING COMPANY
(A DEVELOPMENT STAGE COMPANY)
REPORT AND FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
<PAGE>
MILE HIGH BREWING COMPANY
(A DEVELOPMENT STAGE COMPANY)
INDEX TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
Report of Independent Accountants...........................................F-1
Balance Sheet...............................................................F-3
Statement of Operations.....................................................F-4
Statement of Shareholders' Equity...........................................F-5
Statement of Cash Flows.....................................................F-6
Notes to Financial Statements...............................................F-7
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Mile High Brewing Company
(A Development Stage Company
In our opinion, the accompanying balance sheet and the related statements of
operations, of shareholders' equity (deficit) and of cash flows present
fairly, in all material respects, the financial position of Mile High Brewing
Company (A Development Stage Company) at December 31, 1996 and 1995, and the
results of its operations and its cash flows for the years then ended and the
period from inception (June 8, 1994) to December 31, 1996, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted
our audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 1 to the financial
statements, the Company is a development stage company which has a limited
and unprofitable operating history, has negative working capital of
$2,950,424 and has limited access to capital with which to fund future
operations. Subsequent to December 31, 1996, the Company's management
formalized and approved a plan to sell the operating assets of the Company.
Accordingly, the assets have been reported at estimated fair market value at
December 31, 1996 and management has recorded an impairment loss of
$1,306,879 in the accompanying statement of operations for the year ended
December 31, 1996. Such factors, among others, raise substantial doubt about
its ability to continue as a going concern.
Also discussed in Note 11, the Company has entered into an investment
agreement to be merged with other affiliated companies and convert its stock
into shares of a new publicly traded entity.
F-1
<PAGE>
To the Board of Directors and Shareholder of
Mile High Brewing Company
(A Development Stage Company)
Page 2
Mile High Brewing Company is a member of a group of affiliated companies and,
as disclosed in the financial statements, has extensive transactions and
relationships with members of the group. Because of these relationships, it
is possible that the terms of these transactions are not the same as those
that would result from transactions among wholly unrelated parties.
PRICE WATERHOUSE LLP
Portland, Oregon
March 17, 1997, except as to Note 12
which is as of March 24, 1997
F-2
<PAGE>
MILE HIGH BREWING COMPANY
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
- -------------------------------------------------------------------------------
DECEMBER 31,
1996 1995
---------- ----------
ASSETS
Current assets:
Cash and cash equivalents $ 30,320 $ 379,691
Accounts receivable 85,200 44,118
Inventories (Notes 2 and 11) - 86,763
Prepaid and other current assets 8,170 67,837
---------- ----------
Total current assets 123,690 578,409
Property and equipment (Notes 3, 4 and 11) 2,000,000 2,178,732
Other noncurrent assets - 131,950
---------- ----------
$2,123,690 $2,889,091
---------- ----------
---------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 816,664 $ 143,750
Reserve for impairment loss (Note 11) 338,000 -
Other accrued liabilities 15,663 79,526
Payables to parent and affiliated companies
(Note 8) 1,834,547 20,614
Current portion of loan from parent (Note 4) - 416,200
Current portion of capital lease obligation
(Note 4) 69,270 7,829
---------- ----------
Total current liabilities 3,074,114 667,919
Capital lease obligation, less current portion
(Note 4) 241,224 22,068
Advances from affiliates (Note 8) - 250,000
Loan from parent less current portion (Note 4) - 383,800
Deferred rent (Note 10) - 43,377
---------- ----------
3,315,338 1,367,164
---------- ----------
Commitments and contingencies (Notes 10 and 11)
Shareholders' equity (deficit) (Notes 6, 7 and 11):
Common stock, $.001 par value, 10,000,000 shares
authorized, 4,693,787 and 4,690,167 shares issued
and outstanding at December 31, 1996 and 1995,
respectively 4,694 4,690
Additional paid-in capital 2,252,274 2,245,581
Deficit accumulated during the development stage (3,448,616) (728,344)
---------- ----------
(1,191,648) 1,521,927
---------- ----------
Total liabilities and shareholders' equity $2,123,690 $2,889,091
---------- ----------
---------- ----------
The accompanying notes are an integral part of this financial statement.
F-3
<PAGE>
MILE HIGH BREWING COMPANY
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CUMULATIVE
AMOUNTS FROM
INCEPTION
YEAR ENDED (JUNE 8, 1994) TO
DECEMBER 31, DECEMBER 31,
1996 1995 1996
----------- ----------- -----------------
<S> <C> <C> <C>
Gross sales (Note 9) $ 1,600,915 $ 216,498 $ 1,817,413
Less excise taxes (85,426) (3,917) (89,343)
----------- --------- -----------
Net sales 1,515,489 212,581 1,728,070
Cost of goods sold 1,905,335 220,656 2,125,991
----------- --------- -----------
Gross deficit (389,846) (8,075) (397,921)
Selling, general and administrative
expenses (Notes 6 and 8) 790,615 728,021 1,582,915
----------- --------- -----------
Loss from operations (1,180,461) (736,096) (1,980,836)
Other income (expense):
Estimated impairment loss (Note 11) (1,306,879) - (1,306,879)
Interest income (expense) (37,958) 67,615 34,073
Other expense (194,974) - (194,974)
----------- --------- -----------
Loss before income taxes (2,720,272) (668,481) (3,448,616)
Income taxes (Note 5) - - -
----------- --------- -----------
Net loss as a development stage company $(2,720,272) $(668,481) $(3,448,616)
----------- --------- -----------
----------- --------- -----------
Net loss per common share (Note 1) $ (0.58) $ (0.14) $ (0.81)
----------- --------- -----------
----------- --------- -----------
Weighted average number of common
shares outstanding (Note 1) 4,691,810 4,685,649 $ 4,243,217
----------- --------- -----------
----------- --------- -----------
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-4
<PAGE>
MILE HIGH BREWING COMPANY
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF SHAREHOLDERS' EQUITY
PERIOD FROM INCEPTION (JUNE 8, 1994) TO DECEMBER 31, 1996
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
ADDITIONAL DURING THE
COMMON STOCK PAID-IN DEVELOPMENT
SHARES AMOUNT CAPITAL STAGE TOTAL
--------- --------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Balances, June 8, 1994 - $ - $ - $ - $ -
Stock issued to Willamette Valley, Inc. 2,391,985 2,392 97,608 - 100,000
Proceeds from stock offering 2,258,994 2,259 2,104,902 - 2,107,161
Net loss - - - (59,863) (59,863)
--------- ------ ---------- ----------- -----------
Balances, December 31, 1994 4,650,979 4,651 2,202,510 (59,863) 2,147,298
Proceeds from stock offering 39,188 39 43,071 - 43,110
Net loss - - - (668,481) (668,481)
--------- ------ ---------- ----------- -----------
Balances, December 31, 1995 4,690,167 4,690 2,245,581 (728,344) 1,521,927
Stock issued to employees 3,620 4 6,693 - 6,697
Net loss - - - (2,720,272) (2,720,272)
--------- ------ ---------- ----------- -----------
Balance, December 31, 1996 4,693,787 $4,694 $2,252,274 $(3,448,616) $(1,191,648)
--------- ------ ---------- ----------- -----------
--------- ------ ---------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-5
<PAGE>
MILE HIGH BREWING COMPANY
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CUMULATIVE
AMOUNTS FROM
INCEPTION
YEAR ENDED (JUNE 8, 1994) TO
DECEMBER 31, DECEMBER 31,
1996 1995 1996
----------- ----------- -----------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss as a development stage company $(2,720,272) $ (668,481) $(3,448,616)
Reconciliation of net loss to cash used by
operating activities:
Depreciation and amortization 216,593 51,323 267,916
Deferred rent - 43,377 43,377
Estimated impairment loss (Note 11) 1,306,879 - 1,306,879
Shares granted to employees 6,697 - 6,697
Changes in current assets and current
liabilities:
Accounts receivable (41,082) (44,118) (85,200)
Inventories (99,937) (81,230) (186,700)
Prepaid and other assets 59,667 (67,837) (8,170)
Accounts payable 672,914 122,442 816,664
Accrued liabilities (63,893) 79,526 15,633
----------- ----------- -----------
Net cash used for operating activities (662,434) (564,998) (1,271,520)
----------- ----------- -----------
Cash flows from investing activities:
Capital expenditures (385,712) (2,195,078) (2,581,190)
Cash paid for other noncurrent assets - (119,834) (132,439)
----------- ----------- -----------
Net cash used for investing activities (385,712) (2,314,912) (2,713,629)
----------- ----------- -----------
Cash flows from financing activities:
Proceeds from the sale of common stock
to parent company - - 100,000
Net proceeds from common stock offering - 43,110 2,150,271
Principal payments on capital lease
obligation (65,158) (4,191) (69,349)
Net borrowings and advances from parent
and affiliated companies 763,933 968,595 1,834,547
----------- ----------- -----------
Net cash provided by financing activities 698,775 1,007,514 4,015,469
----------- ----------- -----------
Net decrease in cash (349,371) (1,872,396) 30,320
Cash and cash equivalents, beginning of period 379,691 2,252,087 -
----------- ----------- -----------
Cash and cash equivalents, end of period $ 30,320 $ 379,691 $ 30,320
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-6
<PAGE>
MILE HIGH BREWING COMPANY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION, OPERATIONS AND BASIS OF PRESENTATION
Mile High Brewing Company (the Company) is a development stage company
organized under the laws of the State of Delaware. From the date of
inception (June 8, 1994) through December 31, 1996, the Company's efforts
have been directed primarily toward organizing and issuing a public
offering of shares of its common stock and building, equipping its brewery
and developing a marketable beer. The brewery began producing and selling
beer in September 1995, however in 1996 the Company is brewing at only 19%
of its expected capacity. The Company built and operated a brewery in a
leased facility in Denver, Colorado. The Company is one of four majority or
wholly owned subsidiaries of Willamette Valley, Inc. Microbreweries across
America (WVI), a company located in Oregon, organized to establish
microbreweries throughout the United States. At December 31, 1996 and 1995,
WVI owned approximately 51% of the Company's common stock; see also Note 6.
The Company is a development stage company which has only a limited and
unprofitable operating history, has negative working capital of $2,950,424,
has limited access to capital with which to fund future operations, and
ceased production of its products in November 1996. During 1996, the
Company recorded an impairment loss and has written its assets down to fair
market value. Subsequent to December 31, 1996, the Company's management
formulated a plan to sell all of the assets of the Company. Because the
long-lived assets of the Company are not being used for production, they
are considered to be impaired. All assets have been written down to fair
market value and the Company has recorded a reserve for losses expected to
be incurred until the assets are sold. Such factors, among others, raise
substantial doubt as to the Company's ability to continue as a going
concern (see Note 11).
In addition, management expects the Company to be merged with its affiliate
breweries during 1997 and for all of the Company's common stock to be
converted into shares of a new public company. The Company currently has no
source of capital other than the proposed investor discussed in Note 11.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles which require management to make
certain estimates and assumptions. These estimates and assumptions affect
the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities as of the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
INVENTORIES
Inventories at December 31, 1996 and 1995 are stated at the lower of cost
(first-in, first-out basis) or market.
F-7
<PAGE>
MILE HIGH BREWING COMPANY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1995 are stated at cost and are
depreciated over their estimated useful lives estimated to be 5-15 years
using the straight-line method, beginning at the time the assets are placed
in operation. See Note 3.
Expenditures for repairs and maintenance are charged to expense as
incurred, and expenditures for additions and betterments are capitalized.
Leasehold improvements are depreciated over the shorter of the life of the
asset or the lease.
OTHER NONCURRENT ASSETS
In 1995, the Company capitalized the fees and related legal costs of
organization which are included in other noncurrent assets in the
accompanying balance sheet. These items were written off in 1996 based on
management's intention of being merged into a new public company, as these
intangible assets no longer have future value.
INCOME TAXES
The Company accounts for income taxes using the asset and liability
approach prescribed by Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes." Under this approach, deferred income taxes
are calculated for the expected future tax consequences of temporary
differences between the book basis and tax basis of the Company's assets
and liabilities. The Company files a stand-alone federal income tax return.
REVENUE RECOGNITION
The Company recognizes revenue upon the delivery of its products to its
customers. Sales are recorded as trade accounts receivable and no
collateral is required.
NET LOSS PER COMMON SHARE
Net loss per common share is calculated based on the weighted average
number of common shares outstanding after giving effect to the shares
granted to employees throughout the periods presented, see Note 6. No
common stock equivalents with a dilutive effect were outstanding during the
periods presented. Shares held in escrow are included in the weighted
average number of common shares outstanding.
STATEMENT OF CASH FLOWS
The Company considers short-term investments which are highly liquid, are
readily convertible into cash, and have original maturities of fewer than
three months to be cash equivalents for the purposes of cash flows. For the
year ended December 31, 1996, the Company paid no income taxes and paid
interest of $37,958. For the year ended December 30, 1995, the Company paid
no income taxes and paid interest of $4,781. During 1996 and 1995, the
Company acquired $366,000 and $34,000, respectively, of equipment under
capital lease obligations. These non-cash transactions have been excluded
from the accompanying statement of cash flows.
F-8
<PAGE>
MILE HIGH BREWING COMPANY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FAIR MARKET VALUE OF FINANCIAL INSTRUMENTS
Except as discussed in Note 8 under advances from affiliates, the fair
market value of the Company's recorded financial instruments materially
approximate their respective recorded balances, as the recorded assets and
liabilities are stated at amounts expected to be realized or paid, or carry
interest rates commensurate with current rates for instruments with a
similar duration and degree of risk.
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 123
The Company adopted Statement of Financial Accounting Standards No. 123
(SFAS 123), "Accounting for Stock-Based Compensation," for its year ending
December 31, 1996. SFAS 123 was issued by the Financial Accounting
Standards Board in October 1995, and allows companies to choose whether to
account for stock-based compensation under the current intrinsic method as
prescribed in Accounting Principles Board Opinion Number 25 (APB 25) or
use the fair value method prescribed in SFAS 123. The Company continues
to follow the provisions of APB 25. The impact of adoption does not have
a significant effect on the Company's financial position or results of
operations (see Note 7).
RECLASSIFICATIONS
Certain reclassifications have been made to the 1995 financial statements
to conform with 1996 presentation. These reclassifications have no impact
on previously reported results of operations or common shareholders'
equity (deficit).
2. INVENTORIES
At December 31, 1996, inventories consist primarily of raw materials
considered by management to have no value at year end because the brewery
had ceased operations and the inventory had been subsequently discarded.
See Note 11. Inventories at December 31, 1995 consisted of:
Raw materials $18,372
Work-in-process 26,332
Finished goods 25,915
Retail inventory 16,144
-------
$86,763
-------
-------
F-9
<PAGE>
MILE HIGH BREWING COMPANY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
3. PROPERTY AND EQUIPMENT
The property and equipment of the Company has been written down to
estimated market value as of December 31, 1996 to reflect management's
intention to dispose of the assets (see Note 11). Property and equipment on
December 31, 1995 consisted of:
1996 1995
----------- ----------
Land and improvements $1,504,610 $1,277,484
Brewery equipment 1,495,074 893,798
Office furniture and equipment 25,274 23,034
Vehicles 21,250 21,250
Construction in progress 53,460 14,000
---------- ----------
3,099,668 2,229,556
Less accumulated depreciation (267,427) (50,834)
Write-down to fair market value (832,241) --
---------- ----------
$2,000,000 $2,178,732
---------- ----------
---------- ----------
4. LOAN AND CAPITAL LEASE OBLIGATIONS
Capital lease obligations relate to the acquisition of a bottling line in
1996 and to other equipment purchased in 1995. These leases bear interest
rates ranging from 9% to 15% and require monthly payments of principal and
interest. These leases are secured by the equipment and mature in the years
of 1998 and 2000. Future minimum payments under the Company's loan and
capital lease obligations are as follows:
Principal Interest Total
--------- -------- --------
1997 $ 69,270 $30,727 $ 99,997
1998 73,696 22,746 96,442
1999 80,332 14,423 94,755
2000 87,196 5,227 92,423
-------- ------- --------
$310,494 $73,123 $383,617
-------- ------- --------
-------- ------- --------
5. INCOME TAXES
Pre-tax loss was attributable to operations entirely within the United
States. For the periods ended December 31, 1996 and 1995, there was no
current or deferred provision for income taxes.
F-10
<PAGE>
MILE HIGH BREWING COMPANY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
5. INCOME TAXES (CONTINUED)
The benefit for income taxes differs from the amount of income taxes
determined by applying the U.S. statutory graduated federal rate due to the
following:
YEAR ENDED
DECEMBER 31,
1996 1995
--------- --------
Statutory graduated federal rate 34.0% 34.0%
State taxes, net of federal benefit 3.3 3.3
Reserve of net operating loss
carryforward assets (37.3) (37.3)
--------- --------
-% -%
--------- --------
--------- --------
Deferred tax assets (liabilities) consist of:
DECEMBER 31,
1996 1995
----------- ----------
Federal net operating loss carryforwards $ 795,000 $ 235,000
Expenses not currently deductible 444,000 13,000
Fixed assets (70,000) (30,000)
Deferred tax asset valuation allowance (1,169,000) (218,000)
----------- ----------
$ - $ -
----------- ----------
----------- ----------
As of December 31, 1996, the Company had a net operating loss carryforward
aggregating approximately $2,337,000 for federal purposes, which may be
used to offset future taxable income, if any. The annual utilization of
this carryforward may be limited after the Company undergoes the ownership
change anticipated by management or fails to meet the continuity of
business requirements defined by the Internal Revenue Code. The Company's
net operating loss carryforwards begin expiring in 2010.
6. SHAREHOLDERS' EQUITY
The Company is authorized to issue 10,000,000 shares of its common stock.
Each share of common stock entitles the holder to one vote. In June 1994,
the Company received $100,000 cash from WVI in exchange for 2,391,985
shares of unregistered common stock.
In connection with the Company's initial stock offering under Oregon
securities laws, WVI agreed to place in escrow its 2,391,985 shares of the
Company's common stock. These shares were to be released from escrow to WVI
when the Company satisfied one or more certain earnings requirements or
established a bona fide over-the-counter trading market for its common
stock and maintained a bid price equal to or greater than a stipulated
benchmark price for 26 or more consecutive weeks. Unless released pursuant
to these conditions, the 2,391,985 shares were to remain in escrow until
unconditionally released in 25% increments on July 31, 2001, 2002, 2003 and
2004. Based on the
F-11
<PAGE>
MILE HIGH BREWING COMPANY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
6. SHAREHOLDERS' EQUITY (CONTINUED)
ownership change anticipated by management described in Note 11, the shares
will not be released from escrow, and all shares will be converted to
shares of the new Company. The shares, while in escrow, entitle WVI to the
same rights and privileges as all other shareholders of common stock,
except for certain rights relating to transferability and liquidation.
During 1994 and 1995, the Company sold 2,298,182 shares of its common stock
at $1.10 per share pursuant to a Form SB-2 public offering filed with the
Securities and Exchange Commission. Cash proceeds from this offering, net
of offering expenses of $377,729, aggregated $2,107,161 in 1994 and $43,110
in 1995.
During 1996, the Company granted a total of 3,620 shares to employees. The
Company recorded $6,697 of expense related to these grants which is
included in selling, general and administrative expenses in the
accompanying financial statements for the year ended December 31, 1996.
See Note 11 for additional discussion of the planned ownership change.
7. STOCK INCENTIVE PLAN
The Company adopted a 1994 Stock Incentive Plan (the "Plan") and has
reserved 250,000 shares of the Company's common stock thereunder. The Plan
provides for the grant of incentive stock options to employees of the
Company and non-qualified stock options, stock sales, and stock grants to
employees, directors, and consultants of the Company. In 1995, the Company
granted a total of 19,400 options under the Plan at an exercise price of
$1.10 and $1.85 per share, which approximated fair market value at the date
of grant. These options vest ratably over five and ten years, respectively,
beginning one year from the date of grant. In 1996, the Company granted
31,500 options under the Plan. Of these, 7,500 options vest over a ten-year
term and 6,500 vest over a five-year term and 17,500 were subsequently
canceled. These options have an exercise price of $1.85 per share, which
approximated the fair market value at the date of grant. At December 31,
1996, vested options totaled 23,900 and options that remain outstanding
totaled 33,400. No options have been exercised to date.
The Company has elected to account for its stock-based compensation under
Accounting Principles Board Opinion No. 25. The Company has determined that
the pro forma effects of applying SFAS 123 would not have a material effect
on the results of operations for 1996 and 1995. This determination was made
using the Black-Scholes option pricing model. The weighted average
assumptions used for stock option grants for 1996 and 1995 were a risk-free
interest rate of 6.67% and 7.35%, respectively, an expected dividend yield
of 0% and 0%, respectively, an expected life of 8.04 years and 10 years,
respectively, and an expected volatility of 57% and 54%, respectively. The
weighted average fair value of stock options granted in 1996 and 1995 was
$1.22 and $0.81, respectively.
F-12
<PAGE>
MILE HIGH BREWING COMPANY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
7. STOCK INCENTIVE PLAN (CONTINUED)
Options were assumed to be exercised upon vesting for purposes of this
valuation. Adjustments are made for options forfeited prior to vesting. For
the years ended December 31, 1996 and 1995, the total value of the options
granted was computed to be $17,045 and $15,741, respectively, which would
be amortized on a straight-line basis over the vesting period of the
options.
Note that all options granted by the Company are expected to be converted
to options of the new company expected to be formed at the same conversion
rate as the conversion of common stock as discussed in Note 11.
8. RELATED PARTIES
NATURE OF RELATED PARTIES
The Company's president partially owns and controls Willamette Valley
Vineyards (WVV), a winery in Oregon; and Nor'Wester Brewing Company Inc.
(Nor'Wester), a microbrewery in Oregon; as well as WVI. Additionally, WVI
is the majority owner of Aviator Ales, Inc. (AAI) and Bayhawk Ales, Inc.
(BAI), and fully owns North Country Brewing Company, Inc. (NCBCI),
development stage companies located in Washington, California and New York,
respectively. As a result of certain arrangements between the Company and
its affiliates, as well as the Company president's positions with and/or
ownership interests in each of these companies, inherent conflicts of
interest exist with respect to the pricing of services, the sharing of
resources and the allocation of the Company president's time.
RELATED PARTY TRANSACTIONS
For the period from inception through December 31, 1996, WVI and WVV
provided secretarial, accounting, marketing, and administrative services
related to the Company's initial stock offering and for general and
administrative purposes. Beginning in 1996, the Company began contracting
certain of these services from Nor'Wester under a general services
agreement between Nor'Wester, WVI and WVV. During 1996 and 1995, the
Company purchased these services at an approximate cost of $145,725 and
$163,000, respectively, which is included in selling, general and
administrative expenses in the accompanying financial statements.
Additionally, WVI has allowed the Company to utilize certain proprietary
concepts for no cash consideration. As a result of these and certain other
transactions, the Company owed approximately $1,831,000 and $1,122,000, at
December 31, 1996 and 1995, respectively, to affiliated companies.
In 1995, the Company paid for certain brewing equipment costing $53,000
which was ultimately shipped to Nor'Wester. As a result of this
transaction, the Company was owed approximately $47,000 from Nor'Wester at
December 31, 1995; this balance was collected in March 1996.
ADVANCES FROM PARENT AND AFFILIATE
In connection with the Cooperative Brewing Agreement with Nor'Wester
described above, Nor'Wester advanced $500,000 and $250,000 to the Company
in 1996 and 1995, respectively, for the purchase of ingredients and
packaging materials for the Company's initial and continued production of
Nor'Wester's products. The advances received in 1996 were also used for the
Company's production of its own beers. These advances are unsecured and do
not bear interest.
F-13
<PAGE>
MILE HIGH BREWING COMPANY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
8. RELATED PARTIES (CONTINUED)
Because of the anticipated ownership change discussed in Note 11,
management does not expect to repay these advances. Instead, the advances
are being considered in determining the purchase price and stock conversion
ratios being used in the transaction.
In 1995, WVI loaned $800,000 to the Company to fund operations and purchase
capital assets. This loan was to be repaid in the following manner: as soon
as the Company had raised $800,000 in net proceeds through its planned
stock offering, $400,000 of the loan would have been payable under the
terms of a note requiring monthly payments of $5,300 per month including
interest at 10% per annum, with the remaining principal balance due
eighteen months after the issuance of the note. The Company was not
successful raising $800,000 in capital in its planned offering.
Accordingly, the entire loan amount became payable under the terms
described above with such notes being issued in April 1996. Because
management plans to merge the Company into a new company, and because
subsequent to December 31, 1996 management decided to sell the operations
of the Company (see Note 11), management believes the entire balance is
considered to be payable currently. Note that the Company expects to repay
a portion of the loan with the proceeds it expects to receive when the
operating assets are sold, and any remaining payables to WVI or to
Nor'Wester will be considered in the conversion of the Company's shares
into shares of the new company to be formed.
STRATEGIC ALLIANCE AND COOPERATIVE BREWING AGREEMENTS
The Company has entered into a Strategic Alliance (the "Alliance") with
Nor'Wester, AAI, BAI, NCBCI, and WVI. The Company, Nor'Wester, AAI, BAI,
NCBCI, and WVI are collectively referred to as "Alliance members," and the
Company, AAI, and BAI are collectively referred to as the "Cooperative
Brewers," and individually referred to as a "Cooperative Brewer." The
purpose of the Alliance is to promote and support the growth of all of the
Alliance members by increasing production at each Cooperative Brewer's
facility and supporting the entry of Nor'Wester products into new markets.
To achieve this goal, each Cooperative Brewer has agreed to cooperatively
brew Nor'Wester's products, and to support the entry of these products into
new markets by facilitating Nor'Wester's access to the Cooperative Brewer's
network of distributors.
The Alliance is created through a Strategic Alliance Agreement between
Nor'Wester and each of the Companies, AAI, and BAI. The terms of the
Strategic Alliance Agreement and the Cooperative Brewing Agreements are
four years, unless earlier terminated under limited circumstances, which
include material breach in the case of the Cooperative Brewing Agreements.
The Agreements are subject to renewal. Pricing for the purchase of beer
produced under the Cooperative Brewing Agreement is at the lesser of cost
plus 10% or Nor'Wester's average cost of production at its Nor'Wester
Brewery, plus a mark-up of 10%. The Agreement provides that no Alliance
member will use the proprietary information or technology of another
Alliance member to produce any beer with a flavor profile or appearance
that is substantially similar to such Alliance member's beer. With the
consent of all Alliance members, additional parties may be added to the
Alliance.
Under the terms of the Cooperative Brewing Agreements, the Company will
produce Nor'Wester beer, in the amounts and packaging as specified in firm
orders submitted by Nor'Wester on a periodic basis. The Company's
production of Nor'Wester beer must comply with specifications concerning
recipes, quality control procedures, flavor profile and appearance.
Nor'Wester has a right to reject beer not meeting its specifications.
F-14
<PAGE>
MILE HIGH BREWING COMPANY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
8. RELATED PARTIES (CONTINUED)
Nor'Wester has acquired certain specified brewing equipment for the
Company's use in producing Nor'Wester's beer. To the extent that this
equipment is not needed for the production of Nor'Wester beers, the Company
may, upon notice to Nor'Wester, use this equipment to produce its own beer
subject to the payment of an agreed-upon lease fee.
The Cooperative Brewing Agreement requires that the Cooperative Brewer
maintain the equipment supplied by Nor'Wester, that Nor'Wester insure this
equipment, and that the Cooperative Brewer and Nor'Wester each indemnify
the other for damages and losses in connection with the Agreement.
Nor'Wester may at its cost remove or replace its equipment at any time if
market conditions or other circumstances make such action desirable to
Nor'Wester.
Cooperative brewing revenues totaled $796,540, which is 53% of the
Company's net revenues. Because of the pricing terms surrounding
cooperative brewing discussed above and the fact that the Company's costs
to produce beer were higher than Nor'Wester's costs to produce beer,
cooperative brewing sales resulted in significant negative gross margins
for the Company. Accordingly, the Company ceased its cooperative brewing of
Nor'Wester beers in November 1996.
Subsequent to December 31, 1996, the cooperative brewing agreement was
canceled with the consent of all Alliance members.
9. SIGNIFICANT CUSTOMERS
Approximately 20% and 62% of the Company's sales were to wholesale
distributors located in Colorado for the year ended December 31, 1996 and
1995, respectively. Sales to the Company's largest customer (excluding
cooperative brewing) represented approximately 9% and 48% of gross sales
for the years ended December 31, 1996 and 1995, respectively.
10. COMMITMENTS
The Company has entered into agreements with several independent
distributors for the distribution of the Company's products in Colorado.
These agreements contain normal distribution provisions and are cancelable
by either the Company or the distributors.
During 1995, the Company entered into a 15-year operating lease arrangement
with optional renewal terms for its production facility in Denver,
Colorado. Management expects to terminate the lease during 1997. However,
minimum future lease payments according to the lease are as follows:
F-15
<PAGE>
MILE HIGH BREWING COMPANY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
10. COMMITMENTS (CONTINUED)
YEAR ENDING
DECEMBER 31,
------------
1997 $ 107,000
1998 111,000
1999 116,000
2000 121,000
2001 130,000
Thereafter 1,274,000
----------
$1,859,000
----------
----------
The terms of this lease allowed for no lease payments to be made during the
initial four months of the lease term, and contain escalating payments. The
Company has recorded lease expense on the straight-line method over the
lease term; accordingly, deferred rent has been recorded in the
accompanying balance sheet as of December 31, 1995. Because the Company
intends to dispose of its assets and terminate its lease during 1997, it is
not likely to experience escalating lease payments.
Accordingly, deferred rent recorded in 1995 and 1996 has been reversed and
has been netted against the estimated impairment loss, and no deferred rent
balance is recorded as of December 31, 1996. See Note 11. Rent expense,
including common area charges and rental of temporary storage in 1995,
aggregated approximately $102,000 and $85,000 during 1996 and 1995,
respectively, and is allocated between cost of sales and selling, general
and administrative expenses in the accompanying statement of operations.
11. SUBSEQUENT EVENTS
MERGER OF AFFILIATED BREWERIES AND INVESTMENT BY UBA
On January 30, 1997, the Company along with its parent (WVI) and its
affiliates (Nor'Wester, AAI and BAI) entered into an investment
agreement with United Breweries of America, Inc. (UBA), an entity
controlled by the UB Group of Bangalore, India. The agreement provides for
Nor'Wester, WVI, AAI, MHBC and BAI to consolidate into a company to be
known as United Craft Brewers, Inc. (UCB). This merger will result in the
issuance of newly registered shares of UCB common stock in exchange for
shares of Nor'Wester, WVI and its subsidiaries. The merger and share
exchange will require approval by the Boards of Directors and shareholders
of each of the entities. Following consolidation, all shareholders in the
Nor'Wester/WVI alliance will hold shares in UCB, a company which is
intended to be listed for trading on the Nasdaq National Market system
under the symbol ALES. Proposed exchange ratios for each of the entities
are as follows, based on an average closing price of $2.63 for Nor'Wester's
common stock for the 20 trading days immediately preceding execution of the
merger:
F-16
<PAGE>
MILE HIGH BREWING COMPANY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
11. SUBSEQUENT EVENTS (CONTINUED)
COMPANY EXCHANGE RATIO
----------- --------------
Nor'Wester 1:1
WVI 1.99159:1
AAI 2.98739:1
BAI 1.99159:1
MHBC 2.98739:1
Following the merger, UBA has proposed to invest $8.63 million in exchange
for a 45% equity interest in the new equity, UCB. Of the $8.63 million
proposed investment by UBA, $2.75 million is in the form of bridge loans
conditionally available to Nor'Wester during the consolidation phase. As of
March 21, 1997, $1,500,000 has already been loaned to Nor'Wester, the
majority of which has been advanced to North Country. At closing, it is
anticipated that the bridge loans will be converted into shares of UCB and
the remaining $5.88 million cash investment will be made directly in shares
of UCB.
The closing of the proposed investment remains subject to (i) approval by
the shareholders of each of the companies, (ii) achievement of certain
operating results at each of the breweries, (iii) maintenance of certain
operating conditions and covenants, including that there shall be no
material adverse change in the businesses of the affiliated breweries taken
as a whole, (iv) approval by federal and state liquor control agencies, (v)
registration with the U.S. Securities and Exchange Commission of UCB shares
to be exchanged in the merger, (vi) extension of the Company's $1 million
revolving line of credit through September 30, 1997 (see Note 4); and the
lender shall have waived any defaults under the line of credit agreement
and the line of credit shall have been converted to a term loan (see Note
5), and (vii) such other customary conditions for transactions of this
type.
Immediately following the proposed investment by UBA, UBA would own 45% and
the Company's president would own 10% of UCB. The public shareholders of
Nor'Wester, WVI, and WVI's subsidiaries would own the remaining 45% of UCB.
RENEGOTIATION OF THE TERMS
In light of lower than anticipated 1996 results, lower than anticipated
first quarter 1997 sales and other operating results and adverse conditions
within the craft beer industry in general, representatives of UBA and
management and the investment bankers of the affiliated companies are in
the process of renegotiating the terms of the UBA investment discussed in
Note 11. The renegotiation will reflect a significantly lower valuation for
the affiliate companies, a reduction in the total amount of cash to be
invested by UBA to $5.5 million and a reduction of UBA's percentage
ownership position in UCB to 40% following the consolidation. It is
anticipated that the $2.75 million bridge loan amount will not be reduced.
The existing shareholders in the affiliated Companies would retain a 60%
interest in UCB. The exact distribution of ownership interests among
shareholders of the affiliated companies has not yet been determined.
Management will soon
F-17
<PAGE>
MILE HIGH BREWING COMPANY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
11. SUBSEQUENT EVENTS (CONTINUED)
seek Board approval by each of the affiliated companies of any renegotiated
terms. Failure of the parties to reach a mutually agreeable renegotiated
investment agreement could lead to a loss of the bridge loans and the
remainder of the UBA investment which would materially and adversely affect
the Company's financial condition and results of operations. There can
be no assurance that the proposed merger will be completed or that the
Company will obtain the capital needed to sustain operations.
IMPAIRMENT OF ASSETS
Subsequent to December 31, 1996, the Company's management decided to sell
the operating assets of the Company. No definitive agreement has been
reached, but management has received an offer of approximately $2 million
in exchange for all of MHBC's property and equipment at the brewery and
assumption of the facility lease. Based on this plan, management has
recorded a partial write-down of operating brewery assets to their
estimated fair market value. The Company based its analysis on Statement of
Financial Accounting Standards No. 121, (SFAS 121), "Accounting for the
Impairment of Long-Lived Assets to be Disposed Of," which establishes the
standards to identify and measure impairment of long-lived assets.
Management's best estimate of this write-down, based on the present offer,
is $968,879. In addition, management estimates the cost to dispose of the
assets to be $50,000, and this amount is recorded in the financial
statements as of December 31, 1996, as part of the reserve for impairment
loss. While management searches for potential buyers, the Company is
operating on a limited basis as a contract brewer for a local brewery.
Revenues related to contract brewing are not sufficient to cover the fixed
costs to operate the brewery. Accordingly, a reserve for losses from
operations of the impaired assets in the amount of $288,000 is also
recorded as part of the reserve for impairment loss.
F-18
<PAGE>
INVESTMENT AGREEMENT
INVESTMENT AGREEMENT (the "Agreement"), dated as of January 30, 1997
by and among Nor'Wester Brewing Company, Inc. ("Nor'Wester"), North Country
Joint Venture, LLC ("North Country"), Willamette Valley, Inc. Microbreweries
Across America ("WVI") and each of the entities identified in Schedule 1.0
hereto (collectively, the "WVI Subsidiaries"), James W. Bernau ("Bernau") and
United Breweries of America, Inc. (the "Purchaser").
W I T N E S S E T H:
WHEREAS, Nor'Wester, North Country, WVI and the WVI Subsidiaries
desire to consolidate so that each of such companies become a wholly owned
subsidiary of United Craft Brewers, Inc. ("UCB") and the shareholders of each of
such companies become shareholders in UCB (referred to herein as the
"Consolidation").
WHEREAS, Nor'Wester desires, upon the terms and conditions hereinafter
provided, to form UCB for purposes of the Consolidation and cause UCB to issue
and sell to the Purchaser shares of its equity securities;
WHEREAS, Purchaser desires, upon the terms and conditions hereinafter
provided, to purchase from UCB shares of its equity securities; and
WHEREAS, Bernau, on his own behalf and on behalf of UCB, desires to
transfer certain of the shares in UCB he will receive in the Consolidation to
Purchaser in order to, among other things, induce the investment by the
Purchaser contemplated by this Agreement.
NOW, THEREFORE, in consideration of the promises and the covenants
hereinafter contained and intending to be legally bound hereby, it is agreed as
follows:
I. DEFINITIONS
"Affiliate" shall mean, with respect to any Person, (i) each Person that,
directly or indirectly, owns or controls, whether beneficially, or as a
trustee, guardian or other fiduciary, 5% or more of the Stock having ordinary
voting power in the election of directors of such Person or (ii) each Person
that controls, is controlled by or is under common control with such Person or
any Affiliate of such Person. For the purpose of this definition, "control" of
a Person shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of its
<PAGE>
management or policies, whether through the ownership of voting securities,
by contract or otherwise. The term "Affiliated" shall have meanings
correlative to the foregoing.
"Ancillary Agreements" shall mean Bernau's Employment Agreement, the
Production Agreement, the Registration Rights Agreement, the Security Agreement,
the Stockholder's Agreement, the Services Agreement and any other document or
instrument delivered at the Closing in connection therewith.
"Bernau's Employment Agreement" shall have the meaning set forth in Section
6.1(l)(i).
"Bridge Loans" shall have the meaning set forth in Section 7.1.
"Bridge Loan Shares" shall have the meaning set forth in Section 2.1.
"Business Day" shall mean a day of the year on which banks are not required
or authorized to close in New York City.
"Capital Expenditures" shall mean all payments for any fixed assets or
improvements, or for replacements, substitutions or additions thereto, that have
a useful life of more than one year and which are required to be capitalized
under GAAP.
"Capital Lease" shall mean, with respect to any Person, any lease of any
property (whether real, personal or mixed, by such Person as lessee that, in
accordance with GAAP, either would be required to be classified and accounted
for as a capital lease on a balance sheet of such Person or otherwise be
disclosed as a capital lease in a note to such balance sheet, other than, in the
case of UCB or a Subsidiary of UCB, any such lease under which UCB or such
Subsidiary is the lessor.
"Capital Lease Obligation" shall mean, with respect to any Capital Lease,
the amount of the obligation of the lessee thereunder that, in accordance with
GAAP, would appear on a balance sheet of such lessee in respect of such Capital
Lease or otherwise be disclosed in a note to such balance sheet.
"Charges" shall mean all federal, state, county, city, municipal, local,
foreign or other governmental (including, without limitation, PBGC) taxes at the
time due and payable, levies, assessments, charges, liens, claims or
encumbrances upon or relating to (i) each of the Constituent Corporations'
employees, payroll, income or gross receipts, (ii) each of the Constituent
Corporations' ownership or use of any of its assets, or (iii) any other aspect
of each of the Constituent Corporations' business.
"Closing" shall have the meaning set forth in Section 2.2.
2
<PAGE>
"Closing Date" shall have the meaning set forth in Section 2.2.
"Common Stock" shall initially mean the common stock, $0.001 par value per
share, of UCB and shall thereafter mean any shares of any class or classes of
capital stock resulting from any reclassification or reclassifications thereof
or otherwise issued, which have no preference in respect of dividends or of
amounts payable in the event of voluntary or involuntary liquidation,
dissolution or winding up of UCB and which are not subject to redemption by UCB.
"Confidential Information" shall have the meaning set forth in Section
10.10.
"Consolidation" shall mean the transactions whereby each of the Constituent
Corporations becomes a wholly-owned subsidiary of UCB, all as more fully
described in Section 5.9 hereof.
"Constituent Corporations" shall mean Nor'Wester, North Country, WVI, the
WVI Subsidiaries and, when formed, UCB collectively and Nor'Wester, North
Country, WVI, the WVI Subsidiaries and, when formed, UCB are each individually
referred to herein as a "Constituent Corporation".
"Diluted Basis" shall mean that, for purposes of calculating ownership of
the Common Stock, all outstanding options, warrants or other rights to acquire
Common Stock or securities convertible or exchangeable into Common Stock shall
be valued using the "treasury stock method" as promulgated by the SEC.
Notwithstanding the foregoing, options to purchase Common Stock to be granted to
Bernau pursuant to the terms of the Bernau Employment Agreement shall not be
considered outstanding for purposes of calculating ownership of the Common
Stock.
"Environmental Laws" shall mean all federal, state and local laws,
statutes, ordinances and regulations, now or hereafter in effect, and in each
case as amended or supplemented from time to time, and any judicial or
administrative interpretation thereof, including any applicable judicial or
administrative order, consent decree or judgment, relative to the applicable
property, relating to the regulation and protection of human health, safety, the
environment and natural resources (including, without limitation, ambient air,
surface water, groundwater, wetlands, land surface or subsurface strata,
wildlife, aquatic species and vegetation). Environmental Laws include but are
not limited to the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended (42 U.S.C. Section 9601 ET SEQ.) ("CERCLA");
the Hazardous Material Transportation Act, as amended (49 U.S.C. Section 1801
ET SEQ.); the Federal Insecticide, Fungicide, and Rodenticide Act, as amended (7
U.S.C. Section 136 ET SEQ.); the Resource Conservation and Recovery Act, as
amended (42 U.S.C. Section 6901 ET SEQ.) ("RCRA"); the Toxic Substance Control
Act, as amended (15 U.S.C. Section 2601 ET SEQ.); the Clean Air Act, as amended
3
<PAGE>
(42 U.S.C. Section 649 ET SEQ.); the Federal Water Pollution Control Act, as
amended (33 U.S.C. Section 1251 ET SEQ.); the Occupational Safety and Health
Act, as amended (29 U.S.C. Section 651 ET SEQ.) ("OSHA"); and the Safe
Drinking Water Act, as amended (42 U.S.C. Section 3001 ET SEQ.), and all
analogous state and local counterparts or equivalents and any transfer of
ownership, notification or approval statutes.
"Environmental Liabilities and Costs" shall mean all liabilities,
obligations, responsibilities, remedial actions, losses, damages, punitive
damages, consequential damages, treble damages, costs and expenses (including,
without limitation, all fees, disbursements and expenses of counsel, experts and
consultants and costs of investigation and feasibility studies), fines,
penalties, sanctions and interest incurred as a result of any claim, suit,
action or demand by any person or entity, whether based in contract, tort,
implied or express warranty, strict liability, criminal or civil statute or
common law (including, without limitation, any thereof arising under any
Environmental Law, permit, order or agreement with any Governmental Authority)
and which relate to any health or safety condition regulated under any
Environmental Law or in connection with any other environmental matter or
release or disposal of any Hazardous Substance or the presence of a hazardous
substance or threatened release or disposal of any Hazardous Substance.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974 (or
any successor legislation thereto), as amended from time to time and any
regulations promulgated thereunder.
