Exhibit 10.57
CONVERTIBLE PROMISSORY NOTE
MENDOCINO BREWING COMPANY, INC.
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Name of Issuer: Mendocino Brewing Company, Inc. Dated: July 1, 2001
Maturity Date: December 31, 2002
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1. Promise. Mendocino Brewing Company, Inc., a California corporation
having its principal office at 1601 Airport Road, Ukiah, California 95482
and any successor (the "Company"), for value received, promises to pay to
United Breweries of America Inc., a Delaware corporation or to its
registered successors or assigns (the "Holder") the principal sum of Six
Thousand Two Hundred Seventy-Nine Dollars and Fifty-Four Cents ($6,279.54)
on presentation and surrender of this Convertible Note ("Note") on December
31, 2002 (the "Maturity Date"), and to pay interest on that principal sum
at a rate equal to the lesser of (i) one and one-half percent (1.50%) per
annum above the prime rate offered from time to time by the Bank of America
in San Francisco, California, or (ii) ten percent (10%). Interest payments
shall be paid quarterly on the first day of the months of April, July,
October, and January of each year. Company may use any of the funds
borrowed from Holder for any corporate purposes of Company, including
paying obligations owed by Company to Holder.
2. Form of Payment. All payments under this Note shall be made in
lawful money of the United States of America. The Company waives diligence,
presentment, protest, demand and notice of protest, dishonor, and
nonpayment of this Note.
3. Conversion/Redemption/Renewal.
(a) The Holder has the right, at the holder's option, at any time
on or after the Maturity Date, to convert all or any portion of this Note
into fully paid and nonassessable shares of common stock ("Common Stock")
of the Company at the rate of one share of such Common Stock for each One
Dollar and 50/100 ($1.50) (the "Conversion Rate") principal amount of this
Note and any accrued but unpaid interest. The Holder agrees that all shares
of Common Stock of the Company, issued by the Company upon the conversion
of all or any part of this Note shall be restricted securities within the
meaning of Rule 144(a) of the Securities Act of 1933. The Holder further
agrees that any shares of Common Stock acquired by means of any conversion
as set forth herein shall be further restricted by the terms and conditions
set forth in that certain Shareholders' Agreement, dated October 24, 1997,
by and among the Company, Holder, and the Original Partners (as such term
is defined in the Shareholders' Agreement).
(b) The conversion right set forth in this Section 3 is subject
to any
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adjustment of the Conversion Rate set forth in Section 5 and Section 6, and
is only exercisable upon the surrender of this Note for conversion at the
office or agency to be maintained by the Company accompanied by instruments
of transfer, in form satisfactory to the Company, duly executed by the
registered holder. No fractional shares are issuable on any conversion, but
in lieu of issuing fractional shares the Company shall pay for such
fractional shares in cash.
(c) At any time prior to seventeen (17) months from the date of
this Note, the Holder may provide written notice to the Company requiring
the Company to commence repay of the outstanding principal balance of this
Note, together with any accrued but unpaid interest thereon, to Holder. In
such case, commencing on the Maturity Date, Company shall pay Holder equal
monthly installments of principal, together with any unpaid interest, over
a period of five (5) years until all amounts due hereunder shall be repaid
in full.
(d) If Holder does not convert or redeem any or all of the
principal amount of the Note into Common Stock on the Maturity Date, Holder
has the right to extend the term of this Note for a period of time mutually
agreed upon between Holder and the Company. At any time during such
extension period, Holder shall have the right to convert all or any part of
the outstanding principal amount of the Note plus accrued and unpaid
interest into Common Stock as set forth in this Section 3. Moreover, at any
time during such extension period, Holder shall have the right to require
the Company to repay all or any part of the outstanding principal balance
of this Note, together with any accrued but unpaid interest thereon, to
Holder within sixty (60) days.
4. Company Redemption. Prior to the Maturity Date, this Note may be
redeemed by the Company, in whole or in part, at any time after sixty (60)
days written notice ("Redemption Notice") to Holder. During such sixty (60)
day period, Holder shall have the right to convert all or any part of the
outstanding principal amount of the Note plus accrued and unpaid interest
into Common Stock, as set forth in Section 3. If Holder does not convert
all outstanding amounts into Common Stock, the Company may redeem any
remaining amounts at any time during a thirty (30) day period commencing
with the date of expiration of the sixty (60) day period provided for in
the Redemption Notice. Thereafter, Company shall be required to provide
Holder with a new Redemption Notice, and Holder shall have a new sixty (60)
day period within which to convert all or any part of the outstanding
principal amounts plus accrued and unpaid interest into Common Stock, as
set forth in Section 3.
