Exhibit 4
SHAREHOLDERS' AGREEMENT
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This SHAREHOLDERS' AGREEMENT (this "Agreement") is made this 24th day
of October, 1997 by and among MENDOCINO BREWING COMPANY, INC., a California
corporation (herein called the "Mendocino" or the "Company"), H. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇ ▇▇▇▇▇▇▇ (the
"Original Partners"), and United Breweries of America, Inc. (the "Purchaser",
together with the Original Partners are referred to herein as the
"Shareholders").
W I T N E S S E T H
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WHEREAS, the Company and the Purchaser have entered into an Investment
Agreement dated October 24, 1997 (the "Investment Agreement") pursuant to which
the Purchaser has agreed to purchase from the Company an aggregate of at least
2,002,000 shares of the Company's Common Stock (the "Purchase Shares");
WHEREAS, the Original Partners wish to provide a further inducement to
the Purchaser to purchase the Purchase Shares by entering into this Agreement;
and
WHEREAS, the execution and delivery of this Agreement is a condition
precedent to the consummation of the transactions contemplated by the Investment
Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
1. Definitions. Certain terms used herein are defined as follows:
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(a) "Board of Directors" means the Board of Directors of the Company.
(b) "Immediate Family" means any spouse or domestic partner of a
Shareholder and any child, grandchild, parent, brother, or sister of a
Shareholder or of a spouse or domestic partner of a Shareholder.
(c) "Shares" means any shares of capital stock of the Company or any
securities convertible into or exchangeable for any class of capital stock of
the Company and all securities into which such Shares may be converted or
reclassified as a result of any merger, consolidation, stock split, stock
dividend, or other recapitalization of the Company whether now owned or
hereafter acquired.
(d) "affiliate" means with respect to any person, (i) each person
that, directly or indirectly, owns or controls, whether beneficially, or as
trustee, guardian or other fiduciary, five percent (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 purposes 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 management or policies, whether
through the ownership of voting securities, by contract or otherwise. The term
"affiliated" shall have meanings correlative to the foregoing.
2. Restriction of Shares. Each Original Partner, severally and not jointly,
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agrees that during the term of this Agreement all Shares owned by such Original
Partner (which Shares shall be referred to as the "Restricted Shares") shall be
subject to the terms and conditions of this Agreement. No sale (as defined in
Section 13 hereof), whether voluntary or involuntary, of any Restricted Shares
shall be valid unless the terms and conditions of this Agreement have been
complied with. Each Original Partner, severally and not jointly, represents and
warrants that the total number of shares of common stock (the "Common Stock")
presently owned by each such Original Partner is set forth under the signature
of such Original Partner on the signature page of this Agreement and that such
Original Partner is the sole legal and beneficial owner of such shares, except
to the extent that such shares may be pledged for security for indebtedness of
such Original Partner. If the shares are pledged, the name and address of the
pledgee is also set forth on the signature page of this Agreement.
3. Legend. Each certificate representing Restricted Shares shall forthwith
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be endorsed on the face thereof with the following legend:
"THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND CONDITIONS
OF A CERTAIN SHAREHOLDERS' AGREEMENT BY AND AMONG THE CORPORATION AND
THE SHAREHOLDERS THAT ARE SIGNATORIES THERETO, PROVIDING FOR, AMONG
OTHER MATTERS, A RIGHT OF FIRST REFUSAL TO PURCHASE THE SECURITIES
REPRESENTED BY THIS CERTIFICATE. COPIES OF SUCH AGREEMENT MAY BE
OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE CORPORATION."
Shareholders whose certificates are held by a pledgee will use their best
efforts to cause the pledgee to place such legend on the certificates held by
them. This Section 3 legend shall be removed upon termination of this
Agreement in accordance with the provisions of Section 8 hereof.