"ERISA Affiliate" shall mean, with respect to the Constituent Corporations,
any trade or business (whether or not incorporated) under common control with
any Constituent Corporation and which, together with any Constituent
Corporation, are treated as a single employer within the meaning of Section
414(b), (c), (m) or (o) of the IRC.
"Existing Advance" shall have the meaning set forth in Section 7.1.
"Financials" shall mean the financial statements referred to in Section 3.7
hereof.
"Fiscal Year" shall mean the calendar year. Subsequent changes of the
fiscal year of any of the Constituent Corporations shall not change the term
"Fiscal Year," unless the Purchaser shall consent in writing to such changes.
"Fully Diluted Basis" shall mean that, for purposes of calculating
ownership of the Common Stock, all outstanding options, warrants or other rights
to acquire Common Stock or securities convertible or exchangeable into Common
Stock shall be assumed to be exercised, converted and exchanged into the shares
of Common Stock into which they, pursuant to their terms, may
4
<PAGE>
then or thereafter upon the passage of time be exercised, converted or
exchanged. Notwithstanding the foregoing, options to purchase Common Stock
to be granted to Bernau pursuant to the terms of the Bernau Employment
Agreement shall not be considered outstanding for purposes of calculating
ownership of the Common Stock.
"GAAP" shall mean generally accepted accounting principles in the United
States of America as in effect from time to time.
"Group" shall mean any Group as defined by Sections 13(d)(3) and 14(d)(2)
of the Securities Exchange Act.
"Guaranteed Indebtedness" shall mean, as to any Person, any obligation of
such Person guaranteeing any indebtedness, lease, dividend, or other obligation
("primary obligations") of any other Person (the "primary obligor") in any
manner including, without limitation, any obligation or arrangement of such
Person (a) to purchase or repurchase any such primary obligation, (b) to advance
or supply funds (i) for the purchase or payment of any such primary obligation
or (ii) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency or any balance sheet condition
of the primary obligor, (c) to purchase property, securities or services
primarily for the purpose of assuring the owner of any such primary obligation
of the ability of the primary obligor to make payment of such primary
obligation, or (d) to indemnify the owner of such primary obligation against
loss in respect thereof.
"Guaranty" shall have the meaning set forth in Section 2.4(b).
"Hazardous Material" shall mean any substance, chemical, compound, product,
solid, gas, liquid, waste, byproduct, pollutant, contaminant or material which
is hazardous or toxic, and includes, without limitation, (a) asbestos,
polychlorinated biphenyls and petroleum (including crude oil or any fraction
thereof) and (b) any such material classified or regulated as "hazardous" or
"toxic" pursuant to the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended by the Superfund Amendments and
Reauthorization Act of 1966, 42 U.S.C. Sections 8591 ET SEQ., Solid Waste
Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976
and Hazardous and Solid Waste Amendments of 1984, 42 U.S.C. Sections 6901 ET
SEQ., Federal Water Pollution Control Act, as amended by the Clean Water Act of
1977, 33 U.S.C. Sections 1251 ET SEQ., Clean Air Act of 1966, as amended, 42
U.S.C. Sections 6491 ET SEQ., Toxic Substances Control Act of 1976, 15 U.S.C.
Sections 2601 ET SEQ., or Hazardous Materials Transportation Act, 49 U.S.C.
App. Sections 1801 ET SEQ.
"Indebtedness" of any Person shall mean (i) all indebtedness of such Person
for borrowed money or for the deferred purchase price of property or services
(including, without limitation, reimbursement and all other obligations with
respect to surety
5
<PAGE>
bonds, letters of credit and bankers' acceptances, whether or not matured,
but not including obligations to trade creditors incurred in the ordinary
course of business), (ii) all indebtedness created or arising under any
conditional sale or other title retention agreements with respect to property
acquired by such Person (even though the rights and remedies of the seller or
lender under such agreement in the event of default are limited to
repossession or sale of such property), (iv) all Capital Lease Obligations,
(v) all Guaranteed Indebtedness, (vi) all Indebtedness referred to in clause
(i), (ii), (iii), (iv) or (v) above secured by (or for which the holder of
such Indebtedness has an existing right, contingent or otherwise, to be
secured by) any Lien upon or in property (including, without limitation,
accounts and contract rights) owned by such Person, even though such Person
has not assumed or become liable for the payment of such Indebtedness and
(vii) all liabilities under Title IV of ERISA.
"Initial Loan" shall have the meaning set forth in Section 7.1.
"IRC" shall mean the Internal Revenue Code of 1986, as amended, and any
successor thereto.
"IRS" shall mean the Internal Revenue Service, or any successor thereto.
"Kingfisher Brands" shall mean the Kingfisher, Sun Lager and Taj Mahal beer
brands.
"Lien" shall mean any mortgage or deed of trust, pledge, hypothecation,
assignment, deposit arrangement, lien, charge, claim, security interest,
easement or encumbrance, or preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever (including, without
limitation, any lease or title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing
of, or agreement to give, any financing statement perfecting a security interest
under the Uniform Commercial Code or comparable law of any jurisdiction).
"Material Adverse Effect" shall mean a material adverse effect on the
business, assets, operations, prospects or financial or other condition of the
Constituent Corporations taken as a whole.
"Material Contracts" shall mean (i) all of each Constituent Corporation's
contracts, agreements, leases or other instruments to which each Constituent
Corporation is a party or by which each Constituent Corporation or its
properties are bound, which involves payments by or to such Constituent
Corporation of more than $25,000 or which extends for a term of more than a year
from the date hereof, (ii) all of each Constituent Corporation's loan
agreements, bank lines of credit agreements, indentures,
6
<PAGE>
mortgages, deeds of trust, pledge and security agreements, factoring
agreements, conditional sales contracts, letters of credit or other debt
instruments, (iii) all operating or capital leases for equipment to which
each Constituent Corporation is a party which involves payments by or to such
Constituent Corporation of more than $25,000, (iv) all noncompetition and
similar agreements to which each Constituent Corporation is a party, (v) all
guarantees by each Constituent Corporation, (vi) all contracts and agreements
between each Constituent Corporation and the wholesalers of its respective
products and (vii) all other contracts, oral or written, that each
Constituent Corporation considers to be material to the business, assets,
operations, prospects or financial or other condition of such Constituent
Corporation taken as a whole.
"Multiemployer Plan" shall mean a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA, and to which any Constituent Corporation or any
ERISA Affiliate is making, is obligated to make, has made or been obligated to
make, contributions on behalf of participants who are or were employed by any of
them.
"Nor'Wester" shall mean Nor'Wester Brewing Company, Inc. an Oregon
corporation.
"North Country" shall mean North Country Joint Venture, LLC, a limited
liability corporation organized under the laws of the state of Oregon.
"Notice" shall have the meaning set forth in Section 7.2(b)(i).
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any successor
thereto.
"Pension Plan" shall mean an employee pension benefit plan, as defined in
Section (3)(2) of ERISA (other than a Multiemployer Plan), which is not an
individual account plan, as defined in Section 3(34) of ERISA, and which any
Constituent Corporation, or, if a Title IV Plan, any ERISA Affiliate maintains,
contributes to or has an obligation to contribute to on behalf of participants
who are or were employed by any of them.
"Person" shall mean any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation,
institution, public benefit corporation, entity or government (whether federal,
state, county, city, municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body or department thereof).
"Plan" shall mean, with respect to any Constituent Corporation or any ERISA
Affiliate, at any time, an employee benefit plan, as defined in Section 3(3) of
ERISA, which any such
7
<PAGE>
Constituent Corporation maintains, contributes to or has an obligation to
contribute to on behalf of participants who are or were employed by any of
them.
"Production Agreement" shall have the meaning set forth in Section
6.1(l)(ii).
"Projections" shall mean the projections referred to in Section 3.8 hereof.
"Purchase Shares" shall have the meaning set forth in Section 2.1 hereof.
"Qualified Plan" shall mean an employee pension benefit plan, as defined in
Section 3(2) of ERISA, which is intended to be tax-qualified under
Section 401(a) of the IRC, and which any Constituent Corporation or any ERISA
Affiliate maintains, contributes to or has an obligation to contribute to on
behalf of participants who are or were employed by any of them.
"Registration Rights Agreement" shall have the meaning set forth in Section
6.1(l)(iii).
"Representatives" shall have the meaning set forth in Section 10.10.
"Restricted Payment" shall mean (i) the declaration or payment of any
dividend or the occurrence of any liability to make any other payment or
distribution of cash or other property or assets in respect of UCB's Stock or
(ii) any payment on account of the purchase, redemption or other retirement of
UCB's Stock or any other payment or distribution made in respect of any Stock of
UCB, either directly or indirectly.
"Retiree Welfare Plan" shall refer to any Welfare Plan providing for
continuing coverage or benefits for any participant or any beneficiary of a
participant after such participant's termination of employment, other than
continuation coverage provided pursuant to Section 4980B of the IRC and at the
sole expense of the participant or the beneficiary of the participant.
"SEC" shall mean the Securities and Exchange Commission.
"SEC Documents" shall have the meaning set forth in Section 3.24.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Securities Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
"Security Agreement" shall have the meaning set forth in Section
6.1(l)(iv).
8
<PAGE>
"Services Agreement" shall have the meaning set forth in Section 6.1(l)(v).
"Stockholder's Agreement" shall have the meaning set forth in Section
2.4(a).
"Stock" shall mean all shares, options, warrants, general or limited
partnership interests, rights, participations or other equivalents (regardless
of how designated) of or in a corporation, partnership or equivalent entity
whether voting or nonvoting, including, without limitation, common stock,
preferred stock, or any other "equity security" (as such term is defined in Rule
3a11-1 of the General Rules and Regulations promulgated by the SEC under the
Securities Exchange Act).
"Subsidiary" shall mean, with respect to any Person, (a) any corporation of
which an aggregate of more than 50% of the outstanding Stock having ordinary
voting power to elect a majority of the board of directors of such corporation
(irrespective of whether, at the time, Stock of any other class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time, directly or indirectly, owned
legally or beneficially by such Person and/or one or more Subsidiaries of such
Person, and (b) any partnership or other entity in which such Person and/or one
or more Subsidiaries of such Person shall have an interest (whether in the form
of voting or participation in profits or capital contribution) of more than 50%.
"Title IV Plan" shall mean a Pension Plan, other than a Multiemployer Plan,
which is covered by Title IV of ERISA.
"Transactions" shall have the meaning set forth in Section 3.6.
"Transfer Shares" shall have the meaning set forth in Section 2.1.
"UCB" shall mean United Craft Brewers, Inc., a Delaware corporation formed
for the purpose of being the holding company resulting from the Consolidation
whose Subsidiaries consist of the Constituent Corporations.
"Withdrawal Liability" shall mean, at any time, the aggregate amount of the
liabilities, if any, pursuant to Section 4201 of ERISA, and any increase in
contributions pursuant to Section 4243 of ERISA with respect to all
Multiemployer Plans.
9
<PAGE>
"WVI Subsidiaries" shall mean each of the entities identified in Schedule
1.0 hereto.
II. THE PURCHASE AND TRANSFER OF EQUITY SECURITIES
II.1 PURCHASE AND TRANSFER OF EQUITY SECURITIES. Subject to the terms and
conditions set forth in this Agreement, (i) the Purchaser agrees to subscribe
for and purchase from UCB, and Nor'Wester agrees to cause UCB to issue and sell
to the Purchaser, 2,237,681 shares of Common Stock, equal to 17.19% of UCB's
outstanding Common Stock on a Diluted Basis after giving effect to the
Consolidation, for $5,882,653 (the "Purchase Shares") and 2,497,184 shares of
Common Stock, equal to 19.18% of UCB's outstanding Common Stock on a Diluted
Basis after giving effect to the Consolidation, upon the automatic conversion
of the Bridge Loans (the "Bridge Loan Shares"), and (ii) Bernau agrees to
transfer to Purchaser 1,124,195 shares of Common Stock, equal to 8.63% of UCB's
outstanding Common Stock on a Diluted Basis after giving effect to the
Consolidation (the "Transfer Shares") in consideration for (a) forestalling any
potential lawsuits from current shareholders of the Constituent Corporations
and thus supporting the financial viability of UCB on an ongoing basis, (b)
inducing the investment by the Purchaser contemplated by this Agreement, thus
protecting Bernau's investment in the Constituent Corporations, and (c)
protecting Bernau's goodwill and general business reputation, all as more fully
described in Section 2.2 hereof. After giving effect to the Consolidation, the
Purchase Shares, the Bridge Loan Shares and the Transfer Shares shall
collectively total 45% of the outstanding Common Stock of UCB on a Diluted
Basis.
II.2 CLOSING. The closing of the purchase and sale and transfer of the
Common Stock described in Section 2.1 (the "Closing") shall take place at the
offices of Orrick, Herrington & Sutcliffe LLP, Old Federal Reserve Bank
Building, 400 Sansome Street, San Francisco, California 94111, (a) commencing
at 9:30 a.m. local time on a date within five Business Days following the last
special meeting of shareholders of the Constituent Corporations at which
approval by the shareholders of the Constituent Corporations of this Agreement,
the Consolidation and the transactions contemplated hereby and thereby is duly
obtained or as soon thereafter is practicable or (b) such other date as
Nor'Wester and the Purchaser may mutually determine (the "Closing Date").
On the Closing Date, (i) Bernau shall deliver to the Purchaser certificates
representing the Transfer Shares to be transferred to the Purchaser registered
in the Purchaser's name (subject to the requirements of Section 10.4) and in
such denominations as the Purchaser requests and (ii) Nor'Wester shall cause UCB
to deliver to the Purchaser certificates representing the Purchase Shares and
the Bridge Loan Shares, registered in the Purchaser's name (subject to the
requirements of Section 10.4)
10
<PAGE>
and in such denominations as the Purchaser requests against delivery by the
Purchaser of the purchase price therefor consisting of (a) a certified or bank
check in the name of UCB in the amount of $5,882,653 and (b) the automatic
conversion of $2.75 million of indebtedness pursuant to the Bridge Loans.
II.3 LEGENDS. Each certificate representing the shares acquired by the
Purchaser at the Closing shall bear a legend substantially in the following
form:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 ("THE ACT"). THESE SECURITIES MAY NOT BE SOLD, PLEDGED OR
OTHERWISE TRANSFERRED UNLESS THE COMPANY'S TRANSFER AGENT RECEIVES
EVIDENCE SATISFACTORY TO IT THAT SUCH SALE, PLEDGE OR TRANSFER
COMPLIES WITH THE REQUIREMENTS OF EACH SUBSECTION OF RULE 144 UNDER
THE ACT, OTHER THAN SUBSECTION (D) OF SUCH RULE."
The legend described in this Section 2.3 shall be removed promptly, and UCB
shall issue to the Purchaser a new certificate for any of the shares acquired by
the Purchaser at the Closing (or pursuant to Section 7.2), that have been sold
in a sale registered under the Securities Act and with respect to which a
prospectus meeting the requirements of Section 10 of the Securities Act is
available or with respect to which Purchaser has provided to UCB an opinion of
counsel, satisfactory in the reasonable judgment of UCB, that the public sale,
transfer or assignment thereof may be made without registration under the
Securities Act.
II.4 ADDITIONAL AGREEMENTS. On the date hereof, (a) Bernau simultaneously
herewith delivers to the Purchaser the Stockholder's Agreement between Bernau
and the Purchaser dated the date of this Agreement and duly executed by Bernau,
a copy of which is attached hereto as Exhibit 2.4(a) (the Stockholder's
Agreement); and (b) Purchaser simultaneously herewith delivers to Nor'Wester a
Guaranty from UB International Ltd. to each of the Constituent Corporations
dated the date of this Agreement and duly executed by UB International Ltd., a
copy of which is attached hereto as Exhibit 2.4(b) (the "Guaranty").
III. REPRESENTATIONS AND WARRANTIES OF THE CONSTITUENT CORPORATIONS AND
BERNAU.
With regard to Sections 3.1 through 3.27, each Constituent Corporation and
Bernau, jointly and severally, make, and with regard to Sections 3.28 through
3.31, Bernau only makes, the following representations and warranties to the
Purchaser, each and all of which shall survive the execution and delivery of
this Agreement and the Closing hereunder:
III.1 AUTHORIZED AND OUTSTANDING SHARES OF CAPITAL STOCK. The authorized
capital stock of Nor'Wester consists of
11
<PAGE>
10,000,000 shares of Common Stock, no par value per share, and 15,000,000 shares
of Preferred Stock, no par value per share. Schedules 3.1(a)(1) and (2) set
forth the number of shares of Common Stock and Preferred Stock of Nor'Wester
authorized and outstanding and subject to options, respectively, as of the date
hereof. Schedules 3.1(b)(1) and (2) set forth the number of shares of Common
Stock and Preferred Stock of WVI, North Country and each of the WVI Subsidiaries
that is authorized and outstanding and subject to options, respectively, as of
the date hereof. All of the issued and outstanding shares are, and as of the
Closing Date will be, validly issued, fully paid and non-assessable. A list
of all of the holders who beneficially own in excess of five percent (5%) of
the outstanding shares of Common Stock and Preferred Stock of each of the
Constituent Corporations, indicating the number of shares of Common Stock
and Preferred Stock, respectively, owned by each such holder on the date
hereof and to be owned by each such holder after the Consolidation, is set
forth on Schedule 3.1(c). Schedule 3.1(d) sets forth the ratio at which
existing shares and options of each Constituent Corporation will be
converted into shares of UCB in connection with the Consolidation and sets
forth the number of shares of Common Stock of UCB to be outstanding and the
percentage ownership on a Diluted Basis of the stockholders thereof. Except
as set forth on Schedules 3.1(a)(2) and 3.1(b)(2), (i) there is no existing
option, warrant, call, commitment or other agreement to which any
Constituent Corporation is a party requiring, and there are no convertible
securities of any Constituent Corporation outstanding which upon conversion
would require, the issuance of any additional share of Stock of any
Constituent Corporation or other securities convertible into shares of
equity securities of any Constituent Corporation, and (ii) there are no
agreements to which any Constituent Corporation is a party or, to the best
knowledge of any Constituent Corporation, to which such Constituent
Corporation is not a party, in each case, among, between or with any of the
stockholders of any Constituent Corporation with respect to the voting or
transfer of the Stock of the Constituent Corporations or with respect to any
other aspect of any Constituent Corporation's affairs. Schedules 3.1(a)(2)
and 3.1(b)(2) set forth complete, correct and accurate statements of the
option terms, exercise price and identity of the optionee with respect to
each outstanding stock option or other stock incentive of each of the
Constituent Corporations. There are no stockholders' preemptive rights or
rights of first refusal or other similar rights with respect to the issuance
of Stock by any Constituent Corporation, other than pursuant to this Agreement.
III.2 AUTHORIZATION AND ISSUANCE OF EQUITY SECURITIES. Nor'Wester and
Bernau shall take all necessary corporate action to cause, and shall cause, UCB
to take all necessary corporate action to duly authorize the issuance of the
Common Stock hereunder. Upon delivery to the Purchaser of certificates
therefor against payment in accordance with the terms hereof, the Common Stock
to be issued to the Purchaser hereunder will be
12
<PAGE>
validly issued and fully paid and nonassessable, free and clear of all Liens
and preemptive rights. The Purchase Shares and the Bridge Loan Shares to be
issued to the Purchaser by UCB, together with the Transfer Shares to be
transferred to the Purchaser by Bernau, on the Closing will collectively
represent 45.00000% of the outstandingshares of Common Stock of UCB on a
Diluted Basis after giving effect to the Consolidation. Upon Closing,
Bernau will beneficially own 10.000005% of the outstanding shares of Common
Stock of UCB on a Diluted Basis after giving effect to the Consolidation and
except as set forth in Bernau's Employment Agreement, Bernau will have no
options, warrants or other rights to acquire theCommon Stock or other Stock
of UCB.
III.3 SECURITIES LAWS. In reliance on the investment representations
contained in Section 4.1, the offer, issuance, sale and delivery of the Common
Stock, as provided in this Agreement, are exempt from the registration
requirements of the Securities Act and all applicable state securities laws,
and are otherwise in compliance with such laws. Neither the Constituent
Corporations, Bernau nor any Person acting on their behalf has taken or will
take any action (including, without limitation, any offering of any securities
of the Constituent Corporations under circumstances which would require the
integration of such offering with the offering of the Common Stock hereunder
under the Securities Act) which might subject the offering, issuance or sale of
the Common Stock hereunder to the registration and prospectus delivery
requirements of Section 5 of the Securities Act.
III.4 CORPORATE EXISTENCE; COMPLIANCE WITH LAW. Each Constituent
Corporation (i) is a corporation duly organized, validly existing and, to the
extent a Delaware corporation, in good standing under the laws of the state of
its organization; (ii) is duly qualified as a foreign corporation and in good
standing under the laws of each jurisdiction where its ownership or lease of
property or the conduct of its business requires such qualification (except for
jurisdictions in which such failure to so qualify or to be in good standing
would not have a Material Adverse Effect); (iii) has the requisite corporate
power and authority and the legal right to own, pledge, mortgage or otherwise
encumber and operate its properties, to lease the property it operates under
lease, and to conduct its business as now, heretofore and proposed to be
conducted; (iv) has all material licenses, permits, consents or approvals from
or by, and has made all material filings with, and has given all material
notices to, all governmental authorities having jurisdiction or other Persons,
to the extent required for such ownership, operation and conduct; (v) is in
compliance with its certificate or articles of incorporation and by-laws; and
(vi) is in material compliance with all applicable provisions of law.
III.5 SUBSIDIARIES. Except as set forth in Schedule 3.5, there exist no
subsidiaries of any of the Constituent Corporations.
13
<PAGE>
III.6 CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. The
execution, delivery and performance by each of the Constituent Corporations of
this Agreement, the Ancillary Agreements to which it is a party, the
Consolidation, and all instruments and documents to be delivered by each
Constituent Corporation, to the extent it is a party thereto, hereunder and
thereunder, and the consummation of the other transactions contemplated by any
of the foregoing (collectively referred to as the "Transactions"): (i) are
within each Constituent Corporations corporate power; (ii) have been duly
authorized by all necessary or proper corporate action on the part of each
Constituent Corporation (except for shareholder approval); (iii) are not in
contravention of any provision of each Constituent Corporation's articles of
incorporation or by-laws; (iv) will not violate any law or regulation, or any
order or decree of any court or governmental instrumentality; (v) will not
conflict with or result in the breach or termination of, constitute a default
under or accelerate any performance required by, any indenture, mortgage, deed
of trust, lease, agreement or other instrument to which each Constituent
Corporation is a party or by which each Constituent Corporation or any of its
respective property is bound; (vi) will not result in the creation or
imposition of any Lien upon any of the property of the Consolidated
Corporation; and (vii) except for the filings described on Schedule 3.6 hereto,
do not require the consent or approval of, or any filing with, any governmental
authority or any other Person. This Agreement has been duly executed and
delivered by each Constituent Corporation and constitutes a legal, valid and
binding obligation of each Constituent Corporation, enforceable against it in
accordance with its terms. This Agreement has been, and as of their respective
dates and at the Closing Date each of the Ancillary Agreements shall have been,
duly executed and delivered by the Constituent Corporations, and each is or
shall then (as appropriate) constitute a legal, valid and binding obligation of
each Constituent Corporation to the extent it is a party thereto, enforceable
against it in accordance with its terms. Bernau has full right, power and
authority to enter into the Transactions and the execution, delivery and
performance by Bernau of the Transactions will not result in a breach or
violation by Bernau of any of the terms or provisions of, or constitute a
default by Bernau under, any indenture, mortgage, deed of trust, trust
(constructive or other), loan agreement, lease, franchise, license or other
agreement or instrument to which Bernau is a party or by which Bernau or any of
his properties is bound, any statute, or any judgment, decree, order, rule or
regulation of any court or governmental agency or body applicable to Bernau or
any of his properties.
14
<PAGE>
III.7 FINANCIAL STATEMENTS.
(a) The pro forma balance sheet of the Constituent Corporations on a
consolidated basis as of September 30, 1996, a copy of which has been furnished
to Purchaser prior to the date of this Agreement, has been prepared in
accordance with GAAP and is based on the unaudited balance sheet of the
Constituent Corporations as of September 30, 1996, adjusted for the
Consolidation and as if the purchase and transfer of the Common Stock
contemplated hereby had occurred as at the date of such balance sheet and
presents fairly on a pro forma basis the position of the Constituent
Corporations on a consolidated basis at such date assuming the events specified
in this paragraph had actually occurred on such date.
(b) All of the following balance sheets and statements of income and
retained earnings of each Constituent Corporation, copies of which are attached
hereto as Schedule 3.7, have been, except as noted therein, prepared in
conformity with GAAP consistently applied throughout the periods involved and
present fairly the financial position of each Constituent Corporation in each
case as the dates thereof, and the results of operations and cash flows for the
periods then ended (and as to the unaudited interim financial statements,
subject to normal year-end audit adjustments not material in amount):
(i) the unaudited balance sheet of each Constituent Corporation
as at September 30, 1996, and the related statements of income, retained
earnings and cash flows for the nine months ending on such date; and
(ii) the audited balance sheets of each Constituent Corporation
as at December 31, 1995, as at December 31, 1994 and as at December 31,
1993, and the related statements of income, retained earnings and cash
flows for the year then ended, with the opinion thereon of Price
Waterhouse LLP.
(c) Except as set forth in Schedule 3.7(c), each Constituent
Corporation has no obligations, contingent or otherwise, including, without
limitation, liabilities for charges, long-term leases or unusual forward or
long-term commitments which are not reflected in the balance sheets of each
Constituent Corporation, other than those that are both incurred in the
ordinary course of business and are immaterial in amount.
III.8 PROJECTIONS. The projections of the Constituent Corporation's, on
a consolidated basis, annual operating budgets, balance sheets and cash flow
statements for the fiscal years ending on December 31, 1996, 1997, and 1998
(the "Projections"), attached hereto as Schedule 3.8, disclose all material
assumptions made in formulating such Projections. To the knowledge of Bernau
and each Constituent Corporation no facts
15
<PAGE>
will exist which should result in any material change in any of such
Projections. The Projections will be based upon reasonable estimates and
assumptions, all of which Bernau and each Constituent Corporation in good
faith will believe to be reasonable and fair in light of current conditions,
will be prepared on the basis of the assumptions stated therein, and will
reflect the good faith estimate of each Constituent Corporation of the
results of operations and other information projected therein.
III.9 OWNERSHIP OF PROPERTY.
(a) Each Constituent Corporation owns good and marketable fee simple
title to all of the real estate described on Schedule 3.9(a) hereto (subject to
only those Liens disclosed on such Schedule 3.9(a)) and good, valid and
marketable leasehold interests in the leases described in Schedule 3.9(b)
hereto, and good and marketable title to, or valid leasehold interests in, all
of its other properties and assets.
(b) All real property owned, leased, used or occupied by each
Constituent Corporation is set forth on Schedule 3.9(a) and 3.9(b),
respectively. The Constituent Corporations do not own any other real property
and are not a lessee or lessor under any leases, or a licensee or licensor of
real property, other than set forth therein. Each of such leases is valid and
enforceable in accordance with its terms and is in full force and effect. Each
Constituent Corporation has delivered to the Purchaser true and complete copies
of each of such leases set forth on Schedule 3.9(b) and all documents affecting
the rights or obligations of each Constituent Corporation, including, without
limitation, any non-disturbance and recognition agreements, subordination
agreements, attornment agreements and agreements regarding the term or rental
of any of the leases. Neither the Constituent Corporation nor any other party
to any such lease is in default of its obligations thereunder or has delivered
or received any notice of default under any such lease, nor has any event
occurred which, with the giving of notice, the passage of time or both, would
constitute a default under any such lease.
(c) Except as disclosed on Schedule 3.9(b), each Constituent
Corporation is not obligated under or a party to, any option, right of first
refusal or any other contractual right to purchase, acquire, sell, assign or
dispose of any real property owned or leased by each Constituent Corporation.
(d) All real estate and improvements owned, leased, used or occupied
by each Constituent Corporation have adequate connections to all necessary
utilities and conform with all applicable zoning, building, subdivision and
other requirements of any governmental authority and all restrictive covenants
affecting such real estate and improvements except any such failures to confirm
that, singly or in the aggregate, would not
16
<PAGE>
have a Material Adverse Effect. To the knowledge of each Constituent
Corporation, there are no presently pending or contemplated special tax
assessment, condemnation proceedings or nuisance claims affecting such real
estate and improvements.
(e) Except as set forth in Schedule 3.9(e), the consummation of the
Transactions, including the Closing, do not require the consent of any lessor
or licensor of any real property leased, licensed or used by each Constituent
Corporation.
III.10 MATERIAL CONTRACTS. Schedule 3.10 contains a true, correct and
complete list and description of all Material Contracts, whether oral or
written, and any amendments or supplements thereto or extensions thereof, and
each Constituent Corporation has made available to the Purchaser for its review
complete, current and accurate copies of each Material Contract including any
amendments or supplements thereto or extensions thereof or has completely,
currently and accurately described the terms of any oral agreement, amendment,
supplement or extension. Each Material Contract is a valid and binding
agreement of the Constituent Corporation enforceable against such Constituent
Corporation in accordance with its terms, and such Constituent Corporation does
not have any knowledge that any Material Contract is not a valid and binding
agreement against the other parties thereto. Each Constituent Corporation has
fulfilled all obligations required pursuant to each Material Contract to have
been performed by such Constituent Corporation on its part. Each Constituent
Corporation is not in default or breach, nor to such Constituent Corporation's
knowledge is any third party in default or breach, under or with respect to any
Material Contract.
III.11 ENVIRONMENTAL PROTECTION.
(a) Each Constituent Corporation and all real property owned, leased
or otherwise operated by each Constituent Corporation (each, a "Facility")
comply in material respects with any applicable Environmental Law;
(b) Each Constituent Corporation has all permits and authorizations
necessary from any government authorities for its operations and the Facilities
by any applicable Environmental Law;
(c) Except as set forth in Schedule 3.11(c), each Constituent
Corporation has not, and has no knowledge of any other person who has, caused
any release, threatened release or disposal of any Hazardous Material at any
Facility in any material quantity, and, to the knowledge of each Constituent
Corporation, the Facilities are not adversely affected by any release,
threatened release or disposal of a Hazardous Material originating or emanating
from any other property;
(d) Each Constituent Corporation has generated,
17
<PAGE>
treated, stored or disposed of all Hazardous Materials in full compliance
with applicable Environmental Laws, except such non-compliances which in the
aggregate have no reasonable likelihood of having a Material Adverse Effect;
(e) Each Constituent Corporation has obtained and is in full
compliance with and in good standing under all permits required under
Environmental Laws, and the Consolidated Corporation has no knowledge of any
proceedings to substantially modify or to revoke any such permit, other than
those permits, the failure of which to obtain or have in effect, in the
aggregate, would have no reasonable likelihood of having a Material Adverse
Effect;
(f) There are no investigations; judicial or administrative
proceedings, pending litigation or, to each Constituent Corporation's
knowledge, threatened investigations, proceedings or litigation affecting or
relating to each Constituent Corporation or the Facilities relating to
Environmental Laws or Hazardous Materials.
(g) The Constituent Corporations have not received any communication
or notice (including, without limitation, requests for information) indicating
the potential of Environmental Liabilities and Costs against any of the
Constituent Corporations or the Facilities;
(h) Each Constituent Corporation has provided to the Purchaser or
made available to the Purchaser all environmental records, documents,
correspondence, analytical results, manifests, permits or other records
concerning the potential of Environmental Liabilities and Costs against any
Constituent Corporation or the Facilities that any Constituent Corporation
possesses.
III.12 LABOR MATTERS. There are no strikes or other labor disputes
against any Constituent Corporation pending or, to any Constituent
Corporation's knowledge, threatened. Hours worked by and payments made to
employees of each Constituent Corporation have not been in violation of the
Fair Labor Standards Act or any other applicable law dealing with such matters.
All payments due from each Constituent Corporation on account of employee
health and welfare insurance have been paid or accrued as a liability on the
books of such Constituent Corporation. None of the Constituent Corporations
have any obligation under any collective bargaining agreement or similar
agreement. There is no organizing activity involving any Constituent
Corporation pending or, to any Constituent Corporation's knowledge, threatened
by any labor union or group of employees. There are no representation
proceedings pending or threatened with the National Labor Relations Board, and
no labor organization or group of employees of any Constituent Corporation has
made a pending demand for recognition. Except as set forth in Schedule 3.12,
there are no complaints or charges against any
18
<PAGE>
Constituent Corporation pending or, to any Constituent Corporation's
knowledge, threatened to be filed with any federal, state, local or foreign
court, governmental agency or arbitrator based on, arising out of, in
connection with, or otherwise relating to the employment or termination of
employment by any Constituent Corporation of any individual.
III.13 OTHER VENTURES. Except as set forth in Schedule 3.13, each
Constituent Corporation is not engaged in any joint venture or partnership with
any other Person.
III.14 TAXES. All federal, state, local and foreign tax returns, reports
and statements required to be filed by each Constituent Corporation have been
filed with the appropriate governmental authority and are complete and
accurate. Except as set forth on Schedule 3.14, all Charges and other
impositions shown thereon to be due and payable or required to be shown thereon
have been paid prior to the date on which any fine, penalty, interest, late
charge may be added thereto for nonpayment thereof, or any such fine, penalty,
interest, late charge or loss has been paid. Proper and accurate amounts have
been withheld by each Constituent Corporation from its employees for all
periods in full and complete compliance with the tax, social security and
unemployment withholding provisions of applicable federal, state, local and
foreign law and such withholdings have been timely paid to the respective
governmental agencies. None of the Constituent Corporations have executed or
filed with the IRS or any other governmental authority any agreement or other
document extending, or having the effect of extending, the period for
assessment or collection of any Charges. None of the Constituent Corporations
have filed a consent pursuant to IRC Section 341(f) or agreed to have IRC
Section 341(f)(2) apply to any dispositions of subsection (f) assets (as such
term is defined in IRC Section 341(f)(4)). None of the property owned by any
Constituent Corporation is property which any Constituent Corporation is
required to treat as being owned by any other Person pursuant to the provisions
of IRC Section 168 (f)(8) of the Internal Revenue Code of 1954, as amended, and
in effect immediately prior to the enactment of the Tax Reform Act of 1986 or
is "tax-exempt use property" within the meaning of IRC Section 168(h). None of
the Constituent Corporations have agreed or have been requested to make any
adjustment under IRC Section 481(a) by reason of a change in accounting method
or otherwise. None of the Constituent Corporations have any obligation under
any written tax sharing agreement. There are no Liens for or in respect of
taxes upon any assets of any Constituent Corporation, other than with respect
to taxes not yet due and payable. None of the Constituent Corporations have
agreed to indemnify any other party with respect to such party's tax
liabilities. Each of the Constituent Corporations does not now, and has never,
filed federal, state, local or foreign income tax returns on a consolidated,
unitary or other similar basis with one or more corporations, except with
another Constituent Corporation.
19
<PAGE>
III.15 NO LITIGATION. Except as disclosed on Schedule 3.15, no action,
claim or proceeding is now pending or, to the knowledge of each Constituent
Corporation, threatened against such Constituent Corporation, at law, in
equity or otherwise, before any court, board, commission, agency or
instrumentality of any federal, state, or local government or of any agency
or subdivision thereof, or before any arbitrator or panel of arbitrators, nor
to the knowledge of each Constituent Corporation does a state of facts exist
which is reasonably likely to give rise to such proceedings.
III.16 BROKERS. Except as set forth on Schedule 3.16 and other than
Needham & Company, Inc. and Black & Company, no broker or finder acting on
behalf of any Constituent Corporation brought about the consummation of the
transactions contemplated pursuant to this Agreement, and none of the
Constituent Corporations have an obligation to any Person, in respect of any
finder's or brokerage fees in connection with the transaction contemplated by
this Agreement. Nor'Wester and WVI are solely responsible for the payment of
all fees and expenses of Needham & Company, Inc., Black & Company and any
other brokers or finders acting on behalf or at the request of any
Constituent Corporation.
III.17 EMPLOYMENT AND LABOR AGREEMENTS. Except as set forth on
Schedule 3.17, there are no employment, consulting or management agreements
covering management of any Constituent Corporation and there are no
collective bargaining agreements or other labor agreements covering any
employees of any Constituent Corporation.
III.18 PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES. Each Constituent
Corporation owns all licenses, patents, patent applications, copyrights,
service marks, trademarks, trademark applications, trade dress, trade
secrets, trade names and other intellectual property rights necessary to
continue to conduct its business as heretofore conducted by it, now conducted
by it and proposed to be conducted by it, including those trademarks listed,
together with Patent and Trademark Office application or registration
numbers, where applicable, or other similar information with respect to
filings made in countries other than the United States, where applicable, on
Schedule 3.18 hereto. Each Constituent Corporation conducts its businesses
without infringement, unfair competition or dilution or claim of
infringement, unfair competition or dilution of any license, patent,
copyright, service mark, trademark, trade name, trade secret or other
intellectual property right of others. To each Constituent Corporation's
knowledge, there is no infringement or claim of infringement by others of any
material license, patent, copyright, service mark, trademark, trade name,
trade dress, trade secret or other intellectual property right of any
Constituent Corporation.
III.19 FULL DISCLOSURE. Except as set forth on Schedule
20
<PAGE>
3.19, no information contained in this Agreement, the Financials, any
Ancillary Agreement or any schedules thereto prepared by any Constituent
Corporation or its representatives and furnished by or on behalf of any
Constituent Corporation pursuant to the terms of this Agreement, any
Ancillary Agreement or the other Transactions contains any untrue statement
of an material fact or, when taken as a whole, omits to state a material fact
necessary to make the statements contained herein or therein not misleading
in light of the circumstances under which they were made.
III.20 NO MATERIAL ADVERSE EFFECT. No event has occurred since
September 30, 1996 which has had, or is reasonably likely to have, a Material
Adverse Effect. Since December 31, 1995 or September 30, 1996 except as
otherwise contemplated in this Agreement or as indicated in Schedule 3.20,
(i) Each Constituent Corporation has not sold leased,
transferred or assigned any of its assets, tangible or intangible,
other than for fair consideration in the ordinary course of business
consistent with past practice;
(ii) Each Constituent Corporation has not changed its
accounting methods, principles or practices;
(iii) Each Constituent Corporation has not increased the
compensation payable or to become payable to its officers or key
employees other than in the ordinary course of business consistent
with past practice;
(iv) Each Constituent Corporation has not increased any bonus,
insurance, pension or other employee benefit plan for or with any
such officers or key employees other than in the ordinary course of
business consistent with past practice;
(v) Each Constituent Corporation has not entered into any
agreement, commitment or transaction (including any borrowing,
capital expenditure or capital financing) except in the ordinary
course of business consistent with past practice;
(vi) Except for and between the Constituent Corporations, no
Constituent Corporation has granted or received any license or
sublicense or any rights under or with respect to any license,
patent, copyright, service mark, trademark, trade name, trade secret
or other intellectual property right of such Constituent Corporation;
(vii) Each Constituent Corporation has not declared, set aside
or paid any dividends or made any
21
<PAGE>
distribution with respect to its capital stock (whether in cash or
in kind) or redeemed, purchased or otherwise acquired any of its
capital stock;
(viii) Each Constituent Corporation has not experienced any
material damage, destruction or loss (whether or not covered by
insurance) to its property;
(ix) Except for and between the Constituent Corporations, no
Constituent Corporation has made any capital investment in, any loan
to, or any acquisition of the securities or assets of, any other
Person;
(x) Except for and between the Constituent Corporations, no
Constituent Corporation has cancelled, compromised, waived or
released any right or claim outside the ordinary course of business
consistent with past practice;
(xi) Each Constituent Corporation has not issued, sold or
otherwise disposed of any of its capital stock, or granted any
options, warrants, or other rights to purchase or obtain (including
upon conversion, exchange or exercise) any of its capital stock,
other than pursuant to any currently authorized stock option plans;
(xii) Each Constituent Corporation has not delayed or postponed
the payment of accounts payable or other labilities outside the
ordinary course of business consistent with past practice;
(xiii) Each Constituent Corporation has not incurred or become
subject to any material liability, outside the ordinary course of
business consistent with past practice;
(xiv) Each Constituent Corporation has not discharged or
satisfied any Lien on its properties or assets or, except in the
ordinary course of business consistent with past practice, paid any
material liability;
(xv) Each Constituent Corporation has not mortgaged, pledged or
subjected to any Lien any of its assets or properties except (A)
Liens for taxes not delinquent or for taxes being contested in good
faith by appropriate proceedings and as to which adequate financial
reserves have been established by such Constituent Corporation, and
(B) Liens (other than any Lien imposed by ERISA), created and
maintained in the ordinary course of business that are not material
to such Constituent Corporation in the aggregate, that would not
have a Material Adverse Effect and that would
22
<PAGE>
not adversely affect the operation of any Facility and that
constitute (aa) pledges or deposits under worker's compensation
laws, unemployment insurance laws, or similar legislation, (bb) good
faith deposits in connection with bids tenders, contracts or leases
to which such Constituent Corporation is a party for a purpose other
than borrowing money or obtaining credit, (cc) Liens imposed by law,
such as those of carriers, warehousemen and mechanics, payment of
the obligation secured thereby not yet being due, (dd) Liens
securing taxes, assessments or other governmental charges or levies
not yet subject to penalties for nonpayment or (ee) pledges or
deposits to secure public or statutory obligations of such
Constituent Corporation or surety, customs or appeal bonds to which
such Constituent Corporation is a party;
(xvi) Each Constituent Corporation has not committed to any of
the foregoing; and
III.21 ERISA.
(a) Each Constituent Corporation has no ERISA Affiliates other
than its Subsidiaries.
(b) Set forth on Schedule 3.21 is a complete and accurate list of
all plans maintained, contributed to or which there has been or currently is
an obligation to contribute to by each Constituent Corporation or any of its
Subsidiaries. Except as indicated otherwise in Schedule 3.21, none of the
Plans is a Pension Plan, Multiemployer Plan, Title IV Plan, Retiree Welfare
Plan or is or has been subject to Sections 4063 or 4064 or ERISA; and neither
each Constituent Corporation nor any Subsidiary has contributed, or been
obligated to contribute, to a Multiemployer Plan or Title IV Plan.
(c) Each of the Qualified Plans and the trust maintained pursuant
thereto are exempt from federal income taxation under Section 501 of the IRC,
and nothing has occurred with respect to the operation of such Qualified
Plans which could cause the loss of such qualifications or exemptions or the
imposition of any liability, penalty or tax under ERISA or the IRC.
