OH&S DRAFT
7/21/97
EXECUTIVE
EMPLOYMENT AGREEMENT
EXECUTIVE EMPLOYMENT AGREEMENT (this "Agreement") made as of this
_____ day of ________, 1997, between United Craft Brewers, Inc., a Delaware
corporation, having its principal place of business at Three Harbor Drive, Suite
____, Sausalito, California ("Company"), and Jim Bernau ("Executive").
W I T N E S S E T H:
WHEREAS, Executive possesses a detailed knowledge of the business and
affairs of Company, its policies, methods, personnel and customers; and
WHEREAS, Company recognizes Executive's importance to the growth and
success of Company and desires to assure Executive's continued contribution and
to compensate him in a manner which it has determined will reinforce and
encourage his continued attention and dedication; and
WHEREAS, Executive is desirous of committing himself to serve Company
on the terms herein provided;
NOW, THEREFORE, in consideration of the foregoing, and of the
respective covenants and agreements of the parties herein contained, the parties
hereto hereby agree as follows:
1. EMPLOYMENT.
(a) Company hereby employs Executive to serve as President of
Company, for the period commencing on the date of this Agreement and ending two
(2) years from the date of this Agreement, unless such employment is sooner
terminated as provided in this Agreement. In the event Executive continues in
the full-time employment of Company after the end of such term, such continued
employment shall be on a month-to-month basis terminable at any time, with or
without cause, by Executive or Company upon 30 days' notice.
(b) Executive hereby accepts employment under this Agreement and
agrees to devote all his best efforts and, subject to the terms of Section 3(a),
his full time and attention exclusively to the business and affairs of Company,
all pursuant to the general direction of the Board of Directors of Company (the
"Board") and Vijay Mallya, the Chairman of the Board (the "Chairman") and Chief
Executive Officer ("CEO"). During the term of this Agreement, Executive shall
perform such duties and responsibilities as may be assigned to him by the
Chairman and CEO which duties shall be commensurate with his title. Executive
shall report directly to the Chairman. Executive understands that the Board
will determine who, if anyone, will serve as Chief Operating Officer of Company,
and his
responsibilities, on or after the date hereof. Company shall retain full
direction and control of the manner, means and methods by which Executive
performs the services for which he is employed hereunder and of the place or
places at which such services shall be rendered.
(c) Executive shall observe and comply with Company's rules and
regulations as provided in any employee policy manual of the Company.
2. COMPENSATION.
(a) BASE SALARY. Executive shall be paid, for his employment
hereunder, a base salary at the annual rate of One Hundred Twenty Five Thousand
Dollars ($125,000) during the term of this Agreement, payable in substantially
equal biweekly installments and prorated in any partial year of employment.
Executive shall be eligible for a salary increase after the first year of the
term of this Agreement, such increase, if any, to be determined by the Board and
the CEO in their sole discretion.
(b) REIMBURSEMENTS. Executive shall be entitled to reimbursement for
reasonable travel and other business expenses incurred in the performance of his
duties under this Agreement in accordance with the general policy of Company, as
it may change from time to time, provided that Executive provide an itemized
account together with supporting receipts for such expenditures in accordance
with the requirements set forth in the Internal Revenue Code of 1986, as
amended, and related regulations, subject to the right of Company at any time to
place reasonable limitations on such expenses thereafter to be incurred or
reimbursed.
(c) WITHHOLDING. Company shall be entitled to withhold from any
compensation paid or payable hereunder such amounts on account of payroll taxes,
income taxes and other similar matters as are required to be withheld by
applicable law.
(d) INSURANCE. Company may, at its discretion, secure at its own
expense a "key-man" life insurance policy upon the life of Executive, payable to
Company in the event of Executive's death. Executive agrees that any such
insurance policy shall be for Company's benefit only, and acknowledges that no
person claiming by or through Executive shall have any right to the proceeds of
such insurance policy. Executive agrees to execute all documents and take all
acts reasonably requested by Company to secure and enjoy the benefits of such
insurance policy.