4. Sale of Shares.
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(a) Notice of Sale. An Original Partner may sell any or all Restricted
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Shares provided such sale is made pursuant to the terms and conditions of this
Agreement. If an Original Partner desires to sell any Restricted Shares such
Original Partner shall deliver a written notice of the intended sale (the
"Notice") to the Purchaser and to Enterprise Law Group, Inc., counsel for the
Company at least sixty (60) days prior to the date of such intended sale,
including, without limitation, the name and address of the prospective
purchaser, the purchase price and other terms and conditions of payment, the
date on or about which such sale is intended to be made, the number of
Restricted Shares to be sold (such shares hereinafter being referred to as the
"Offered Shares"), the percentage of all Restricted Shares of such Original
Partner which the Offered Shares represent and that the third party purchaser
has been informed of the rights of the Purchaser under this Agreement.
(b) Right of First Refusal. The Purchaser shall have the right,
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exercisable upon written notice to such selling Original Partner within thirty
(30) days from the date of
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receipt by the Purchaser of the Notice, to elect to purchase (in substitution
for and in place of the intended purchaser thereof) all of the Offered Shares on
the same terms and conditions stated in the Notice.
(c) In the event that the consideration to be paid to the selling
Original Partner shall consist, in whole or in part, of property other than
cash, the selling Original Partner shall specify the cash equivalent value of
such property in the Notice. In the event such property consists of securities
for which a public market exists, the cash equivalent value shall mean the
closing price or quotation for such securities in the applicable public market
on the day prior to the date of the Notice. Except where determined pursuant to
sales in a public market, the Purchaser shall have the right to contest in good
faith the cash equivalent value set forth in the Notice, provided the Purchaser
so notifies the selling Original Partner in writing within five (5) days of
their receipt of the Notice. Upon receipt of such notice of contest the selling
Original Partner shall petition the Board of Directors to determine by majority
vote of the disinterested directors the appropriate equivalent value, whose
decision shall be final and binding on all parties. During the period preceding
such decision by the disinterested directors all actions otherwise to be taken
hereunder shall be extended for the number of days between the selling Original
Partner's petition of the Board of Directors and the Board of Director's
announcement to the selling Original Partner and the Purchaser of its decision,
but in no case more than sixty (60) days. If no decision is made within the time
provided, the value shall be the value specified in the notice to the Board of
Directors. For the foregoing purpose, the four individuals selected by the
Purchaser pursuant to Section 7(a) hereof and, if the selling Original Partner
is the one individual selected by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ or the Original Partners
pursuant to Section 7(a) hereof, such selling Original Partner, are deemed not
disinterested.
(d) To the extent the Purchaser does not elect to purchase as provided
in subparagraph (b) of this Section 4, the selling Original Partner may sell the
Offered Shares to the buyer at the price and terms specified in the Notice or at
a higher price than specified therein. If the the Offered Shares on the same
terms within one hundred twenty (120) days after the mailing of the Notice to
the Purchaser, the selling Original Partner shall not sell such Offered Shares
without again complying with the terms of this Agreement.
(e) Any notice given by the Purchaser pursuant to subparagraph (b)
above shall, when taken together with the Notice mailed to the Purchaser,
constitute a binding legal agreement on the terms and conditions therein set
forth, it being understood that any modification, amendment, variance or other
change by the Purchaser of the terms and conditions set forth in the Notice
mailed to him other than as provided herein shall be of no force and effect
unless consented to in writing by the selling Original Partner.
The selling Original Partner and the Purchaser shall be entitled
to rely conclusively upon any notice received pursuant to subparagraph (b) above
with respect to their respective rights and obligations under this Section 4.
(f) The Purchase Shares and any other Shares held by the Purchaser
shall not be subject to a right of first refusal or other restrictions under
this Section 4.
5. Rule 144 Sales. Anything in this Agreement to the contrary
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notwithstanding, an Original Partner may sell or otherwise dispose of Restricted
Shares owned by such Original
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Partner in an unsolicited brokers' transaction under Rule 144 if such Original
Partner has provided the Purchaser with at least ten (10) days notice of such
Original Partner's intent to sell. Purchaser shall have the right to purchase
the Offered Shares at market price based on the average closing price of the
Company's common stock during the twenty (20) trading days immediately preceding
the date the notice is deemed to have been given. If Purchaser does not elect to
purchase the Offered Shares within five (5) days from the date the notice is
deemed to have been given, such Original Partner may sell the Offered Shares
pursuant to an unsolicited brokers' transaction under Rule 144, without the
necessity of complying with any of the terms and conditions of Section 4.