(d) All contributions (including all employer contributions and
employee salary reduction contributions) required to have been made under any
of the Plans or by law (without regard to any waivers granted under Section
412 of the IRC), to any funds or trusts established thereunder or in
connection therewith have been made by the due date thereof (including any
valid extension), and all contributions for any period ending on or before
the Closing Date which are not yet due will have been paid or accrued on or
prior to the Closing Date.
23
<PAGE>
(e) There is no material violation of ERISA with respect to the
filing of applicable reports, documents and notices regarding he Plans or any
tax-exempt trust related to any of the Plans with the Secretary of Labor and
the Secretary of the Treasury or the furnishing of such documents to the
participants or beneficiaries of the Plans.
(f) True, correct and complete copies of the following documents,
with respect to each of the Plans, have been made available or delivered to
the Purchaser by each Constituent Corporation: (i) current plans and related
trust documents, and amendments thereto; (ii) the most recent Forms 5500,
Forms 990, if applicable, and any Forms 990T, 5329, 5330 that have been filed
and any Forms 5558 that have been filed for reasons other than extensions of
time; (iii) the last IRS determination letter; (iv) current summary plan
descriptions; (v) written communications to employee relating to the Plans,
and (vi) written descriptions of all not-written agreements relating to the
Plans.
(g) There are no pending actions, claims or lawsuits which have
been asserted or instituted against the Plans, the assets of any of the
trusts under such Plans or the plan sponsor or the plan administrator, or
against any fiduciary of the Plans with respect to the operation of such
Plans (other than routine benefits claims), nor does each Constituent
Corporation or any of its Subsidiaries have knowledge of facts which could
form the basis for any such claim or lawsuit.
(h) The Plans have been maintained, in all material respects, in
accordance with their terms and with all provisions of ERISA and other
applicable federal and state laws and regulations, and neither each
Constituent Corporation nor any of its Subsidiaries or any "party in
interest" or "disqualified person" with respect to the Plans has engaged in a
"prohibited transaction" within the meaning of Section 4975 of the IRC or
Section 406 of ERISA. No fiduciary has any liability for breach of fiduciary
duty or any other failure to act or comply in connection with the
administration or investment of the assets of any Plan.
(i) Each Constituent Corporation and any of its Subsidiaries which
maintains a "group health plan" within the meaning of Section 5000 (b) (1) of
the IRC has complied with the notice and continuation requirements of Section
4980B of the IRC, the Consolidated Omnibus Budget Reconciliation Act of 1985,
as amended, Part 6 of Subtitle B of Title I of ERISA and the regulations
thereunder and with the requirements of Section 5000 of the Code.
(j) No liability under any Plan has been funded nor has any such
obligation been satisfied with the purchase of a contract from an insurance
company that is not rated AA by Standard & Poor's Corporation and the
equivalent by each other
24
<PAGE>
nationally recognized rating agency.
(k) None of the Constituent Corporations nor any of their
Subsidiaries have any contract, plan or commitment, whether legally binding
or not, to create any additional Plan or to modify any existing Plan.
III.22 REGISTRATION RIGHTS. Except as set forth on Schedule 3.22, none
of the Constituent Corporations are under any obligation to register under
the Securities Act any of its presently outstanding securities or any
securities which may hereafter be issued.
III.23 LIQUOR CONSENTS AND PERMITS. Set forth on Schedule 3.23 is a
list of all material licenses, permits, consents or approvals from or by ,
all material filings required to be made with, and all material notices
required to be given to, all governmental authorities having jurisdiction, to
the extent required for each Constituent Corporation to own and operate its
properties, to lease the property it operates under lease, and to conduct its
business as now, heretofore and proposed to be conducted.
III.24 SEC DOCUMENTS. Each Constituent Corporation has furnished the
Purchaser with a true and complete copy of the SEC Documents. The SEC
Documents are all the documents (other than preliminary material) that each
Constituent Corporation has been required to file since January 1, 1995. As
of its filing date (and, with respect to any registration statement, the date
on which it or any post-effective amendment was declared effective), each SEC
Document was in compliance, in all material respects, with the applicable
requirements of the Securities Act and the Securities Exchange Act, contained
no untrue statement of a material fact and did not omit any statement of a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The financial statements of each Constituent Corporation
included in the SEC Documents complied, at the time of filing with the SEC
(and, with respect to any registration statement, at the time it was declared
effective), as to form, in all material respects, with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, were prepared in accordance with generally accepted accounting
principles applied on a consistent basis during the periods involved
(subject, in the case of the unaudited statements, to the omission of certain
footnotes) and fairly present, in all material respects (subject, in the case
of the unaudited statements, to normal, recurring year-end audit adjustments)
the consolidated financial position of each Constituent Corporation, as
applicable, as of the dates thereof and the consolidated results of their
operations for the periods presented.
III.25 MAJOR CUSTOMERS AND SUPPLIERS. Schedule 3.25
25
<PAGE>
contains a complete and correct list of the top 10 customers of each
Constituent Corporation and the top vendors or suppliers of each Constituent
Corporation, in each case for the Fiscal Year ended December 31, 1995, in
terms of the aggregate dollar purchases or aggregate dollars sales, as
applicable.
III.26 ACQUISITIONS; CAPITAL EXPENDITURES. Except for existing
commitments which have been set forth on Schedule 3.26, none of the
Constituent Corporations has any existing commitments or agreements to
acquire any assets (including under circumstances where such acquisition
would be classified as a capital expenditure under GAAP) or to make any
capital expenditure or contribution in any individual transaction or project
where the purchase price, capital expenditure or contribution required of any
Constituent Corporation, directly or indirectly, exceeds $100,000 or in
transactions or projects where the aggregate purchase price, capital
expenditure or contribution exceeds $200,000.
III.27 RELATED PARTY TRANSACTIONS. Except for loans amongst and
between the Constituent Corporations, all of the related party transactions
between Bernau and any Constituent Corporation and between any Constituent
Corporation and any other Constituent Corporation were made on terms no less
favorable to such Constituent Corporation than could have been obtained from
unaffiliated third parties and, except with respect to transactions involving
Mile High Brewing Company which has no independent directors, were approved
by a majority of the independent directors of any Constituent Corporation
which was a party thereto.
III.28 TITLE OF TRANSFER SHARES. Except as set forth in Schedule 3.28,
Bernau is the lawful owner of the Transfer Shares to be transferred by him
hereunder and upon delivery of such Transfer Shares, as provided herein,
Bernau will convey good and marketable title to such Transfer Shares, free
and clear of all liens, encumbrances, equities and claims whatsoever.
III.29 MANIPULATION. Bernau has not taken and will not take, directly
or indirectly, any action designed to or which has constituted or which might
reasonably be expected to cause or result, under the Securities Exchange Act
or otherwise, in stabilization or manipulation of the price of any security
of the Constituent Corporations to facilitate the transfer, sale or resale of
the Transfer Shares and has not effected any sales of shares of Common Stock
which, if effected by any of the Constituent Corporations, would be required
to be disclosed in response to Item 701 of Regulation S-K.
III.30 CONSENT. Except as set forth in Schedule 3.30, no consent,
approval, authorization or order of any court or governmental agency or body
is required for the consummation by Bernau of the transactions contemplated
herein, except such as may have been obtained under the Securities Act and
such as may
26
<PAGE>
be required under the blue sky laws of any jurisdiction in connection with
the transfer of the Transfer Shares by Bernau and such other approvals as
have been obtained.
III.31 NO CONFLICT. Except as set forth in Schedule 3.31, neither the
transfer of the Transfer Shares by Bernau nor the consummation of any other
of the transactions herein contemplated by Bernau or the fulfillment of the
terms hereof by Bernau will conflict with, result in a breach or violation
thereof, or constitute a default under any law or the terms of any indenture
or other agreement or instrument to which Bernau is a party or bound, or any
judgement, order or decree applicable to Bernau of any court, regulatory
body, administrative agency, governmental body or arbitrator having
jurisdiction over Bernau.
IV. PURCHASER'S REPRESENTATIONS AND WARRANTIES
Purchaser makes the following representations and warranties to the
Constituent Corporation, each and all of which shall survive the execution
and delivery of this Agreement and the Closing hereunder:
IV.1 CORPORATE EXISTENCE. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
IV.2 INVESTMENT INTENTION. Purchaser is purchasing the shares of
Common Stock specified in Section 2.1 for its own account, for investment
purposes and not with a view to the distribution thereof.
IV.3 INVESTMENT EXPERIENCE. Purchaser represents that it is
experienced in evaluating and investing in securities of craft brewing
companies in the growth stage and acknowledges that it is able to fend for
itself, can bear the economic risk of its investment and has such knowledge
and experience in financial and business matters that it is capable of
evaluating the merits and risks of the investment in making the Bridge Loans.
IV.4 ACCESS TO INFORMATION. In connection with Purchaser's loans to
Nor'Wester pursuant to the Bridge Loans, Purchaser acknowledges that it (a)
is familiar with the craft brewing industry in which the Constituent
Corporations do business, (b) has received all the information it considers
necessary or appropriate for deciding whether to advance monies pursuant to
the Bridge Loans, and (c) has had an opportunity to ask questions and has
received answers from the Constituent Corporations about their respective
businesses and the advances of monies hereunder and to obtain additional
information necessary to verify the accuracy of the information supplied or
to which the Purchaser had access. The foregoing, however, does not limit or
modify the representations and warranties of the Constituent Corporations and
Bernau in Section III of this Agreement. It is understood and agreed that
the Constituent Corporations have agreed to
27
<PAGE>
provide the Purchaser with continuing access to information concerning the
Constituent Corporations, their business, management and financial affairs
under Section 5.7 hereunder.
IV.5 CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. The
execution, delivery and performance by Purchaser of this Agreement, and the
other Transactions to which it is a party and all instruments and documents
to be delivered by Purchaser, to the extent that it is a party thereto,
hereunder and thereunder: (i) are within Purchaser's corporate power; (ii)
have been duly authorized by all necessary corporate action on the part of
Purchaser; (iii) are not in contravention of any provision of Purchaser's
articles of incorporation or by-laws; (iv) will not violate any law or
regulation, or any order or decree of any court or government
instrumentality; (v) will not conflict with or result in the breach or
termination of, constitute a default under or accelerate any performance
required by, any indenture, mortgage, deed of trust, lease, agreement or
other instrument to which Purchaser is a party or by which Purchaser or any
of this property is bound; (vi) will not result in the creation or imposition
of any Lien upon any of the property of Purchaser: and (vii) except for the
filings described on Schedule 4.5 hereto, do not require the consent or
approval of, or any filing with, any governmental authority or any other
Person. This Agreement has been duly executed and delivered by Purchaser and
constitutes a legal, valid and binding obligation of Purchaser, enforceable
against it in accordance with its terms. As of their respective dates and at
the Closing Date, the Ancillary Agreements to which Purchaser is a party
shall have been duly executed and delivered by Purchaser and each is or shall
then (as appropriate) constitute a legal, valid and binding obligation of
Purchaser, enforceable against it in accordance with its terms.
V. PRE-CLOSING COVENANTS.
With regard to Sections 5.1 through 5.10, each Constituent Corporation
hereby covenants and agrees as follows and Bernau agrees to use his
reasonable efforts to assist each Constituent Corporation in satisfying such
covenants, and as to Sections 5.11 and 5.12, Bernau hereby covenants and
agrees:
V.1 OPERATION OF BUSINESS.
(a) From the date hereof and through the Closing, each Constituent
Corporation shall, unless previously waived in writing by the Purchaser,:
(i) do or cause to be done all things necessary to preserve
and keep in full force and effect its corporate existence, and its
rights and franchises;
(ii) timely make all payments required to be paid in the
amounts and on the dates as mutually agreed upon by
28
<PAGE>
the parties;
(iii) not incur any obligations or sell, dispose of or
transfer any assets other than in the ordinary course of business;
(iv) not incur any obligations on behalf of, or sell, dispose
of or transfer cash, monies or other assets or extend guarantees or
provide any other financial or other support, directly or
indirectly, to the Mile High Brewing Company, except for management
services in connection with the preservation of the assets of the
Mile High Brewing Company;
(v) continue to conduct its business in the brewing and
distributing of malt beverages substantially as now conducted or as
otherwise permitted hereunder and shall not engage in any material
respect in any other business;
(vi) at all times maintain, preserve and protect any trademark
or trade name acquired or owned by and currently being utilized in
product marketing by such Constituent Corporation or any Subsidiary
after the date hereof;
(vii) preserve all the remainder of its property, in use or
useful in the conduct of its business and keep the same in good
repair, working order and condition (taking into consideration
ordinary wear and tear) and from time to time, make, or cause to be
made, all necessary and proper repairs, renewals and replacements,
betterments and improvements thereto consistent with industry
practices, so that the business carried on in connection therewith
may be properly and advantageously conducted at all times, except
to the extent such property has become obsolete;
(viii) use its reasonable efforts to retain as employees the
individuals employed by such Constituent Corporation on the date
hereof;
(ix) not waive any material right under any Material
Contract;
(x) not increase or modify, or agree to increase or modify,
the compensation, bonuses or other benefits or prerequisites for
employees of such Constituent Corporation, except in the ordinary
course of business consistent with past practice;
(xi) use its reasonable efforts in light of the circumstances
to preserve the operations, organization and reputation of such
Constituent Corporation intact, to preserve the good will and
business of such Constituent Corporation's customers, suppliers and
others having
29
<PAGE>
business relations with such Constituent Corporation and to
continue to conduct the financial operations of such Constituent
Corporation, including its credit and collection policies, with no
less effort, as in the prior conduct in the business of such
Constituent Corporation;
(xii) each Constituent Corporation shall continue to
maintain and carry its existing insurance; and
(xiii) maintain its books and records in accordance with
generally accepted accounting principles.
(b) From the date hereof and through the Closing, each Constituent
Corporation shall not (i) amend its Certificate of Incorporation or bylaws or
enter into, agree to enter into or effect any merger or consolidation; (ii)
make any change in the number of shares of its capital stock authorized,
issued or outstanding; and except as set forth on Schedule 5.1(b), grant or
issue any option, warrant or other right to purchase, or convert any
obligation into, shares of its capital stock, other than the issuance of
shares of common stock pursuant to outstanding options to purchase such
shares as set forth in Schedules 3.1(a)(2) and 3.1(b)(2); (iii) declare or
pay any dividends; or (iv) purchase or redeem any shares of its capital stock
or any other security. Notwithstanding the foregoing, each Constituent
Corporation may take such actions as are necessary to effect the
Consolidation.
V.2 AGREEMENTS. From and after the date hereof and through the
Closing, without the prior consent of the Purchaser, each Constituent
Corporation will not (a) amend or modify any of the material terms of any
agreement listed on Schedule 3.10 or (b) enter into any agreement which would
become a Material Contract and thus be required to be listed on Schedule
3.10, except in the ordinary course of business consistent with past
practices. The Constituent Corporation shall promptly provide to the
Purchaser true and complete copies of all amendments, modifications and
agreements referred to in this Section 5.2.
V.3 NOTIFICATION.
(a) Each Constituent Corporation and, to his knowledge, Bernau
shall give prompt notice to the Purchaser of the occurrence, or
non-occurrence, of any event which would be likely to cause any
representation or warranty herein to be untrue or inaccurate, or any
covenant, condition or agreement herein not to be complied with or satisfied
and, upon written consent of the Purchaser, each Constituent Corporation and
Bernau shall be entitled to update, modify, amend or replace any schedule
hereto in order to rectify any such inaccuracy or breach.
(b) Between the date of this Agreement and the Closing, each
Constituent Corporation shall keep the Purchaser
30
<PAGE>
reasonably informed of all material operational matters and business
developments known to each Constituent Corporation with respect to the
business of each Constituent Corporation by providing reports twice a month
to Purchaser of such material operational matters in a manner reasonably
satisfactory to the Purchaser. It is anticipated that the Purchaser and the
Constituent Corporations will agree upon a format for such reports.
V.4 NO INCONSISTENT ACTION. None of the Constituent Corporations nor
Bernau shall take any action which is inconsistent with its obligations under
this Agreement or that would hinder or delay the consummation of the
transactions contemplated by this Agreement.
V.5 NO SOLICITATION. Neither Bernau nor any Constituent Corporation
nor any Constituent Corporation's employees or agents shall directly or
indirectly contact, solicit from, or negotiate with anyone other than the
Purchaser regarding the sale or potential sale of the assets, the business or
any equity interest in any Constituent Corporation. Each Constituent
Corporation and, to his knowledge, Bernau shall promptly notify the Purchaser
in writing if any such offer or proposal is made to them between the date of
this Agreement and the Closing.
V.6 FINANCIAL STATEMENTS. Within 20 days after the end of each month
until the Closing Date, each Constituent Corporation shall deliver to the
Purchaser unaudited consolidating statements of revenue and operations for
the month then ended, along with a balance sheet as of the end of such month.
Within 45 days after December 31, 1996, each Constituent Corporation shall
deliver to the Purchaser unaudited consolidating statements of operations for
such fiscal year, and the related balance sheets as at the end of such fiscal
year. Within 90 days after December 31, 1996, each Constituent Corporation
shall deliver to the Purchaser the financial statements referred to in the
foregoing sentence certified by Price Waterhouse LLP, independent certified
public accountant and including all adjustments made to each Constituent
Corporation's year-end audited balance sheets and related statements of
operations. All financial statements furnished pursuant to this Section
shall be true and complete and fairly present in all material respects the
financial condition and the results of operations of each Constituent
Corporation as of the dates and for the periods covered by such statements.
Each Constituent Corporation shall furnish to the Purchaser any and all other
information customarily prepared by each Constituent Corporation concerning
the financial condition of each Constituent Corporation that the Purchaser
may reasonably request.
V.7 ACCESS TO INFORMATION CONCERNING PROPERTIES AND RECORDS. Each
Constituent Corporation shall give to the Purchaser and the Purchaser's
appraisers, accountants, engineers, attorneys and other representatives, and
their lenders and
31
<PAGE>
prospective partners of the Purchaser, reasonable access during normal
business hours to all properties, equipment, books, accounts, contracts and
documents of or related to each Constituent Corporation, its businesses and
properties, to the extent that doing so does not materially disrupt or
interfere with the operations of such Constituent Corporation, and each
Constituent Corporation shall within a reasonable period of time furnish or
cause to be furnished to the Purchaser and its representatives all data and
information concerning the business, properties of each Constituent
Corporation as the Purchaser reasonably may request.
V.8 CONSENTS, FILINGS AND SATISFACTION OF CONDITIONS. Subject to the
terms and conditions of this Agreement and to applicable law, each
Constituent Corporation shall use, and Bernau shall use reasonable efforts to
cause each Constituent Corporation to use, best efforts promptly to take or
cause to be taken all action and promptly to do or cause to be done all
things necessary, proper or advisable under applicable laws and regulations
to consummate and make effective the Transactions.
V.9 CONSOLIDATION; STOCKHOLDER MEETING; PROXY MATERIALS; REGISTRATION
STATEMENT.
(a) The Constituent Corporations shall enter into an agreement
whereby each Constituent Corporation shall become a wholly-owned subsidiary
of UCB, and the shareholders of each Constituent Corporation shall receive
shares in UCB consistent with the ratios and in the aggregate amounts set
forth in Schedule 3.1(d) all on terms reasonably satisfactory to the
Purchaser based upon consideration of applicable tax, legal, accounting and
other factors. All of the outstanding options to purchase common stock of
the Constituent Corporations shall have been assumed by UCB and such options
shall be exercisable for that number of UCB shares as is set forth on
Schedule 3.1(a)(2) and 3.1(b)(2) and based on the ratios set forth in
Schedule 3.1(d). The Constituent Corporations will take all necessary
actions to (i) cease having the securities of Nor'Wester, WVI and the WVI
Subsidiaries registered with the SEC after the Consolidation, (ii) register
the Common Stock of UCB with the SEC pursuant to the Securities Exchange Act
and (iii) list the Common Stock of UCB on the Nasdaq National Market. The
Constituent Corporations shall cause any shares of Common Stock of such
Constituent Corporations held in escrow by or subject to any restrictions on
transfer imposed by any state department or commission to be either released
from such escrow or restrictions or cancelled, as the case may be, so that
after the Consolidation none of the outstanding shares of Common Stock of UCB
shall be subject to any escrow or restriction by a state department or
commission. Attached hereto as Exhibits 5.9(a)(i) and 5.9(a)(ii),
respectively, are the form of Certificate of Incorporation and Bylaws to be
used in the formation of UCB.
(b) Each of the Constituent Corporations shall cause a
32
<PAGE>
meeting of their respective stockholders to be duly called and held as soon
as reasonably practicable after the execution of this Agreement for the
purpose of voting on the approval and adoption of this Agreement and the
Consolidation, as applicable. The Directors of each of the Constituent
Corporations shall recommend approval and adoption of this Agreement and the
Consolidation by the respective stockholders. In connection with such
meeting, the Constituent Corporation (i) will promptly prepare and file with
the SEC the Preliminary Proxy Statement and such other registration
statements as the Constituent Corporation shall deem necessary in connection
with the transactions contemplated by the Consolidation, (ii) will use all
reasonable efforts to respond to the comments of the SEC on the Preliminary
Proxy Statement and will make any further filings in connection therewith
that may be necessary, proper or advisable, and will use all reasonable
efforts to cause the registration statement of which the Definitive Proxy
Statement/Prospectus is a part to be declared effective by the SEC as soon as
reasonably practicable, (iii) will thereafter mail to its stockholders as
promptly as practicable the Definitive Proxy Statement/Prospectus and all
other proxy materials as required for such meeting, (iv) will use all
reasonable efforts to obtain the necessary approvals by the stockholders for
each of the Constituent Corporations and (v) will otherwise comply with all
legal requirements applicable to such meeting.
(c) The information in the Definitive Proxy Statement/Prospectus
relating to Bernau and each of the Constituent Corporations, as of the date
of its distribution to holders of stock in any of the Constituent
Corporations, will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(d) The information in the Definitive Proxy Statement/Prospectus
provided by the Purchaser on the Purchaser at the date of the distribution of
the Definitive Proxy Statement/Prospectus to holders of stock in any of the
Constituent Corporations, will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
V.10 RELATED PARTY TRANSACTIONS. Neither Bernau nor any Constituent
Corporation shall engage in any transaction with any Constituent Corporation
which is on terms less favorable to such Constituent Corporation than can be
obtained form unaffiliated third parties and, except in the case of Mile High
Brewing Company so long as it does not have any independent directors, which
have not been approved by a majority of the independent directors of any
Constituent Corporation which is a party thereto.
33
<PAGE>
V.11 RESTRICTION ON TRANSFER SHARES. Bernau shall not, directly or
indirectly: (a) except as contemplated herein, offer for sale, sell,
transfer, tender, pledge, encumber, assign or otherwise dispose of, or enter
into any contract, option or other arrangement or understanding with respect
to or consent to the offer for sale, sale, transfer, tender, pledge,
encumbrance, assignment or other disposition of, any or all of the Transfer
Shares or any interest therein or (b) take any action that would make any
representation or warranty of Bernau contained in this Agreement untrue or
incorrect or have the effect of preventing or disabling Bernau from
performing his obligations under this Agreement.
V.12 RESTRICTION ON BORROWINGS BY BERNAU. Bernau's borrowings under the
Individual Loan Agreement with Bank of America Oregon dated February 20,
1996, shall not exceed $100,000.
VI. CONDITIONS PRECEDENT.
VI.1 CONDITIONS OF PURCHASER WITH RESPECT TO THE CLOSING. The
obligation of Purchaser to purchase the Common Stock pursuant to Section 2.1
hereof is subject to the following conditions:
(a) Purchaser shall have received favorable opinions of counsel to
Bernau and each of the Constituent Corporations, substantially in the form
attached hereto as Exhibit 6.1(a), and dated the Closing Date, it being
understood that to the extent that such opinions of counsel shall rely upon
any other opinion of counsel, each such other opinion shall be in form and
substance reasonably satisfactory to the Purchaser and shall provide that the
Purchaser may rely thereon.
(b) Purchaser shall have received resolutions of the board of
directors of each Constituent Corporation, certified by the Secretary or
Assistant Secretary of the Constituent Corporation, as of the Closing Date,
to be duly adopted and in full force and effect on such date, authorizing (i)
the consummation of each of the Transactions, including but not limited to,
the transactions contemplated by this Agreement and (ii) specific officers to
execute and deliver this Agreement and each Ancillary Agreement to which it
is a party.
(c) Purchaser shall have received governmental certificates, dated
the most recent practicable date prior to the Closing Date, with telegram
updates where available, showing that each Constituent Corporation is
organized and, to the extent a Delaware corporation, in good standing in the
jurisdiction of its organization and is qualified as a foreign corporation
and in good standing in all other jurisdictions in which it is qualified to
transact business.
34
<PAGE>
(d) Purchaser shall have received a copy of the organizational
charter and all amendments thereto of each Constituent Corporation, including
but not limited to documents evidencing the Consolidation, certified as of a
recent date by the Secretary of State in the jurisdiction of its
organization, and copies of each Constituent Corporation's bylaws, certified
by the Secretary or Assistant Secretary of each Constituent Corporation as
true and correct as of the Closing Date.
(e) Purchaser shall have received certificates of the Secretary or
Assistant Secretary of each Constituent Corporation, dated the Closing Date,
as to the incumbency of the officers of each Constituent Corporation
executing this Agreement, each Ancillary Agreement to which it is a party,
the other documents in connection with the Transactions to which it is a
party and any other certificate or other document to be delivered pursuant
hereto or thereto.
(f) Purchaser shall have received a copy of each agreement or plan
or, if not available, a summary thereof, providing for employment, severance,
deferred payments, bonus payments or accruals, profit sharing arrangements,
stock option or stock appreciation rights, incentive payments, pension or
employment benefit contributions or similar payments or arrangements for the
benefit of each Constituent Corporation's management personnel, in form and
substance as has been approved by the Purchaser.
(g) All of the representations and warranties of each Constituent
Corporation and Bernau contained herein or in the Ancillary Agreements shall
be correct on and as of the date made and as of the Closing Date as though
made on and as of the Closing Date, each Constituent Corporation and Bernau
shall have complied with all of its or his obligations hereunder or
thereunder to be satisfied on or prior to the Closing Date, and the Purchaser
shall have received a certificate dated as of the Closing Date executed by
the chief executive officer and chief financial officer of each Constituent
Corporation, and a certificate dated as of the Closing Date executed by
Bernau, to that effect.
(h) All licenses, permits, consents or approvals from or by, and
all filings with and all notices to, all governmental authorities having
jurisdiction, to the extent required for Purchaser to purchase, and UCB to
sell, the Common Stock and for Purchaser, each Constituent Corporation to
consummate the other transactions contemplated by the Transactions, including
from the Oregon Liquor Control Commission, the U.S. Bureau of Alcohol,
Tobacco & Firearms, shall have been received or made.
(i) There shall have been no changes which have had a Material
Adverse Effect on the Constituent Corporations since the date hereof.
35
<PAGE>
(j) No United States or state governmental authority or other
agency or commission thereof or any court of the Untied State or state court
of competent jurisdiction shall have enacted, issued, promulgated, enforced
or entered, and there shall not be threatened, instituted or pending before
the United States or state governmental authority or other agency or
commission thereof or any court of the United States or state court of
competent jurisdiction, any statute, rule, regulation, litigation,
proceeding, injunction or other order (whether temporary, preliminary or
permanent) that has or would have the effect of making the consummation of
the Transactions illegal, prohibiting consummation of such transactions,
seeking damages in connection with such transactions, or otherwise seeking to
challenge such transactions or impose limitations on the ability of Purchaser
to hold the Common Stock acquired by the Purchaser at the Closing or to
exercise its rights under any Ancillary Agreement or other document in
connection with the Transactions.
(k) The Board of Directors of UCB after the Consolidation shall be
composed of seven persons, all of whom shall have been duly elected,
consisting of (i) one person selected by Bernau, (ii) four persons selected
by the Purchaser, one of whom shall be Vijay Mallya who shall be Chairman of
the Board of Directors, and (iii) two outside directors who shall be mutually
satisfactory to Bernau and the Purchaser.
(l) Purchaser shall received copies of the following documents
duly executed by the other parties thereto:
(i) Bernau's Employment Agreement between UCB and Bernau
dated the Closing Date and in a form reasonably satisfactory to
the Purchaser, which agreement shall contain the terms set forth on
Schedule 6.1(l)(i) ("Bernau's Employment Agreement");
(ii) the Production Agreement between UCB and the Purchaser
dated the Closing Date and in a form satisfactory to the Purchaser
(the "Production Agreement");
(iii) the Registration Rights Agreement between UCB and the
Purchaser dated the Closing Date and in a form satisfactory to the
Purchaser (the "Registration Rights Agreement").
(iv) the Security Agreement between Bernau and the Purchaser
dated the Closing Date and in a form satisfactory to the Purchaser
(the "Security Agreement") in which Bernau pledges his shares as
security for his obligations incurred under this Agreement; and
(v) the Services Agreement between Vijay Mallya and UCB dated
the date of Closing Date and in a form
36
<PAGE>
satisfactory to the Purchaser and UCB (the "Services Agreement") in
which UCB agrees to pay Vijay Mallya $126,000 per year for services
rendered.
(m) The Consolidation shall have been completed on terms
reasonably satisfactory to the Purchaser based upon consideration of
applicable tax, legal, accounting and other factors.
(n) The pro forma net income and gross sales for the Constituent
Corporations combined, prepared in accordance with GAAP, for each month from
the date hereof through the Closing Date shall not decrease by more than 10%
on a cumulative basis from January 1, 1997 through the Closing Date from the
projections set forth on Schedule 6.1(n), and the net worth of the
Constituent Corporations combined, prepared in accordance with GAAP shall not
be less than $10.0 million as of the Closing Date and before taking into
account any write downs related to the sale of the assets of Bayhawk Ales,
Inc. and any gains related to the sale of the assets of Mile High Brewing
Company.
(o) All requisite consents of any third parties to the
transactions contemplated by this Agreement, including those set forth on
Schedules 3.6 and 3.30, shall have been obtained. All Material Contracts of
the Constituent Corporations shall be in full force and effect and the
consummation of the transactions contemplated hereby shall not have a
Material Adverse Effect on such Material Contracts.
(p) Purchaser shall have received the Transfer Shares as
contemplated by Section 2.2.
(q) The line of credit provided by Bank of America to Nor'Wester
which is scheduled to expire on December 31, 1996, shall have been extended
through September 30, 1997 on terms and conditions substantially similar to
those under the current line of credit and any loan covenants relating to the
line of credit or the term loan have not been violated, or if violated, have
been waived by Bank of America. At the Closing Date the line of credit will
be converted to a term loan.
(r) The Financial Consulting Agreement with Patriot Capital Corp.
dated August 26, 1996 and any agreements with The Money Source shall have
been terminated.
(s) A majority of the shareholders of each applicable Constituent
Corporation shall have voted in favor of release of all of the shares of the
Constituent Corporations held in escrow by the Department of Consumer and
Business Affairs of the State of Oregon and subject to restrictions on
transfer imposed by the California Corporations Commission and each of the
California Corporations Commission and the Department of Consumer and
Business Affairs of the State of Oregon shall have released all of the shares
of the Constituent Corporations held in escrow by
37
<PAGE>
or subject to any restrictions of such commission or department, as the case
may be.
(t) Purchaser shall have received such additional information and
materials as it may reasonably request, all in form and substance
satisfactory to Purchaser.
VI.2 CONDITIONS OF UCB WITH RESPECT TO THE CLOSING. The obligation of
UCB to sell the Purchase Shares and the Bridge Loan Shares and of Bernau to
transfer the Transfer Shares pursuant to Section 2.1 hereof is subject to the
following conditions:
(a) UCB shall have received copies of Bernau's Employment
Agreement, the Production Agreement, the Registration Rights Agreement, the
Stockholder's Agreement and the Services Agreement duly executed by the other
parties thereto.
(b) All of the representations and warranties of Purchaser
contained herein and in the Transactions shall be correct on and as of the
date made and as of the Closing Date as though made on and as of the Closing
Date, Purchaser shall have complied with all of its obligations hereunder and
thereunder to be satisfied on or prior to the Closing Date, and UCB shall
have received a certificate dated as of the Closing Date executed by an
officer of Purchaser to that effect.
(c) UCB shall have received resolutions of the Board of Directors
of Purchaser, certified by the Secretary or Assistant Secretary thereof, as
of the Closing Date, to be duly adopted and in full force and effect on such
date, authorizing (i) the consummation of each of the transactions
contemplated by this Agreement, and (ii) specific officers of Purchaser to
execute and deliver this Agreement and each Ancillary Agreement to which
Purchaser is a party.
(d) UCB shall have received resolutions of the Board of Directors
of the Purchaser, certified by the Secretary or Assistant Secretary thereof,
as of the Closing Date, to be duly adopted and in full force and effect on
such date, authorizing the purchase and acquisition by the Purchaser of the
Common Stock to be purchased and acquired by the Purchaser pursuant to this
Agreement.
(e) UCB shall have received certificates of the Secretary or an
Assistant Secretary of the Purchaser, dated the Closing Date, as to the
incumbency of the officers of the Purchaser executing this Agreement and each
Ancillary Agreement to which it is a party and any certificate or other
document to be delivered pursuant hereto or thereto.
(f) All licenses, permits, consents or approvals from or by, and
all filings with all notices to, all governmental authorities having
jurisdiction, to the extent required for Purchaser to purchase, and UCB to
sell, the Common Stock and for
38
<PAGE>
Purchaser and each Constituent Corporation to consummate the other
transactions contemplated by the Transactions, including from the Oregon
Liquor Control Commission and the U.S. Bureau of Alcohol, Tobacco & Firearms,
shall have been received or made.
(g) No United States or state governmental authority or other
agency or commission thereof or any court of the United States or state court
of competent jurisdiction shall have enacted, issued, promulgated, enforced
or entered, and there shall not be threatened, instituted or pending before
any United States or state governmental authority or other agency or
commission thereof or any court of the United States or state court of
competent jurisdiction, any statute, rule regulation, litigation, proceeding,
injunction or other order (whether temporary, preliminary or permanent) that
has or would have the effect of making the consummation of the transactions
described herein illegal, prohibiting consummation of such transactions,
seeking damages in connection with such transactions, or otherwise seeking to
challenge such transaction or impose limitations on the ability of each
Constituent Corporation to exercise its rights under any of the Ancillary
Agreements or other document in connection with the Transactions.
(h) UCB shall have received a favorable opinion of Orrick,
Herrington & Sutcliffe LLP, Counsel to the Purchaser, dated the Closing Date
and substantially in the form attached hereto as Exhibit 6.2(h), it being
understood that to the extent that such opinions of counsel shall rely upon
any other opinion of counsel, each such other opinion shall be in form and
substance reasonably satisfactory to UCB and shall provide that UCB may rely
thereon.
(i) The sale of the shares of Common Stock hereunder shall have
been duly approved by the shareholders of UCB.
(j) Nor'Wester shall have received a fairness opinion from Needham
& Company, Inc. and WVI and each of the WVI Subsidiaries shall have received
a fairness opinion from Black & Company in connection with approval by the
Constituent Corporations of the Transactions, including the sale and transfer
of shares of Common Stock to the Purchaser hereunder.
VII. ADDITIONAL COVENANTS.
VII.1 BRIDGE LOANS; INTERIM FINANCING.
Prior to the date of this Agreement, Purchaser has provided interim
financing to Nor'Wester in the form of bridge loans consisting of loans in the
amounts of $500,000 on October 31, 1996 (the "Initial Loan"), $150,000 on
November 8, 1996 and $250,000 on December 27, 1996 (together with the Initial
Loan, the "Existing Advance"), and will provide additional amounts as
contemplated by this Section 7.1 (collectively, the "Bridge Loans"). Purchaser
agrees to provide interim financing in an
39
<PAGE>
aggregate amount up to $2.75 million (including the Existing Advance) in
amounts and on the dates to be mutually agreed upon by the Purchaser and
Nor'Wester, provided, that (i) the parties enter into reasonably satisfactory
documents similar to those entered into in connection with the Initial Loan,
including, but not limited to a guarantee by Bernau; (ii) the Purchaser
perfects a security interest in the assets of North Country and the
membership interests of North Country and releases its security interests in
Bernau's shares of Common Stock of Willamette Valley Vineyards; (iii) each
time an advance of monies is made, neither Bernau nor any of the Constituent
Corporations is in breach of any representation, warranty, covenant or other
agreement under this Agreement; (iv) the Bridge Loans have a maturity date 60
days after the date of termination of this Agreement; and (v) if the parties
are unable to agree in good faith as to the timing and amounts of the
advances pursuant to this Section 7.1, and such failure to agree results in
the interruption of the Constituent Corporations' business, then the failure
of the Constituent Corporations to meet the projections set forth in Schedule
6.1(n) to the extent caused by such interruption shall not entitle the
Purchaser to refuse to close on the basis that the condition set forth in
Section 6.1(n) has not been satisfied.
VII.2 RIGHT OF FIRST OFFER.
(a) Subject to the terms and conditions specified in this
Section 7.2, UCB hereby grants to the Purchaser, as long as it continues to
own securities representing at least 10% of the outstanding voting securities
of UCB, a right to participate in future sales by UCB of its Shares (as
hereinafter defined).
(b) Each time UCB proposes to offer any shares of, or securities
or other right convertible into or exercisable for any shares of, any class
of its capital stock ("Shares"), UCB shall first make an offering of a
portion of such Shares to the Purchaser in accordance with the following
provisions:
(i) UCB shall deliver a written notice ("Notice") to the
Purchaser stating (1) its bona fide intention to offer such Shares, (2) the
number of such Shares to be offered, and (3) the price and terms, if any,
upon which it proposes to offer such Shares.
(ii) Within 45 calendar days after receipt of the Notice, the
Purchaser may elect to purchase or obtain, at the price and on the terms
specified in the Notice, up to that portion of such Shares which equals the
number of Shares that when added to the number of shares of Common Stock held
by the Purchaser (including for such calculation any shares issuable upon
conversion of any capital stock convertible into Common Stock) will give the
Purchaser 45% of the Common Stock of UCB on a Diluted Basis after giving
effect to the issuance of the Shares.
40
<PAGE>
(iii) UCB may during the period following the expiration of
the 45-day period provided in subsection (ii) hereof, offer the remaining
unsubscribed portion of such Shares which the Purchaser has not elected to
purchase to any person or persons at a price not less than, and upon terms no
more favorable to the offeree than those specified in the Notice. If UCB
does not enter into an agreement for the sale of the Shares within 90 days of
the expiration of such 45-day period, or if such agreement is not consummated
within 120 days following the expiration of such 45-day period, the right
provided hereunder shall be deemed to be revived and such Shares shall not be
offered unless first reoffered to the Purchaser in accordance herewith.
VII.3 PERCENTAGE OWNERSHIP. So long as the Purchaser continues to own
securities representing at least 10% of the then outstanding voting
securities of UCB, UCB shall not issue securities to any party which would
enable such party to exceed the percentage ownership of the voting securities
owned by the Purchaser. From time to time, the Purchaser shall be permitted
to request that UCB determine the percentage ownership of the outstanding
Common Stock held by the Purchaser or any other Person specified by the
Purchaser, as calculated on a Diluted Basis, and UCB shall promptly (but in
any event no later than five Business Days after such request is made) and
accurately provide the Purchaser with a written determination of the
percentage ownership of the outstanding Common Stock of the Purchaser or such
other Person, as calculated on a Diluted Basis, as of the date such request
is made with such verification and detail as reasonably requested by the
Purchaser. Such response given by UCB shall be binding on UCB for purposes
of determining the Purchaser's and UCB's rights and obligations under this
Agreement and the Ancillary Agreements as of the date such request is made.
VII.4 NO SECURITIES SENIOR TO COMMON STOCK. UCB may not, without the
prior written consent of Purchaser, issue any securities (i) having
contractual rights, privileges or preferences which are senior to the
securities issued to the Purchaser or (ii) which by the terms of UCB's
Certificate of Incorporation are senior to the securities issued to the
Purchaser.
VII.5 PERMITTED ACQUISITIONS OR INVESTMENTS. Unless waived in writing
by the Purchaser, UCB shall not, and shall not permit any of its Subsidiaries
to directly or indirectly in any transaction or related series of
transactions, acquire or invest in, whether for cash, debt, Stock, or other
property or assets or by guaranty of any obligation, any assets (other than
cash or cash equivalents) or business the aggregate purchase price of which
in any such transaction or related series of transactions exceeds 50% of the
book value of UCB's assets on the date of such acquisition or investment
immediately before giving effect thereto.
41
<PAGE>
VII.6 SALES OF ASSETS. Unless waived in writing by the Purchaser:
(a) UCB shall not, and shall not permit any Subsidiary of UCB to,
sell, lease, transfer, convey or otherwise dispose of assets in any
transaction or related series of transactions, which assets have an aggregate
book value exceeding 50% of the aggregate book value of UCB's assets on the
date of such sale, lease, transfer, conveyance or disposition immediately
before giving effect thereto; PROVIDED, HOWEVER, that except as otherwise set
forth herein, the foregoing shall not prohibit any bona fide sale-leaseback
transaction in which all leases entered into by UCB or any Subsidiary of UCB
in connection with such transaction are Capital Leases. UCB shall not
terminate any such lease prior to its specified term and shall not amend or
supplement any such lease, if such amendment or supplement would cause such
lease to be classified or accounted for as other than a Capital Lease.
(b) UCB and its Subsidiaries shall not sell, transfer, convey,
license, pledge or otherwise dispose of any trademark or trade name acquired
or owned by any of them after the date hereof if 15% or more of the revenues
of UCB and its consolidated Subsidiaries for the preceding Fiscal Year were
attributable to sales of products using such trademark or trade name or any
trademark or trade name listed on Schedule 3.18.
VII.7 BOOKS AND RECORDS. Unless waived in writing by the Purchaser,
UCB shall, and shall cause its Subsidiaries to, keep adequate records and
books of account with respect to their business activities, in which proper
entries, reflecting all of their financial transactions, are made in
accordance with GAAP consistently applied.
VII.8 FINANCIAL AND OTHER INFORMATION. Unless waived in writing by the
Purchaser:
(a) MONTHLY STATEMENTS. UCB will deliver to the Purchaser as soon
as practicable after the end of each month, but in any event within 30 days
thereafter: (i) an unaudited consolidated balance sheet of UCB and its
Subsidiaries as at the end of such month, (ii) unaudited consolidated
statements of income, retained earnings and changes in financial position of
UCB and its Subsidiaries for such month and for the portion of such year
ending with such month and (iii) a sales report for such month, which report
will show sales by product, by distributor and whether by bottle or draft in
each state in which UCB sells its products, in each case for such month and
for the portion of the Fiscal Year ending with such month and showing a
comparison of such year to date sales results with those of the previous
year, including growth figures for each product on a state by state basis.