5. Anti-Dilution.
(a) If at any time there is a capital reorganization of the
Company's Common Stock, including any combination, reclassification,
exchange, or subdivision of shares, a merger or consolidation of the
Company with or into another corporation, or the sale of all or
substantially all the Company's properties and assets as, or substantially
as, an entirety to another person, then, as a part of such reorganization,
merger, consolidation, or sale, lawful provision shall be made so that
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Holder shall thereafter be entitled to receive on conversion of this Note,
during the period specified in this Note, the number of shares of Common
Stock of the Company, or of the successor corporation resulting from such
merger or consolidation, to which a holder of the Common Stock deliverable
on conversion of this Note would have been entitled on that event if this
Note had been converted immediately before that event. In any such case,
appropriate adjustment (as determined by the Company's board of directors)
shall be made in applying this Note to the rights and the percentage
interests of Holder after the reorganization, merger, consolidation, or
sale to the end that this Note (including adjustment of the Conversion
Rate) shall be applicable after that event, as near as reasonably may be,
in relation to the shares of Common Stock deliverable after that event on
conversion of this Note. The Company shall, not later than thirty (30) days
prior to making such adjustment, give written notice ("Notice") by courier
to Holder at the address of Holder shown on the Company's books.
(b) Any Notice that is sent pursuant to Section 5(a) shall set
forth, in reasonable detail, the event requiring the adjustment and the
method by which the adjustment was calculated and shall specify the
Conversion Rate then in effect after the adjustment and the increased or
decreased number of shares of Common Stock to be received upon conversion
of this Note. When appropriate, advance notice may be given and included as
part of the notice required under other provisions of this Note.
6. Conversion Rate Protection.
(a) If at any time, or from time to time, the Company issues or
sells shares of Common Stock without consideration or for a consideration
per share less than the Conversion Rate in effect immediately before that
issue or sale, then and in each such case:
(i) the Conversion Rate then in effect and the Conversion
Rate applicable for any subsequent period shall be adjusted to a price
(calculated to the nearest cent) determined by dividing: (y) the sum of
(aa) the number of shares of Common Stock outstanding immediately before
that issue or sale multiplied by the Conversion Rate in effect immediately
before that issue or sale, plus (bb) the consideration, if any, received by
the Company on that issue or sale, by (z) the number of shares of the
Company's Common Stock outstanding immediately after that issue or sale;
and
(ii) Holder shall after that issue or sale, on conversion of
this Note, be entitled to receive the number of shares of Common Stock
equal to the number of shares that would otherwise, but for the adjustment
provided for in Section 6(a)(i), be issuable on such conversion multiplied
by a fraction, the numerator of which is the Conversion Rate then in effect
and the denominator of which is the Conversion Rate in effect immediately
after the adjustment provided for in Section 6(a)(i) on the date of
conversion. No such adjustment shall be made in an amount less than Five
Cents ($0.05), but any such amount shall be carried forward and given
effect in the next adjustment, if any.
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(b) If the Company (i) grants any rights or options to subscribe
for, purchase, or otherwise acquire shares of Common Stock, or (ii) issues
or sells any security, other than this Note, which is convertible into
shares of Common Stock, then the price per share of Common Stock issuable
on the exercise of the rights or options or the conversion of the
securities shall be calculated by dividing: (y) the total amount, if any,
received or receivable by the Company as consideration for the granting of
the rights or options or the issue or sale of the convertible securities,
plus the minimum aggregate amount of additional consideration payable to
the Company on exercise of the convertible securities, by (z) the maximum
number of shares of Common Stock issuable on the exercise or conversion.