Notwithstanding Section 4, an Original Partner may transfer Shares:
(i) to a member of the Original Partner's Immediate Family or to a trust
established for the benefit of a member or members of the Original Partner's
Immediate Family, (ii) to an affiliate or equity holder of the Original Partner,
or (iii) to the estate of any of the foregoing by gift, will or intestate
succession; provided that the Original Partner or his representative notifies
the Company of such transfer not less than ten (10) nor more than ninety (90)
days prior to the transfer and that the proposed transferee agrees to be bound
by the terms and provisions of this Agreement and to become a party to this
Agreement immediately upon the receipt of such Shares.
6. Transfers in Violation of Agreement. A transfer in violation of this
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Agreement is null and void and the Company agrees to issue stop transfer
instructions to its stock transfer agent, or, so long as it may act as its own
transfer agent, to make a stop transfer notation in its appropriate stock record
with respect to any such void transfer in its shareholder records. The Company
shall continue to treat any Original Partner who made such transfer of
Restricted Shares in violation of this Agreement as the holder of such
Restricted Shares.
7. Voting Agreement.
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(a) Board of Directors. The Shareholders shall take all actions
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necessary (including, without limitation, voting such number of shares of the
voting stock of the Company now owned or hereafter acquired or controlled by
them, calling special meetings of shareholders and executing and delivering
written consents) and use their best efforts as shareholders of the Company to
cause the Board of Directors, at all times from and after the date hereof for
the election of directors of Mendocino, to consist of seven (7) directors and to
elect the directors nominated as follows: (i) four individuals selected by the
Purchaser, (ii) two independent directors acceptable to the Purchaser, and (iii)
one individual selected by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇. If ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ is unable to
select a director, or fails to select a director, a director shall instead be
selected by vote of the holders of a majority of the outstanding Restricted
Securities present and voting at a meeting of the Original Partners held on at
least four (4) days notice.
(b) Neither the Board of Directors nor any committee thereof shall
take any action without first giving effect to any nomination of directors by a
group in accordance with this Section 7, provided, however, that if a group
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fails to make a nomination within ten (10) business days after receipt of notice
from the Company or another party requesting that such group make a nomination,
the Board of Directors may fill the vacancy and the Board of Directors or
committee thereof may then take action; provided, further, that the director so
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appointed by the Board of Directors shall be removed if the group entitled to
select the director to fill such vacancy subsequently makes a nomination.
(c) The provisions of this Section 7 shall terminate when any
Shareholder holds more than 50% of the outstanding Shares or when the Original
Partners collectively hold less than 10% of the outstanding Shares.
8. Termination. This Agreement shall terminate on December 31, 2004.
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9. Notices. All notices, requests, demands, or other communications which
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are required or may be given pursuant to the terms of this Agreement shall be in
writing and shall be deemed to have been duly given upon receipt, if delivered
by hand, by telecopy or telegram, or if by mail, the earlier of receipt or three
days after deposit in the U.S. mail, postage prepaid, addressed to Purchaser and
to the Company as follows:
Purchaser: United Breweries of America, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention.: ▇▇▇▇▇ ▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP
Old Federal Reserve Bank Building
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention.: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ c/o Mendocino Brewing Company, Inc.
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇.▇. ▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ 101,
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Company: Mendocino Brewing Company, Inc.
▇.▇. ▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Copy to: Enterprise Law Group, Inc.
Menlo Oaks Corporate Center
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
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or to such other address as any party may designate for itself by notice
given as provided in this Agreement. Copies of notice to counsel shall be
given at the same time and by the same method of delivery as notice to the
parties.
10. Successors and Assigns. This Agreement and the rights and obligations
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of the parties hereunder shall be binding upon and shall inure to the benefit of
each Shareholder and such shareholder's respective successors, heirs, executors,
administrators, permitted assigns and legal representatives, and to the Company
and its successors and assigns; provided, however, that the rights and
obligations shall not inure to any person who acquires Shares through sales into
the public market.
11. Company Efforts. The Company agrees to use its best efforts to enforce
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this Agreement, to inform the Shareholders of any violation of this Agreement
and to assist the Shareholders in the exercise of their rights hereunder.