42
<PAGE>
(b) SEC FILINGS. UCB will deliver to the Purchaser, promptly upon
their becoming available, one copy of each report, notice or proxy statement
sent by UCB to its stockholders generally, and of each regular or periodic
report (pursuant to the Securities Exchange Act) and any registration
statement, prospectus or other writing (other than transmittal letters)
(including, without limitation, by electronic means) pursuant to the
Securities Act filed by UCB with (i) the SEC or (ii) any securities exchange
or the Nasdaq Stock Market on which shares of Common Stock of UCB are listed
or quoted. Prior to filing or making publicly available any such report,
notice, proxy statement, registration statement, prospectus or other writing
which references or makes any disclosure concerning the Purchaser or its
business, UCB shall provide the Purchaser a reasonable opportunity to review
such report, notice, proxy statement, registration statement, prospectus or
other writing and shall not make any such reference or disclosure to the
Purchaser or its business to which the Purchaser reasonably objects, unless,
in the reasonable opinion of counsel to UCB failure to make such reference or
disclosure would create a reasonable risk of liability under the securities
laws.
(c) PROJECTIONS. UCB will deliver to the Purchaser within 60 days
prior to the beginning of each Fiscal Year:
(A) a projected consolidated balance sheet of UCB and its
Subsidiaries, for each month of such Fiscal Year;
(B) projected consolidated and consolidating cash flow
statements of UCB and its Subsidiaries, including summary details of
cash disbursements (including Capital Expenditures), for each month
of such Fiscal Year; and
(C) projected consolidated and consolidating income
statements of UCB and its Subsidiaries for each quarter of such
Fiscal Year;
together with appropriate supporting details.
(d) OTHER INFORMATION. UCB will deliver to the Purchaser such
other information with respect to UCB's or any of its Subsidiaries' business,
financial condition or prospects as the Purchaser may, from time to time,
reasonably request.
VII.9 COMMUNICATION WITH ACCOUNTANTS. UCB authorizes the Purchaser to
communicate directly with its independent certified public accountants and
tax advisors and authorizes those accountants to disclose to the Purchaser
any and all financial statements and other supporting financial documents and
schedules including copies of any management letter with respect to the
business, financial condition and other affairs of UCB and any of its
Subsidiaries. At or before the Closing Date, UCB shall deliver a letter
addressed to such accountants and tax advisors instructing them to comply
with the provisions of this
43
<PAGE>
Section 7.9, a copy of which letter shall be provided to the Purchaser at
the Closing.
VII.10 TAX COMPLIANCE. Unless waived in writing by the Purchaser, UCB
shall pay all transfer, excise or similar taxes (not including income or
franchise taxes) in connection with the issuance, sale, delivery or transfer
by UCB to the Purchaser of the Common Stock and shall indemnify and save the
Purchaser therefrom. UCB shall not be responsible for any taxes in
connection with the transfer by the Purchaser of the Common Stock. The
obligations of UCB under this Section 7.10 shall survive the payment and the
termination of this Agreement.
VII.11 INSURANCE. Unless waived in writing by the Purchaser, UCB
shall, and shall cause each Subsidiary of UCB to, maintain insurance
covering, without limitation, fire, theft, burglary, public liability,
property damage, product liability, workers' compensation, key man insurance
and insurance on all property and assets, all in amounts customary for the
industry. UCB shall, and shall cause each of its Subsidiaries to, pay all
insurance premiums payable by them.
VII.12 AGREEMENTS. Unless waived in writing by the Purchaser, UCB
shall perform, within all required time periods (after giving effect to any
applicable grace periods), all of its obligations and enforce all of its
rights under its credit agreements.
VII.13 EMPLOYEE LOANS. Unless waived in writing by the Purchaser, UCB
shall not and shall not permit any Subsidiary of UCB to make or accrue any
loans or other advances of money to any employee of UCB or such Subsidiary
outside the ordinary course of business consistent with past practice or in
excess at any one time of $100,000 in the aggregate for all such loans, other
than such loans the principal amounts of which do not exceed in aggregate
$200,000 and are required to be repaid on or prior to 30 days after the date
such loans are made.
VII.14 CAPITAL STRUCTURE. Unless waived in writing by the Purchaser:
(a) UCB shall not make or permit any Subsidiary of UCB to make any
changes in its capital structure by means of an amendment of its articles of
incorporation or bylaws (including, without limitation, in the terms of its
outstanding Stock) other than any increase in its authorized capital stock.
(b) UCB shall issue, transfer or sell Common Stock for the
purposes of raising capital or in connection with any acquisition of any
property or business only, if in the good faith judgment of its board of
directors, such issuance, transfer or sale, in the light of the other
alternatives available to UCB to raise capital or effect such acquisition and
the relative costs of such alternatives, the financial and operational
44
<PAGE>
flexibility provided to UCB as a result thereof, the effect of such
alternatives on the prices required to be paid by UCB in connection with any
such acquisition and the relative effect of the available alternatives on the
long-term returns to the shareholders of UCB, is in the best interests of UCB
and its shareholders.
(c) UCB shall not, and shall not permit any Subsidiary of UCB to,
issue or sell or agree to issue or sell any Stock to any Person engaged in
the business of brewing, producing or distributing malt or any alcoholic
beverages in North America or India or to any Person known by UCB to be an
Affiliate of any such Person other than (i) to any Person, the gross revenues
of which Person and all Persons known by UCB to be an Affiliate of such
Person resulting from the business of brewing, producing or distributing malt
or any other alcoholic beverages in North America or India for the fiscal
year preceding the date of such issuance do not exceed $500,000 (which amount
shall be increased on each January 1 beginning with January 1, 1997 by the
percentage increase in the Consumer Price Index (All Urban Consumers-U.S.
City Average) for the preceding calendar year), (ii) to any Person acquiring
Stock in any underwritten public offering of the Stock if UCB has not,
directly or indirectly directed the sale of Stock to such Person or (iii) to
the Purchaser or an Affiliate of the Purchaser.
(d) UCB shall not, pursuant to any agreement or the terms of any
Stock issued by UCB, give to any Person or Group the right to name or
designate members of the board of directors of UCB equal to or greater in
number than that number that the Purchaser is entitled to designate pursuant
to Section 6.1(l).
VII.15 TRANSACTIONS WITH AFFILIATES. Unless waived in writing by the
Purchaser, UCB shall not and shall not permit any Subsidiary of UCB to enter
into or be a party to any transaction with any Affiliate of UCB or such
Subsidiary except (A) pursuant to the reasonable demands of UCB's or such
Subsidiary's business or any transaction reasonably related to a reasonable
and legitimate business objective of UCB, and, in either case, (x) in the
ordinary course of business consistent with past practice or (y) upon fair
and reasonable terms that are fully disclosed to the Purchaser and are no
less favorable to UCB or such Subsidiary than would be obtained in a
comparable arm's-length transaction with a Person not an Affiliate of UCB or
such Subsidiary (as determined by the vote of a majority of the independent
directors of the board of directors of UCB) or (B) as expressly contemplated
by the Transactions. The provisions of this Section 7.15 shall not apply to
any transaction between UCB and the Purchaser or any Subsidiary or Affiliate
of the Purchaser.
VII.16 GUARANTEED INDEBTEDNESS. Unless waived in writing by the
Purchaser, UCB shall not and shall not permit any Subsidiary of UCB to incur
any Guaranteed Indebtedness except (i) by endorsement of instruments or items
of payment for deposit
45
<PAGE>
to the general account of UCB or such Subsidiary, and (ii) for Guaranteed
Indebtedness incurred for the benefit of UCB or any Subsidiary of UCB if the
primary obligation is permitted by this Agreement.
VII.17 RESTRICTED PAYMENTS. Unless waived in writing by the Purchaser,
UCB shall not and shall not permit any Subsidiary of UCB to make any
Restricted Payments nor shall UCB permit any Subsidiary to make such payments
with respect to UCB's Stock;
VII.18 EMPLOYEE PLANS. Unless waived in writing by the Purchaser:
(a) With respect to other than a Multiemployer Plan, for each
Qualified Plan hereafter adopted or maintained by UCB or any of its
Subsidiaries, UCB shall (A) seek, or cause its Subsidiaries to seek, and
receive determination letters from the IRS to the effect that such Qualified
Plan is qualified within the meaning of Section 401(a) of the IRC; and
(B) from and after the adoption of any such Qualified Plan, cause such plan to
be qualified within the meaning of Section 401(as) of the IRC and to be
administered in all material respects in accordance with the requirements of
ERISA and Section 401(a) of the IRC.
(b) With respect to each Welfare Plan hereafter adopted or
maintained by UCB or any of its Subsidiaries, UCB shall comply, or cause its
Subsidiaries to comply, with all requirements of Section 4980B and Section
5000 of the IRC and the regulations thereunder.
(c) UCB shall not, directly or indirectly, and shall not permit
its Subsidiaries to directly or indirectly by reason of an amendment or
amendments to, or the adoption of, one or more Title IV Plans, permit the
present value of all benefit liabilities, as defined in Title IV of ERISA
(using the actuarial assumptions utilized by the PBGC upon termination of a
plan), for which UCB or its Subsidiaries are responsible (A) to increase by
more than $50,000 after the date hereof; PROVIDED that this limitation shall
not be applicable to the extent that the fair market value of assets
allocable to such benefits, all determined as of the most recent valuation
date for each such Title IV Plan, is in excess of the benefit liabilities; or
(B) to increase to the extent security must be provided to any Title IV Plan
under Section 401(A)(29) of the IRC. Neither UCB nor any of its Subsidiaries
shall establish or become obligated under any new Retiree Welfare Plan, or
modify any existing Retiree Welfare Plan, which would reasonably be expected
to result in the present value of future liabilities under all such plans to
increase by more than $50,000 after the date hereof. Neither UCB nor any of
its Subsidiaries shall establish or become obligated to any new unfunded
Pension Plan, or modify any existing unfunded Pension Plan, which would
reasonably be expected to result in the present value of future liabilities
under all such plans to increase by more than $50,000 after the date hereof.
UCB shall not directly
46
<PAGE>
or indirectly, and shall not permit its Subsidiaries to (a) satisfy any
liability under any Qualified Plan by purchasing annuities from an insurance
company or (b) invest the assets of any Qualified Plan with an insurance
company, unless, in each case, such insurance company is rated AA by Standard
& Poor's Corporation and the equivalent by each other nationally recognized
rating agency at the time of the investment. Except as otherwise expressly
provided herein, for purposes of this paragraph present values shall be
determined in accordance with accepted financial practices.
(d) UCB, any of its Subsidiaries and any ERISA Affiliate shall not
contribute or become obligated to contribute to any Multiemployer Plan where
a withdrawal by such person from such plan could reasonably be expected to
result in a Withdrawal Liability in excess of $50,000 to UCB.
VII.19 ENVIRONMENTAL MATTERS. Unless waived in writing by the
Purchaser, UCB shall and shall cause each of its Subsidiaries to comply in
all material respects with the Environmental Laws applicable to it and shall
not cause, directly or indirectly, or suffer to occur any one or more
releases or disposals of any Hazardous Material at any Facility which may
result in material Environmental Liabilities and Costs.
VII.20 MAINTENANCE OF EXISTENCE AND CONDUCT OF BUSINESS. Unless waived
in writing by the Purchaser, UCB shall, and shall cause each of its
Subsidiaries to: (i) do or cause to be done all things necessary to preserve
and keep in full force and effect its corporate existence, and its rights and
franchises; (ii) continue to conduct its business in the brewing and
distributing of malt beverages substantially as now conducted or as otherwise
permitted hereunder and shall not engage in any material respect in any other
business; (iii) at all times maintain, preserve and protect any trademark or
trade name acquired or owned by UCB or any Subsidiary of UCB after the date
hereof if 15% or more of the revenues of UCB and its consolidated
Subsidiaries for the preceding Fiscal Year were attributable to sales of
products using such trademark or trade name and all of its trademarks and
trade names set forth on Schedule 7.6(c); (iv) preserve all the remainder of
its property, in use or useful in the conduct of its business and keep the
same in good repair, working order and condition (taking into consideration
ordinary wear and tear) and from time to time make, or cause to be made, all
necessary and proper repairs, renewals and replacements, betterments and
improvements thereto consistent with industry practices, so that the business
carried on in connection therewith may be properly and advantageously
conducted at all times, except to the extent such property is disposed of as
permitted under Section 7.6 of this Agreement or to the extent such property
has become obsolete; and (v) comply in all material respects with all
applicable laws, rules, regulations and orders of any governmental authority.
47
<PAGE>
VII.21 MERGERS. Unless waived in writing by the Purchaser, UCB shall
not consolidate, merge or engage in a share exchange with or into any other
corporation, other than (A) a merger of a subsidiary of UCB into UCB whereby
UCB is the surviving corporation or (B) a merger whereby (1) UCB will be the
surviving corporation in such merger, (2) the holders of UCB's outstanding
Common Stock and other securities entitled to ordinary voting power
immediately preceding such merger will, immediately after such merger, own
shares possessing more than 50% of the aggregate voting power and economic
rights of the outstanding capital stock of UCB, (3) no breach by UCB of any
covenant contained in this Agreement or in any Ancillary Agreement or right
on behalf of the Purchaser to terminate any Ancillary Agreement shall exist
immediately prior to or immediately after such merger, (4) there will be no
shares of any class or classes of UCB's capital stock ranking prior to
(either as to dividends or upon voluntary or involuntary liquidation,
dissolution or winding up) the Common Stock after the merger, and (5) the
only substantial business of the company merging into UCB is producing or
distributing beverages.
VII.22 LIQUIDATION. Unless waived in writing by the Purchaser, UCB
shall not liquidate, wind up or dissolve itself.
VII.23 HOSTILE ACQUISITION. Unless waived in writing by the Purchaser,
UCB shall not, nor shall it permit any of its Subsidiaries to, engage in any
unsolicited transaction for the control of another company which is not
approved by the board of directors of such company, whether by open market
purchases of the capital stock of such company, by offer for the capital
stock of such company or by solicitation of proxies or consents of the
shareholders of such company.
VII.24 ACCESS TO BOOKS AND RECORDS. Unless waived in writing by the
Purchaser, UCB shall permit representatives of the Purchaser to visit and
inspect, at no charge to the Purchaser, any of the properties of UCB and its
Subsidiaries, to examine the corporate books and make copies or extracts
therefrom and to discuss the affairs, finances and accounts of UCB and its
Subsidiaries with the principal officers of UCB, all at such reasonable
times, upon reasonable notice and as often as the Purchaser may reasonably
request.
VII.25 AUDITORS. Unless waived in writing by the Purchaser, UCB shall
not change its independent certified public accounting firm except to any
nationally recognized independent certified public accounting firm.
VII.26 EMPLOYEES. UCB acknowledges that, except as may be explicitly
provided otherwise in this Agreement, UCB shall have complete responsibility
and authority concerning recognition of collective bargaining units within
its employees or those of its Subsidiaries, the determination as to whether
to enter into collective bargaining agreements or labor agreements with its
48
<PAGE>
employees or those of its Subsidiaries, and the terms of any such agreement.
VII.27 RELEASE OF BERNAU'S GUARANTEES. UCB shall use its best efforts
to cause Bernau to be released and UCB substituted as guarantor for those
obligations set forth on Schedule 7.27; provided that the lender thereof does
not seek additional security than that currently in place and that there is
not any cost implication to UCB. If UCB is unable to remove Bernau as a
guarantor for those obligations set forth on Schedule 7.27, then UCB will
provide Bernau with security in case Bernau is required to satisfy any of the
obligations set forth on Schedule 7.27.
VII.28 BUSINESS OPPORTUNITIES. Except as set forth in the Production
Agreement, there shall be no limitations on the production, marketing, sale
and distribution of the Kingfisher Brands, which activities shall be the
exclusive right of the Purchaser. Any opportunity which the Purchaser
develops or becomes aware of relating to the production, marketing, sale and
distribution of microbrewed beverage products within North America (except
opportunities related to the Kingfisher Brands) shall be presented to UCB for
pursuit exclusively by UCB, and the Purchaser shall cooperate with UCB in the
pursuit of such opportunities. Once presented to UCB, the Board of Directors
of UCB shall determine within seven (7) days whether to pursue such
opportunity and shall enter into a definitive contract within 30 days of the
decision to pursue such opportunity and close such acquisition or investment
within 90 days of the decision to pursue such opportunity. If UCB is
unwilling or unable to pursue a particular opportunity within the time limits
prescribed in the preceding sentence, then the Purchaser will be free to
pursue such opportunity. The obligations of the Purchaser under this Section
7.28 shall cease upon the earlier of (i) the Purchaser owning less than 25%
of the Common Stock of UCB on a Fully Diluted Basis and not having a
representative on the Board of Directors of UCB or (ii) the Purchaser owning
less than 15% of the Common Stock of UCB on a Fully Diluted Basis.
VII.29 TERMINATION OF CERTAIN COVENANTS. The obligations of UCB set
forth in Sections 7.2 through 7.26 shall terminate on the date on which the
Purchaser and all Subsidiaries of Purchaser do not hold, in aggregate 7.5% of
the outstanding Common Stock of UCB calculated on a Fully Diluted Basis.
VIII. TERMINATION.
VIII.1 TERMINATION.
(a) The parties hereto may terminate this Agreement as provided
below:
(i) Purchaser and Nor'Wester may terminate this Agreement
by mutual written consent at any time prior to the Closing.
49
<PAGE>
(ii) This Agreement may be terminated by (A) the Purchaser by
giving written notice to Nor'Wester at any time prior to the Closing
in the event that any of Bernau or any of the Constituent
Corporations has breached any covenant in material respects or has
breached any representation or warranty contained in this Agreement
or any document relating to the Transactions, Purchaser has notified
Bernau or the Constituent Corporation of the breach and the breach
has continued without cure for a period of 10 days after the notice
of breach (if such breach is curable), (B) Nor'Wester by giving
written notice to the Purchaser at any time prior to the Closing in
the event that the Purchaser has breached any covenant in material
respects or has breached any representation or warranty contained in
this Agreement, Nor'Wester has notified the Purchaser of the breach
and the breach has continued without cure for a period of 10 days
after the notice of breach (if such breach is curable), or
(C) written notice from Nor'Wester to the Purchaser, or from the
Purchaser to Nor'Wester, at any time after August 31, 1997;
PROVIDED, HOWEVER, that the right to terminate this Agreement under
this subsection 8.1(a)(ii)(C) shall not be available to any party
whose failure to fulfill any obligation under this Agreement shall
have been the primary cause of, or resulted primarily in, the
failure of the Closing to occur on or before such date.
(b) In the event of a termination of this Agreement as described
in this Article VIII, all rights and obligations of each party hereunder
shall terminate without any liability of either party to the other except for
any liability of either party arising out of any breach of this Agreement;
provided however, that Section 10.1, 10.2, 10.4, 10.5, 10.6, 10.7, 10.8,
10.9, 10.10, 10.12, 10.13, 10.14 and 10.15 shall survive termination.
50
<PAGE>
IX. INDEMNIFICATION
IX.1 INDEMNIFICATION.
(a) Each Constituent Corporation and Bernau, jointly and severally,
agrees to indemnify and hold harmless Purchaser, its officers, directors and
employees from and against any liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs, attorneys' fees,
expenses and disbursements of any kind (including Environmental Costs) which
may be imposed upon, incurred by or asserted against Purchaser, such
officers, directors and employees in any matter relating to or arising out of
(i) any untrue representation, breach of warranty or failure to perform any
covenants by any Constituent Corporation or Bernau contained herein, the
Ancillary Agreements or in the other Transactions to which any Constituent
Corporation or Bernau is a party or in any certificate or document delivered
pursuant hereto or thereto, (ii) any Environmental Law applicable to any
Constituent Corporation, or (iii) any liability of any Constituent
Corporation or its Subsidiaries that is not explicitly assumed by Purchaser
hereunder, in the Ancillary Agreements or in the Transactions; PROVIDED,
HOWEVER, that except with regards to any breach by Bernau of the
representations and warranties contained in Sections 3.28 through 3.31 hereof
or a breach of the covenants contained in Section 5.12, the only recourse
that Purchaser may have against Bernau under this Agreement for
indemnification, contribution, reimbursement of expenses or breach of any
representation and warranty is limited to the shares in UCB held by Bernau
after the Consolidation, which are the subject of the Security Agreement,
excluding any shares of Common Stock received by Bernau as a result of the
exercise of options to purchase Common Stock granted pursuant to Bernau's
Employment Agreement.
(b) Purchaser agrees to indemnify and hold harmless Bernau and
each Constituent Corporation and its officers, directors and employees from
and against any liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, claims, costs, attorneys' fees, expenses and
disbursements of any kind which may be imposed upon, incurred by or asserted
against any Constituent Corporation and such officers, directors and
employees in any matter relating to or arising out of any untrue
representation, breach of warranty or failure to perform any covenants by the
Purchaser contained herein, in the Ancillary Agreements or in the other
Transactions to which the Purchaser is a party or in any certificate or
document delivered pursuant hereto or thereto.
(c) The foregoing indemnification provisions are in addition to,
and not in derogation of, any statutory, equitable or common law remedy the
Purchaser, Bernau, each Constituent Corporation and their respective
officers, directors and employees may have for breach or representation,
warranty or
51
<PAGE>
covenant.
(d) No claim may be brought under this Agreement against Bernau
based upon a breach of a representation or warranty contained herein, except
for a breach of a representation or warranty contained in Sections 3.28
through 3.31, unless written notice describing in reasonable detail the
nature and basis of such claim is given on or prior to the day that is one
year from the Closing Date.
(e) Bernau and the Constituent Corporations shall not be obligated
to indemnify the Purchaser unless and until the cumulative amount of all
losses incurred, suffered or paid by the Purchaser under this Section 9.1
exceeds $150,000 in the aggregate, whereupon the Purchaser shall be entitled
to indemnification hereunder for the full amount of all such losses and shall
thereafter be entitled to indemnification of losses as such losses are
incurred.
(f) The Purchaser shall not be obligated to indemnify the Bernau
and the Constituent Corporations unless and until the cumulative amount of
all losses incurred, suffered or paid by Bernau and the Constituent
Corporations under this Section 9.1 exceeds $150,000 in the aggregate,
whereupon Bernau and the Constituent Corporations shall be entitled to
indemnification hereunder for the full amount of all such losses and shall
thereafter be entitled to indemnification of losses as such losses are
incurred.
X. MISCELLANEOUS
X.1 NOTICES. Whenever it is provided herein that any notice, demand,
request, consent, approval, declaration or other communication shall or may
be given to or served upon any of the parties by another, or whatever any of
the parties desires to give or serve upon another any such communication with
respect to this Agreement, each such notice, demand, request, consent,
approval, declaration or other communication shall be in writing and either
shall be delivered in person with receipt acknowledged or by registered or
certified mail, return receipt requested, postage prepaid, or by telecopy and
confirmed by telecopy answerback addressed as follows:
IF TO NOR'WESTER AT:
Nor'Wester Brewing Company,
66 S.E. Morrison Street
Portland, OR 97214
Attention: James W. Bernau
Telecopy Number: (503) 232-2363
WITH A COPY TO:
Jack W. Schifferdecker, Jr.
Ater Wynne Hewitt Dodson & Skerritt
52
<PAGE>
222 S.W. Columbia, Suite 1800
Portland, OR 97201
Telecopy Number: (503) 226-0079
IF TO NORTH COUNTRY AT:
Nor'Wester Brewing Company,
66 S.E. Morrison Street
Portland, OR 97214
Attention: James W. Bernau
Telecopy Number: (503) 232-2363
WITH A COPY TO:
Robert Craven
North Country Brewing Company
131 Excelsior Avenue
P.O. Box 376
Saratoga Springs, NY 12866
Telecopy Number: (518) 581-1804
and
Jack W. Schifferdecker, Jr.
Ater Wynne Hewitt Dodson & Skerritt
222 S.W. Columbia, Suite 1800
Portland, OR 97201
Telecopy Number: (503) 226-0079
IF TO WVI AT:
Willamette Valley, Inc. Microbreweries Across America
66 S.E. Morrison Street
Portland, OR 97214
Attention: James W. Bernau
Telecopy Number: (503) 232-2363
WITH A COPY TO:
Gordon R. Hanna
Donaldson, Albert, Tweet, Connolly, Hanna & Muniz
340 Vista Avenue, Suite 310
P.O. Box 968
Salem, OR 97308
IF TO AVIATOR ALES, INC. AT:
Aviator Ales, Inc.
14316 NE 203rd Street
Woodinville, Washington 98072
Attention: Dusty Wyant
Telecopy Number: (206) 487-0847
WITH A COPY TO:
Willamette Valley, Inc. Microbreweries Across
America
53
<PAGE>
c/o Gordon R. Hanna
Donaldson, Albert, Tweet, Connolly, Hanna & Muniz
340 Vista Avenue, Suite 310
P.O. Box 968
Salem, OR 97308
and
Willamette Valley, Inc. Microbreweries Across
America
66 S.E. Morrison Street
Portland, OR 97214
Attention: James W. Bernau
Telecopy Number: (503) 232-2363
IF TO BAYHAWK ALES, INC. AT:
Bayhawk Ales, Inc.
2000 Main Street - Suite A
Irvine, CA 92714
Attention: David Voorhies
Telecopy Number: (714) 442-7566
WITH A COPY TO:
Willamette Valley, Inc. Microbreweries Across
America
c/o Gordon R. Hanna
Donaldson, Albert, Tweet, Connolly, Hanna & Muniz
340 Vista Avenue, Suite 310
P.O. Box 968
Salem, OR 97308
and
Willamette Valley, Inc. Microbreweries Across
America
66 S.E. Morrison Street
Portland, OR 97214
Attention: James W. Bernau
Telecopy Number: (503) 232-2363
IF TO MILE HIGH BREWING COMPANY AT:
Mile High Brewing Company
2401 Blake Street
Denver, CO 80205
Attention: John Carter
Telecopy Number: (303) 299-9192
WITH A COPY TO:
Willamette Valley, Inc. Microbreweries Across
America
c/o Gordon R. Hanna
Donaldson, Albert, Tweet, Connolly, Hanna & Muniz
54
<PAGE>
340 Vista Avenue, Suite 310
P.O. Box 968
Salem, OR 97308
and
Willamette Valley, Inc. Microbreweries Across
America
66 S.E. Morrison Street
Portland, OR 97214
Attention: James W. Bernau
Telecopy Number: (503) 232-2363
IF TO BERNAU AT:
James W. Bernau
8800 Enchanted Way, S.E.
Turner, OR 97392
Telecopy Number: (503) 588-8894
IF TO PURCHASER AT:
United Breweries of America, Inc.
One Harbor Drive, Suite 102
Sausalito, CA 94965
Attention: Vijay Mallya
Telecopy Number: (415) 289-1409
WITH A COPY TO:
Alan Talkington
Orrick, Herrington & Sutcliffe LLP
Old Federal Reserve Building
400 Sansome Street
San Francisco, CA 94111
Telecopy Number: (415) 773-5759
The parties agree to send such notices to such other address as may
be substituted by notice given as herein provided. The giving of any notice
required hereunder may be waived in writing by the party entitled to receive
such notice. Every notice, demand, request, consent, approval, declaration
or other communication hereunder shall be deemed, request, consent, approval,
declaration or other communication hereunder shall be deemed to have been
duly given or served on the date on which personally delivered, with receipt
acknowledged, telecopied and confirmed by telecopy answerback, or three (3)
Business Days after the same shall have been deposited, with the United
States mail.
X.2 BINDING EFFECT; BENEFITS. Except as otherwise provided herein, this
Agreement shall be binding upon and inure to the benefit of the parties to this
Agreement and their respective successors and permitted assigns. Nothing is
this Agreement, express or implied, is intended or shall be construed to give
any person other than the parties to this Agreement or their
55
<PAGE>
respective successors or assigns any legal or equitable right, remedy or
claim under or in respect of any agreement or any provision contained herein.
X.3 AMENDMENT. Any amendment or waiver of any provision of this
Agreement, any Ancillary Agreement or the other Transactions or any consent
to any departure therefrom shall not be effective unless the same shall be in
writing and signed by Nor'Wester, Bernau and the Purchaser and shall
specifically refer to this Agreement or such Ancillary Agreement or such
Transaction. Except as provided in the preceding sentence, no action taken
pursuant to this Agreement, including, without limitation, any investigation
by or on behalf of any party, shall be deemed to constitute a waiver by the
party hereto of a breach of any provision of this Agreement shall not operate
or be construed as a waiver of any preceding or succeeding breach, and no
failure by either part to exercise any right or privilege hereunder shall be
deemed a waiver of such party's rights or privilege hereunder or shall be
deemed a waiver of such party's rights to exercise the same at any subsequent
time or times hereunder.
X.4 PARTIES IN INTEREST; ASSIGNMENT. Nothing contained in this
Agreement, express or implied, is intended to confer upon any person or
entity, other than the parties hereto and their permitted assignees and the
parties entitled to indemnification hereunder, any rights or remedies under
or by reason of this Agreement. No assignment of this Agreement or any
rights hereunder by any Constituent Corporation, Bernau or the Purchaser
shall be given any effect without the prior written consent of all of the
others; provided, however, that the Purchaser may, without the prior written
consent of any Constituent Corporation and Bernau, assign all of their rights
hereunder to one or more entities, 100% of the interests in which are owned
directly or indirectly by the Purchaser or otherwise controlled by Vijay
Mallya, provided that, notwithstanding any such assignment, the Purchaser
shall remain liable to perform all obligations of the Purchaser hereunder.
Subject to the foregoing sentence, this Agreement shall inure to the benefit
of, and be binding upon, the parties hereto and their respective successors
and assigns.
X.5 REMEDIES. Purchaser, Bernau and each Constituent Corporation, in
addition to being entitled to exercise all rights granted by law, including
recovery damages, will be entitled to specific performance of their rights
under this Agreement. Each Constituent Corporation, Bernau and Purchaser agree
that monetary damages would not be adequate compensation for any loss incurred
by reason of a breach by them of the provisions of this Agreement and hereby
agree to waive the defense in any action for specific performance that a remedy
at law would be adequate. Each party hereto shall be paid by the other party
hereto for any reasonable costs and expenses incurred by it (including
reasonable fees and expenses of counsel and whether incurred as a result of
negotiations, legal proceedings or otherwise) in connection with the
enforcement of its rights under the Transactions against such
56
<PAGE>
other party.
X.6 APPLICABLE LAW. This Agreement shall be governed by and construed
in accordance with the law of the State of California, without regard to the
principles thereof regarding conflict of laws; provided that to the extent
that the parties hereto (or their officers, directors and shareholders) are
required under the Oregon Business Corporation Act to comply with the Oregon
Business Corporation Act with respect to any matters arising under this
Agreement, nothing in this Section 10.6 shall be deemed to prohibit such
compliance or the reference to the Oregon Business Corporation Act for
purposes of determining the rights and obligations of the paries hereto (or
their officers, directors and shareholders). Each party to this Agreement
hereby consents to service of process in the County of San Francisco,
California and hereby agrees that all disputes relating to or arising under
this Agreement shall be the jurisdiction of the state and federal courts
located in the County of San Francisco, California.
X.7 SECTION AND OTHER HEADINGS. The section and other headings
contained in this Agreement are for reference purposes only and shall not
affect the meaning or interpretation of this Agreement.
X.8 SEVERABILITY. In the event that any one or more of the provisions
contained in this Agreement shall be determined to be invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision or provisions in every other respect and
the remaining provisions of this Agreement shall not be in any way impaired.
X.9 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of
which together shall be deemed to be one and the same instrument.
X.10 NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Without the prior
written consent of the Constituent Corporation, any information relating to
the Constituent Corporation provided to Purchaser in connection with, or as a
result of, its acquisition of the Common Stock which is either confidential,
proprietary, or otherwise not generally available to the public (but
excluding (a) information the Purchaser has obtained independently or from
third-party sources without the Purchaser's knowledge that the source has
violated any fiduciary duty or other duty not to disclose such information,
(b) information that otherwise becomes generally available to the public, or
(c) information known to Purchaser prior to its receipt of such information
in connection with, or as a result of, its purchase of Common Stock
hereunder) (the "Confidential Information") will be kept confidential by
Purchaser, using the same standard of care in safeguarding the Confidential
Information as Purchaser employs in protecting its own proprietary
information which Purchaser desires not to
57
<PAGE>
disseminate or publish and Purchaser will instruct its directors, officers,
and representatives (collectively, "Representatives") as to keep such
Confidential Information confidential. It is understood (i) that such
Representatives shall be informed by Purchaser of the confidential nature of
the Confidential Information and (ii) that such Representatives shall be
bound by the provisions of this Section 10.10 as condition of receiving the
Confidential Information. Purchaser shall not use any such Confidential
Information to produce a malt beverage whose formula duplicates any formula
for a malt beverage disclosed by the Constituent Corporation to Purchaser.
X.11 PUBLICITY. Neither Purchaser nor the Constituent Corporation shall
issue any press release or make any public disclosure regarding this
Agreement or any of the transactions contemplated hereby without the prior
consent of the other party hereto; provided, however, that nothing in this
Section 10.11 shall be deemed to prohibit any party to this Agreement from
making any disclosure required by law.
X.12 ENTIRE AGREEMENT. This Agreement, the Ancillary Agreements and the
other documents contemplated by the Transactions constitute the entire
agreement among the parties hereto and supersede any prior understandings,
agreements or representations by or among the parties hereto, written or
oral, to the extent they are related in any way to the subject matter hereof.
X.13 FEES AND EXPENSES. Each of the parties hereto shall bear its own
costs and expenses (including legal fees and expenses) incurred in connection
with this Agreement and the transactions contemplated hereby; provided,
however, that Nor'Wester shall pay the costs and expenses (including
reasonable legal fees and expenses) incurred by the Purchaser in connection
with the Bridge Loans.
X.14 EXHIBITS AND SCHEDULES. The exhibits and schedules identified in
this Agreement are incorporated herein by reference and made a part hereof.
X.15 CONSTRUCTION. Any reference to any federal, state, local or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise.
The word "including" shall mean including without limitation. If either
party has breached any representation, warranty or covenant contained herein
in any respect, the existence of another representation, warranty or covenant
related to the same subject matter (regardless of the relative levels of
specificity) that the party has not breached shall not detract from or
mitigate the breach of the former representation, warranty or covenant.
References of this Agreement shall mean this Investment Agreement,
including all amendments, modifications and
58
<PAGE>
supplements and any exhibits or schedules to any of the foregoing, and shall
refer to the Agreement as the same may be in effect at the time such
reference becomes operative.
59
<PAGE>
IN WITNESS WHEREOF, Nor'Wester, North Country, WVI, the WVI
Subsidiaries and Bernau and the Purchaser have executed this Agreement as of the
day and year first above written.
NOR'WESTER BREWING COMPANY
By: /S/ JAMES W. BERNAU
----------------------------
Name: James. W. Bernau
Title: President
NORTH COUNTRY BREWING COMPANY
By: /S/ JAMES W. BERNAU
----------------------------
Name: James W. Bernau
Title: President
WILLAMETTE VALLEY, INC. MICROBREWERIES ACROSS AMERICA
By: /S/ JAMES W. BERNAU
----------------------------
Name: James W. Bernau
Title: President
AVIATOR ALES, INC.
By: /S/ JAMES W. BERNAU
----------------------------
Name: James W. Bernau
Title: President
BAYHAWK ALES, INC.
By: /S/ JAMES W. BERNAU
----------------------------
Name: James W. Bernau
Title: President
MILE HIGH BREWING COMPANY
By: /S/ JAMES W. BERNAU
----------------------------
Name: James W. Bernau
Title: President
60
<PAGE>
JAMES W. BERNAU
By: /S/ JAMES W. BERNAU
----------------------------
Name: James W. Bernau
UNITED BREWERIES OF AMERICA, INC.
By: /S/ VIJAY MALLYA
----------------------------
Name: Vijay Mallya
Title: Chairman
61
<PAGE>
TABLE OF CONTENTS
Page
----
I. DEFINITIONS......................................................... 1
II. THE PURCHASE AND TRANSFER OF EQUITY SECURITIES...................... 9
2.1 Purchase and Transfer of Equity Securities..................... 10
2.2 Closing........................................................ 10
2.3 Legends........................................................ 11
2.4 Additional Agreements.......................................... 11
III. REPRESENTATIONS AND WARRANTIES OF THE CONSTITUENT
CORPORATIONS AND BERNAU............................................. 11
3.1 Authorized and Outstanding Shares of Capital Stock............. 11
3.2 Authorization and Issuance of Equity Securities................ 12
3.3 Securities Laws................................................ 13
3.4 Corporate Existence; Compliance with Law....................... 13
3.5 Subsidiaries................................................... 13
3.6 Corporate Power; Authorization; Enforceable Obligations........ 13
3.7 Financial Statements........................................... 14
3.8 Projections.................................................... 15
3.9 Ownership of Property.......................................... 16
3.10 Material Contracts............................................. 17
3.11 Environmental Protection....................................... 17
3.12 Labor Matters.................................................. 18
3.13 Other Ventures................................................. 18
3.14 Taxes.......................................................... 19
3.15 No Litigation.................................................. 19
3.16 Brokers........................................................ 20
3.17 Employment and Labor Agreements................................ 20
3.18 Patents, Trademarks, Copyrights and Licenses................... 20
3.19 Full Disclosure................................................ 20
3.20 No Material Adverse Effect..................................... 21
3.21 ERISA.......................................................... 23
3.22 Registration Rights............................................ 24
3.23 Liquor Consents and Permits.................................... 25
3.24 SEC Documents.................................................. 25
3.25 Major Customers and Suppliers.................................. 25
3.26 Acquisitions; Capital Expenditures............................. 25
3.27 Related Party Transactions..................................... 26
3.28 Title of Transfer Shares....................................... 26
3.29 Manipulation................................................... 26
3.30 Consent........................................................ 26
3.31 No Conflict.................................................... 26
IV. PURCHASER'S REPRESENTATIONS AND WARRANTIES.......................... 27
4.1 Corporate Existence............................................ 27
4.2 Investment Intention........................................... 27
4.3 Investment Experience.......................................... 27
4.4 Access to Information.......................................... 27
4.5 Corporate Power; Authorization; Enforceable Obligations........ 27
i
<PAGE>
Page
----
V. PRE-CLOSING COVENANTS.............................................. 28
5.1 Operation of Business......................................... 28
5.2 Agreements.................................................... 30
5.3 Notification.................................................. 30
5.4 No Inconsistent Action........................................ 31
5.5 No Solicitation............................................... 31
5.6 Financial Statements.......................................... 31
5.7 Access to Information Concerning Properties and Records....... 31
5.8 Consents, Filings and Satisfaction of Conditions.............. 32
5.9 Consolidation; Stockholder Meeting; Proxy Materials;
Registration Statement........................................ 32
5.10 Related Party Transactions.................................... 33
5.11 Restriction on Transfer Shares................................ 33
5.12 Restriction on Borrowings by Bernau........................... 34
VI. CONDITIONS PRECEDENT............................................... 34
6.1 Conditions of Purchaser with respect to the Closing........... 34
6.2 Conditions of UCB with respect to the Closing................. 37
VII. ADDITIONAL COVENANTS............................................... 39
7.1 Bridge Loans; Interim Financing............................... 39
7.2 Right of First Offer.......................................... 40
7.3 Percentage Ownership.......................................... 41
7.4 No Securities Senior to Common Stock.......................... 41
7.5 Permitted Acquisitions or Investments......................... 41
7.6 Sales of Assets............................................... 41
7.7 Books and Records............................................. 42
7.8 Financial and Other Information............................... 42
7.9 Communication with Accountants................................ 43
7.10 Tax Compliance................................................ 43
7.11 Insurance..................................................... 44
7.12 Agreements.................................................... 44
7.13 Employee Loans................................................ 44
7.14 Capital Structure............................................. 44
7.15 Transactions with Affiliates.................................. 45
7.16 Guaranteed Indebtedness....................................... 45
7.17 Restricted Payments........................................... 45
7.18 Employee Plans................................................ 46
7.19 Environmental Matters......................................... 47
7.20 Maintenance of Existence and Conduct of Business.............. 47
7.21 Mergers....................................................... 47
7.22 Liquidation................................................... 48
7.23 Hostile Acquisition........................................... 48
7.24 Access to Books and Records................................... 48
7.25 Auditors...................................................... 48
7.26 Employees..................................................... 48
7.27 Release of Bernau's Guarantees................................ 48
7.28 Business Opportunities........................................ 49
7.29 Termination of Certain Covenants.............................. 49
ii
<PAGE>
Page
----
VIII. TERMINATION........................................................ 49
8.1 Termination................................................... 49
IX. INDEMNIFICATION.................................................... 50
9.1 Indemnification............................................... 50
X. MISCELLANEOUS...................................................... 52
10.1 Notices....................................................... 52
10.2 Binding Effect; Benefits...................................... 55
10.3 Amendment..................................................... 55
10.4 Parties in Interest; Assignment............................... 56
10.5 Remedies...................................................... 56
10.6 Applicable Law................................................ 56
10.7 Section and Other Headings.................................... 57
10.8 Severability.................................................. 57
10.9 Counterparts.................................................. 57
10.10 Nondisclosure of Confidential Information.................... 57
10.11 Publicity.................................................... 57
10.12 Entire Agreement............................................. 58
10.13 Fees and Expenses............................................ 58
10.14 Exhibits and Schedules....................................... 58
10.15 Construction................................................. 58
iii
<PAGE>
SCHEDULES
Schedule
- --------
1.0 - List of WVI Subsidiaries
3.1(a)(1) - Capitalization of Nor'Wester
3.1(a)(2) - Pro Forma Capitalization of Nor'Wester after Consolidation
3.1(b)(1) - Capitalization of WVI and WVI Subsidiaries
3.1(b)(2) - Pro Forma Capitalization of WVI and WVI Subsidiaries after
Consolidation
3.1(c) - List of 5% Stockholders of Constituent Corporations - actual and
pro forma basis
3.1(d) - Consolidation Exchange Ratios
3.5 - Subsidiaries of Constituent Corporations
3.6 - Constituent Corporations' Governmental Filings
3.7 - Financial Statements of Constituent Corporations
3.7(c) - Off-Balance Sheet Liabilities
3.8 - Constituent Corporations' Projections
3.9(a) - Constituent Corporations' Real Property
3.9(b) - Constituent Corporations' Leases
3.9(e) - Constituent Corporations' Consents Required
3.10 - Constituent Corporations' Material Contracts
3.11(c) - Constituent Corporations' Environmental Protection
3.12 - Constituent Corporations' Labor Disputes
3.13 - Constituent Corporations' Joint Ventures
3.14 - Constituent Corporations' Taxes
3.15 - Constituent Corporations' Litigation
3.16 - Constituent Corporations' Broker's Fees
3.17 - Constituent Corporations' Management Contracts
3.18 - Constituent Corporations' Intellectual Property
3.19 - Constituent Corporations' Full Disclosure
3.20 - Constituent Corporations' Absence of Changes or Events
3.21 - Constituent Corporations' Benefit Plans
3.22 - Constituent Corporations' Registration Rights
3.23 - Constituent Corporations' Governmental Approvals
3.25 - Constituent Corporations' Major Customers and Suppliers
3.26 - Constituent Corporations' Acquisitions and Capital Expenditures
3.28 - Bernau's Pledges of Shares
3.30 - Consents required for transfer of Bernau's Shares
3.31 - Conflicts with Transfer of Bernau's Shares
4.5 - Purchaser's Governmental Filings
5.1(b) - Options to be Granted by Constituent Corporations
6.1(l)(i) - Terms of Bernau's Employment Agreement
6.1(n) - Projections regarding Gross Sales and Net Income
7.27 - Bernau Guarantees
iv
<PAGE>
EXHIBITS
Exhibit
- -------
2.4(a) - Stockholder's Agreement
2.4(b) - Guaranty
5.9(a)(i) - Form of Certificate of Incorporation for United Craft Brewers,
Inc.