(i) If the price per share so calculated is less than the
Conversion Rate of this Note in effect immediately before the rights or
options are granted or the convertible securities are issued or sold, the
granting or issue or sale shall be considered to be an issue or sale for
cash of the maximum number of shares of Common Stock so issuable on
exercise or conversion at the price per share determined under this
provision, and the Conversion Rate of this Note shall be adjusted as
provided above to reflect (on the basis of that determination) the issue or
sale. No further adjustment of the Conversion Rate shall be made as a
result of the actual issuance of shares of Common Stock on the exercise of
any such rights or options or the conversion of any such convertible
securities.
(ii) If such rights or options or convertible securities by
their terms provide, with the passage of time or otherwise, for any
increase in the amount of additional consideration payable to the Company
or any decrease in the number of shares of Common Stock issuable on such
exercise or exchange (by change of rate or otherwise), the Conversion Rate
shall, when each such increase or decrease becomes effective, be readjusted
to reflect the increase or decrease as far as it affects rights of exercise
or conversion that have not expired before that time.
(iii) If, on the expiration of such rights or options or the
rights of conversion of such convertible securities, any of them shall not
have been exercised, the Conversion Rate shall be readjusted and will then
be the same as it would have been had it originally been adjusted (or had
the original adjustment not been required, as the case may be), on the
basis that (y) the only shares of Common Stock so issued were the shares of
Common Stock, if any, actually issued or sold on the exercise of such
rights or options or rights of conversion of such convertible securities,
and (z) such shares of Common Stock, if any, were issued or sold for the
consideration actually received by the Company on such exercise plus the
consideration, if any, actually received by the Company for granting all
such rights or options or for issuing or selling all such convertible
securities.
(iv) No adjustment of the Conversion Rate as provided in
this Section 6(b) shall occur upon the granting or issuance of stock, stock
options, or warrants to employees or directors of the Company in the
aggregate amount of less than six hundred thousand (600,000) shares of
Common Stock.
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7. Subordination.
(a) Upon the written agreement of Holder, this Note may be
subordinated to any or all debt owed by the Company to banks and other
financial institutions, other than to the extent debt to any such bank or
financial institution involves the issuance of shares of the Company's
stock or notes, warrants, options or any other security convertible into
such stock.
(b) The payment of the indebtedness evidenced by this instrument
is subordinated to the payment of the "Senior Debt" defined and described
in the Subordination Agreement, dated as of September 24, 1998, between
United Breweries of America Inc. and the CIT Group/Credit Finance, Inc., as
amended by that certain Amendment to Subordination Agreement, dated as of
June 22, 1999, and reference is made to such Agreement for a full statement
of the terms and conditions of such subordination.
(c) The payment of the indebtedness evidenced by this instrument
is subordinated to the payment of the "Senior Debt" defined and described
in the Subordination Agreement, dated on or about November 15, 1998,
between United Breweries of America Inc. and the Savings Bank of Mendocino,
Inc., and reference is made to such Agreement for a full statement of the
terms and conditions of such subordination.
8. Enforcement. The Company agrees to reimburse Holder for all costs
of collection or enforcement of this Note, whether or not suit is filed
(including, but not limited to, reasonable attorney fees), incurred by
Holder.
9. Governing Law. This Note shall be governed by and construed in
accordance with the laws, without regard to the laws as to choice or
conflict of laws, of the State of California.
10. Default. If Company fails to pay any installment of principal or
interest when due, then, or at any time during such default, the entire
amount of the unpaid principal and interest shall, at the election of
Holder, become immediately due and payable.
11. Waiver. No previous waiver and no failure or delay by Holder in
acting with respect to the terms of this Note shall constitute a waiver of
any subsequent breach, default or failure of condition under this Note. A
waiver of any term of this Note must be in writing and shall be limited to
the express written terms of such waiver. No delay or omission on the part
of Holder in exercising any right under this Note shall operate as a waiver
of such right or of any other right.
12. Reservation of Stock. The Company covenants that it will at all
times reserve and keep available, solely for issuance on conversion of this
Note, all shares of Common Stock from time to time issuable upon exercise
of this Note.
13. Replacement. Upon receipt of evidence reasonably satisfactory to
the
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Company, of the loss, theft, destruction, or modification of this Note and,
in the event of such occurrence, on delivery of an indemnity agreement or
Note reasonably satisfactory in form and amount to the Company or in the
case of mutilation, on surrender and cancellation of this Note, the Company
at its expense will execute and deliver, in lieu of this Note, a new Note
of like tender.