12. Counterparts. This Agreement may be executed in two or more
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counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
13. Certain Definitions. The words "sale," "sell," "transfer" and the like
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shall include any disposition by way of transfer, with or without consideration,
to any person for any purpose and shall include but shall not be limited in any
way to redemption by the issuer, private or public sale, exchanges of securities
on account of merger, consolidation, reorganization or any other transaction
affecting the securities of the Company held by the Shareholder; provided,
however, that the participation rights of the Shareholders under this Agreement
shall not pertain or apply to any pledge of Restricted Shares made by the
Shareholder pursuant to a bona fide loan transaction which creates a mere
security interest provided that any pledgee or transferee shall furnish the
Shareholders with a written agreement to be bound by and comply with all
provisions of this Agreement applicable to the Shareholder.
14. Severability. In case any one or more of the provisions or parts of a
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provision contained in this Agreement shall for any reason be held to be
invalid, illegal or unenforceable in any respect in any jurisdiction, such
invalidity, illegality or unenforceability shall not affect any other provision
or part of a provision of this Agreement or with respect to any other
jurisdiction, but this Agreement shall be reformed and construed in any such
jurisdiction as if such invalid or illegal or unenforceable provision or part of
a provision had never been contained herein and such provision or part reformed
so that it would be valid, legal and enforceable to the maximum extent permitted
in such jurisdiction.
15. Cooperation. Each of the parties hereto agrees to execute all such
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further instruments and documents and to take all such further action as the
other party may reasonably require in order to effectuate the terms and purposes
of this Agreement.
16. Construction. This Agreement and all documents contemplated hereby, and
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all remedies in connection therewith and all questions or transactions relating
thereto, shall be construed in accordance with and governed by the laws of the
state of California.
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This Agreement shall be interpreted according to its fair meaning and not
strictly for or against any party.
17. Attorney's Fees. In the event of any legal action or proceeding to
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enforce or interpret the provisions hereof, the prevailing party shall be
entitled to reasonable attorneys' fees, whether or not the proceeding results in
a final judgment.
18. Injunctions. Irreparable damage would occur in the event that any of
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the provisions of this Agreement were not performed in accordance with its
specified terms or were otherwise breached. Therefore, the parties hereto shall
be entitled to an injunction or injunctions to prevent breaches of the
provisions of this Agreement and to enforce specifically the terms of provisions
hereof in any court having jurisdiction, such remedy being in addition to any
other remedy to which they may be entitled at law or in equity.
19. Entire Agreement. This Agreement constitutes the full and entire
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understanding and agreement among or between the parties with regard to the
subjects hereof, and supersedes any prior or contemporaneous understandings,
representations, warranties or agreements related thereto (oral or written).
20. Governing Law. This Agreement shall be governed by and construed
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according to the laws of the State of California without regard to the
principles thereof regarding conflict of laws.
20. Amendments. This Agreement may be amended only by the written consent
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of (a) the Purchaser, (b) the holders of a majority of the outstanding
Restricted Shares present and voting at a meeting of the Original Partners held
on at least four (4) days notice, and (c) if the amendment changes the existing
rights or obligations or imposes additional obligations on the Company, the
Company.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands
the day and year first above written.
MENDOCINO BREWING COMPANY, INC.,
a California corporation
By: /s/ H. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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Name: H. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Chairman and Chief Executive Officer
UNITED BREWERIES OF AMERICA, INC.,
a Delaware corporation
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chairman and Chief Executive Officer
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AGREED TO by the following Original Partners, each of whom herewith
certifies that such shareholder owns, of the outstanding shares of Common Stock
of the above corporation, the number following such shareholder's name.
/s/ H. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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H. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Number of Shares of
Common Stock held: 272,367
Number of Shares Pledged: 3,529
Pledgee: The Savings Bank of Mendocino County
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, V.P.
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇▇▇▇▇▇
Number of Shares of
Common Stock held: 244,512
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Number of Shares of
Common Stock held: 93,034
Number of Shares Pledged: 93,034
Pledgee: Heritage Bank of Commerce
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇
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▇▇▇▇ ▇▇▇▇▇▇▇
Number of Shares of
Common Stock held: 248,809
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Number of Shares of
Common Stock held: 101,559
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