5.9(a)(ii) - Form of Bylaws for United Craft Brewers, Inc.
6.1(a) - Form of opinion of counsel for Bernau and Constituent
Corporations
6.2(h) - Form of opinion of Orrick, Herrington & Sutcliffe LLP
v
<PAGE>
[EXECUTION COPY]
- --------------------------------------------------------------------------------
INVESTMENT AGREEMENT
DATED JANUARY 30, 1997
BY AND AMONG
NOR'WESTER BREWING COMPANY, INC.
NORTH COUNTRY JOINT VENTURE, LLC
WILLAMETTE VALLEY, INC. MICROBREWERIES ACROSS AMERICA
AND VARIOUS SUBSIDIARIES
JAMES W. BERNAU
AND
UNITED BREWERIES OF AMERICA, INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT 2.4(a)
STOCKHOLDER'S AGREEMENT
STOCKHOLDER'S AGREEMENT ("Agreement"), dated as of January 30, 1997,
by and between United Breweries of America, Inc., a Delaware corporation ("UB"),
and James W. Bernau (the "Stockholder"), a beneficial and/or record holder of
Common Stock of Nor'Wester Brewing Company, Inc. ("Nor'Wester") and Willamette
Valley, Inc. Microbreweries Across America ("WVI"). WVI is the beneficial
and/or record holder of Common Stock of the subsidiaries of WVI listed on
Schedule 1 hereto (collectively, the "WVI Subsidiaries").
W I T N E S S E T H:
WHEREAS, Nor'Wester, North Country Brewing Company, WVI, the WVI
Subsidiaries and UB, propose to enter into an Investment Agreement, dated as of
the date hereof (the "Investment Agreement"), providing for, INTER ALIA, the
consolidation of Nor'Wester, North Country Brewing Company, WVI and the WVI
Subsidiaries under the ownership of United Craft Brewers, Inc., a newly formed
Delaware corporation (the "Consolidation"); and
WHEREAS, as a condition to their willingness to enter into the
Investment Agreement, UB has required that the Stockholder enter into, and the
Stockholder has agreed to enter into, this Agreement; and
WHEREAS, in order to induce UB to enter into the Investment Agreement,
the Stockholder desires to grant UB a proxy as to all shares of Nor'Wester, WVI
and WVI Subsidiaries Common Stock beneficially owned by Stockholder and make
certain agreements with UB as provided herein;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein, and for other good and valuable consideration
including the inducement to UB to consummate the Investment Agreement, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
.1. REPRESENTATIONS AND WARRANTIES. The Stockholder hereby represents and
warrants to UB as follows:
(a) OWNERSHIP OF SHARES. The Stockholder is either (i) the record
and beneficial owner of, (ii) trustee of a trust that is the record holder or
beneficial owner of, and whose beneficiaries are the beneficial owners (such
trustee, a "Trustee") of, or (iii) the beneficial owner but not the record
holder of, the number of shares of Nor'Wester, WVI and WVI Subsidiaries Common
Stock as set forth opposite the Stockholder's name on Schedule 2 hereto (the
"Existing Shares", and together with any shares of Nor'Wester, WVI and WVI
Subsidiaries Common Stock acquired by the Stockholder after the date hereof and
prior to the termination hereof, whether upon exercise of options, conversion of
convertible securities, purchase, exchange or otherwise, the "Shares"). On the
date hereof, the Existing Shares set forth opposite the Stockholder's name on
Schedule 2 constitute all of the shares of Nor'Wester, WVI and WVI Subsidiaries
Common Stock owned of record or beneficially by the Stockholder. The
Stockholder (or, to the extent the Stockholder is a Trustee, the Stockholder
together with other Trustees who are signatories to this Agreement) has sole
voting power with respect to the matters set forth in Section 2, sole power of
disposition and sole power to demand appraisal rights in each case with respect
to all of the Existing Shares set forth opposite the Stockholder's name on
Schedule 2, with no restrictions subject to applicable federal securities laws
and the terms of this Agreement, on such rights.
<PAGE>
(b) POWER; BINDING AGREEMENT. The Stockholder has the legal
capacity, power and authority to enter into and perform all of the Stockholder's
obligations under this Agreement. The execution, delivery and performance of
this Agreement by the Stockholder will not violate any other agreement to which
the Stockholder is a party including, without limitation, any trust agreement,
voting agreement, stockholders agreement or voting trust. This Agreement has
been duly and validly executed and delivered by the Stockholder and constitutes
a valid and binding agreement of the Stockholder, enforceable against the
Stockholder in accordance with its terms, except as may be limited by
bankruptcy, insolvency, reorganization or other similar laws affecting the
enforcement of creditors' rights generally and by general equitable principles.
There is no beneficiary or holder of a voting trust certificate or other
interest of any trust of which a Stockholder is Trustee whose consent is
required for the execution and delivery of this Agreement or the consummation of
the transactions contemplated hereby. This Agreement has been duly authorized,
executed and delivered by, and constitutes a valid and binding agreement of, the
Stockholder's spouse, enforceable against such person in accordance with its
terms, except as may be limited by bankruptcy, insolvency, reorganization or
other similar laws affecting the enforcement of creditors' rights generally and
by general equitable principles.
(c) NO CONFLICTS. (i) No filing with, and no permit, authorization,
consent or approval of, any state or federal public body or authority is
necessary for the execution of this Agreement by the Stockholder and the
consummation by the Stockholder of the transactions contemplated hereby and
(ii) neither the execution and delivery of this Agreement by the Stockholder nor
the consummation by the Stockholder of the transactions contemplated hereby nor
compliance by the Stockholder with any of the provisions hereof shall
(x) conflict with or result in any breach of any applicable trust or other
organizational documents applicable to the Stockholder, (y) result in a
violation or breach of, or constitute (with or without notice or lapse of time
or both) a default (or give rise to any third party right of termination,
cancellation, material modification or acceleration) under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, license,
contract, commitment, arrangement, understanding, agreement or other instrument
or obligation of any kind to which the Stockholder is a party or by which the
Stockholder or any of the Stockholder's properties or assets may be bound or
(z) violate any order, writ, injunction, decree, judgment, order, statute, rule
or regulation applicable to the Stockholder or any of the Stockholder's
properties or assets.
(d) Except for (i) 101,913 shares of Stockholder's Nor'Wester stock
pledged to Bank of America to secure payment under Stockholder's Individual Loan
Agreement dated February 20, 1996, (ii) 808,705 shares of Stockholder's
Nor'Wester stock pledged to Pershing, Division of Donaldson, Lufkin & Jenrette
Securities Corporation to secure payment under Stockholder's Margin Agreement
dated October 1, 1996, and (iii) 3,018,444 shares of Stockholder's WVI stock
held in escrow at First Interstate Bank of Oregon pursuant to the Founder's
Escrow Agreement dated February 22, 1994, the Stockholder's Shares and the
certificates representing such Shares are now and at all times during the term
hereof will be held by the Stockholder, or by a nominee or custodian for the
benefit of the Stockholder, free and clear of all liens, claims, security
interests, proxies, voting trusts or agreements, understandings or arrangements
or any other encumbrances whatsoever, except for any such encumbrances or
proxies arising hereunder.
(e) Except as disclosed in Section 3.16 of the Investment Agreement,
no broker, investment banker, financial adviser or other person is entitled to
any broker's, finder's, financial adviser's or other similar fee or commission
in connection with the transactions contemplated hereby based upon arrangements
made by or on behalf of the Stockholder.
(f) The Stockholder understands and acknowledges that UB is entering
into
<PAGE>
the Investment Agreement in reliance upon the Stockholder's execution and
delivery of this Agreement.
2. AGREEMENT TO VOTE; PROXY.
2.1 VOTING. The Stockholder hereby agrees that, during the time this
Agreement is in effect, at any meeting of the stockholders of the Constituent
Corporations, however called, or in connection with any written consent of the
stockholders of the Constituent Corporations, the Stockholder shall vote (or
cause to be voted) the Shares held of record or beneficially by the Stockholder,
including, but not limited to, causing WVI to vote the shares held of record by
it in the WVI Subsidiaries, (a) in favor of the Consolidation, the execution and
delivery by each of the Constituent Corporations of the Investment Agreement and
the approval of the terms thereof and each of the other actions contemplated by
the Investment Agreement and this Agreement and any actions required in
furtherance hereof and thereof; (b) against any action or agreement that would
result in a breach in any material respect of any covenant, representation or
warranty or any other obligation or agreement of each of the Constituent
Corporations under the Investment Agreement or this Agreement; (c) except as
otherwise agreed to in writing in advance by UB or permitted pursuant to the
Investment Agreement, against the following actions (other than the
Consolidation and the transactions contemplated by the Investment Agreement):
(i) any extraordinary corporate transaction, such as a merger, consolidation or
other business combination involving any of the Constituent Corporations; (ii) a
sale, lease or transfer of a material amount of assets of any of the Constituent
Corporations or a reorganization, recapitalization, dissolution or liquidation
of any of the Constituent Corporations; (iii) (1) any change in the majority of
the board of directors of any of the Constituent Corporations; (2) any material
change in the present capitalization of any of the Constituent Corporations or
any amendment of any of the Constituent Corporations' Certificate of
Incorporation; (3) any other material change in any of the Constituent
Corporations' corporate structure or business; or (4) any other action; which,
in the case of each of the matters referred to in clauses (iii)(1), (2), (3) or
(4), is intended, or could reasonably be expected, to impede, interfere with,
delay, postpone, discourage or materially adversely affect the contemplated
economic benefits to UB of the Consolidation or the transactions contemplated by
the Investment Agreement or this Agreement. The Stockholder shall not enter
into any agreement or understanding, whether oral or written, with any person or
entity prior to the Termination Date (as defined in Section 7.1) to vote after
the Termination Date in any manner inconsistent with clauses (a), (b) or (c) of
the preceding sentence.
2.2 PROXY. The Stockholder hereby grants to, and appoints, UB and
Vijay Mallya and O'Neil Nalavadi, in their respective capacities as officers of
UB, and any individual who shall hereafter succeed to any such office of UB, and
any other designee of UB, each of them individually, the Stockholder's
irrevocable proxy and attorney-in-fact (with full power of substitution) to vote
the Shares as indicated in Section 2.1 above. The Stockholder intends this
proxy to be irrevocable and coupled with an interest and will take such further
action and execute such other instruments as may be necessary to effectuate the
intent of this proxy and hereby revokes any proxy previously granted by the
Stockholder with respect to the Stockholder's Shares.
3. CERTAIN COVENANTS OF STOCKHOLDERS. Except in accordance with the
terms of this Agreement, the Stockholder hereby covenants and agrees as follows:
3.1 NO SOLICITATION. Except with regard to Mile High Brewing Company
and Bayhawk Ales, Inc., the Stockholder shall not, directly or indirectly,
solicit (including by way of furnishing information) or respond to any inquiries
or the making of any proposal by any person
<PAGE>
(other than UB or any affiliate of UB) with respect to any of the Constituent
Corporations that constitutes or could reasonably be expected to lead to a
proposal to acquire an interest in any of the Constituent Corporations. If
the Stockholder receives any such inquiry or proposal, then the Stockholder
shall promptly inform UB of the terms and conditions, if any, of such inquiry
or proposal and the identity of the person making it. The Stockholder will
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted heretofore with
respect to any of the foregoing.
3.2 RESTRICTION ON TRANSFER, PROXIES AND NON-INTERFERENCE;
RESTRICTION ON WITHDRAWAL. The Stockholder shall not, directly or indirectly:
(a) except as contemplated by the Investment Agreement and with respect to
existing stock pledges described in Section 1(d) above, offer for sale, sell,
transfer, tender, pledge, encumber, assign or otherwise dispose of, or enter
into any contract, option or other arrangement or understanding with respect to
or consent to the offer for sale, sale, transfer, tender, pledge, encumbrance,
assignment or other disposition of, any or all of the Stockholder's Shares or
any interest therein; (b) except as contemplated hereby, grant any proxies or
powers of attorney, deposit any Shares into a voting trust or enter into a
voting agreement with respect to any Shares; or (c) take any action that would
make any representation or warranty of the Stockholder contained in this
Agreement untrue or incorrect or have the effect of preventing or disabling the
Stockholder from performing the Stockholder's obligations under this Agreement.
3.3 WAIVER OF APPRAISAL RIGHTS. The Stockholder hereby waives any
rights of appraisal or rights to dissent from the Consolidation that the
Stockholder may have. Each Trustee represents that no beneficiary who is a
beneficial owner of Shares under any trust for which such Trustee acts as
trustee has any right of appraisal or right to dissent from the Consolidation
which has not been so waived.
3.4 CERTAIN RIGHTS. The Stockholder hereby waives any rights to
cause any of the Constituent Corporations to register, or include in any
registration statement of such Constituent Corporation or UB filed with the
Securities and Exchange Commission, under the Securities Act of 1933, as
amended, any of the Stockholder's Shares. The Stockholder hereby waives any
co-sale or similar rights respecting shares of the Constituent Corporations'
Common Stock.
4. FURTHER ASSURANCES. From time to time, at the other party's request
and without further consideration, each party hereto shall execute and deliver
such additional documents and take all such further action as may be necessary
or desirable to consummate and make effective, in the most expeditious manner
practicable, the transactions contemplated by this Agreement.
5. CERTAIN EVENTS. The Stockholder agrees that this Agreement and the
obligations hereunder shall attach to the Stockholder's Shares and shall be
binding upon any person to which legal or beneficial ownership of such Shares
shall pass, whether by operation of law or otherwise, including without
limitation such Shareholder's heirs, guardians, administrators or successors.
6. STOP TRANSFER. The Stockholder agrees with, and covenants to, UB that
the Stockholder shall not request that any of the Constituent Corporations
register the transfer (book-entry or otherwise) of any certificate or
uncertificated interest representing any of the Stockholder's Shares, unless
such transfer is made in compliance with this Agreement. The Stockholder
agrees, with respect to any Shares in certificated form, that the Stockholder
will tender to the respective Constituent Corporations within fifteen (15)
business days after the date hereof, the certificates representing such Shares
and such Constituent Corporation will inscribe upon such certificates the
following legend: "The shares of Common Stock of [insert applicable
<PAGE>
company name] (the "Company") represented by this certificate are subject to
a Stockholders Agreement, dated as of January 30, 1997, and may not be sold
or otherwise transferred, except in accordance therewith. Copies of such
Agreement may be obtained at the principal executive offices of the Company."
The Stockholder agrees that within fifteen (15) business days after the date
hereof, the Stockholder will no longer hold any Shares, whether certificated
or uncertificated, in "street name" or in the name of any nominee. In the
event of a stock dividend or distribution, or any change in the Company
Common Stock by reason of any stock dividend, split-up, recapitalization,
combination, exchange of shares or the like, the term "Shares" as used in
this Agreement shall be deemed to refer to and include the Shares as well as
all such stock dividends and distributions and any shares into which or for
which any or all of the Shares may be changed or exchanged.
7. TERMINATION; EXPENSES.
7.1 EVENTS OF TERMINATION. This Agreement and the obligations of the
Stockholder hereunder (other than those set forth in this Section 7.1 and
Sections 7.2, 7.3 and 9.4 hereof, which shall survive any such termination)
shall terminate on the first to occur of (a) termination of the Investment
Agreement in accordance with its terms or (b) the Closing. In addition, this
Agreement and the obligations of the Stockholder hereunder may be terminated
(other than those set forth in this Section 7.1 and Sections 7.2, 7.3 and 9.4
hereof, which shall survive any such termination) by UB if UB is not in material
breach of its obligations under this Agreement and if there has been a breach in
any material respect by the Stockholder of any of its representations,
warranties, covenants or agreements contained in this Agreement and such breach
has not been promptly cured after notice to the Stockholder; PROVIDED, HOWEVER,
that such breach shall be of the kind that denies UB the material benefits
contemplated by this Agreement. As used in this Agreement, the term
"Termination Date" shall mean the date upon which this Agreement terminates
pursuant to clause (a) of this Section 7.1.
7.2 EXPENSES. (a) Except as set forth in this Section 7.2, all fees
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses, whether
or not the Consolidation is consummated.
(b) If this Agreement is terminated pursuant to the second sentence of
Section 7.1 of this Agreement and provided that UB is not then in material
breach of its obligations under this Agreement, then the Stockholder shall
reimburse UB, within one (1) business day of UB's request therefor, for all
reasonable and documented fees and expenses actually incurred by UB in
connection with the Investment Agreement.
7.3 REMEDIES. If this Agreement shall be terminated by UB as
provided in the second sentence of Section 7.1, notwithstanding the payment made
to UB pursuant to such Section 7.2 the Stockholder shall not be relieved from
any liability to UB for breach of this Agreement.
8. STOCKHOLDER CAPACITY. No person executing this Agreement who is or
becomes during the term hereof a director of any Constituent Corporation makes
any agreement or understanding herein in his or her capacity as such director.
The Stockholder signs solely in his or her capacity as the record and beneficial
owner of, or the trustee of a trust whose beneficiaries are the beneficial
owners of, the Stockholder's Shares.
<PAGE>
9. MISCELLANEOUS.
9.1 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement (i) constitutes the
entire agreement between the parties with respect to the subject matter hereof
and supersedes all other prior agreements and understandings, both written and
oral, between the parties with respect to the subject matter hereof (other than
the Investment Agreement) and (b) shall not be assigned by operation of law or
otherwise without the prior written consent of the other party; PROVIDED that UB
may assign, in its sole discretion, its rights and obligations hereunder to any
direct or indirect wholly owned subsidiary of UB, but no such assignment shall
relieve UB of its obligations hereunder if such assignee does not perform such
obligations.
9.2 AMENDMENTS. This Agreement may not be modified, amended, altered
or supplemented, except upon the execution and delivery of a written agreement
executed by the parties hereto; PROVIDED that Schedule 2 hereto may be
supplemented by UB by adding the name and other relevant information concerning
any stockholder of Nor'Wester, WVI or the WVI Subsidiaries who agrees to be
bound by the terms of this Agreement without the agreement of any other party
hereto, and thereafter such added stockholder shall be treated as a
"Stockholder" for all purposes of this Agreement.
9.3 NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if so given) by hand delivery, telegram, telex
or telecopy, or by mail (registered or certified mail, postage prepaid, return
receipt requested) or by any courier service, such as Federal Express, providing
proof of delivery. All communications hereunder shall be delivered to the
respective parties at the following addresses:
If to a Stockholder: At the address set forth on Schedule 2 hereto
copy to: Ater Wynne Hewitt Dodson & Skerritt
222 S.W. Columbia, Suite 1800
Portland, OR 97201
Attn.: Jack W. Schifferdecker, Jr., Esq.
If to UB: The UB Group
One Harbor Drive, Suite 102
Sausalito, California 94965
Attn.: O'Neil Nalavadi, Senior Vice President
copy to: Orrick, Herrington & Sutcliffe
Old Federal Reserve Bank Building
400 Sansome Street
San Francisco, California 94111
Attn.: Alan Talkington, Esq.
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
9.4 GOVERNING LAW. The validity, interpretation, enforceability and
performance of this Agreement shall be governed by, and construed in accordance
with, the laws of the State of California, without regard to the principles
thereof regarding conflict of laws, and the terms and provisions hereby may not
be waived, altered, modified or amended except in
<PAGE>
writing duly signed by UB and the Stockholder. The Stockholder and UB hereby
consent to service of process in the County of San Francisco, California and
hereby agree that all disputes relating to or arising under this Agreement
shall be the jurisdiction of the state and federal courts located in the
County of San Francisco, California.
9.5 SPECIFIC PERFORMANCE. Each of the parties hereto recognizes and
acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause the other party to sustain damages for which it would
not have an adequate remedy at law for money damages, and therefore each of the
parties hereto agrees that in the event of any such breach the aggrieved party
shall be entitled to the remedy of specific performance of such covenants and
agreements and injunctive and other equitable relief in addition to any other
remedy to which it may be entitled, at law or in equity. UB agrees that it
shall not bring any action for money damages relating to this Agreement or the
transactions herein contemplated against any trustee of any Stockholder that is
a trust in such trustee's personal capacity based upon any action taken or not
taken pursuant to a court order or a final legal judgment.
9.6 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same Agreement.
9.7 DESCRIPTIVE HEADINGS. The descriptive headings used herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
9.8 SEVERABILITY. Whenever possible, each provision or portion of
any provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law, but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
9.9 DEFINITIONS. For purposes of this Agreement:
(a) "beneficially own", "beneficial owner" or "beneficial
ownership" with respect to any securities shall mean having "beneficial
ownership" of such securities (as determined pursuant to Rule 13d-3 under the
Securities Exchange Act of 1934, as amended), including pursuant to any
agreement, arrangement or understanding, whether or not in writing. Without
duplicative counting of the same securities by the same holder, securities
beneficially owned by a person shall include securities beneficially owned by
all other persons with whom such person would constitute a "group" as described
in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended.
(b) "person" shall mean an individual, corporation,
partnership, joint venture, association, trust, unincorporated organization,
limited liability company or other entity.
(c) Capitalized terms used herein and not defined shall have
the meanings assigned to them in the Investment Agreement.
<PAGE>
IN WITNESS WHEREOF, UB and the Stockholder have caused this Agreement
to be duly executed as of the day and year first above written.
UNITED BREWERIES OF AMERICA, INC.
By
-------------------------------------
Name: Vijay Mallya
Title: Chief Executive Officer and President
STOCKHOLDER
JAMES W. BERNAU
By
--------------------------------------
Name: James W. Bernau
<PAGE>
CONSENT OF SPOUSE
I am the spouse of James W. Bernau. On behalf of myself, my heirs and
legatees, I consent to the terms of the Stockholder's Agreement signed by or on
behalf of my spouse and agree to the voting agreement and proxy with respect to
the Shares (as defined in such Stockholder's Agreement) registered in the name
of my spouse or otherwise registered, which my spouse proposes to grant pursuant
to the Stockholder's Agreement.
Dated: January __, 1997
(Signature of Spouse)
<PAGE>
SCHEDULE 1
SUBSIDIARIES OF WILLAMETE VALLEY, INC.
MICROBREWERIES ACROSS AMERICA
Aviator Ales, Inc.
Mile High Brewing Company
Bayhawk Ales, Inc.
<PAGE>
SCHEDULE 2
<TABLE>
<CAPTION>
NUMBER OF SHARES OF COMMON STOCK OWNED
--------------------------------------
WVI SUBSIDIARIES
--------------------------------------
NAME AND ADDRESS
OF STOCKHOLDER NOR'WESTER WVI AVIATOR MILE HIGH BAYHAWK
- ------------------------- ---------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
James W. Bernau 910,618 3,018,444 2,715,584 2,391,985 1,249,811
8800 Enchanted Way
Turner, OR 97392
</TABLE>
<PAGE>
EXHIBIT 2.4(b)
GUARANTY
THIS GUARANTY, dated as of January 30, 1997, from UB International
Ltd., a corporation organized under the laws of the United Kingdom
("Guarantor"), to each of Nor'Wester Brewing Company, Inc., an Oregon
corporation ("Nor'Wester"), North Country Joint Venture, LLC, an Oregon limited
liability corporation ("North Country"), Willamette Valley, Inc. Microbreweries
Across America, an Oregon corporation ("WVI"), Aviator Ales, Inc., a Delaware
corporation ("AAI"), Bayhawk Ales, Inc., a Delaware corporation ("BAI"), Mile
High Brewing Company, Delaware corporation ("MHBC," and together with
Nor'Wester, North Country, WVI, AAI, and BAI, the "Constituent Corporations"),
is made in connection with the Investment Agreement dated as of the date hereof
between United Breweries of America, Inc. ("UB"), the Constituent Corporations
and James W. Bernau (the "Investment Agreement").
W I T N E S S E T H
WHEREAS, UB, the Constituent Corporations and James W. Bernau have
entered into the Investment Agreement for the purchase by UB of shares of Common
Stock in an entity resulting from the Consolidation of the Constituent
Corporations;
WHEREAS, UB has agreed to provide the Constituent Corporations with
certain interim financing as more fully set forth in the Investment Agreement;
and
WHEREAS, Guarantor will guaranty certain payment obligations of UB to
the Constituent Corporations under the Investment Agreement;
NOW, THEREFORE, in consideration of the foregoing premises and other
good and valuable consideration, the adequacy and receipt of which hereby is
acknowledged, Guarantor hereby agrees to and does the following:
1. Guarantor does hereby absolutely and unconditionally guarantee to
the Constituent Corporations all payment obligations of UB under the Investment
Agreement (the "Guaranteed Obligations").
2. The obligations of Guarantor hereunder are independent of the
obligations of UB, and a separate action or actions may be brought and
prosecuted against Guarantor whether or not action is brought against UB and
whether or not UB is joined in any such action or actions. Any circumstance
which operates to toll any statute of limitations as to UB shall operate to toll
the statute of limitations as to Guarantor.
3. Guarantor makes the following representations and warranties to
each of the Constituent Corporations:
a. Guarantor is a corporation organized under the laws of the
United
<PAGE>
Kingdom, and has the power and adequate authority, rights and franchises
to execute and deliver, and to perform all of its obligations under, this
Guaranty.
b. The execution, delivery and performance of this Guaranty by
Guarantor have been duly authorized by all necessary action and do not and will
not violate any provision of any law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award presently in effect having
applicability to it, or of its [Charter documents].
c. This Guaranty constitutes the legal, valid and binding
obligation of Guarantor, enforceable against Guarantor in accordance with its
terms, subject to the effect of bankruptcy, insolvency, reorganization,
moratorium or similar laws now or hereafter in effect generally affecting
creditors' rights.
d. No actions, suits or proceedings are pending, or to the
knowledge of Guarantor, threatened against or affecting it, or any of its
assets, properties or rights, at law or in equity, by or before any court,
arbitrator or administrative or governmental body which, if determined adversely
to Guarantor, would have a material adverse effect on its ability to perform its
obligations hereunder.
4. Guarantor hereby waives:
a. Any right to require the Constituent Corporations to
(i) proceed against UB or any other guarantor of the Guaranteed Obligations,
(ii) proceed against or exhaust any security received from UB, Guarantor or any
other guarantor of the Guaranteed Obligations or otherwise marshall the assets
of UB or (iii) pursue any other remedy in the Constituent Corporation's power
whatsoever;
b. Any defense arising by reason of the application by UB of the
proceeds of any borrowing;
c. Any defense resulting from the absence, impairment or loss of
any right of reimbursement, subrogation, contribution or other right or remedy
of Guarantor against UB, any other guarantor of the Guaranteed Obligations or
any security, whether resulting from an election by the Constituent Corporations
to foreclose upon security by nonjudicial sale, or otherwise;
d. Any benefit arising from any setoff or counterclaim of UB or
any defense which results from any disability or other defense of UB or the
cessation or stay of enforcement from any cause whatsoever of the liability of
UB (including, without limitation, the lack of validity or enforceability of the
Investment Agreement, but excluding any set-off or counterclaim asserted by UB
based upon the Constituent Corporation's failure to perform its obligations
under the Investment Agreement);
e. Any defense based upon any law, rule or regulation which
provides
<PAGE>
that the obligation of a surety must not be greater or more burdensome
than the obligation of the principal;
f. Until all of the Guaranteed Obligations have been fully,
finally and indefeasibly paid, any right of subrogation, reimbursement,
indemnification or contribution and other similar right to enforce any remedy
which the Constituent Corporations or any other Person now has or may hereafter
have against UB on account of the Guaranteed Obligations, and any benefit of,
and any right to participate in, any security now or hereafter received by the
Constituent Corporations or any other Person on account of the Guaranteed
Obligations;
g. All presentments, demands for performance, notices of
non-performance, notices delivered under the Investment Agreement, protests,
notice of dishonor, and notices of acceptance of this Guaranty and of the
existence, creation or incurring of new or additional Guaranteed Obligations and
notices of any public or private foreclosure sale;
h. Any appraisement, valuation, stay, extension, moratorium
redemption or similar law or similar rights for marshalling;
i. Any right to be informed by the Constituent Corporations of
the financial condition of UB or any other guarantor of the Guaranteed
Obligations or any change therein or any other circumstances bearing upon the
risk of nonpayment or nonperformance of the Guaranteed Obligations;
j. Until all of the Guaranteed Obligations have been fully,
finally and indefeasibly paid or released, any right to revoke this Guaranty;
k. Any defense arising from an election for the application of
Section 1111(b)(2) of the United States Bankruptcy Code which applies to the
Guaranteed Obligations; and
l. Any defense based upon any borrowing or grant of a security
interest under Section 364 of the United States Bankruptcy Code.
Without limiting the scope of any of the foregoing provisions of this
PARAGRAPH 4, Guarantor hereby further waives (A) all rights and defenses arising
out of an election of remedies by the Constituent Corporations, even though that
election of remedies, such as a nonjudicial foreclosure with respect to security
for a Guaranteed Obligation, has destroyed Guarantor's rights of subrogation and
reimbursement against UB by the operation of Section 580d of the Code of Civil
Procedure or otherwise, (B) all rights and defenses Guarantor may have by reason
of protection afforded to UB with respect to the Guaranteed Obligations pursuant
to the antideficiency or other laws of California limiting or discharging the
Guaranteed Obligations, including, without limitation, Section 580a, 580b, 580d,
or 726 of the California Code of Civil Procedure, and (C) all other rights and
defenses available to Guarantor by reason of Sections 2787 to 2855, inclusive,
Section 2899 or Section 3433 of the
<PAGE>
California Civil Code or Section 3605 of the California Commercial Code.
5. The validity, interpretation, enforceability and performance of
this Guaranty shall be governed by, and construed in accordance with, the laws
of the State of California, without regard to the principles thereof regarding
conflict of laws, and the terms and provisions hereby may not be waived,
altered, modified or amended except in writing duly signed by Nor'Wester and
Guarantor. The Guarantor and the Constituent Corporations hereby consent to
service of process in the County of San Francisco, California and hereby agree
that all disputes relating to or arising under this Guaranty shall be the
jurisdiction of the state and federal courts located in the County of San
Francisco, California.
6. This Guaranty shall not be deemed to create any right in any
Person except as provided herein, nor be construed in any respect to be a
contract in whole or in part for the benefit of any other Person, and shall be
deemed to be extinguished upon the irrevocable discharge by UB of all of its
obligations under the Investment Agreement. This Guaranty is an irrevocable
continuing guaranty of the Guaranteed Obligations which shall continue in effect
until all of the Guaranteed Obligations have been fully, finally and
indefeasibly paid. If any payment on any Guaranteed Obligation is set aside,
avoided or rescinded or otherwise recovered from the Constituent Corporations,
such recovered payment shall constitute a Guaranteed Obligation hereunder and,
if this Guaranty was previously released or terminated, it automatically shall
be fully reinstated, as if such payment was never made.
7. Guarantor shall pay on demand all reasonable fees and expenses,
including reasonable attorneys' fees and expenses, incurred by the Constituent
Corporations in the enforcement or attempted enforcement of this Guaranty or in
preserving any of the Constituent Corporations' rights and remedies (including,
without limitation, all such fees and expenses incurred in connection with any
"workout" or restructuring affecting this Guaranty or any bankruptcy or similar
proceeding involving Guarantor). The obligations of Guarantor under this
PARAGRAPH 7 shall survive the payment and performance of the Guaranteed
Obligations and the termination of this Guaranty.
8. This Guaranty shall be binding upon and inure to the benefit of
the Constituent Corporations and Guarantor and their respective successors and
assigns; PROVIDED, HOWEVER, that neither the Constituent Corporations nor
Guarantor may assign or transfer any of their respective rights and obligations
under this Guaranty without the prior written consent of the other parties
hereto. All references in this Personal Guaranty to any Person shall be deemed
to include all permitted successors and assigns of such Person.
9. Guarantor authorizes the Constituent Corporations and UB, in their
discretion, without notice to Guarantor and without affecting or impairing in
any way the liability of Guarantor hereunder, from time to time to create new
Guaranteed Obligations and renew, compromise, extend, accelerate or otherwise
change the time for payment or performance of, or otherwise amend or modify the
Investment Agreement or change the terms of the Guaranteed Obligations or any
part thereof.
<PAGE>
10. Terms used herein and not otherwise defined herein shall have the
meanings assigned to such terms by the Investment Agreement.
IN WITNESS WHEREOF, Guarantor, pursuant to due corporate authority,
has caused these presents to be signed in its name by a duly authorized officer
as of the date first above written.
UB INTERNATIONAL LTD.
By _______________________________
Title
<PAGE>
EXHIBIT 5.9(a)(ii)
BY-LAWS
OF
UNITED CRAFT BREWERS, INC.
ARTICLE I
OFFICES
Section 1. REGISTERED OFFICE.
The registered office of the Corporation in the State of Delaware
shall be 1209 Orange Street, City of Wilmington, County of New Castle, State of
Delaware. The name of the registered agent is [Incorporating Services, Ltd].
Such registered agent has a business office identical with such registered
office.
Section 2. OTHER OFFICES.
The Corporation also may have offices at such other places both within
and without the State of Delaware as the Board of Directors may from time to
time determine or the business of the Corporation may require.
ARTICLE II
STOCKHOLDERS
Section 1. STOCKHOLDER MEETINGS.
(a) TIME AND PLACE OF MEETINGS. Meetings of the stockholders shall
be held at such times and places, either within or without the State of
Delaware, as may from time to time be fixed by the Board of Directors and stated
in the notices or waivers of notice of such meetings.
(b) ANNUAL MEETING. The annual meeting of the stockholders shall be
held at such date and at such time as may be designated by the Board of
Directors, for the election of directors and the transaction of such other
business properly brought before such annual meeting of the stockholders and
within the powers of the stockholders.
(c) SPECIAL MEETINGS. Special meetings of the stockholders of the
Corporation, for any purpose or purposes, may be called at any time by the
Chairman of the Board of Directors, the President of the Corporation, the Board
of Directors or any stockholder holding at least ten percent of the outstanding
Common Stock. Business transacted at any special meeting of the stockholders
shall be limited to the purposes stated in the notice of such meeting.
Stockholders of the Corporation shall not have the right to request or call a
special meeting of the stockholders.
<PAGE>
(d) NOTICE OF MEETINGS. Except as otherwise provided by law, the
Certificate of Incorporation or these By-laws, written notice of each meeting of
the stockholders shall be given not less than ten (10) days nor more than sixty
(60) calendar days before the date of such meeting to each stockholder entitled
to vote thereat, directed to such stockholder's address as it appears upon the
books of the Corporation, such notice to specify the place, date, hour and, in
the case of a special meeting, the purpose or purposes of such meeting. When a
meeting of the stockholders is adjourned to another time and/or place, notice
need not be given of such adjourned meeting if the time and place thereof are
announced at the meeting of the stockholders at which the adjournment is taken,
unless the adjournment is for more than thirty (30) days or unless after the
adjournment a new record date is fixed for such adjourned meeting, in which
event a notice of such adjourned meeting shall be given to each stockholder of
record entitled to vote thereat. Notice of the time, place and purpose of any
meeting of the stockholders may be waived in writing either before or after such
meeting and will be waived by any stockholder by such stockholder's attendance
thereat in person or by proxy. Any stockholder so waiving notice of such a
meeting shall be bound by the proceedings of any such meeting in all respects as
if due notice thereof had been given.
(e) QUORUM. Except as otherwise required by law, the Certificate of
Incorporation or these By-laws, the holders of not less than a majority of the
shares entitled to vote at any meeting of the stockholders, present in person or
by proxy, shall constitute a quorum and the affirmative vote of the majority of
such quorum shall be deemed the act of the stockholders. If a quorum shall fail
to attend any meeting of the stockholders, the presiding officer of such meeting
may adjourn such meeting from time to time to another place, date or time,
without notice other than announcement at such meeting, until a quorum is
present or represented. At such adjourned meeting at which a quorum is present
or represented, any business may be transacted that might have been transacted
at the meeting of the stockholders as originally noticed. The foregoing
notwithstanding, if a notice of any adjourned special meeting of the
stockholders is sent to all stockholders entitled to vote thereat which states
that such adjourned special meeting will be held with those present in person or
by proxy constituting a quorum, then, except as otherwise required by law, those
present at such adjourned special meeting of the stockholders shall constitute a
quorum and all matters shall be determined by a majority of the votes cast at
such special meeting.
Section 2. DETERMINATION OF STOCKHOLDERS ENTITLED TO NOTICE AND TO
VOTE.
To determine the stockholders entitled to notice of any meeting of the
stockholders or to vote thereat, the Board of Directors may fix in advance a
record date as provided in Article VII, Section 1 of these By-laws, or if no
record date is fixed by the Board of Directors, a record date shall be
determined as provided by law.
Section 3. VOTING.
(a) Except as otherwise required by law, the Certificate of
Incorporation or these By-laws, each stockholder present in person or by proxy
at a meeting of the stockholders shall be entitled to one vote for each full
share of stock registered in the name of such
<PAGE>
stockholder at the time fixed by the Board of Directors or by law as the
record date for the determination of stockholders entitled to vote at such
meeting.
(b) Every stockholder entitled to vote at a meeting of the
stockholders may do so either in person or by one or more agents authorized by a
written proxy executed by the person or such stockholder's duly authorized agent
whether by manual signature, typewriting, telegraphic transmission or otherwise.
(c) Voting may be by voice or by ballot as the presiding officer of
the meeting of the stockholders shall determine. On a vote by ballot, each
ballot shall be signed by the stockholder voting, or by such stockholder's
proxy, and shall state the number of shares voted.
(d) In advance of any meeting of the stockholders, the Board of
Directors may appoint one or more persons as inspectors of election
("Inspectors") to act at such meeting. If Inspectors are not so appointed, or if
an appointed Inspector fails to appear or fails or refuses to act at a meeting
of the stockholders, the presiding officer of any such meeting may, and at the
request of any stockholder or such stockholder's proxy shall, appoint Inspectors
at such meeting. Such Inspectors shall take charge of the ballots at such
meeting. After the balloting thereat on any question, the Inspectors shall count
the ballots cast thereon and make a written report to the secretary of such
meeting of the results thereof. An Inspector need not be a stockholder of the
Corporation and any officer of the Corporation may be an Inspector on any
question other than a vote for or against such officer's election to any
position with the Corporation or of any other questions in which such officer
may be directly interested. If there are three Inspectors, the determination
report or certificate of two such Inspectors shall be effective as if
unanimously made by all Inspectors.
Section 4. LIST OF STOCKHOLDERS.
The officer who has charge of the stock ledger of the Corporation
shall prepare and make available, at least ten (10) days before every meeting of
stockholders, a complete list of the stockholders entitled to vote thereat,
arranged in alphabetical order, showing the address of and the number of shares
registered in the name of each such stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to such meeting, during
ordinary business hours, for a period of at least ten (10) days prior to such
meeting, either at a place within the city where such meeting is to be held and
which place shall be specified in the notice of such meeting, or, if not so
specified, at the place where such meeting is to be held. The list also shall
be produced and kept at the time and place of the meeting of the stockholders
during the whole time thereof, and may be inspected by any stockholder who is
present.
<PAGE>
ARTICLE III
BOARD OF DIRECTORS
Section 1. GENERAL POWERS.
Unless otherwise provided by law, the Certificate of Incorporation or
these By-laws, all corporate powers shall be exercised by or under the authority
of, and the business and affairs of the Corporation shall be managed by, the
Board of Directors.
Section 2. ELECTION OF DIRECTORS.
(a) NUMBER, QUALIFICATION AND TERM OF OFFICE. The authorized number
of directors of the Corporation shall be fixed from time to time by the Board of
Directors, but shall not be less than three (3). The exact number of directors
shall be determined from time to time, either by a resolution or By-law
provision duly adopted by the Board of Directors. Except as otherwise required
by law, the Certificate of Incorporation or these By-laws, each of the directors
of the Corporation shall be elected at the annual meeting of the stockholders
and each director so elected shall hold office until such director's successor
is elected or until such director's death, resignation or removal. Directors
need not be stockholders.
(b) VACANCIES. No decrease in the number of directors constituting
the Board of Directors shall shorten the term of any incumbent director. Unless
otherwise restricted by law or by the certificate of Incorporation, newly
created directorships resulting from any increase in the number of directors and
any vacancies on the Board of Directors resulting from death, resignation
removal or other cause may be filled by the affirmative vote of a majority of
the remaining directors then in office, even though less than a quorum of the
Board of Directors, or by the stockholders. Any director elected in accordance
with the preceding sentence shall hold office until the next annual meeting of
the stockholders and until such director's successor shall have been elected, or
until such director's death, resignation or removal.
(c) RESIGNATION. Any director may resign from the Board of Directors
at any time by giving written notice thereof to the Chairman of the Board, the
President or the Secretary of the Corporation. Any such resignation shall take
effect at the time specified therein, or, if the time when such resignation
shall become effective shall not be so specified, then such resignation shall
take effect immediately upon its receipt by the Secretary; and, unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
(d) REMOVAL. Except as provided in the Certificate of Incorporation,
any director of the Corporation may be removed from office with or without
cause, but only by the affirmative vote of the holders of not less than a
majority of the outstanding capital stock of the Corporation entitled to vote
generally in the election of directors, voting together as a single class.
<PAGE>
Section 3. MEETINGS OF THE BOARD OF DIRECTORS.
(a) REGULAR MEETINGS. Regular meetings of the Board of Directors
shall be held without call at the following times:
(i) at such times as the Board of Directors shall from time to
time by resolution determine; and
(ii) immediately following the adjournment of any annual or
special meeting of the stockholders.
Notice of all such regular meetings hereby is dispensed with.
(b) SPECIAL MEETINGS. Special meetings of the Board of Directors may
be called by the Chairman of the Board of Directors or by any two (2) directors.