14. Transfer. NO SALE OR TRANSFER OF THIS NOTE SHALL BE EFFECTIVE
UNLESS AND UNTIL ALL OF THE FOLLOWING STEPS ARE COMPLIED WITH:
(a) The transferor and the transferee shall execute the form of
Transfer Statement attached to this Note (or a similar statement which
shall then be attached to this Note);
(b) This Note and the executed Transfer Statement, together with
a United States Internal Revenue Service Form W-8 "Certificate of Foreign
Status" or a Form W-9 "Request for Taxpayer Identification Number and
Certification" completed and executed by the transferee, shall be delivered
to the Company at the Company's address as provided above; and
(c) If the Company is satisfied that the information contained in
the Transfer Statement is consistent with the information contained in the
completed and executed Form W-8 or W-9, as applicable, the Company shall
enter the transfer on a Note Holder Ledger maintained by the Company for
this purpose.
Any purported transfer with respect to which all of the above steps have note
been complied with shall be null and void and of no force or effect.
15. Entire Agreement; Written Modification Only. This Agreement
contains the entire agreement of the parties, and constitutes the complete,
final and exclusive embodiment of their agreement with respect to its
subject matter. This Agreement supersedes any and all prior correspondence,
arrangements, representations and understandings, whether written or oral,
express or implied, with respect to its subject matter. This Agreement may
not be modified except by a written agreement, which specifically sets
forth each modification and is signed by a duly authorized representative
of both parties. This Agreement is executed without reliance upon any
promise, warranty or representation by the parties or any of their
representatives, other than such promises, warranties or representations as
are expressly contained in this Agreement.
16. Severability. If any provision of this Agreement is deemed or held
invalid or unenforceable in whole or in part, for any reason, that
provision shall be deemed severed from the remainder of this Agreement, and
shall in no way affect or impair the validity or enforceability of any
portion or all of this Agreement, which otherwise shall remain in full
force and effect.
IN WITNESS WHEREOF, the Company has caused this Convertible Note to be executed
in its corporate name by the signature of its president and secretary.
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MENDOCINO BREWING COMPANY, INC., a California
corporation
By: /s/ Yashpal Singh
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Yashpal Singh
Its: President
By: /s/ N. Mahadevan
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N. Mahadevan
Its: Chief Financial Officer
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CONVERSION NOTICE
Conversion Notice To: MENDOCINO BREWING COMPANY, INC.
The undersigned holder of this Note, hereby irrevocably exercises the
option to convert this Note or the portion of it designated below into shares of
Common Stock of the Company, in accordance with the terms of the Note, and
directs that the shares issuable and deliverable on the conversion, together
with any check in payment of fractional shares, be issued and delivered to the
undersigned unless a different name is specified below. If shares of Common
Stock are to be issued in the name of anyone other than the undersigned, the
undersigned will pay all transfer taxes payable on this conversion and issuance.
Dated:
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Signature
If the shares are to be issued Portion to be converted (in
other than to a registered multiples) of $1,000 if less
holder, print name, address, than all:
city, state less and zip code $
of issuee: ---------------------------
Social Security Number of
other identifying number of
issuers:
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Notice: The signature of these instructions to convert must correspond with the
name as written on the face of this Note in every particular,
without alteration, enlargement, or any change whatsoever
TRANSFER STATEMENT
NOTICE TO: MENDOCINO BREWING COMPANY, INC.
FOR VALUE RECEIVED, the undersigned, the holder of that certain Convertible
Note initially executed on the Effective Date (as defined below) by Mendocino
Brewing Company, Inc. (the "Company") to the Initial Holder (as defined below)
in the Face Value set forth below (the "Note"), hereby sells, assigns, transfers
and conveys all of the rights of the undersigned under the Note, subject to the
terms of the Note, unto the Transferee (as described below):
Name of Transferee Address Face Value of Note
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The following terms have the following meanings:
Effective Date: , 2001
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Initial Holder:
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Dated: TRANSFEROR:
------------------------------ [Name of Transferor]
By:
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Name:
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Its:
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ACKNOWLEDGMENT OF THE COMPANY:
MENDOCINO BREWING COMPANY, INC.
By:
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Name:
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Its:
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