Notice of the time and place of special meetings of the Board of Directors shall
be given by the Secretary or an Assistant Secretary of the Corporation, or by
any other officer authorized by the Board of Directors. Such notice shall be
given to each director personally or by mail, messenger, telephone, telecopy,
telegraph or any other form of recorded communication at such director's
business or residence address. Notice by mail shall be deposited in the United
States mail postage prepaid, not later than the third day prior to the date
filed for such special meeting. Notice by telephone, telecopy or telegraph
shall be sent, and notice given personally or by messenger or any other form of
recorded communication shall be delivered, at least twenty-four (24) hours prior
to the time set for such special meeting. Notice of a special meeting of the
Board of Directors need not contain a statement of the purpose of such special
meeting.
(c) ADJOURNED MEETINGS. A majority of directors present at any
regular or special meeting of the Board of Directors or any committee thereof,
whether or not constituting a quorum, may adjourn any meeting from time to time
until a quorum is present or otherwise. Notice of the time and place of holding
any adjourned meeting shall not be required if the time and place are fixed at
the meeting adjourned.
(d) PLACE OF MEETINGS. Meetings of the Board of Directors, both
regular and special, may be held at any place within or without the state of
Delaware which has been designated in the notice of the meeting or, if not
stated in the notice or if there is no notice, designated by resolution of the
Board of Directors. In the absence of any such designation, meetings of the
Board of Directors shall be held at the Corporation's principal executive
office.
(e) PARTICIPATION BY TELEPHONE. Members of the Board of Directors or
any committee thereof may participate in any meeting of the Board of Directors
or committee through the use of conference telephone or similar communications
equipment, so long as all members participating in such meeting can hear one
another, and such participation shall constitute presence in person at such
meeting.
<PAGE>
(f) QUORUM. At all meetings of the Board of Directors or any
committee thereof, a majority of the total number of directors then in office or
such committee, shall constitute a quorum for the transaction of business and
the act of a majority of the directors present at any such meeting at which
there is a quorum shall be the act of the Board of Directors or any committee
thereof, except as may be otherwise specifically provided by law, the
Certificate of Incorporation or these By-laws. A meeting of the Board of
Directors or any committee thereof at which a quorum initially is present may
continue to transact business notwithstanding the withdrawal of directors so
long as any action is approved by at least a majority of the required quorum for
such meeting.
(g) WAIVER OF NOTICE. The transactions of any meeting of the Board
of Directors or any committee thereof, however called and noticed or wherever
held, shall be as valid as though had at a meeting duly held after regular call
and notice, if a quorum be present and if, either before or after the meeting,
each of the directors not present signs a written waiver of notice, or a consent
to hold such meeting, or an approval of the minutes thereof. All such waivers,
consents or approvals shall be filed with the corporate records or made a part
of the minutes of the meeting. Notice of a special meeting will be
automatically waived by any director's attendance or participation at such
meeting.
Section 4. ACTION WITHOUT MEETING.
Any action required or permitted to be taken by the Board of Directors
at any meeting thereof or at any meeting of a committee thereof may be taken
without a meeting if all members of the Board of Directors or such committee
thereof consent thereto in writing and the writing or writings are filed with
the minutes of the proceedings of the Board of Directors or such committee
thereof.
Section 5. COMPENSATION OF DIRECTORS.
Unless otherwise restricted by law, the Certificate of Incorporation
or these By-laws, the Board of Directors shall have the authority to fix the
compensation of directors. The directors may be paid their expenses, if any, of
attendance at each meeting of the Board of Directors and may be paid a fixed sum
for attendance at each meeting of the Board of Directors or a stated salary as
director. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of committees of the Board of Directors may be allowed like compensation for
attending committee meetings.
Section 6. COMMITTEES OF THE BOARD.
(a) COMMITTEES. The Board of Directors may, by resolution adopted by
a majority of the Board of Directors, designate one or more committees of the
Board of Directors, each committee to consist of one or more directors. Each
such committee, to the extent permitted by law, the Certificate of Incorporation
and these By-laws, shall have and may exercise such of the powers of the Board
of Directors in the management and affairs of the Corporation as may be
prescribed by the resolutions creating such committee. Such
<PAGE>
committee or committees shall have such name or names as may be determined
from time to time by resolution adopted by the Board of Directors. The Board
of Directors may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting
of the committee. In the absence or disqualification of a member of a
committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. The Board of
Directors shall have the power, at any time for any such reason, to change
the members of any such committee, to fill vacancies, and to discontinue any
such committee.
(b) MINUTES OF MEETINGS. Each committee shall keep regular minutes
of its meetings and report the same to the Board of Directors when required.
(c) LIMITS ON AUTHORITY OF COMMITTEES. No committee shall have the
power or authority in reference to amending the CertifiCate of Incorporation
(except that a committee may, to the extent authorized in the resolution or
resolutions providing for the issuance of shares of stock adopted by the Board
of Directors as provided in Section 151(a) of the General Corporation Law of the
State of Delaware, fix the designations and any of the preferences or rights of
such shares relating to dividends, redemption, dissolution, any distribution of
assets of the Corporation, or the conversion into, or the exchange of such
shares for, shares of any other class or classes or any other series of stock or
authorize the increase or decrease of the shares of any series), adopting an
agreement of merger or consolidation, recommending to the stockholders the sale,
lease or exchange of all or substantially all of the Corporation's property and
assets, recommending to the stockholders a dissolution of the Corporation or a
revocation of a dissolution, or amending any provision of these By-laws; nor,
unless the resolutions establishing such committee or the Certificate of
Incorporation expressly so provide, shall have the power or authority to declare
a dividend, to authorize the issuance of stock, to adopt a certificate of
ownership and merger, or to fill vacancies in the Board of Directors.
ARTICLE IV
OFFICERS
Section 1. OFFICERS.
(a) NUMBER. The officers of the Corporation shall be chosen by the
Board of Directors and shall include a Chairman of the Board of Directors, a
President, Vice Presidents (including any Executive, Senior and/or First Vice
President as the Board of Directors may determine from time to time), a
Secretary and a Treasurer. The Board of Directors also may appoint one or more
Assistant Secretaries or Assistant Treasurers and such other officers and agents
with such powers and duties as it shall deem necessary. Any Vice President may
be given such specific designation as may be determined from time to time by the
Board of Directors. Any number of offices may be held by the same person, unless
otherwise required by law, the Certificate of Incorporation or these By-laws.
<PAGE>
(B) ELECTION AND TERM OFFICE. The officers shall be elected annually
by the Board of Directors at its regular meeting following the annual meeting of
the stockholders and each officer shall hold office until the next annual
election of officers and until such officer's successor is elected, or until
such Officer's death, resignation or removal. Any officer may be removed at any
time, with or without cause, by a vote of the majority of the Board of
Directors. Any vacancy occurring in any office may be filled by the Board of
Directors.
(C) DELEGATION OF AUTHORITY. The Board of Directors may from time to
time delegate the powers or duties of any officer to any other officers or
agents, notwithstanding any provision hereof.
Section 2. CHAIRMAN OF THE BOARD OF DIRECTORS.
The Chairman of the Board of Directors shall preside at meetings of
the stockholders and the Board of Directors. Unless otherwise designated by the
Board of Directors, the Chairman of the Board shall be the chief executive
officer of the Corporation. Subject to the provisions of these By-laws and to
the direction of the Board of Directors, he or she shall have the responsibility
for the general management and control of the business and affairs of the
Corporation and shall perform all duties and have all powers that are commonly
incident to the office of chief executive or that are delegated to him or her by
the Board of Directors. He or she shall have power to sign all stock
certificates, contracts and other instruments of the Corporation that are
authorized and shall have general supervision and direction of all of the
duties, employees and agents of the Corporation.
Section 3. PRESIDENT.
In the absence of the Chairman of the Board, or if there is none, the
President shall preside at meetings of the stockholders and the Board of
Directors. The President shall assume and perform the duties of the Chairman of
the Board in the absence or disability of the Chairman of the Board or whenever
the office of the Chairman of the Board is vacant. Subject to the provisions of
these By-laws and to the direction of the Board of Directors and the Chairman of
the Board, he or she shall have responsibility for the day-to-day operations of
the Corporation and shall perform all duties and have all powers that are
commonly incident to the office of chief operating officer or that are delegated
to him or her by the Board of Directors or the Chairman of the Board.
Section 4. VICE PRESIDENTS.
The Vice Presidents shall have such powers and perform such duties as
from time to time may be prescribed for them, respectively, by the Board of
Directors or by the President.
<PAGE>
Section 5. SECRETARY AND ASSISTANT SECRETARIES.
The Secretary shall record or cause to be recorded, in books provided
for the purpose, minutes of the meetings of the stockholders, the Board of
Directors and all committees of the Board of Directors; see that all notices are
duly given in accordance with the provisions of these By-laws as required by
law; be custodian of all corporate records (other than financial) and of the
seal of the Corporation, and have authority to affix the seal to all documents
requiring it and attest to the same; give, or cause to be given, notice of all
meetings of the stockholders and special meetings of the Board of Directors;
and, in general, shall perform all duties incident to the office of Secretary
and such other duties as may, from time to time, be assigned to him by the Board
of Directors or by the President. At the request of the Secretary, or in the
Secretary's absence or disability, any Assistant Secretary shall perform any of
the duties of the Secretary and, when so acting, shall have all the powers of,
and be subject to all the restrictions upon, the Secretary.
Section 6. TREASURER AND ASSISTANT TREASURERS.
The Treasurer shall keep or cause to be kept the books of account of
the Corporation and shall render statements of the financial affairs of the
Corporation in such form and as often as required by the Board of Directors or
the President. The Treasurer shall perform all other duties commonly incident
to his office and shall perform such other duties and have such other powers as
the Board of Directors or the President shall designate from time to time. At
the request of the Treasurer, or in the Treasurer's absence or disability, any
Assistant Treasurer may perform any of the duties of the Treasurer and, when so
acting, shall have all the powers of, and be subject to all the restrictions
upon, the Treasurer. Except where by law the signature of the Treasurer is
required, each of the Assistant Treasurers shall possess the same power as the
Treasurer to sign all certificates, contracts, obligations and other instruments
of the Corporation.
ARTICLE V
INDEMNIFICATION AND INSURANCE
Section 1. ACTIONS AGAINST DIRECTORS AND OFFICERS.
The Corporation shall indemnify to the fullest extent permitted by,
and in the manner permissible under, the laws of the State of Delaware any
person made, or threatened to be made, a party to an action or proceeding,
whether criminal, civil, administrative or investigative (a "Proceeding"), by
reason of the fact that such person or such person's testator or intestate is or
was a director or officer of the Corporation or any predecessor of the
Corporation, or served any other enterprise as a director or officer at the
request of the Corporation or any predecessor of the Corporation (the
"Indemnitee"), including without limitation, all expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by the Indemnitee in connection with such Proceeding.
<PAGE>
In furtherance and not in limitation of the foregoing provisions, all
reasonable expenses incurred by or on behalf of the Indemnitee in connection
with any Proceeding shall be advanced to the Indemnitee by the Corporation
within 20 calendar days after the receipt by the Corporation of a statement or
statements from the Indemnitee requesting such advance or advances from time to
time, whether prior to or after final disposition of such Proceeding. Such
statement or statements shall reasonably evidence the expenses incurred by the
Indemnitee and, if required by law at the time of such advance, shall include or
be accompanied by an undertaking by or on behalf of the Indemnitee to repay the
amounts advanced if it should ultimately be determined that the Indemnitee is
not entitled to be indemnified against such expenses pursuant to this Article V.
Section 2. CONTRACT.
The provisions of Section 1 of this Article V shall be deemed to be a
contract between the Corporation and each director and officer who serves in
such capacity at any time while such By-law is in effect, and any repeal or
modification thereof shall not affect any rights or obligations then existing
with respect to any state of facts then or theretofore existing or any action,
suit or proceeding theretofore or thereafter brought based in whole or in part
upon any such state of facts.
Section 3. NONEXCLUSIVITY.
The rights of indemnification provided by this Article V shall not be
deemed exclusive of any other rights to which any director or officer of the
Corporation may be entitled apart from the provisions of this Article V.
Section 4. INDEMNIFICATION OF EMPLOYEE AND AGENTS.
The Board of Directors in its discretion shall have the power on
behalf of the Corporation to indemnify any person, other than a director or
officer, made a party to any action, suit or proceeding-by reason of the fact
that such person or such person's testator or intestate, is or was an employee
or agent of the Corporation.
Section 5. INSURANCE.
Upon a resolution or resolutions duly adopted by the Board of
Directors of the Corporation, the Corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Corporation against any liability asserted against such person and
incurred by him in any capacity, or arising out of his capacity as such, whether
or not the Corporation would have the power to indemnify such person against
such liability under the provisions of applicable law, the Certificate of
Incorporation or these By-laws.
<PAGE>
ARTICLE VI
CERTIFICATES FOR SHARES AND THEIR TRANSFER
Section 1. CERTIFICATES FOR SHARES.
Unless otherwise provided by a resolution of the Board of Directors,
the shares of the Corporation shall be represented by a certificate. The
certificates of stock of the Corporation shall be numbered and shall be entered
in the books of the Corporation as they are issued. They shall exhibit the
holder's name and number of shares and shall be signed by or in the name of the
Corporation by (a) the Chairman of the Board of Directors, the President or any
Vice President and (b) the Treasurer, any Assistant Treasurer, the Secretary or
any Assistant Secretary. Any or all of the signatures on a certificate may be
facsimile. In case any officer of the Corporation, transfer agent or registrar
who has signed, or whose facsimile signature has been placed upon such
certificate, shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, such certificate may nevertheless be issued
by the Corporation with the same effect as if he were such officer, transfer
agent or registrar at the date of issuance.
Section 2. TRANSFER.
Upon surrender to the Corporation or the transfer agent of the
Corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignation or authority to transfer, it shall be the
duty of the Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
Section 3. RECORD OWNER.
The Corporation shall be entitled to treat the holder of record of any
share or shares of stock as the holder in fact thereof, and, accordingly, shall
not be bound to recognize any equitable or other claim to or interest in such
share on the part of any other person, whether or not it shall have express or
other notice thereof, save as expressly provided by the laws of the State of
Delaware.
Section 4. LOST CERTIFICATES.
The Board of Directors may direct a new certificate or certificates to
be issued in place of any certificate or certificates theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen or destroyed. When authorizing such issue of a new certificate or
certificates, the Board of Directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed certificate or certificates, or his legal representative, to give the
Corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the Corporation with respect to the certificate alleged
to have been lost, stolen or destroyed.
<PAGE>
ARTICLE VII
MISCELLANEOUS
Section 1. RECORD DATE.
(a) In order that the Corporation may determine the stockholders
entitled to notice of or to vote at any meeting of the stockholders or any
adjournment thereof, or entitled to receive payment of any dividend or other
distribution or allotment of any rights or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty (60) nor less than ten (10) days prior to the
date of such meeting nor more than sixty (60) days prior to any other action.
If not fixed by the Board of Directors, the record date shall be determined as
provided by law.
(b) A determination of stockholders of record entitled to notice of
or to vote at a meeting of the stockholders shall apply to any adjournments of
the meeting, unless the Board of Directors fixes a new record date for the
adjourned meeting.
(c) Holders of stock on the record date are entitled to notice and to
vote or to receive the dividend, distribution or allotment of rights or to
exercise the rights, as the case may be, notwithstanding any transfer of any
shares on the books of the Corporation after the record date, except as
otherwise provided by agreement or by law, the Certificate of Incorporation or
these By-laws.
Section 2. EXECUTION OF INSTRUMENTS.
The Board of Directors may, in its discretion, determine the method
and designate the signatory officer of officers, or other persons, to execute
any corporate instrument or document or to sign the corporate name without
limitation, except where otherwise provided by law, the Certificate of
Incorporation or these By-laws. Such designation may be general or confined to
specific instances.
Section 3. VOTING OF SECURITIES OWNED BY THE CORPORATION.
All stock and other securities of other corporations held by the
Corporation shall be voted, and all proxies with respect thereto shall be
executed, by the person so authorized by resolution of the Board of Directors,
or, in the absence of such authorization, by the President.
Section 4. CORPORATE SEAL.
The Corporation shall have a corporate seal in such form as shall be
prescribed and adopted by the Board of Directors.
<PAGE>
Section 5. CONSTRUCTION AND DEFINITIONS.
Unless the context requires otherwise, the general provisions, rules
of construction and definitions in the General Corporation Law of the State of
Delaware shall govern the construction of these By-laws.
Section 6. AMENDMENTS.
These By-laws may be altered, amended or repealed or new By-laws may
be adopted by the stockholders at any meeting or by the Board of Directors.
<PAGE>
SECRETARY'S CERTIFICATE OF ADOPTION OF BY-LAWS
OF
UNITED CRAFT BREWERS, INC.
I, the undersigned, do hereby certify:
1. That I am the duly elected and acting Secretary of United Craft
Brewers, Inc., a Delaware corporation.
2. That the foregoing By-laws constitute the By-laws of said corporation
as adopted by the Directors of said corporation by unanimous written consent on
_________ __, 199_.
3. The foregoing By-laws were also adopted by the shareholders of said
corporation by [unanimous written consent] on __________ __, 199_.
IN WITNESS WHEREOF, I have hereunto subscribed my name this _____ day of
_________, 199_.
------------------------------------
Secretary
<PAGE>
EXHIBIT 5.9(a)(i)
CERTIFICATE OF INCORPORATION
UNITED CRAFT BREWERS, INC.
FIRST: The name of this corporation is: UNITED CRAFT BREWERS, INC.
SECOND: The address of the registered office of the corporation in
the State of Delaware is 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of its registered agent at that address is The
Corporation Trust Company.
THIRD: The name and mailing address of the incorporator of the
corporation is:
____________________________
____________________________
____________________________
____________________________
FOURTH: The purpose of the corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of Delaware.
FIFTH: Section 1. CLASSES AND NUMBER OF SHARES.
The total number of shares of all classes of stock which this
corporation shall have authority to issue is ____________ shares which will
consist of Preferred Stock and Common Stock. The classes and the aggregate
number of shares of stock of each class which this corporation shall have
authority to issue are as follows:
(i) _________ shares of Common Stock, $0.001 par value per share
(hereinafter the "Common Stock");
(ii) _________ shares of Preferred Stock, $0.001 par value per share,
with such rights, privileges, restrictions and preferences as the Board of
Directors may authorize from time to time (hereinafter the "Preferred Stock").
SIXTH: Section 1. NUMBER OF DIRECTORS.
The number of directors which shall constitute the whole Board of
Directors of this corporation shall be as specified in the by-laws of this
corporation.
Section 2. LIMITED LIABILITY.
To the fullest extent permitted by the General Corporation Law of the
State of Delaware (as such law currently exists or may hereafter be amended so
long as any such amendment authorizes action further eliminating or limiting the
personal liabilities of
<PAGE>
directors), a director of the corporation shall not be personally liable to
the corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director. Any repeal or modification of this paragraph
by the stockholders of the corporation shall be prospective only, and shall
not adversely affect any limitation on the personal liability of a director
of the corporation with respect to any act or omission occurring prior to the
time of such repeal or modification.
SEVENTH: Meetings of stockholders may be held within or without the
State of Delaware as the by-laws may provide. The books of the corporation may
be kept, subject to any provision contained in the statutes, outside the State
of Delaware at such place or places as may be designated from time to time by
the Board of Directors or in the by-laws of the corporation. Stockholders shall
not be entitled to request the election of directors by written ballot unless a
by-law of the corporation shall authorize such a vote by written ballot. Any
action required or permitted to be taken by the stockholders of the corporation
must be effected at a duly called annual or special meeting of such holders and
may not be effected by any consent in writing by such holders. Stockholders of
the corporation shall not have the right to request or call a special meeting of
the stockholders.
EIGHTH: The corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred on
stockholders herein are granted subject to this reservation. In furtherance and
not in limitation of the powers conferred by statute, the Board of Directors is
expressly authorized to make, repeal, alter, amend and rescind from time to time
any or all of the by-laws of the corporation; including by-law amendments
increasing or reducing the authorized number of directors.
The undersigned, being the sole incorporator hereinbefore named, for
the purpose of forming a corporation pursuant to the General Corporation Law of
the State of Delaware does make this certificate, hereby declaring and
certifying that this is his act and deed and the facts herein stated are true,
and accordingly has hereunto set forth his hand this _____ day of _________,
199_.
______________________________
<PAGE>
EXHIBIT 6.1(a)
FORM OF OPINION OF SELLER'S COUNSEL
1. Due organization and good standing.
2. Corporate power and due qualification.
3. Documents duly authorized and executed and legal, valid, and binding
obligations.
4. No conflicts.
5. No breach or default.
6. No authorization, consent or approval required.
7. Consolidation validly consummated.
8. No rights of appraisal.
9. Capital stock, options and other stock rights as set forth in Section 3.1
of the Agreement and the schedules thereto. Duly authorized, validly
issued, fully paid, nonassessable, and free of preemptive rights.
10. Shares to be issued duly authorized, validly issued, fully paid and
nonassessable, and no preemptive rights.
<PAGE>
EXHIBIT 6.2(h)
FORM OF OPINION OF PURCHASER'S COUNSEL
1. Due organization and good standing.
2. Corporate power and due qualification.
3. Documents duly authorized and executed and legal, valid, and binding
obligations.
4. No conflicts.
5. No breach or default.
6. No authorization, consent or approval required.
<PAGE>
EXECUTION COPY
______________________________________________________________________________
______________________________________________________________________________
CREDIT AGREEMENT
BY AND BETWEEN
NOR'WESTER BREWING COMPANY
AND
UNITED BREWERIES OF AMERICA, INC.
January __, 1997
________________________________________________________________________________
____________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
Section Page
- ------- ----
SECTION I. INTERPRETATION . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.02. GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.03. Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.04. Plural Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.05. Time. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.06. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.07. Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . 4
. .1.08. Calculation of Interest and Fees . . . . . . . . . . . . . . . 4
1.09. Other Interpretive Provisions . . . . . . . . . . . . . . . . . . 4
SECTION II. CREDIT FACILITY . . . . . . . . . . . . . . . . . . . . . . . . 5
2.01. Credit Facility . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.02. Making the Advances . . . . . . . . . . . . . . . . . . . . . . . 5
2.03. Interest and Repayment. . . . . . . . . . . . . . . . . . . . . . 5
2.04. Payments and Computations . . . . . . . . . . . . . . . . . . . . 6
2.05. Security. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION III. CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . 6
3.01. Initial Conditions Precedent. . . . . . . . . . . . . . . . . . . 6
3.02. Conditions Precedent to Each Advance. . . . . . . . . . . . . . . 7
SECTION IV. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . 7
4.01. Borrower's Representations and Warranties . . . . . . . . . . . . 7
4.02. Reaffirmation . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION V. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.01. Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION VI. DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . 9
6.02. Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION VII. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . 11
7.01. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7.02. Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.03. Waivers; Amendments . . . . . . . . . . . . . . . . . . . . . . . 12
7.04. Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . 13
7.05. No Third Party Rights . . . . . . . . . . . . . . . . . . . . . . 13
<PAGE>
Section Page
- ------- ----
7.06. Partial Invalidity. . . . . . . . . . . . . . . . . . . . . . . . 13
7.07. Obligation Absolute . . . . . . . . . . . . . . . . . . . . . . . 13
7.08. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Schedules
- ---------
Schedule 3.01 - Initial Conditions Precedent
Schedule 4.01(c) - Disclosed Conflicts
Schedule 5.01(d) - Existing Indebtedness
Exhibits
- --------
Exhibit A - Form of Convertible Note
Exhibit B - Form of Security Agreement
Exhibit C - Form of Pledge Agreement
Exhibit D - Form of Personal Guaranty
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT ("AGREEMENT"), dated as of January __, 1997, is
entered into by and between NOR'WESTER BREWING COMPANY, an Oregon corporation
("BORROWER") and UNITED BREWERIES OF AMERICA, INC., a Delaware corporation
("PURCHASER").
RECITALS
A. Reference is made to (i) that certain Investment Agreement, dated
as of January __, 1997, among Borrower, Willamette Valley, Inc. Microbreweries
Across America ("WVI"), various Subsidiaries of Borrower, North Country Joint
Venture, LLC, a limited liability corporation organized under the laws of Oregon
("NORTH COUNTRY"), James W. Bernau, a shareholder of Borrower and the Chairman
of the Board of Directors of Borrower ("BERNAU") and Purchaser (the "INVESTMENT
AGREEMENT"); and (ii) those certain loans advanced by Purchaser to Borrower and
WVI on October 31, 1996, November 7, 1996, and December 27, 1996, respectively,
in an original aggregate principal amount of $900,000 (collectively, the
"EXISTING ADVANCE"), on which the aggregate accrued and unpaid interest thereon
as of January 27, 1997 is $19,184.53.
B. Pursuant to Section 7.1 of the Investment Agreement, Purchaser
has agreed to provide additional loans to Borrower in an aggregate principal
amount not to exceed $1,850,000. When the additional loans are added to the
Existing Advance, the aggregate principal amount will not exceed $2,750,000 (the
"TOTAL COMMITMENT").
C. Purchaser is willing to provide such additional loans to Borrower
upon the terms and subject to the conditions set forth below. In addition,
Borrower and Purchaser also wish to restate herein Borrower's obligation with
respect to the Existing Advance (which obligation shall include the assumption
by Borrower of WVI's obligation, if any, with respect to the Existing Advance).
AGREEMENT
NOW, THEREFORE, in consideration of the above Recitals and the mutual
covenants herein contained, the parties hereto hereby agree as follows.
SECTION I. INTERPRETATION.
1.01. DEFINITIONS. Unless otherwise indicated in this Agreement or any
other Credit Document, each term set forth below, when used in this Agreement or
any other Credit Document, shall have the respective meaning given to that term
below or in the provision of this Agreement or other document, instrument or
agreement referenced below.
<PAGE>
"ADVANCE" shall have the meaning given to that term in SUBPARAGRAPH
2.01(b).
"AGREEMENT" shall mean this Credit Agreement.
"ANCILLARY AGREEMENTS" shall have the meaning given to that term in the
Investment Agreement.
"BERNAU" shall have the meaning given to that term in RECITAL A.
"BORROWER" shall have the meaning given to that term in THE INTRODUCTORY
PARAGRAPH.
"BUSINESS DAY" shall have the meaning given to that term in the Investment
Agreement.
"CLOSING" shall have the meaning given to that term in the Investment
Agreement.
"COLLATERAL" shall mean all property in which Purchaser has a Lien to
secure the Obligations.
"COMMON STOCK" shall have the meaning given to that term in the Investment
Agreement.
"CONSTITUENT CORPORATIONS" shall have the meaning given to that term in the
Investment Agreement.
"CONVERTIBLE NOTE" shall have the meaning given to that term in PARAGRAPH
2.03.
"CREDIT DOCUMENTS" shall mean and include this Agreement, the Convertible
Note, the Security Documents, all other documents, instruments and agreements
delivered to Purchaser pursuant to PARAGRAPH 3.01 and all other documents,
instruments and agreements delivered to Purchaser by Borrower, any of its
Subsidiaries, Bernau or North Country in connection with this Agreement on or
after the date of this Agreement.
"DEFAULT" shall mean any event or circumstance not yet constituting an
Event of Default which, with the giving of any notice or the lapse of any period
of time or both, would become an Event of Default.
"DOLLARS" and "$" shall mean the lawful currency of the United States of
America and, in relation to any payment under this Agreement, same day or
immediately available funds.
"EFFECTIVE DATE" shall mean January __, 1997.
"EVENT OF DEFAULT" shall have the meaning given to that term in PARAGRAPH
6.01.
"EXISTING ADVANCE" shall have the meaning given to that term in RECITAL A.
<PAGE>
"GAAP" shall have the meaning given to that term in the Investment
Agreement.
"INVESTMENT AGREEMENT" shall have the meaning given to that term in RECITAL
A.
"LIEN" shall have the meaning given to that term in the Investment
Agreement.
"MATERIAL ADVERSE EFFECT" shall mean (a) a "Material Adverse Effect" as
such term is defined in the Investment Agreement (including without limitation
schedules of exceptions thereto) and (b) a material adverse effect on
Purchaser's security interest in the Collateral or the perfection or priority of
such security interests.
"NORTH COUNTRY" shall have the meaning given to that term in RECITAL A.
"OBLIGATIONS" shall mean and include, with respect to Borrower, all loans,
advances, debts, liabilities, and obligations, howsoever arising, owed by
Borrower to Purchaser of every kind and description (whether or not evidenced by
any note or instrument and whether or not for the payment of money), direct or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising pursuant to the terms of this Agreement, the Convertible Note
or any of the other Credit Documents, including without limitation all interest,
fees, charges, expenses, attorneys' fees and accountants' fees chargeable to
Borrower or payable by Borrower hereunder or thereunder.
"PERSON" shall have the meaning given to that term in the Investment
Agreement.
"PERSONAL GUARANTY" shall have the meaning given to that term in PARAGRAPH
2.05.
"PLEDGE AGREEMENT" shall have the meaning given to that term in PARAGRAPH
2.05.
"PURCHASER" shall have the meaning given to that term in THE INTRODUCTORY
PARAGRAPH.
"SECURITY AGREEMENT" shall have the meaning given to that term in PARAGRAPH
2.05.
"SECURITY DOCUMENTS" shall mean and include the Security Agreement, the
Pledge Agreement, the Personal Guaranty, and all other instruments, agreements,
certificates, opinions and documents (including Uniform Commercial Code
financing statements, fixture filings and landlord waivers) delivered to
Purchaser in connection with any Collateral or to secure the Obligations.
"SUBSIDIARY" shall have the meaning given to that term in the Investment
Agreement.
"TOTAL COMMITMENT" shall have the meaning given to that term in RECITAL B.
"UCB" shall have the meaning given to that term in the Investment
Agreement.
"WVI" shall have the meaning given to that term in RECITAL A.
<PAGE>
1.02. GAAP. Unless otherwise indicated in this Agreement or any other
Credit Document, all accounting terms used in this Agreement or any other Credit
Document shall be construed, and all accounting and financial computations
hereunder or thereunder shall be computed, in accordance with GAAP consistently
applied.
1.03. HEADINGS. Headings in this Agreement and each of the other
Credit Documents are for convenience of reference only and are not part of the
substance hereof or thereof.
1.04. PLURAL TERMS. All terms defined in this Agreement or any other
Credit Document in the singular form shall have comparable meanings when used in
the plural form and VICE VERSA.
1.05. TIME. All references in this Agreement and each of the other
Credit Documents to a time of day shall mean San Francisco, California time,
unless otherwise indicated.
1.06. GOVERNING LAW. This Agreement and each of the other Credit
Documents (unless otherwise provided in such other Credit Documents) shall be
governed by and construed in accordance with the laws of the State of California
without reference to conflicts of law rules.
1.07. ENTIRE AGREEMENT. This Agreement and each of the other Credit
Documents, taken together, constitute and contain the entire agreement of
Borrower and Purchaser with respect to the matters set forth herein, and
supersede any and all prior agreements, negotiations, correspondence,
understandings and communications among the parties, whether written or oral,
respecting the subject matter hereof.
1.08. CALCULATION OF INTEREST AND FEES. All calculations of interest
and fees under this Agreement and the other Credit Documents for any period (a)
shall include the first day of such period and exclude the last day of such
period and (b) shall be calculated on the basis of a year of 365 or 366 days, as
appropriate, for actual days elapsed.
1.09. OTHER INTERPRETIVE PROVISIONS. References in this Agreement to
"Recitals," "Sections," "Paragraphs," "Subparagraphs," "Exhibits" and
"Schedules" are to recitals, sections, paragraphs, subparagraphs, exhibits and
schedules herein and hereto unless otherwise indicated. References in this
Agreement and each of the other Credit Documents to any document, instrument or
agreement (a) shall include all exhibits, schedules and other attachments
thereto, (b) shall include all documents, instruments or agreements issued or
executed in replacement thereof, and (c) shall mean such document, instrument or
agreement, or replacement or predecessor thereto, as amended, modified and
supplemented from time to time and in effect at any given time. References in
this Agreement and each of the other Credit Documents to any statute or other
law (i) shall include any successor statute or law, (ii) shall include all rules
and regulations promulgated under such statute or law (or any successor statute
or law), and (iii) shall mean such statute or law (or successor statute or law)
and such rules and regulations, as amended, modified, codified or reenacted from
time to time and in effect at any given time. The words "hereof," "herein" and
"hereunder" and words of similar
<PAGE>
import when used in this Agreement or any other Credit Document shall refer
to this Agreement or such other Credit Document, as the case may be, as a
whole and not to any particular provision of this Agreement or such other
Credit Document, as the case may be. The words "include" and "including" and
words of similar import when used in this Agreement or any other Credit
Document shall not be construed to be limiting or exclusive. In the event of
any inconsistency between the terms of this Agreement and the terms of any
other Credit Document, the terms of this Agreement shall govern.
SECTION II. CREDIT FACILITY.
2.01. CREDIT FACILITY.
(a) EXISTING ADVANCE. Borrower acknowledges and agrees that
Purchaser has previously advanced to Borrower and WVI the Existing Advance
and that all of the proceeds of the Existing Advance have been for the
benefit of Borrower. Accordingly, Borrower hereby assumes WVI's
obligation, if any, with respect to the Existing Advance. Borrower's
obligation to repay the Existing Advance shall hereinafter be evidenced by
the Convertible Note.
(b) NEW ADVANCES. Purchaser agrees, on the terms and conditions
hereinafter set forth, to make advances (the "ADVANCES") to Borrower on
such dates and in such amounts as shall be mutually agreed to between
Borrower and Purchaser in an aggregate amount, when combined with the
amounts outstanding under the Existing Advance, not to exceed at any time
outstanding the Total Commitment; PROVIDED, HOWEVER, that Purchaser shall
only be required to make any Advance if the conditions set forth in SECTION
III have been satisfied or waived by Purchaser. In furtherance of the
foregoing, representatives of Purchaser will meet with Borrower and the
other Constituent Corporations from time to time to review the financial
results of Borrower and the other Constituent Corporations, the need for
additional financing and the payment of creditors, and Purchaser and
Borrower will mutually agree upon the timing, amounts and uses of the
Advances. In addition, Purchaser will provide resources to Borrower and
the other Constituent Corporations to assist in the management of
Borrower's and the other Constituent Corporations' accounts payable.
2.02. MAKING THE ADVANCES. Not later than 11:00 a.m. on the date of
such Advance and upon fulfillment of the applicable conditions set forth in
SECTION III, Purchaser will make such Advance available to Borrower in same day
funds at Borrower's address referred to in PARAGRAPH 7.01.
2.03. INTEREST AND REPAYMENT. Borrower shall repay, and shall pay
interest on, the aggregate unpaid principal amount of all Advances in accordance
with a convertible promissory note of Borrower, in substantially the form of
EXHIBIT A hereto (the "CONVERTIBLE NOTE"), evidencing the indebtedness resulting
from the Existing Advance and such other Advances and delivered to Purchaser
pursuant to PARAGRAPH 3.01.
<PAGE>
2.04. PAYMENTS AND COMPUTATIONS. Borrower shall make each payment
under any Credit Document not later than 12:00 noon on the day when due in
lawful money of the United States of America to Purchaser at its address
referred to in PARAGRAPH 7.01 in same day funds. Whenever any payment to be
made hereunder or under the Convertible Note shall be stated to be due on a day
other than a Business Day, such payment may be made on the next succeeding
Business Day, and such extension of time shall in such case be included in the
computation of payment of interest.
2.05. SECURITY.
(a) SECURITY AGREEMENT, PLEDGE AGREEMENT, PERSONAL GUARANTY, ETC.
The Obligations shall be secured by (i) a Security Agreement in the form of
EXHIBIT B, duly executed by North Country (the "SECURITY AGREEMENT"), (ii)
a Pledge Agreement in the form of EXHIBIT C, duly executed by Borrower (the
"PLEDGE AGREEMENT") and (iii) a Personal Guaranty in the form of EXHIBIT D,
duly executed by Bernau (the "PERSONAL GUARANTY"). Upon the execution and
delivery of the Security Agreement and the Pledge Agreement, and the
perfection of the security interests created thereunder, Purchaser shall
execute and deliver such documents, instruments and agreements as Borrower
may reasonably request to release Purchaser's security interest in the
496,003 shares of Willamette Valley Vineyards common stock previously
pledged to Purchaser by Bernau under that certain Amended and Restated
Pledge Agreement dated as of December 27, 1996.
(b) FURTHER ASSURANCES. Borrower shall deliver, and shall cause
North Country and Bernau to deliver, to Purchaser such additional security
agreements, pledge agreements, guaranty agreements, and other instruments,
agreements, certificates and documents (including Uniform Commercial Code
financing statements and fixture filings) as Purchaser may reasonably
request to (i) grant, perfect, maintain, protect and evidence security
interests in favor of Purchaser in the Collateral prior to the Liens or
other interests of any Person, other than such Liens or other interests
expressly permitted in the Security Documents and (ii) otherwise establish,
maintain, protect and evidence the rights provided to Purchaser pursuant to
the Security Documents. Borrower shall fully cooperate, and shall cause
North Country and Bernau to fully cooperate, with Purchaser and perform all
additional acts reasonably requested by Purchaser to effect the purposes of
this PARAGRAPH 2.05.
SECTION III. CONDITIONS PRECEDENT.
3.01. INITIAL CONDITIONS PRECEDENT. The obligations of Purchaser to
make the initial Advance is subject to receipt by Purchaser, on or prior to the
Effective Date, of each item listed in SCHEDULE 3.01, each in form and substance
satisfactory to Purchaser.
3.02. CONDITIONS PRECEDENT TO EACH ADVANCE. The making of each Advance
(including the initial Advance) is subject to the further conditions that on the
date such Advance is to occur and after giving effect to such Advance, the
following shall be true and correct:
<PAGE>
(a) The representations and warranties of Borrower set forth in
PARAGRAPH 4.01 and in the other Credit Documents are true and correct in
all material respects as if made on such date (except as otherwise
scheduled in the Investment Agreement and except for representations and
warranties expressly made as of a specified date, which shall be true as of
such date);
(b) No Default or Event of Default has occurred and is continuing or
will result from such Advance;
(c) All of the Credit Documents are in full force and effect; and
(d) No Material Adverse Effect shall have occurred since September
30, 1996.
SECTION IV. REPRESENTATIONS AND WARRANTIES.
4.01. BORROWER'S REPRESENTATIONS AND WARRANTIES. In order to induce
Purchaser to enter into this Agreement, except as otherwise scheduled in the
Investment Agreement, Borrower hereby represents and warranties to Purchaser as
follows:
(a) ORGANIZATION AND POWERS. Borrower (i) is a corporation duly
organized, validly existing and in good standing under the laws of its
state of incorporation and (ii) has the power and authority to own, lease
and operate its properties and carry on its business as now conducted;
(b) CAPACITY AND ENFORCEABILITY. Borrower has full capacity to
execute and deliver this Agreement and each of the other Credit Documents
to which it is or will be a party and no further action is necessary on the
part of Borrower to make this Agreement and each of the other Credit
Documents to which it is or will be a party the legal, valid and binding
obligation of Borrower, enforceable against it in accordance with their
respective terms;
(c) NO CONFLICT. The execution, delivery and performance by Borrower
of this Agreement and each of the other Credit Documents to which it is or
will be a party does not materially conflict with, violate, result in a
breach of, or cause a default, either immediately or with the passage of
time or the giving of notice or both, which violation, breach or default
would materially impair Purchaser's prospects of repayment of the
Obligations, under (i) any provision of federal, state or local law or
regulation relating to Borrower or Borrower's assets, (ii) any provision of
any order, arbitration award, judgment or decree to which Borrower or any
portion of Borrower's assets are subject, (iii) any provision of any note,
bond, indenture, license, lease, mortgage, agreement or instrument to which
Borrower or any portion of Borrower's assets are subject, except those set
forth on SCHEDULE 4.01(c), or (iv) any other known restriction of any kind
or character to which Borrower or any portion of Borrower's
<PAGE>
assets are subject;
(d) NO VIOLATION. The execution, delivery and performance by
Borrower of this Agreement and each of the other Credit Documents to which
it is or will be a party will not result in giving to others any interest
or rights, including rights of termination, acceleration or cancellation,
in or with respect to any of the material properties, contracts, leases,
mortgages, commitments or other agreements of Borrower, nor are any
consents, approvals or authorizations of, or declarations to or filings
with, any governmental authorities required in connection herewith or
therewith, except those which have been or will be made or obtained
pursuant to the Investment Agreement and except those if not made or
obtained will not result in a Material Adverse Effect;
(e) OTHER AGREEMENTS. No representation or warranty by Borrower in
this Agreement, any of the other Credit Documents to which Borrower is or
will be a party, the Investment Agreement or any Ancillary Agreement to
which Borrower is or will be a party contains any untrue statement of fact
or omits to state a fact necessary to make such representation and warranty
or any such statement therein not misleading.
(f) EXISTING ADVANCE. All of the proceeds of the Existing Advance
have been, and continue to be, for the benefit of Borrower.
4.02. REAFFIRMATION. Borrower shall be deemed to have reaffirmed, for
the benefit of Purchaser, each representation and warranty contained in
PARAGRAPH 4.01 on and as of the date of each Advance (except for representations
and warranties expressly made as of a specified date, which shall be true as of
such date).
SECTION V. COVENANTS.
5.01. COVENANTS. Until the termination of this Agreement and the
satisfaction in full by Borrower of all Obligations, Borrower will comply, and
will cause compliance, with the following covenants, unless Purchaser shall
otherwise consent in writing:
(a) INDEBTEDNESS. Without the prior written consent of Purchaser,
neither Borrower nor any of its Subsidiaries shall create, incur, assume or
permit to exist any indebtedness or liabilities resulting from borrowings,
loans or advances, whether secured or unsecured, matured or unmatured,
liquidated or unliquidated, joint or several, except the liabilities of
Borrower and its Subsidiaries listed on SCHEDULE 5.01(a) and existing or
contemplated on the date hereof and except as otherwise incurred in the
ordinary course of Borrower's business consistent with past practices.
Notwithstanding the foregoing, without the prior written consent of
Purchaser in no event shall Borrower permit the principal amount of the
indebtedness of North County to The Adirondack Trust Company to exceed at
any time $50,000.
(b) DISTRIBUTIONS. Neither Borrower nor any of its Subsidiaries
shall declare or pay any dividends or make any distributions either in
cash, stock or any other
<PAGE>
property on Borrower's stock now or hereafter outstanding, nor redeem,
retire, repurchase or otherwise acquire any shares of any class of
Borrower's or any Subsidiary's stock now or hereafter outstanding.
SECTION VI. DEFAULT.
6.01. EVENTS OF DEFAULT. The occurrence or existence of any one or
more of the following shall constitute an "EVENT OF DEFAULT" hereunder:
(a) Borrower shall fail to pay within ten (10) days when due any
payment as provided by the terms of this Agreement, the Convertible Note or
any of the other Credit Documents;
(b) (i) Borrower, any of its Subsidiaries or Bernau, as applicable,
shall fail to observe or perform any material covenant, obligation,
condition or agreement contained in SECTION V of this Agreement or in any
other Credit Document and such failure (to the extent curable) shall remain
unremedied ten (10) days after written notice thereof shall have been given
to Borrower on behalf of such Person by Purchaser; or (ii) Bernau, Borrower
or any other Constituent Corporation shall fail to observe or perform any
material covenant, obligation, condition or agreement contained in Section
V of the Investment Agreement or any Ancillary Agreement and such failure
(to the extent curable) shall remain unremedied ten (10) days after written
notice thereof shall have been given to Borrower on behalf of such Person
by Purchaser,
(c) Any representation, warranty, information or other statement made
or furnished by (i) Borrower, any of its Subsidiaries or Bernau, as
applicable, in this Agreement or any other Credit Document shall be
materially false, incorrect, incomplete or misleading in any material
respect when made or furnished; or (ii) Bernau, Borrower or any other
Constituent Corporation in the Investment Agreement or any Ancillary
Agreement, shall be materially false, incorrect, incomplete or misleading
in any material respect when made or furnished;
(d) Borrower or any of its Subsidiaries shall fail to make any
payment when due under the terms of any bond, debenture, note or other
evidence of indebtedness to be paid by such Person (excluding any bonds,
debentures, notes and other evidence of indebtedness in favor of suppliers
and contractors in an aggregate principal amount of up to $2,500,000, but
including any other evidence of indebtedness of such Person to Purchaser)
and such failure shall continue beyond any period of grace provided with
respect thereto, or Borrower shall default in the observance or performance
of any other agreement, term or condition contained in any such bond,
debenture, note or other evidence of indebtedness, and the effect of such
failure or default is to cause, or permit the holder or holders thereof to
cause indebtedness under such instrument to become due prior to its stated
date of maturity;
<PAGE>
(e) Borrower or any of its Subsidiaries shall make a general
assignment for the benefit of creditors or admit in writing its inability
to pay its debts generally as they become due, any voluntary petition is
filed by Borrower or any of its Subsidiaries under the federal or similar
state bankruptcy laws, or Borrower or any of its Subsidiaries consents to
the filing of any such petition or consents to the appointment of a
receiver, liquidator or trustee in bankruptcy;
(f) A court of competent jurisdiction enters an order or decree under
the federal or any similar state bankruptcy law (i) for the appointment of
a receiver, liquidator, trustee or assignee in bankruptcy or insolvency of
Borrower or any of its Subsidiaries of all or substantially all of its
assets or for the winding up or liquidation of its affairs, or
(ii) adjudicating Borrower or any of its Subsidiaries a bankrupt or
insolvent or approving a petition seeking reorganization of Borrower or any
or its Subsidiaries under any bankruptcy law, and in any event such order
or decree has continued in force undischarged and unstayed for a period of
ninety (90) days;
(g) Any Credit Document, the Investment Agreement, any Ancillary
Agreement or any material term thereof shall cease to be, or be asserted by
Borrower, any of its Subsidiaries, Bernau, North Country or any other
Constituent Corporation not to be, a legal, valid and binding obligation of
such Person, enforceable in accordance with its terms; or
(h) Any event or condition occurs or exists which has a Material
Adverse Effect.
6.02. REMEDIES. Upon the occurrence or existence of any Event of
Default (other than an Event of Default referred to in CLAUSE (i) OF
SUBPARAGRAPH 6.01(b), CLAUSE (i) OF SUBPARAGRAPH 6.01(c), SUBPARAGRAPH 6.01(e),
SUBPARAGRAPH 6.01(f) or SUBPARAGRAPH 6.01(g)) and at any time thereafter during
the continuance of such Event of Default, Purchaser may, by written notice to
Borrower, declare all outstanding Obligations payable by Borrower to be due and
payable within sixty (60) days thereof without presentment, demand, protest or
any other notice of any kind, all of which are hereby expressly waived, anything
contained herein or in of the other Credit Documents to the contrary
notwithstanding. Upon the occurrence or existence of any Event of Default
described in CLAUSE (i) OF SUBPARAGRAPH 6.01(b), CLAUSE (i) OF SUBPARAGRAPH
6.01(c), SUBPARAGRAPH 6.01(e), SUBPARAGRAPH 6.01(f) or SUBPARAGRAPH 6.01(g),
immediately and without notice, all outstanding Obligations payable by Borrower
hereunder shall automatically become immediately due and payable, without
presentment, demand, protest or any other notice of any kind, all of which are
hereby expressly waived, anything contained herein or in any of the other Credit
Documents to the contrary notwithstanding. In addition to the foregoing
remedies, upon the occurrence or existence of any Event of Default, Purchaser
may exercise any right, power or remedy permitted to it by law, either by suit
in equity or by action at law, or both; PROVIDED, HOWEVER, that upon the
occurrence or existence of any Event of Default (other than an Event of Default
referred to in CLAUSE (i) OF SUBPARAGRAPH 6.01(b), CLAUSE (i) OF SUBPARAGRAPH
6.01(c), SUBPARAGRAPH 6.01(e), SUBPARAGRAPH 6.01(f) or SUBPARAGRAPH 6.01(g)),
Purchase shall only exercise such rights, powers or remedies following the
expiration of the sixty (60) period as provided above.
<PAGE>
Immediately after taking any action under this PARAGRAPH 6.02, Purchaser
shall notify Borrower of such action.
SECTION VII. MISCELLANEOUS.
7.01. NOTICES. Except as otherwise provided herein, all notices,
requests, demands, consents, instructions or other communications to or upon
Borrower or Purchaser under this Agreement or any of the other Credit Documents
shall be in writing and faxed, mailed or delivered at its respective facsimile
number or address set forth below (or to such other facsimile number or address
for any party as indicated in any notice given by that party to the other
party). All such notices and communications shall be effective (a) when sent by
Federal Express or other overnight service of recognized standing, on the
Business Day following the deposit with such service; (b) when mailed, first
class postage prepaid and addressed as aforesaid through the United States
Postal Service, upon receipt; (c) when delivered by hand, upon delivery; and (d)
when faxed, upon confirmation of receipt; PROVIDED, HOWEVER, that any notice
delivered to Purchaser under SECTION II shall not be effective until received by
Purchaser.
Purchaser: UNITED BREWERIES OF AMERICA, INC.
Attn: Mr. Vijay Mallya
One Harbor Drive, Suite 102
Sausalito, California 94965
Attn: Mr. Vijay Mallya
Telephone: (415) 289-1400
Facsimile: (415) 289-1409
With a
copy to: ORRICK, HERRINGTON & SUTCLIFFE LLP
400 Sansome Street
San Francisco, California 94111
Attn: Alan Talkington, Esq.
Telephone: (415) 773-5762
Facsimile: (415) 773-5759
Borrower: NOR'WESTER BREWING COMPANY
Attn: James W. Bernau
66 S.E. Morrison Street
Portland, Oregon 97214
Telephone: (503) 232-9771
Facsimile: (503) 232-2363
With
<PAGE>
copies to: ATER WYNNE HEWITT DODSON & SKERRITT, LLP
Attorneys at Law
Suite 1800
222 S.W. Columbia
Portland, Oregon 97201-6618
Attn: Jack W. Schifferdecker, Jr.
Telephone: (503) 226-8614
Facsimile: (503) 226-0079
In any case where this Agreement authorizes notices, requests, demands or other
communications by Borrower to Purchaser to be made by telephone or facsimile,
Purchaser may conclusively presume that anyone purporting to be a person
designated in any incumbency certificate or other similar document received by
Purchaser is such a person.
7.02. EXPENSES. Borrower shall pay on demand, whether or not any
Advance is made hereunder, (a) all reasonable fees and expenses, including
reasonable attorneys' fees and expenses, incurred by Purchaser in connection
with the preparation, negotiation, execution and delivery of, and the exercise
of its duties under, this Agreement and the other Credit Documents, and the
preparation, negotiation, execution and delivery of amendments and waivers
hereunder and thereunder and (b) all reasonable fees and expenses, including
reasonable attorneys' fees and expenses, incurred by Purchaser in the
enforcement or attempted enforcement of any of the Obligations or in preserving
any of Purchaser's rights and remedies (including, without limitation, all such
fees and expenses incurred in connection with any "workout" or restructuring
affecting the Credit Documents or the Obligations or any bankruptcy or similar
proceeding involving Borrower or any of its Subsidiaries). The obligations of
Borrower under this PARAGRAPH 7.02 shall survive the payment and performance of
the Obligations and the termination of this Agreement.
7.03. WAIVERS; AMENDMENTS. Any term, covenant, agreement or condition
of this Agreement or any other Credit Document may be amended or waived if such
amendment or waiver is in writing and is signed by Borrower and Purchaser. No
failure or delay by Purchaser in exercising any right hereunder shall operate as
a waiver thereof or of any other right nor shall any single or partial exercise
of any such right preclude any other further exercise thereof or of any other
right. Unless otherwise specified in such waiver or consent, a waiver or
consent given hereunder shall be effective only in the specific instance and for
the specific purpose for which given.
7.04. SUCCESSORS AND ASSIGNS. This Agreement and the other Credit
Documents shall be binding upon and inure to the benefit of Borrower, Purchaser,
all future holders of the Convertible Note and their respective successors and
permitted assigns, except that Borrower may not assign or transfer any of its
rights or obligations under any Credit Document without the prior written
consent of Purchaser and Purchaser may only assign or transfer any of its rights
or obligations under any Credit Document to the extent permitted under Section
10.4 of the Investment Agreement. All references in this Agreement and any
other Credit Document to any Person shall be deemed to include all permitted
successors and assigns of such Person.
<PAGE>
7.05. NO THIRD PARTY RIGHTS. Nothing expressed in or to be implied
from this Agreement or any other Credit Document is intended to give, or shall
be construed to give, any Person, other than the parties hereto and their
permitted successors and assigns hereunder, any benefit or legal or equitable
right, remedy or claim under or by virtue of this Agreement, any other Credit
Document or under or by virtue of any provision herein or therein.
7.06. PARTIAL INVALIDITY. If at any time any provision of this
Agreement or any other Credit Document is or becomes illegal, invalid or
unenforceable in any respect under the law or any jurisdiction, neither the
legality, validity or enforceability of the remaining provisions of this
Agreement or such other Credit Document nor the legality, validity or
enforceability of such provision under the law of any other jurisdiction shall
in any way be affected or impaired thereby.
7.07. OBLIGATION ABSOLUTE. The liability of Borrower under this
Agreement and the other Credit Documents to which Borrower is or will be a party
is absolute and unconditional and shall not be affected by any circumstances
whatsoever, including without limitation, any right of set-off, defense or
counterclaim asserted by Borrower or any other Person against Purchaser based
upon any failure by Purchaser or any other Person to perform any of its or their
obligations contained in the Investment Agreement, any Ancillary Agreement or
any agreement or agreements related thereto, but excluding any right of set-off,
defense or counterclaim asserted by Borrower based upon Purchaser's failure to
perform its obligations under this Agreement or any other Credit Document.
7.08. COUNTERPARTS. This Agreement and any other Credit Document may
be executed in any number of identical counterparts, any set of which signed by
all the parties hereto shall be deemed to constitute a complete, executed
original for all purposes.
[The signature page follows.]
<PAGE>
IN WITNESS WHEREOF, Borrower and Purchaser have caused this Agreement to be
executed as of the day and year first above written.
NOR'WESTER BREWING COMPANY,
an Oregon corporation
------------------------------------
Name:
Title:
UNITED BREWERIES OF AMERICA, INC.
a Delaware corporation
------------------------------------
Name:
Title:
<PAGE>
SCHEDULE 3.01
INITIAL CONDITIONS PRECEDENT
A. PRINCIPAL CREDIT DOCUMENTS.
(1) The Agreement, duly executed by Borrower and Purchaser;
(2) The Convertible Note, duly executed by Borrower;
(3) The Security Agreement, duly executed by North Country;
(4) The Pledge Agreement, duly executed by Borrower; and
(5) The Personal Guaranty, duly executed by Bernau and Cathy Bernau.
B. COLLATERAL DOCUMENTS.
(1) Such Uniform Commercial Code financing statements (appropriately
completed and executed) for filing in such jurisdictions as Purchaser may
request to perfect the Liens granted to Purchaser in this Agreement, the
Security Documents and the other Credit Documents;
(2) Such Uniform Commercial Code termination statements
(appropriately completed and executed) for filing in such jurisdictions as
Purchaser may request to terminate any financing statement evidencing Liens
of other Persons in the Collateral which are prior to the Liens granted to
Purchaser in this Agreement, the Security Documents and the other Credit
Documents, except for any such prior Liens which are expressly permitted by
this Agreement, the Security Documents or the other Credit Documents to be
prior;
(3) Uniform Commercial Code search certificates from the
jurisdictions in which Uniform Commercial Code financing statements are to
be filed pursuant to ITEM B.(1) above reflecting no other financing
statements or filings which evidence Liens of other Persons in the
Collateral which are prior to the Liens granted to Purchaser in this
Agreement, the Security Documents and the other Credit Documents, except
for any such prior Liens (a) which are expressly permitted by this
Agreement, the Security Documents or the other Credit Documents to be prior
or (b) for which Purchaser has received a termination statement pursuant to
ITEM B.(2) above; and
(4) Such other documents, instruments and agreements as Purchasers
may reasonably request to establish and perfect the Liens granted to
Purchaser in this Agreement, the Security Documents and the other Credit
Documents.
<PAGE>
C. OTHER ITEMS.
(1) A certificate of an Executive Officer of Borrower, addressed to
Purchaser and dated the Effective Date, certifying that:
(a) The representations and warranties set forth in PARAGRAPH
4.01 and in the other Credit Documents are true and correct in all
material respects as of such date (except as otherwise scheduled in
the Investment Agreement and except for such representations and
warranties expressly made as of a specified date, which shall be true
as of such date);
(b) No Default or Event of Default has occurred and is
continuing or will result from the execution by Borrower of the Credit
Agreement;
(c) All of the Credit Documents are in full force and effect;
and
(d) No Material Adverse Effect shall have occurred since
September 30, 1996; and
(2) All fees and expenses payable to Purchaser's counsel through the
Effective Date (to be paid from the proceeds of the initial Advance).
<PAGE>
SCHEDULE 4.01(c)
DISCLOSED CONFLICTS
See Attachment.
<PAGE>
SCHEDULE 5.01(a)
EXISTING INDEBTEDNESS
See Attachment.
<PAGE>
EXHIBIT A
FORM OF CONVERTIBLE PROMISSORY NOTE
THIS CONVERTIBLE PROMISSORY NOTE (THIS "CONVERTIBLE NOTE") HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT
AND LAWS OR AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO BORROWER THAT SUCH
REGISTRATION IS NOT REQUIRED.
$2,750,000 January __, 1997
FOR VALUE RECEIVED, NOR'WESTER BREWING COMPANY, an Oregon corporation
("BORROWER") hereby promises to pay to the order of UNITED BREWERIES OF AMERICA,
INC., a Delaware corporation, or its successors or assigns ("PURCHASER"), the
principal sum of TWO MILLION SEVEN HUNDRED FIFTY THOUSAND DOLLARS ($2,750,000)
or, if less, the aggregate unpaid principal amount of all Advances (including
the Existing Advance) made by Purchaser to Borrower pursuant to the Credit
Agreement (as hereinafter defined), and interest accrued thereon as described in
Section 3 below all in accordance with the terms and conditions set forth
herein. This Convertible Note is the Convertible Note referred to in that
certain Credit Agreement, dated as of January __, 1997, by and between Borrower
and Purchaser (the "CREDIT AGREEMENT") and is subject to the terms and
conditions of the Credit Agreement, including the rights of prepayment and the
rights of acceleration of maturity set forth therein. Capitalized terms used
herein and not otherwise defined shall have the meanings assigned to such terms
in the Credit Agreement.
1. ADVANCES. Advances made to Borrower under this Convertible Note shall
be made in accordance with the terms and conditions set forth in the Credit
Agreement. Borrower hereby authorizes Purchaser to record on the schedule(s) to
be annexed to this Convertible Note the date and amount of each Advance
(including the Existing Advance) and agrees that all such notations shall
constitute prima facia evidence of the matters noted.
2. PRINCIPAL PAYMENT. All outstanding principal under this Convertible
Note shall be due and payable in one lump sum on the earliest to occur of (i)
August 29, 1997, (ii) sixty (60) days after the termination of the Investment
Agreement or (iii) acceleration of this Convertible Note by Purchaser pursuant
to an Event of Default (and, if applicable, the expiration of the sixty (60) day
period as provided in the Credit Agreement) (each a "PAYMENT EVENT"). Subject
to the automatic conversion of this Convertible Note described in Section 5
below, all payments of principal under this Convertible Note are payable in
lawful money of the United States to Purchaser sent to Purchaser's address as
indicated in the Credit Agreement, or to such other place as Purchaser may
designate in writing, in same day or
<PAGE>
immediately available funds not later than 12:00 noon on the date when due.
Any amounts not paid when due hereunder shall bear interest at a rate per
annum equal to the Interest Rate (as hereinafter defined) plus three percent
(3.00%).
3. INTEREST. Interest shall accrue on the unpaid principal balance of
this Convertible Note outstanding from time to time at a rate per annum equal to
Eleven and One-Quarter percent (11.25%) (the "INTEREST RATE"). All computations
of interest under this Convertible Note shall be based on a year of 365 or 366
days, as applicable, for the actual number of days elapsed. All accrued
interest under this Convertible Note shall be due in payable in on lump sum on
the occurrence of a Payment Event.
4. PREPAYMENTS. This Convertible Note may not be prepaid.
5. AUTOMATIC CONVERSION. Notwithstanding the payment provisions set
forth in Section 2 above, upon the Closing, the outstanding principal under this
Convertible Note shall automatically convert into Two Million Four Hundred
Ninety-Nine Thousand Six Hundred Sixty-Four (2,497,184) shares of Common Stock
of UCB. On and after such automatic conversion and payment by Borrower of all
accrued interest in accordance with Section 3 above, this Convertible Note shall
be deemed to be no longer outstanding, and all rights with respect hereto shall
forthwith cease and terminate, except the right of Purchaser to receive the
Common Stock of UCB to which it shall be entitled upon conversion hereof. Any
such conversion shall be deemed to have been made immediately prior to the close
of business on the date of conversion, and Purchaser upon such conversion shall
be treated for all purposes as the record holder of such Common Stock on such
date.
6. MAXIMUM AMOUNT. Notwithstanding anything in this Convertible Note,
the Credit Agreement or any other Credit Document to the contrary, nothing
contained in this Convertible Note, the Credit Agreement or any other Credit
Document shall be deemed to require the payment by Borrower of interest on the
indebtedness evidenced by this Convertible Note in excess of the amount which
Purchaser may lawfully contract to charge under applicable usury and other laws
(the "MAXIMUM LEGAL RATE"). All agreements between Borrower and Purchaser are
expressly limited so that in no contingency or event shall the amount paid or
agreed to be paid by Borrower hereunder exceed the Maximum Legal Rate. If,
under any circumstance whatsoever, the fulfillment of any obligation under this
Convertible Note, the Credit Agreement or any other Credit Document shall
involve exceeding the Maximum Legal Rate, the obligation to be fulfilled by
Borrower shall be reduced to the minimum amount required so that such obligation
shall not exceed the Maximum Legal Rate. This Section 6 shall control every
other provision of this Convertible Note, the Credit Agreement and any other
Credit Document.
7. GOVERNING LAW. This Convertible Note shall be governed by and
construed in accordance with the laws of the State of California without
reference to conflicts of law rules.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed and delivered this
Convertible Note as of the date first above written.
NOR'WESTER BREWING COMPANY,
an Oregon corporation
------------------------------------
Name:
Title:
ACCEPTED AND AGREED TO:
UNITED BREWERIES OF AMERICA, INC.
a Delaware corporation
- ----------------------------------
Name:
Title:
<PAGE>
EXHIBIT B
FORM OF SECURITY AGREEMENT
THIS SECURITY AGREEMENT ("SECURITY AGREEMENT"), dated as of January __,
1997, is executed by NORTH COUNTRY JOINT VENTURE, LLC, a limited liability
corporation organized under the laws of Oregon ("NORTH COUNTRY"), in favor of
UNITED BREWERIES OF AMERICA, INC., a Delaware corporation ("PURCHASER").
RECITALS
A. Pursuant to a Credit Agreement, dated as of January __, 1997 (the
"CREDIT AGREEMENT"), by and between Nor'Wester Brewing Company, an Oregon
corporation ("BORROWER") and Purchaser, Purchaser has agreed to extend certain
credit facilities to Borrower upon the terms and subject to the conditions set
forth therein.
B. Purchaser's obligation to enter into the Credit Agreement and provide
Advances to Borrower under the Credit Agreement is subject, among other
conditions, to receipt by Purchaser of this Security Agreement, duly executed by
North Country.
AGREEMENT
NOW, THEREFORE, in consideration of the above recitals and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, North Country hereby agrees with Purchaser as follows:
1. DEFINITIONS AND INTERPRETATION. When used in this Security Agreement,
the following terms shall have the following respective meanings:
"ACCOUNT DEBTOR" shall have the meaning given to that term in SUBPARAGRAPH
3(G).
"BORROWER" shall have the meaning given to that term in RECITAL A.
"COLLATERAL" shall have the meaning given to that term in PARAGRAPH 2.
"CREDIT AGREEMENT" shall have the meaning given to that term in RECITAL A.
"EQUIPMENT" shall have the meaning given to that term in ATTACHMENT 1.
"INVENTORY" shall have the meaning given to that term in ATTACHMENT 1.
"NORTH COUNTRY" shall have the meaning given to that term in THE
INTRODUCTORY PARAGRAPH.
<PAGE>
"PURCHASER" shall have the meaning given to that term in THE INTRODUCTORY
PARAGRAPH.
"RECEIVABLES" shall have the meaning given to that term in ATTACHMENT 1.
"RELATED CONTRACTS" shall have the meaning given to that term in ATTACHMENT
1.
"UCC" shall mean the Uniform Commercial Code as in effect in the State of
California from time to time.
Unless otherwise defined herein, all other capitalized terms used herein and
defined in the Credit Agreement shall have the respective meanings given to
those terms in the Credit Agreement, and all terms defined in the UCC shall have
the respective meanings given to those terms in the UCC. The rules of
construction set forth in SECTION I OF THE CREDIT AGREEMENT shall, to the extent
not inconsistent with the terms of this Security Agreement, apply to this
Security Agreement and are hereby incorporated by reference.
2. GRANT OF SECURITY INTEREST. As security for the Obligations, North
Country hereby pledges and assigns to Purchaser and grants to Purchaser a
security interest in all right, title and interest of North Country in and to
the property described in ATTACHMENT 1, whether now owned or hereafter acquired
(collectively and severally, the "COLLATERAL"), which ATTACHMENT 1 is
incorporated herein by this reference.
3. REPRESENTATIONS AND WARRANTIES. North Country represents and warrants
to Purchaser as follows:
(a) North Country is the legal and beneficial owner of the Collateral
(or, in the case of after-acquired Collateral, at the time North Country
acquires rights in the Collateral, will be the legal and beneficial owner
thereof). No other Person has (or, in the case of after-acquired
Collateral, at the time North Country acquires rights therein, will have)
any right, title, claim or interest (by way of Lien, purchase option or
otherwise) in, against or to the Collateral, other than with respect to the
Liens set forth in ATTACHMENT 3 ("PERMITTED LIENS").
(b) Purchaser has (or in the case of after-acquired Collateral, at
the time North Country acquires rights therein, will have) a first priority
perfected security interest in the Collateral other than Inventory and
Receivables in which it has a second priority perfected security interest
subject only to the Permitted Lien in favor of The Adirondack Trust
Company.
(c) All Equipment and Inventory are (i) located at the locations
indicated on ATTACHMENT 2, (ii) in transit to such locations or (iii) in
transit to a third party purchaser which will become obligated on a
Receivable to North Country upon receipt. Except for Equipment and
Inventory referred to in CLAUSES (II) AND (III) of the preceding sentence
and except as disclosed on Schedule 4.01(c) of the Investment Agreement,
North Country has exclusive possession and control of the Inventory and
Equipment.
<PAGE>
(d) All Inventory has been (or, in the case of hereafter produced
Inventory, will be) produced in compliance with all applicable Governmental
Rules, including the Fair Labor Standards Act (if applicable).
(e) North Country keeps all records concerning the Receivables and
the originals of all Related Contracts at its chief executive office
located at the address set forth on ATTACHMENT 2.
(f) North Country has delivered to Purchaser, together with all
necessary stock powers, endorsements, assignments and other necessary
instruments of transfer, the originals of all Receivables consisting of
instruments and chattel paper.
(g) To the best of North Country's knowledge, each Receivable is
genuine and enforceable against the party obligated to pay the same (an
"ACCOUNT DEBTOR") free from any right of rescission, defense, setoff or
discount.
(h) Each insurance policy maintained by North Country is validly
existing and is in full force and effect. North Country is not in default
in any material respect under the provisions of any insurance policy, and
there are no facts which, with the giving of notice or passage of time (or
both), would result in such a default under any provision of any such
insurance policy.
4. COVENANTS. North Country hereby agrees as follows:
(a) North Country, at North Country's expense, shall promptly
procure, execute and deliver to Purchaser all documents, instruments and
agreements and perform all acts which are necessary or desirable, or which
Purchaser may reasonably request, to establish, maintain, preserve, protect
and perfect the Collateral, the Lien granted to Purchaser therein and the
priority of such Lien or to enable Purchaser to exercise and enforce its
rights and remedies hereunder with respect to any Collateral. Without
limiting the generality of the preceding sentence, North Country shall (i)
procure, execute and deliver to Purchaser all stock powers, endorsements,
assignments, financing statements and other instruments of transfer
reasonably requested by Purchaser, (ii) deliver to Purchaser promptly upon
receipt all originals of Collateral consisting of instruments, documents
and chattel paper and certificated securities and (iii) take such action as
may be necessary and requested by Purchaser to perfect the lien of
Purchaser in any Collateral consisting of investment property (including in
those jurisdictions where appropriate or where Purchaser may otherwise
request, causing such liens to be recorded or registered in the books of
any financial intermediary or clearing corporation requested by Purchaser.
(b) North Country shall not use or permit any Collateral to be used
in violation of (i) any material provision of the Credit Agreement, this
Security Agreement or any other Security Document, (ii) any applicable
Governmental Rule where such use might have a Material Adverse Effect, or
(iii) any policy of insurance covering the Collateral.
<PAGE>
(c) North Country shall pay promptly when due all taxes and other
governmental charges, all Liens (other than Permitted Liens) and all other
charges now or hereafter imposed upon, relating to or affecting any
Collateral.
(d) Without thirty (30) days' prior written notice to Purchaser,
North Country shall not (i) change North Country's name or place of
business (or, if North Country has more than one place of business, its
chief executive office), or the office in which North Country's records
relating to Receivables or the originals of Related Contracts are kept,
(ii) keep Collateral consisting of chattel paper and documents at any
location other than its chief executive office set forth on ATTACHMENT 2,
or (iii) keep Collateral consisting of Equipment, Inventory or other goods
at any location other than the locations set forth on ATTACHMENT 2.
(e) North Country shall appear in and defend any action or proceeding
which may affect its title to or Purchaser's interest in the Collateral.
(f) If Purchaser gives value to enable North Country to acquire
rights in or the use of any Collateral, North Country shall use such value
for such purpose.
(g) North Country shall keep separate, accurate and complete records
of the Collateral and shall provide Purchaser with such records and such
other reports and information relating to the Collateral as Purchaser may
reasonably request from time to time.
(h) North Country shall not surrender or lose possession of (other
than to Purchaser), sell, encumber, lease, rent, option, or otherwise
dispose of or transfer any Collateral or right or interest therein (other
than (i) Inventory sold in the ordinary course of North Country's business
and (ii) purchase money security interests in Equipment provided that any
such purchase money security interests only cover Equipment the acquisition
of which was financed by indebtedness which does not exceed the purchase
price of the Equipment so financed), and, notwithstanding any provision of
the Credit Agreement, North Country shall keep the Collateral free of all
Liens, other than Permitted Liens.
(i) North Country shall type, print or stamp conspicuously on the
face of all original copies of all Collateral consisting of chattel paper
and documents not in the possession of Purchaser a legend satisfactory to
Purchaser indicating that such chattel paper is subject to the security
interest granted hereby.
(l) North Country shall collect, enforce and receive delivery of the
Receivables in accordance with past practice until otherwise notified by
Purchaser.
(m) North Country shall comply with all material Requirements of Law
applicable to North Country which relate to the production, possession,
operation, maintenance and control of the Collateral (including, without
limitation, the Fair Labor
<PAGE>
Standards Act).
(n) North Country shall (i) maintain and keep in force insurance of
the types and in amounts customarily carried from time to time during the
term of this Security Agreement in its lines of business, including fire,
public liability, property damage and worker's compensation, such insurance
to be carried with companies and in amounts satisfactory to Purchaser, (ii)
deliver to Purchaser from time to time, as Purchaser may request, schedules
setting forth all insurance then in effect, and (iii) deliver to Purchaser
copies of each policy of insurance which replaces, or evidences the renewal
of, each existing policy of insurance at least fifteen (15) days prior to
the expiration of such policy. Purchaser shall be named as additional
insured or additional loss payee, as appropriate, on all liability and
property insurance of North Country and such policies shall contain such
additional endorsements as shall reasonably be required by Purchaser.
Prior to the occurrence and the continuance of an Event of Default, all
proceeds of any property insurance paid as a result of any event or
occurrence shall be paid to North Country. All proceeds of any property
insurance paid after the occurrence and during the continuance of an Event
of Default shall be paid to Purchaser to be held as Collateral and applied
as provided in the Credit Agreement or, at the election of Purchaser,
returned to North Country.
(o) Without the prior written consent of Purchaser, North Country
shall not create, incur, assume or permit to exist any indebtedness or
liabilities resulting from borrowings, loans or advances, whether secured
or unsecured, matured or unmatured, liquidated or unliquidated, joint or
several.
5. AUTHORIZED ACTION BY PURCHASER. North Country hereby irrevocably
appoints Purchaser as its attorney-in-fact and agrees that Purchaser may perform
(but Purchaser shall not be obligated to and shall incur no liability to North
Country or any third party for failure so to do) any act which North Country is
obligated by this Security Agreement to perform, and to exercise such rights and
powers as North Country might exercise with respect to the Collateral,
including, without limitation, the right to (a) collect by legal proceedings or
otherwise and endorse, receive and receipt for all dividends, interest,
payments, proceeds and other sums and property now or hereafter payable on or on
account of the Collateral; (b) enter into any extension, reorganization,
deposit, merger, consolidation or other agreement pertaining to, or deposit,
surrender, accept, hold or apply other property in exchange for the Collateral;
(c) insure, process, preserve and enforce the Collateral; (d) make any
compromise or settlement, and take any action it deems advisable, with respect
to the Collateral; (e) pay any Indebtedness of North Country relating to the
Collateral; and (f) execute UCC financing statements and other documents,
instruments and agreements required hereunder; PROVIDED, HOWEVER, that Purchaser
may exercise such powers only after the occurrence and during the continuance of
an Event of Default. North Country agrees to reimburse Purchaser upon demand
for all reasonable costs and expenses, including attorneys' fees, Purchaser may
incur while acting as North Country's attorney-in-fact hereunder, all of which
costs and expenses are included in the Obligations. North Country agrees that
such care as Purchaser gives to the safekeeping of its own property of like kind
shall constitute reasonable care of the Collateral when in Purchaser's
possession; PROVIDED, HOWEVER, that Purchaser shall not be required to
<PAGE>
make any presentment, demand or protest, or give any notice and need not take
any action to preserve any rights against any prior party or any other Person
in connection with the Obligations or with respect to the Collateral.
6. DEFAULT AND REMEDIES. North Country shall be deemed in default under
this Security Agreement upon the occurrence and during the continuance of an
Event of Default, as that term is defined in the Credit Agreement. In addition
to all other rights and remedies granted to Purchaser by this Security
Agreement, the Credit Agreement, the other Credit Documents, the UCC and other
applicable Governmental Rules, Purchaser may, upon the occurrence and during the
continuance of any Event of Default (and, if applicable, the expiration of the
sixty (60) day period as provided in the Credit Agreement), exercise any one or
more of the following rights and remedies: (a) collect, receive, appropriate or
realize upon the Collateral or otherwise foreclose or enforce Purchaser's
security interests in any or all Collateral in any manner permitted by
applicable Governmental Rules or in this Security Agreement; (b) notify any or
all Account Debtors to make payments on Receivables directly to Purchaser; (c)
direct any depository bank or intermediary to liquidate the account(s)
maintained by it, pay all amounts payable in connection therewith to Purchaser
and/or deliver any proceeds thereof to Purchaser; (d) sell or otherwise dispose
of any or all Collateral at one or more public or private sales, whether or not
such Collateral is present at the place of sale, for cash or credit or future
delivery, on such terms and in such manner as Purchaser may determine; (e)
require North Country to assemble the Collateral and make it available to
Purchaser at a place to be designated by Purchaser; (f) enter onto any property
where any Collateral is located and take possession thereof with or without
judicial process; and (g) prior to the disposition of the Collateral, store,
process, repair or recondition any Collateral consisting of goods, perform any
obligations and enforce any rights of North Country under any Related Contracts
or otherwise prepare and preserve Collateral for disposition in any commercially
reasonable manner and to the extent Purchaser reasonably deems appropriate. In
furtherance of Purchaser's rights hereunder, North Country hereby grants to
Purchaser an irrevocable, non-exclusive license (exercisable without royalty or
other payment by Purchaser) to use, license or sublicense any patent, trademark,
tradename, copyright or other intellectual property in which North Country now
or hereafter has any right, title or interest, together with the right of access
to all media in which any of the foregoing may be recorded or stored (but only
to the extent North Country is not prohibited from granting such irrevocable,
non-exclusive license under applicable law or any material agreement to which it
is a party). In any case where notice of any sale or disposition of any
Collateral is required, North Country hereby agrees that seven (7) days notice
of such sale or disposition is reasonable.
7. AUTHORIZATIONS, WAIVERS, ETC.
(a) AUTHORIZATIONS. North Country authorizes Purchaser in its
reasonable discretion, without notice to North Country except as required
by applicable law, irrespective of any change in the financial condition of
Borrower, North Country or any other guarantor of the Obligations since the
date hereof, and without affecting or impairing in any way the liability of
North Country hereunder, from time to time to:
(i) Exercise any right or remedy Purchaser may have against
<PAGE>
Borrower, North Country, any other guarantor of the Obligations or any
security, including, without limitation, the right to foreclose upon
any such security by judicial or nonjudicial sale;
(ii) Settle, compromise with, release or substitute any one or
more makers, endorsers or guarantors of the Obligations; and
(iii) To the extent permitted pursuant to SUBPARAGRAPH 7.04
OF THE CREDIT AGREEMENT, assign the Obligations, this Security
Agreement or any other Credit Document in whole or in part.
(b) WAIVERS. North Country hereby waives:
(i) Any right to require Purchaser to (A) proceed against
Borrower or any other guarantor of the Obligations, (B) proceed
against or exhaust any security received from Borrower, North Country
or any other guarantor of the Obligations or otherwise marshall the
assets of Borrower or North Country or (C) pursue any other remedy in
Purchaser's power whatsoever;
(ii) Any defense arising by reason of the application by Borrower
of the proceeds of any borrowing;
(iii) Any defense resulting from the absence, impairment or
loss of any right of reimbursement, subrogation, contribution or other
right or remedy of North Country against Borrower, any other guarantor
of the Obligations or any security, whether resulting from an election
by Purchaser to foreclose upon security by nonjudicial sale, or
otherwise;
(iv) Any benefit arising from any setoff or counterclaim of
Borrower or any defense which results from any disability or other
defense of Borrower or the cessation or stay of enforcement from any
cause whatsoever of the liability of Borrower (including, without
limitation, the lack of validity or enforceability of the Convertible
Note, but excluding any set-off, defense or counterclaim asserted by
Borrower based upon Purchaser's failure to perform its obligations
under the Credit Agreement or the Convertible Note);
(v) Any defense based upon any law, rule or regulation which
provides that the obligation of a surety must not be greater or more
burdensome than the obligation of the principal;
(vi) Until all obligations of Purchaser to extend credit to
Borrower have terminated and all of the Obligations have been fully,
finally and indefeasibly paid, any right of subrogation,
reimbursement, indemnification or contribution and other similar right
to enforce any remedy which Purchaser or any other Person now has or
may hereafter have against Borrower on account of the Obligations, and
any benefit of, and any right to participate in, any
<PAGE>
security now or hereafter received by Purchaser or any other Person
account of the Obligations;
(vii) All presentments, demands for performance, notices of
non-performance, notices delivered under the Credit Agreement,
protests, notice of dishonor, and notices of acceptance of this
Security Agreement and of the existence, creation or incurring of new
or additional Obligations and notices of any public or private
foreclosure sale;
(viii) Any appraisement, valuation, stay, extension,
moratorium redemption or similar law or similar rights for
marshalling;
(ix) Any right to be informed by Purchaser of the financial
condition of Borrower or any other guarantor of the Obligations or any
change therein or any other circumstances bearing upon the risk of
nonpayment or nonperformance of the Obligations;
(x) Until all obligations of Purchaser to extend credit to
Borrower have terminated and all of the Obligations have been fully,
finally and indefeasibly paid, any right to revoke this Security
Agreement;
(xi) Any defense arising from an election for the application of
Section 1111(b)(2) of the United States Bankruptcy Code which applies
to the Obligations; and
(xii) Any defense based upon any borrowing or grant of a
security interest under Section 364 of the United States Bankruptcy
Code.
Without limiting the scope of any of the foregoing provisions of this
PARAGRAPH 7, North Country hereby further waives (A) all rights and defenses
arising out of an election of remedies by Purchaser, even though that election
of remedies has destroyed North Country's rights of subrogation and
reimbursement against Borrower and (B) all other rights and defenses available
to North Country by reason of Sections 2787 to 2855, inclusive, Section 2899 or
Section 3433 of the California Civil Code or Section 3605 of the California
Commercial Code.
<PAGE>
8. MISCELLANEOUS.
(a) NOTICES. Except as otherwise provided herein, all notices,
requests, demands, consents, instructions or other communications to or
upon North Country or Purchaser under this Security Agreement shall be in
writing and faxed, mailed or delivered at his or its respective facsimile
number or address set forth below (or to such other facsimile number or
address for each party as indicated in any notice given by that party to
the other party). All such notices and communications shall be effective
(i) when sent by Federal Express or other overnight service of recognized
standing, on the second day following the deposit with such service; (ii)
when mailed, first class postage prepaid and addressed as aforesaid through
the United States Postal Service, upon receipt; (iii) when delivered by
hand, upon delivery; and (iv) when faxed, upon confirmation of receipt.
Purchaser: UNITED BREWERIES OF AMERICA, INC.
Attn: Mr. Vijay Mallya
One Harbor Drive, Suite 102
Sausalito, California 94965
Telephone: (415) 289-1400
Facsimile: (415) 289-1409
With a
copy to: ORRICK, HERRINGTON & SUTCLIFFE
400 Sansome Street
San Francisco, California 94111
Attn: Alan Talkington, Esq.
Telephone: (415) 773-5762
Facsimile: (415) 773-5759
North
Country: c/o MICROBREWERIES ACROSS AMERICA
Attn: Chief Financial Officer
66 S.E. Morrison Street
Portland, Oregon 97214
Telephone: (503) 232-9771
Facsimile: (503) 232-2363
<PAGE>
With
copies to: ATER WYNNE HEWITT DODSON & SKERRITT, LLP
Attorneys at Law
Suite 1800
222 S.W. Columbia
Portland, Oregon 97201-6618
Attn: Jack W. Schifferdecker, Jr.
Telephone: (503) 226-8614
Facsimile: (503) 226-0079
(b) EXPENSES. North Country shall pay on demand all reasonable fees
and expenses, including reasonable attorneys' fees and expenses, incurred
by Purchaser in the enforcement or attempted enforcement of this Security
Agreement or in preserving any of Purchaser's rights and remedies
(including, without limitation, all such fees and expenses incurred in
connection with any "workout" or restructuring affecting this Security
Agreement or any bankruptcy or similar proceeding involving North Country).
The obligations of North Country under this SUBPARAGRAPH 8(b) shall survive
the payment and performance of the Obligations and the termination of this
Security Agreement.
(c) WAIVERS; AMENDMENTS. This Security Agreement may not be amended
or modified, nor may any of its terms be waived, except by written
instruments signed by North Country and Purchaser. Each waiver or consent
under any provision hereof shall be effective only in the specific
instances for the purpose for which given. No failure or delay on
Purchaser's part in exercising any right hereunder shall operate as a
waiver thereof or of any other right nor shall any single or partial
exercise of any such right preclude any other further exercise thereof or
of any other right.
(d) ASSIGNMENTS. This Security Agreement shall be binding upon and
inure to the benefit of Purchaser, North Country and their respective
successors and assigns, except that North Country may not assign or
transfer any of its rights and obligations under this Security Agreement
without the prior written consent of Purchaser and Purchaser may only
assign or transfer any of its rights and obligations under this Security
Agreement to the extent permitted under Section 10.4 of the Investment
Agreement.
(e) PARTIAL INVALIDITY. If at any time any provision of this
Security Agreement is or becomes illegal, invalid or unenforceable in any
respect under the law of any jurisdiction, neither the legality, validity
or enforceability of the remaining provisions of this Security Agreement
nor the legality, validity or enforceability of such provision under the
law of any other jurisdiction shall in any way be affected or impaired
thereby.
(f) CUMULATIVE RIGHTS, ETC. The rights, powers and remedies of
Purchaser under this Security Agreement shall be in addition to all rights,
powers and remedies
<PAGE>
given to Purchaser by virtue of any applicable law, rule or
regulation of any governmental authority, the Credit Agreement or
any other agreement, all of which rights, powers, and remedies shall be
cumulative and may be exercised successively or concurrently without
impairing Purchaser's rights hereunder. North Country waives any right to
require Purchaser to proceed against any Person or to exhaust any
Collateral or to pursue any remedy in Purchaser's power.
(g) PAYMENTS FREE OF TAXES, ETC. All payments made by North Country
under this Security Agreement shall be made by North Country free and clear
of and without deduction for any and all present and future taxes, levies,
charges, deductions and withholdings. In addition, North Country shall pay
upon demand any stamp or other taxes, levies or charges of any jurisdiction
with respect to the execution, delivery, registration, performance and
enforcement of this Security Agreement. Upon request by Purchaser, North
Country shall furnish evidence satisfactory to Purchaser that all requisite
authorizations and approvals by, and notices to and filings with,
governmental authorities and regulatory bodies have been obtained and made
and that all requisite taxes, levies and charges have been paid.
(h) NORTH COUNTRY'S CONTINUING LIABILITY. Prior to a foreclosure of
Purchaser's security interest in the Collateral or the payment in full of
the Obligations, notwithstanding any provision of this Security Agreement
or any other Credit Document or any exercise by Purchaser of any of its
rights hereunder or thereunder (including, without limitation, any right to
collect or enforce any Collateral), (i) North Country shall remain liable
to perform its obligations and duties in connection with the Collateral
(including, without limitation, the Related Contracts and all other
agreements relating to the Collateral) and (ii) Purchaser shall not assume
any liability to perform such obligations and duties or to enforce any of
North Country's rights in connection with the Collateral (including,
without limitation, the Related Contracts and all other agreements relating
to the Collateral).
(i) GOVERNING LAW. This Security Agreement shall be governed by and
construed in accordance with the laws of the State of California without
reference to conflicts of law rules (except to the extent otherwise
provided in the UCC).
<PAGE>
IN WITNESS WHEREOF, North Country has caused this Security Agreement to be
executed as of the day and year first above written.
NORTH COUNTRY JOINT VENTURE, LLC
By: _____________________________
Name:_________________________
Title:________________________
<PAGE>
ATTACHMENT 1
TO SECURITY AGREEMENT
All right, title and interest of North Country, whether now owned or
hereafter acquired, in and to the following:
(a) All equipment and fixtures (including, without limitation,
fermenting/conditioning tanks, brew kettles, bottling line, kegs, furniture,
vehicles and other machinery, brewing and office equipment), together with all
additions and accessions thereto and replacements therefor (collectively, the
"EQUIPMENT");
(b) All inventory (including, without limitation, (i) all ales, finished
products, packaging materials, and all other raw materials, work in process and
finished goods and (ii) all such goods which are returned to or repossessed by
North Country), together with all additions and accessions thereto, replacements
therefor, products thereof and documents therefor (collectively, the
"INVENTORY");
(c) All accounts, chattel paper, instruments, deposit accounts and other
rights to the payment of money (including, without limitation, general
intangibles and contract rights) (collectively, the "RECEIVABLES") and all
contracts, security agreements, leases, guaranties and other agreements
evidencing, securing or otherwise relating to the Receivables (including,
without limitation, that certain Commercial Lease dated February 15, 1996 by and
between North Country Brewery, Inc. and Stewart's Ice Cream Company, Inc., as
amended from time to time) (collectively, the "RELATED CONTRACTS");
(d) All certificated and uncertificated securities, security entitlements,
security accounts, commodity contracts, commodity accounts and other investment
property;
(e) All other general intangibles and contract rights not otherwise
described above (including, without limitation, (i) customer and supplier lists
and contracts, books and records, insurance policies, tax refunds, contracts for
the purchase of real or personal property; (ii) all patents, copyrights,
trademarks, tradenames and service marks, (iii) all licenses to use,
applications for, and other rights to, such patents, copyrights, trademarks,
tradenames and service marks, and (iv) all goodwill of North Country);
(f) All other property not otherwise described above (including, without
limitation, all money, certificated securities, uncertificated securities,
documents and goods); and
(g) All proceeds of the foregoing (including, without limitation, whatever
is receivable or received when Collateral or proceeds is sold, collected,
exchanged, returned, substituted or otherwise disposed of, whether such
disposition is voluntary or involuntary, including rights to payment and return
premiums and insurance proceeds under insurance with respect to any Collateral,
and all rights to payment with respect to any cause of action affecting or
relating to the Collateral).
<PAGE>
ATTACHMENT 2
TO SECURITY AGREEMENT
LOCATIONS OF COLLATERAL AND CHIEF EXECUTIVE OFFICE
See Attachment.
<PAGE>
ATTACHMENT 3
TO SECURITY AGREEMENT
PERMITTED LIENS
See Attachment.
<PAGE>
EXHIBIT C
FORM OF PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (this "AGREEMENT"), dated as of January __, 1997 is
executed by NOR'WESTER BREWING COMPANY, an Oregon Corporation ("BORROWER") in
favor of UNITED BREWERIES OF AMERICA, INC., a Delaware corporation
("PURCHASER").
RECITALS
A. Pursuant to a Credit Agreement, dated as of January __, 1997 (the
"CREDIT AGREEMENT"), by and between Borrower and Purchaser, Purchaser has agreed
to extend certain credit facilities to Borrower upon the terms and subject to
the conditions set forth therein.
B. Purchaser's obligation to enter into the Credit Agreement and provide
Advances to Borrower under the Credit Agreement is subject, among other
conditions, to receipt by Purchaser of this Agreement, duly executed by
Borrower.
AGREEMENT
NOW, THEREFORE, in consideration of the above recitals and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Borrower hereby agrees with Purchaser as follows:
1. DEFINITIONS AND INTERPRETATION. Unless otherwise defined herein, when
used in this Agreement, the following terms shall have the following respective
meanings:
"BORROWER" shall have the meaning given to that term in THE INTRODUCTORY
PARAGRAPH.
"CREDIT AGREEMENT" shall have the meaning given to that term in THE
INTRODUCTORY PARAGRAPH.
"NORTH COUNTRY" shall mean North Country Joint Venture, LLC, a limited
liability corporation organized under the laws of Oregon.
"OPERATING AGREEMENT" shall mean that certain North Country Joint Venture,
L.L.C. Operating Agreement dated as of March 5, 1996.
"PERMITTED LIENS" shall have the meaning given to that term in SUBPARAGRAPH
3.01(a).
"PLEDGED COLLATERAL" shall have the meaning given to that term in PARAGRAPH
2 hereof.
<PAGE>
"PURCHASER" shall have the meaning given to that term in THE INTRODUCTORY
PARAGRAPH.
"UCC" shall mean the Uniform Commercial Code as in effect in the State of
California from time to time.
Unless otherwise defined herein, all other capitalized terms used herein and
defined in the Credit Agreement shall have the respective meanings given to
those terms in the Credit Agreement, and all terms defined in the UCC shall have
the respective meanings given to those terms in the UCC. The rules of
construction set forth in SECTION I OF THE CREDIT AGREEMENT shall, to the extent
not inconsistent with the terms of this Agreement, apply to this Agreement and
are hereby incorporated by reference.
2. PLEDGE. As security for the Obligations, Borrower hereby pledges and
assigns to Purchaser and grants to Purchaser a security interest in all right,
title and interest of Borrower in and to the property described in ATTACHMENT 1
hereto, whether now owned or hereafter acquired (collectively and severally, the
"PLEDGED COLLATERAL"), which pledge and grant shall be deemed to have been made
in accordance with Article X of the Operating Agreement by which Purchaser shall
at all times be bound.
3. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to
Purchaser as follows:
(a) Borrower is the legal and beneficial owner of the Pledged
Collateral (or, in the case of after-acquired Pledged Collateral, at the
time Borrower acquires rights in the Pledged Collateral, will be the legal
and beneficial owner thereof). No other Person has (or, in the case of
after-acquired Pledged Collateral, at the time Borrower acquires rights
therein, will have) any right, title, claim or interest (by way of Lien or
otherwise) in, against or to the Pledged Collateral, other than with
respect to the Liens set forth in ATTACHMENT 2 ("PERMITTED LIENS").
(b) Purchaser has (or in the case of after-acquired Pledged
Collateral, at the time Borrower acquires rights therein, will have) a
second priority perfected security interest in the Pledged Collateral
subject only to the Permitted Lien in favor of Bank of America NT&SA.
(c) Borrower keeps all records concerning the Pledged Collateral and
all instruments and other writings evidencing the same at its chief
executive office located at 66 S.E. Morrison Street, Portland, Oregon
97214.
4. COVENANTS. Borrower hereby agrees as follows:
(a) Borrower, at Borrower's expense, shall promptly procure, execute
and deliver to Purchaser all documents, instruments and agreements and
perform all acts which are reasonably necessary or desirable, and which
Purchaser may reasonably request, to establish, maintain, preserve, protect
and perfect the Pledged Collateral, the Lien granted to Purchaser therein
and the priority of such Lien or to enable Purchaser
<PAGE>
to exercise and enforce its rights and remedies hereunder with respect to
any Pledged Collateral. Without limiting the generality of the preceding
sentence, Borrower shall (i) procure, execute and deliver to Purchaser all
endorsements, assignments, financing statements and other instruments of
transfer reasonably requested by Purchaser and (ii) deliver to Purchaser
promptly upon receipt originals of all other Pledged Collateral and all
instruments, and other writings evidencing the same.
(b) Borrower shall pay promptly when due all taxes and other
governmental charges, all Liens and all other charges now or hereafter
imposed upon, relating to or affecting any Pledged Collateral.
(c) Without thirty (30) days' prior written notice to Purchaser,
Borrower shall not change its place of business (or, if Borrower has more
than one place of business, its chief executive office), or the office in
which Borrower's records relating to the Pledged Collateral are kept.
(d) Borrower shall appear in and defend any action or proceeding
which may affect its title to or Purchaser's interest in the Pledged
Collateral.
(e) Borrower shall keep separate, accurate and complete records of
the Pledged Collateral and shall provide Purchaser with such records and
such other reports and information relating to the Pledged Collateral as
Purchaser may reasonably request from time to time.
(f) Borrower shall not surrender or lose possession of (other than to
Purchaser), sell, encumber, lease, rent, option, or otherwise dispose of or
transfer any Pledged Collateral or right or interest therein and Borrower
shall keep the Pledged Collateral free of all Liens except the Liens
created pursuant to this Agreement and Permitted Liens.
5. VOTING RIGHTS AND DIVIDENDS PRIOR TO DEFAULT. Unless an Event of
Default has occurred and is continuing (and, if applicable, the expiration of
the sixty (60) day period as provided in the Credit Agreement), Borrower may
exercise or refrain from exercising any and all voting and other consensual
rights pertaining to the Pledged Collateral or any part thereof; PROVIDED,
HOWEVER, that Borrower shall not exercise or refrain from exercising any such
rights where the consequence of such action or inaction would be (a) to impair
any Pledged Collateral, the Lien granted to Purchaser therein, the priority of
such Lien or Purchaser's rights and remedies hereunder with respect to any
Pledged Collateral, (b) to breach or violate any representation, warranty or
covenant made by Borrower under this Agreement, the other Credit Documents to
which Borrower is a party, the Investment Agreement or any Ancillary Agreement
to which Borrower is a party, or (c) otherwise inconsistent with the terms of
this Agreement, the other Credit Documents, the Investment Agreement or any
Ancillary Agreement.
6. AUTHORIZED ACTION BY PURCHASER. Borrower hereby irrevocably appoints
Purchaser as its attorney-in-fact and agrees that after the occurrence and
during the
<PAGE>
continuance of an Event of Default (and, if applicable, the expiration of the
sixty (60) day period as provided in the Credit Agreement) Purchaser may
perform (but Purchaser shall not be obligated to and shall incur no liability
to Borrower or any third party for failure so to do) any act which Borrower
is obligated by this Agreement to perform, and to exercise such rights and
powers as Borrower might exercise with respect to the Pledged Collateral,
including, without limitation, the right to (a) collect by legal proceedings
or otherwise and endorse, receive and receipt for all dividends, interest,
payments, proceeds and other sums and property now or hereafter payable on or
on account of the Pledged Collateral; (b) enter into any extension,
reorganization, deposit, merger, consolidation or other agreement pertaining
to, or deposit, surrender, accept, hold or apply other property in exchange
for the Pledged Collateral; (c) insure, process, preserve and enforce the
Pledged Collateral; (d) make any compromise or settlement, and take any
action it deems advisable, with respect to the Pledged Collateral; (e) pay
any indebtedness of Borrower relating to the Pledged Collateral; and (f)
execute UCC financing statements and other documents, instruments and
agreements required hereunder. Borrower agrees to reimburse Purchaser upon
demand for all reasonable costs and expenses, including attorneys' fees,
Purchaser may incur while acting as Borrower's attorney-in-fact hereunder,
all of which costs and expenses are included in the Obligations.
7. EVENTS OF DEFAULT.
(a) EVENT OF DEFAULT. Borrower shall be deemed in default under this
Agreement upon the occurrence and during the continuance of an Event of
Default, as that term is defined in the Credit Agreement.
(b) VOTING RIGHTS AND DIVIDENDS. Upon the occurrence and during the
continuance of an Event of Default (and, if applicable, the expiration of
the sixty (60) day period as provided in the Credit Agreement):
(i) All rights of Borrower to exercise the voting and other
consensual rights which it would otherwise be entitled to exercise
pursuant to PARAGRAPH 5 hereof shall cease and all such rights shall
thereupon become vested in Purchaser which shall thereupon have the
sole right, but not the obligation, to exercise such voting and other
consensual rights and to receive and hold as Pledged Collateral such
dividends and interest payments.
(ii) Borrower shall promptly deliver to Purchaser to hold as
Pledged Collateral all dividends and interest received by Borrower
after the occurrence and during the continuance of any Event of
Default, in the same form as so received (with any necessary
endorsement), and, until so delivered, shall hold such dividends and
interest in trust for the benefit of Purchaser, segregated from the
other property or funds of Borrower.
<PAGE>
(c) OTHER RIGHTS AND REMEDIES. In addition to all other rights and
remedies granted to Purchaser by this Agreement, the other Credit
Documents, the UCC and other applicable laws, rules or regulations of any
governmental authority, Purchaser may, upon the occurrence and during the
continuance of any Event of Default (and, if applicable, the expiration of
the sixty (60) day period as provided in the Credit Agreement), exercise
any one or more of the following rights and remedies: (i) collect, receive,
appropriate or realize upon the Pledged Collateral or otherwise foreclose
or enforce Purchaser's security interests in any or all Pledged Collateral
in any manner permitted by applicable laws, rules or regulations of any
governmental authority or in this Agreement; (ii) notify any or all issuers
of or transfer or paying agents for the Pledged Collateral or any
applicable clearing corporation, financial intermediary or other Person to
register the Pledged Collateral in the name of Purchaser or its nominee
and/or to pay all dividends, interest and other amounts payable in respect
of the Pledged Collateral directly to Purchaser; (iii) sell or otherwise
dispose of any or all Pledged Collateral at one or more public or private
sales, whether or not such Pledged Collateral is present at the place of
sale, for cash or credit or future delivery, on such terms and in such
manner as Purchaser may determine; and (iv) require Borrower to assemble
all records and information relating to the Pledged Collateral and make it
available to Purchaser at a place to be designated by Purchaser. In any
case where notice of any sale or disposition of any Pledged Collateral is
required, Borrower hereby agrees that seven (7) days notice of such sale or
disposition is reasonable. All amounts received by Purchaser as proceeds
from the disposition or liquidation of all or any part of the Pledged
Collateral shall be applied as follows: first, to the costs and expenses
of collection, including court costs and reasonable attorneys' fees,
whether or not suit is commenced by Purchaser; next, to those costs and
expenses incurred by Purchaser in protecting, preserving, enforcing,
collecting, selling or disposing of all or any part of the Pledged
Collateral; next, to the payment of accrued and unpaid interest on all of
the Obligations; and last, to the payment of the outstanding principal
balance of the Obligations. Any excess Pledged Collateral or excess
proceeds existing after Purchaser's election to retain or dispose or
liquidate the Pledged Collateral (as applicable) will be returned or paid
by Purchaser to Borrower. If Purchaser fails to elect to retain, dispose
or liquidate the Pledged Collateral within a reasonable time after the
occurrence of an Event of Default, Purchaser will be deemed to have elected
to retain the Pledged Collateral.
8. MISCELLANEOUS.
(a) NOTICES. Except as otherwise provided herein, all notices,
requests, demands, consents, instructions or other communications to or
upon Borrower or Purchaser under this Agreement shall be given as provided
in PARAGRAPH 7.01 OF THE CREDIT AGREEMENT.
(b) EXPENSES. Borrower shall pay on demand all reasonable fees and
expenses, including reasonable attorneys' fees and expenses, incurred by
Purchaser in the enforcement or attempted enforcement of this Agreement or
in preserving any of
<PAGE>
Purchaser's rights and remedies (including, without limitation, all
such fees and expenses incurred in connection with any "workout"
or restructuring affecting this Agreement or any bankruptcy or
similar proceeding involving Borrower). The obligations of Borrower under
this SUBPARAGRAPH 8(b) shall survive the payment and performance of the
Obligations and the termination of this Agreement.
(c) WAIVERS; AMENDMENTS. This Agreement may not be amended or
modified, nor may any of its terms be waived, except by written instruments
signed by Borrower and Purchaser. Each waiver or consent under any
provision hereof shall be effective only in the specific instances for the
purpose for which given. No failure or delay on Purchaser's part in
exercising any right hereunder shall operate as a waiver thereof or of any
other right nor shall any single or partial exercise of any such right
preclude any other further exercise thereof or of any other right.
(d) ASSIGNMENTS. This Agreement shall be binding upon and inure to
the benefit of Purchaser, Borrower and their respective successors and
assigns, except that Borrower may not assign or transfer any of its rights
and obligations under this Agreement without the prior written consent of
Purchaser and Purchaser may only assign or transfer any of its rights and
obligations under this Agreement to the extent permitted under Section 10.4
of the Investment Agreement.
(e) PARTIAL INVALIDITY. If at any time any provision of this
Agreement is or becomes illegal, invalid or unenforceable in any respect
under the law of any jurisdiction, neither the legality, validity or
enforceability of the remaining provisions of this Agreement nor the
legality, validity or enforceability of such provision under the law of any
other jurisdiction shall in any way be affected or impaired thereby.
(f) CUMULATIVE RIGHTS, ETC. The rights, powers and remedies of
Purchaser under this Agreement shall be in addition to all rights, powers
and remedies given to Purchaser by virtue of any applicable law, rule or
regulation of any governmental authority, the Credit Agreement or any other
agreement, all of which rights, powers, and remedies shall be cumulative
and may be exercised successively or concurrently without impairing
Purchaser's rights hereunder. Borrower waives any right to require
Purchaser to proceed against any Person or to exhaust any Pledged
Collateral or to pursue any remedy in Purchaser's power.
(g) BORROWER'S CONTINUING LIABILITY. Prior to a foreclosure of
Purchaser's security interest in the Collateral or the payment in full of
the Obligations, notwithstanding any provision of this Agreement or any
exercise by Purchaser of any of its rights hereunder (including, without
limitation, any right to collect or enforce any Pledged Collateral), (i)
Borrower shall remain liable to perform its obligations and duties in
connection with the Pledged Collateral and (ii) Purchaser shall not assume
or be considered to have assumed any liability to perform such obligations
and duties or to enforce any of Borrower's rights in connection with the
Pledged Collateral.
(h) GOVERNING LAW. This Agreement shall be governed by and construed
in
<PAGE>
accordance with the laws of the State of California without reference to
conflicts of law rules (except to the extent otherwise provided in the
UCC).
<PAGE>
IN WITNESS WHEREOF, Borrower has caused this Agreement to be executed as of
the day and year first above written.
NOR'WESTER BREWING COMPANY,
an Oregon corporation
------------------------------------
Name:
Title:
<PAGE>
ATTACHMENT 1
TO PLEDGE AGREEMENT
All right, title and interest of Borrower, whether now owned or hereafter
acquired, in and to North Country Joint Venture LLC, a limited liability
corporation organized under the laws of Oregon ("NORTH COUNTRY"), including
without limitation the following:
(a) all of Borrower's interest in all profits, losses, assets and
other distributions to which Borrower shall at any time be entitled in
respect of its interests in North Country;
(b) all other payments due or to become due to Borrower in respect of
its interest in North Country, whether as contractual obligations, damages,
insurance proceeds or otherwise;
(c) all of Borrower's claims, rights, powers, privileges, authority,
options, security interest, Liens and remedies, if any, in respect of its
interest in North Country;
(d) all present and future claims, if any, of Borrower against North
Country for money loaned or advanced, for services rendered or otherwise;
(e) all of Borrower's to exercise and enforce every right, power,
remedy, authority, option and privilege of Borrower relating to such
interest in North Country, including any power to dissolve North Country,
to execute any instruments and to take any and all other action on behalf
of and in the name of Borrower in respect of such interest in North
Country, to make determinations, to exercise any election (including, but
not limited to, election of remedies) or option or to give or receive any
notice, consent, amendment, waiver or approval, together with full power
and authority to demand, receive, enforce, collect or receipt for any of
the foregoing or for any asset of North Country, to enforce or execute any
checks, or other instruments or orders, to file any claims and to take any
action in connection with any of the foregoing;
(f) all other property hereafter delivered in substitution for or in
addition to any of the foregoing, all certificates and instruments
representing or evidencing such other property and all cash, interest,
distributions, rights and other property at any time and from time to time
received, receivable or otherwise distributed in respect of or in exchange
for any or all thereof; and
(g) to the extent not otherwise included in (a) through (f) above,
all proceeds of any or all of the foregoing.
<PAGE>
ATTACHMENT 2
TO PLEDGE AGREEMENT
PERMITTED LIENS
See Attachment.
<PAGE>
EXHIBIT D
FORM OF PERSONAL GUARANTY
THIS PERSONAL GUARANTY ("PERSONAL GUARANTY"), dated as of January __, 1997,
is executed by JAMES W. BERNAU, an individual ("GUARANTOR") in favor of UNITED
BREWERIES OF AMERICA, INC., a Delaware corporation ("PURCHASER").
RECITALS
A. Guarantor is a shareholder of Nor'Wester Brewing Company, an Oregon
corporation ("BORROWER") and is also the Chairman of the Board of Directors of
Borrower.
B. Pursuant to a Credit Agreement, dated as of January __, 1997 (the
"CREDIT AGREEMENT"), by and between Borrower and Purchaser, Purchaser has agreed
to extend certain credit facilities to Borrower upon the terms and subject to
the conditions set forth therein.
C. Purchaser's obligation to enter into the Credit Agreement and provide
Advances to Borrower under the Credit Agreement is subject, among other
conditions, to receipt by Purchaser of this Personal Guaranty, duly executed by
Guarantor.
AGREEMENT
NOW, THEREFORE, in consideration of the above recitals and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Guarantor hereby agrees with Purchaser as follows:
1. DEFINITIONS. When used in this Personal Guaranty, the following terms
shall have the following respective meanings:
"DISALLOWED POST-COMMENCEMENT INTEREST AND EXPENSES" shall mean
interest computed at the rate provided in the Credit Agreement or the
Convertible Note accruing or claimed at any time after the commencement of
any Insolvency Proceeding, if the claim for such interest, reimbursement,
costs, expenses or indemnities is not allowable, allowed or enforceable
against Borrower in such Insolvency Proceeding.
"GUARANTEED OBLIGATIONS" shall mean the "Obligations" as such term is
defined in the Credit Agreement.
"INSOLVENCY PROCEEDING" shall mean any case or proceeding under the
United States Bankruptcy Code or any other similar law, rule or regulation
of the United States or any jurisdiction or any other action or proceeding
for the reorganization,
<PAGE>
liquidation, appointment of a receiver, rearrangement of debts, marshalling
of assets or similar action relating to Borrower or Guarantor, their
respective creditors or any substantial part of their respective assets,
whether or not any such case, proceeding or action is voluntary or
involuntary.
"SUBORDINATED OBLIGATIONS" shall have the meaning given to that term
in PARAGRAPH 6 hereof.
Unless otherwise defined herein, all other capitalized terms used herein and
defined in the Credit Agreement shall have the respective meanings given to
those terms in the Credit Agreement. The rules of construction set forth in
SECTION I OF THE CREDIT AGREEMENT shall, to the extent not inconsistent with the
terms of this Personal Guaranty, apply to this Personal Guaranty and are hereby
incorporated by reference.
2. PERSONAL GUARANTY.
(a) PAYMENT GUARANTY. Guarantor unconditionally guarantees and
promises to pay and perform as and when due, upon the demand of Purchaser,
any and all of the Guaranteed Obligations. If any Insolvency Proceeding
relating to Borrower is commenced, Guarantor further unconditionally
guarantees and promises to pay and perform, upon the demand of Purchaser,
any and all of the Guaranteed Obligations (including any and all Disallowed
Post-Commencement Interest and Expenses), whether or not such obligations
are then due and payable by Borrower and whether or not such obligations
are modified, reduced or discharged in such Insolvency Proceeding. This
Personal Guaranty is a guaranty of payment and not of collection.
(b) CONTINUING PERSONAL GUARANTY. This Personal Guaranty is an
irrevocable continuing guaranty of the Guaranteed Obligations which shall
continue in effect until all of the Guaranteed Obligations have been fully,
finally and indefeasibly paid. If any payment on any Guaranteed Obligation
is set aside, avoided or rescinded or otherwise recovered from Purchaser,
such recovered payment shall constitute a Guaranteed Obligation hereunder
and, if this Personal Guaranty was previously released or terminated, it
automatically shall be fully reinstated, as if such payment was never made.
(c) INDEPENDENT OBLIGATION. The liability of Guarantor hereunder is
independent of the Guaranteed Obligations, and a separate action or actions
may be brought and prosecuted against Guarantor irrespective of whether
action is brought against Borrower or any other guarantor of the Guaranteed
Obligations or whether Borrower or any other guarantor of the Guaranteed
Obligations is joined in any such action or actions.
(d) FRAUDULENT TRANSFER LIMITATION. If, in any action to enforce
this Personal Guaranty, any court of competent jurisdiction determines that
enforcement against Guarantor for the full amount of the Guaranteed
Obligations is not lawful under or would be subject to avoidance under
Section 548 of the United States Bankruptcy
<PAGE>
Code or any applicable provision of any comparable law of any state or
other jurisdiction, the liability of Guarantor under this Personal
Guaranty shall be limited to the maximum amount lawful and not subject
to such avoidance.
3. REPRESENTATIONS AND WARRANTIES. Guarantor hereby represents and
warrants to Purchaser as follows:
(a) Guarantor is an individual with full capacity to execute and
deliver this Personal Guaranty.
(b) This Personal Guaranty and each other document or agreement
executed, or to be executed, by Guarantor in connection herewith or
therewith has been, or will be, duly executed and delivered by Guarantor
and constitutes, or will constitute, a legal, valid and binding obligation
of Guarantor, enforceable against Guarantor in accordance with their terms,
except as limited by bankruptcy, insolvency or other laws of general
application relating to or affecting the enforcement of creditors' rights
generally and general principles of equity.
(c) The execution, delivery and performance by Guarantor of this
Personal Guaranty and each other document or agreement executed, or to be
executed, by Guarantor in connection herewith or therewith and the
consummation of the transactions contemplated hereby or thereby are within
the power of Guarantor.
(d) No consent, approval, order or authorization of, or registration,
declaration or filing with, any governmental authority or other Person
(including, without limitation, the shareholders of any Person) is required
in connection with the execution and delivery of this Personal Guaranty or
any other document or agreement executed, or to be executed, in connection
herewith or therewith, by Guarantor and the performance and consummation of
the transactions contemplated hereby or thereby which would materially
impair Purchaser's ability to collect on this Personal Guaranty.
(e) The execution, delivery and performance by Guarantor of this
Personal Guaranty and each other document or agreement executed, or to be
executed, by Guarantor in connection herewith or therewith does not (i)
violate any provision of any law or regulation; (ii) result in any breach
of or default under any contract, obligation, indenture or other instrument
to which such Person is a party or by which such Person may be bound; or
(iii) result in the creation or imposition of any Lien upon any asset or
property of such Person which would materially impair Purchaser's ability
to collect on this Personal Guaranty.
(f) Guarantor has no knowledge of any pending assessments or
adjustments of Guarantor's income tax payable with respect to any year.
(g) There is no agreement, indenture, contract or instrument to which
Guarantor is a party or by which Guarantor may be bound that requires the
subordination in right of payment of any of Guarantor's obligations subject
to this
<PAGE>
Principal Guaranty and the other documents or agreements executed,
or to be executed, by Guarantor in connection herewith or therewith to any
other obligation of Guarantor.
(h) Neither this Personal Guaranty nor any other document or
agreement executed, or to be executed, by Guarantor in connection herewith
or therewith and none of the other certificates, financial statements or
information furnished to Purchaser by Guarantor in connection with this
Personal Guaranty and the other documents or agreements executed, or to be
executed, by Guarantor in connection herewith or therewith or the
transactions contemplated hereby or thereby contains or will contain any
untrue statement of a material fact or omits or will omit to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
4. COVENANTS. Until all of the Guaranteed Obligations have been fully,
finally and indefeasibly paid, Guarantor shall comply with the following
covenants:
(a) To the extent possible, Guarantor shall cause Borrower to
materially comply with each of the covenants applicable to Borrower as set
forth in the Credit Agreement and the Convertible Note;
(b) Guarantor shall materially comply with all applicable laws and
material contractual obligations; and
(c) Guarantor shall pay and discharge when due any and all material
indebtedness, obligations, assessments and taxes, both real or personal,
including, without limitation, Federal and state income taxes and state and
local property taxes and assessments owed by Guarantor.
5. AUTHORIZATIONS, WAIVERS, ETC.
(a) AUTHORIZATIONS. Guarantor authorizes Purchaser in its reasonable
discretion, without notice to Guarantor except as required by applicable
law, irrespective of any change in the financial condition of Borrower,
Guarantor or any other guarantor of the Guaranteed Obligations since the
date hereof, and without affecting or impairing in any way the liability of
Guarantor hereunder, from time to time to:
(i) Exercise any right or remedy Purchaser may have against
Borrower, Guarantor, any other guarantor of the Guaranteed Obligations
or any security, including, without limitation, the right to foreclose
upon any such security by judicial or nonjudicial sale;
(ii) Settle, compromise with, release or substitute any one or
more makers, endorsers or guarantors of the Guaranteed Obligations;
and
(iii) To the extent permitted pursuant to SUBPARAGRAPH 7.04 OF
THE
<PAGE>
CREDIT AGREEMENT, assign the Guaranteed Obligations, this Personal
Guaranty or any other Credit Document in whole or in part.
(b) WAIVERS. Guarantor hereby waives:
(i) Any right to require Purchaser to (A) proceed against
Borrower or any other guarantor of the Guaranteed Obligations,
(B) proceed against or exhaust any security received from Borrower,
Guarantor or any other guarantor of the Guaranteed Obligations or
otherwise marshall the assets of Borrower or (C) pursue any other
remedy in Purchaser's power whatsoever;
(ii) Any defense arising by reason of the application by Borrower
of the proceeds of any borrowing;
(iii) Any defense resulting from the absence, impairment or
loss of any right of reimbursement, subrogation, contribution or other
right or remedy of Guarantor against Borrower, any other guarantor of
the Guaranteed Obligations or any security, whether resulting from an
election by Purchaser to foreclose upon security by nonjudicial sale,
or otherwise;
(iv) Any benefit arising from any setoff or counterclaim of
Borrower or any defense which results from any disability or other
defense of Borrower or the cessation or stay of enforcement from any
cause whatsoever of the liability of Borrower (including, without
limitation, the lack of validity or enforceability of the Credit
Agreement or the Convertible Note);
(v) Any defense based upon any law, rule or regulation which
provides that the obligation of a surety must not be greater or more
burdensome than the obligation of the principal;
(vi) Until all obligations of Purchaser to extend credit to
Borrower have terminated and all of the Guaranteed Obligations have
been fully, finally and indefeasibly paid, any right of subrogation,
reimbursement, indemnification or contribution and other similar right
to enforce any remedy which Purchaser or any other Person now has or
may hereafter have against Borrower on account of the Guaranteed
Obligations, and any benefit of, and any right to participate in, any
security now or hereafter received by Purchaser or any other Person on
account of the Guaranteed Obligations;
(vii) All presentments, demands for performance, notices of
non-performance, notices delivered under the Credit Agreement or the
Convertible Note, protests, notice of dishonor, and notices of
acceptance of this Personal Guaranty and of the existence, creation or
incurring of new or additional Guaranteed Obligations and notices of
any public or private foreclosure sale;
<PAGE>
(viii) Any appraisement, valuation, stay, extension,
moratorium redemption or similar law or similar rights for
marshalling;
(ix) Any right to be informed by Purchaser of the financial
condition of Borrower or any other guarantor of the Guaranteed
Obligations or any change therein or any other circumstances bearing
upon the risk of nonpayment or nonperformance of the Guaranteed
Obligations;
(x) Until all obligations of Purchaser to extend credit to
Borrower have terminated and all of the Guaranteed Obligations have
been fully, finally and indefeasibly paid, any right to revoke this
Personal Guaranty;
(xi) Any defense arising from an election for the application of
Section 1111(b)(2) of the United States Bankruptcy Code which applies
to the Guaranteed Obligations; and
(xii) Any defense based upon any borrowing or grant of a
security interest under Section 364 of the United States Bankruptcy
Code.
Without limiting the scope of any of the foregoing provisions of this
PARAGRAPH 5, Guarantor hereby further waives (A) all rights and defenses
arising out of an election of remedies by Purchaser, even though that
election of remedies has destroyed Guarantor's rights of subrogation and
reimbursement against Borrower and (B) all other rights and defenses
available to Guarantor by reason of Sections 2787 to 2855, inclusive,
Section 2899 or Section 3433 of the California Civil Code or Section 3605
of the California Commercial Code. Notwithstanding the foregoing
provisions of this PARAGRAPH 5, however, Guarantor shall at all times be
entitled to the same benefits as Borrower arising with respect to any
setoff, defense or counterclaim asserted by Borrower based upon Purchaser's
failure to perform its obligations under the Credit Agreement or any other
Credit Document.
(c) FINANCIAL CONDITION OF BORROWER, ETC. Guarantor is fully aware
of the financial condition and affairs of Borrower. Guarantor has executed
this Personal Guaranty without reliance upon any representation, warranty,
statement or information concerning Borrower furnished to Guarantor by
Purchaser and has, independently and without reliance on Purchaser, and
based on such documents and information as it has deemed appropriate, made
its own appraisal of the financial condition and affairs of Borrower and of
other circumstances affecting the risk of nonpayment or nonperformance of
the Guaranteed Obligations. Guarantor is in a position to obtain, and
assumes full responsibility for obtaining, any additional information about
the financial condition and affairs of Borrower and of other circumstances
affecting the risk of nonpayment or nonperformance of the Guaranteed
Obligations and will, independently and without reliance upon Purchaser,
and based on such documents and information as it shall deem appropriate at
the time, continue to make its own appraisals and decisions in taking or
not taking action in connection with this Personal Guaranty.
<PAGE>
6. SUBORDINATION. Guarantor and Guarantor's spouse hereby subordinate
any indebtedness of Borrower or any of their Subsidiaries to Guarantor or
Guarantor's spouse to the Guaranteed Obligations. Guarantor and Guarantor's
spouse agree that Purchaser shall be entitled to receive payment on the
Guaranteed Obligations before Guarantor or Guarantor's spouse receives payment
of any indebtedness of Borrower or any of their Subsidiaries to Guarantor or
Guarantor's spouse. Any payments on such indebtedness of Borrower or their
Subsidiaries to Guarantor or Guarantor's spouse, if Purchaser so requests, shall
be collected, enforced and received by Guarantor or Guarantor's spouse as
trustee for Purchaser and be paid over to Purchaser on account of the Guaranteed
Obligations. Purchaser is authorized and empowered (but without any obligation
to so do), in its discretion, (a) in the name of Guarantor or Guarantor's
spouse, to collect and enforce, and to submit claims in respect of, indebtedness
of Borrower to Guarantor or Guarantor's spouse and to apply any amounts received
thereon to the Guaranteed Obligations, and (b) to require Guarantor and
Guarantor's spouse (i) to collect and enforce, and to submit claims in respect
of, indebtedness of Borrower or any of their Subsidiaries to Guarantor or
Guarantor's spouse, and (ii) to pay any amounts received on such indebtedness to
Purchaser for application to the Guaranteed Obligations. Notwithstanding the
foregoing, prior to the occurrence of an Event of Default, Guarantor shall be
entitled to receive from Borrower compensation in the form of salary in an
aggregate amount not to exceed in any fiscal year $125,000 and board approved
bonuses, if any.
7. MISCELLANEOUS.
(a) NOTICES. Except as otherwise provided herein, all notices,
requests, demands, consents, instructions or other communications to or
upon Guarantor or Purchaser under this Personal Guaranty shall be in
writing and faxed, mailed or delivered at his or its respective facsimile
number or address set forth below (or to such other facsimile number or
address for each party as indicated in any notice given by that party to
the other party). All such notices and communications shall be effective
(i) when sent by Federal Express or other overnight service of recognized
standing, on the second day following the deposit with such service; (ii)
when mailed, first class postage prepaid and addressed as aforesaid through
the United States Postal Service, upon receipt; (iii) when delivered by
hand, upon delivery; and (iv) when faxed, upon confirmation of receipt.
<PAGE>
Purchaser: UNITED BREWERIES OF AMERICA, INC.
Attn: Mr. Vijay Mallya
One Harbor Drive, Suite 102
Sausalito, California 94965
Telephone: (415) 289-1400
Facsimile: (415) 289-1409
With a
copy to: ORRICK, HERRINGTON & SUTCLIFFE
400 Sansome Street
San Francisco, California 94111
Attn: Alan Talkington, Esq.
Telephone: (415) 773-5762
Facsimile: (415) 773-5759
Guarantor: JAMES W. BERNAU
8800 Enchanted Way, S.E.
Turner, Oregon 97392
Telephone: (503) 371-1664
Facsimile: (503) 371-1664
With
copies to: ATER WYNNE HEWITT DODSON & SKERRITT, LLP
Attorneys at Law
Suite 1800
222 S.W. Columbia
Portland, Oregon 97201-6618
Attn: Jack W. Schifferdecker, Jr.
Telephone: (503) 226-8614
Facsimile: (503) 226-0079
and
DONALDSON, ALBERT, TWEET, CONNOLLY,
HANNA & MUNIZ
340 Vista Avenue, Suite 310
P.O. Box 968
Salem, Oregon 97308
Attn: Gordon R. Hanna
Telephone: (503) 585-2055
Facsimile: (503) 375-2649
(b) PAYMENTS. Guarantor shall make all payments required hereunder
to Purchaser, or its order, at Purchaser's office located at the address
set forth in SUBPARAGRAPH 7(A) hereof, or at such other office as Purchaser
may designate, on demand, in dollars. If any amounts required to be paid
by Guarantor under this
<PAGE>
Personal Guaranty are not paid when due, Guarantor shall pay interest on
the aggregate, outstanding balance of such amounts from the date due until
those amounts are paid in full at a per annum rate equal to the then
current Interest Rate (as defined in the Credit Agreement) PLUS three
percent (3.00%).
(c) EXPENSES. Guarantor shall pay on demand all reasonable fees and
expenses, including reasonable attorneys' fees and expenses, incurred by
Purchaser in the enforcement or attempted enforcement of this Personal
Guaranty or in preserving any of Purchaser's rights and remedies
(including, without limitation, all such fees and expenses incurred in
connection with any "workout" or restructuring affecting this Personal
Guaranty or any bankruptcy or similar proceeding involving Guarantor). The
obligations of Guarantor under this SUBPARAGRAPH 7(c) shall survive the
payment and performance of the Guaranteed Obligations and the termination
of this Personal Guaranty.
(d) WAIVERS; AMENDMENTS. This Personal Guaranty may not be amended
or modified, nor may any of its terms be waived, except by written
instruments signed by Guarantor and Purchaser. Each waiver or consent
under any provision hereof shall be effective only in the specific
instances for the purpose for which given. No failure or delay on
Purchaser's part in exercising any right hereunder shall operate as a
waiver thereof or of any other right nor shall any single or partial
exercise of any such right preclude any other further exercise thereof or
of any other right.
(e) ASSIGNMENTS. This Personal Guaranty shall be binding upon and
inure to the benefit of Purchaser and Guarantor and their respective
successors and assigns; PROVIDED, HOWEVER, that Guarantor may not assign or
transfer any of its rights and obligations under this Personal Guaranty
without the prior written consent of Purchaser; and PROVIDED, FURTHER, and
Purchaser may only assign or transfer any of its rights and obligations
under this Personal Guaranty to the extent permitted under Section 10.4 of
the Investment Agreement.
(f) CUMULATIVE RIGHTS, ETC. The rights, powers and remedies of
Purchaser under this Personal Guaranty shall be in addition to all rights,
powers and remedies given to Purchaser by virtue of any applicable law,
rule or regulation of any governmental authority, any other document or any
other agreement executed by Guarantor in connection herewith or therewith,
all of which rights, powers, and remedies shall be cumulative and may be
exercised successively or concurrently without impairing Purchaser's rights
hereunder. Guarantor waives any right to require Purchaser to proceed
against any Person or to pursue any remedy in Purchaser's power.
(g) PARTIAL INVALIDITY. If at any time any provision of this
Personal Guaranty is or becomes illegal, invalid or unenforceable in any
respect under the law or any jurisdiction, neither the legality, validity
or enforceability of the remaining provisions of this Personal Guaranty nor
the legality, validity or enforceability of such provision under the law of
any other jurisdiction shall in any way be affected or impaired
<PAGE>
thereby.
(h) LIABILITY ABSOLUTE. The liability of Guarantor hereunder is
absolute and unconditional and shall not be affected by any circumstances
whatsoever, including without limitation, any right of set-off, defense or
counterclaim asserted by Guarantor or any other Person against Purchaser
based upon any failure by Purchaser or any other Person to perform any of
its or their obligations to Borrower contained in the Investment Agreement,
any Ancillary Agreement or any agreement or agreements related hereto or
thereto, but excluding any right of set-off, defense or counterclaim
asserted by Borrower based upon Purchaser's failure to perform its
obligations under the Credit Agreement or any other Credit Document.
(i) GOVERNING LAW. This Personal Guaranty shall be governed by and
construed in accordance with the laws of the State of California without
reference to conflicts of law rules.
<PAGE>
IN WITNESS WHEREOF, Guarantor has caused this Personal Guaranty to be
executed as of the day and year first above written.
_____________________________
JAMES W. BERNAU
CONSENT OF SPOUSE
_________________________________
CATHY BERNAU
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 30,320
<SECURITIES> 0
<RECEIVABLES> 85,200
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 123,690
<PP&E> 2,000,000
<DEPRECIATION> 229,566
<TOTAL-ASSETS> 2,123,690
<CURRENT-LIABILITIES> 3,074,114
<BONDS> 241,224
0
0
<COMMON> 4,694
<OTHER-SE> (1,196,342)
<TOTAL-LIABILITY-AND-EQUITY> 2,123,690
<SALES> 1,600,915
<TOTAL-REVENUES> 1,600,915
<CGS> 1,905,335
<TOTAL-COSTS> 790,615
<OTHER-EXPENSES> 1,501,853
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 42,397
<INCOME-PRETAX> (2,720,272)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,720,272)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,720,272)
<EPS-PRIMARY> (0.58)
<EPS-DILUTED> (0.58)
</TABLE>