(e) VACATION. Executive shall be entitled to a number of paid
vacation days in each calendar year in accordance with Company policy, but not
less than fifteen (15) days per calendar year. Such paid time off shall be
taken at times which do not interfere with the normal operation of Company's
business.
(f) BENEFIT PLANS. Subject to any limitations imposed by applicable
law, Executive shall be eligible to participate in all Company employee benefit
programs, including without limitation, medical and dental coverage, life
insurance, profit sharing, retirement, pension and tax-qualified plans, in
substantially the same manner and to
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substantially the same extent as other Company employees. Nothing in this
agreement shall preclude Company or any affiliate of Company from terminating or
amending any employee benefit plan or program at any time or from time to time.
(g) BONUSES. Executive shall be entitled to periodic bonuses in
amounts and on such terms as the Board may from time to time determine in its
sole discretion.
(h) OPTIONS. Executive shall be entitled to receive options to
purchase shares of Company's Common Stock in accordance with the terms of the
Option Agreement attached hereto as Exhibit B.
(i) REGISTRATION RIGHTS. Executive shall be entitled to registration
rights in accordance with the terms of the Registration Rights Agreement
attached hereto as Exhibit C.
(j) SUBSTITUTION OF GUARANTORS. Schedule 2(j) attached hereto
identifies those obligations (the "Guaranteed Obligations") of the Constituent
Corporations (as that term is defined in the Investment Agreement dated January
30, 1997, as amended, between the Constituent Corporations, Executive and United
Breweries of America, Inc.) for which Executive is a guarantor. Company shall
use its best efforts to arrange for the substitution of Company for Executive as
guarantor under the Guaranteed Obligations; PROVIDED, HOWEVER, that Company
shall have no obligation to arrange for such substitution if doing so would
require the giving of any additional security or the imposition of any costs on
Company or any of the Constituent Corporations. If Company is unable to obtain,
or for one of the reasons noted above chooses not to obtain, the release of
Executive and substitution of Company as guarantor under the Guaranteed
Obligations, then, except as provided below, Company shall indemnify and
reimburse Executive for any and all costs or losses arising from Executive's
obligations as guarantor and shall provide security to Executive in assets of
the Company or the Constituent Corporations having an aggregate value of 140% of
the amount of the obligations underlying any such remaining guaranty. Such
security shall be subordinated as required by creditors of the Company or the
Constituent Corporations. The Company shall not be obligated to indemnify,
reimburse or provide security to Executive, however, for any costs or losses
resulting from the negligence of Executive or the failure of Executive to timely
notify Company of a claim against any guarantee or to properly and diligently
defend against any such claim.
(k) RELOCATION. If during the term of this Agreement the Board of
Directors requires Executive to relocate to the San Francisco, California area
for purposes of Executive's employment with Company, Executive shall be entitled
to a one-time relocation fee of Fifty Thousand Dollars ($50,000). Executive
shall not be entitled to reimbursement of costs or any other payments relating
to the relocation. Executive's office shall be at the Company's principal place
of business; however, Executive understands that significant travel may be
required to carry out the requirements of his position.
(l) BENEFITS RETAINED BY COMPANY. All rights, assets, opportunities,
and other benefits accruing as a result of Executive's performance hereunder
shall be deemed the property of Company, including without limitation, accounts,
leads, reciprocal actions
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promised by third parties, and gratuities from vendors, prospective vendors,
business associates, and prospective business associates.
3. EXECUTIVE'S BUSINESS ACTIVITIES.
(a) Executive shall devote his entire professional time, attention
and energy exclusively to the performance of his duties and responsibilities for
Company; provided, however, that Executive may spend up to 20 hours per month in
providing services to Willamette Valley Vineyards. Other than as set forth in
the preceding sentence, Executive shall not, directly or indirectly, (i)
substantially be engaged in or concerned with any other commercial duties or
pursuits, (ii) render services to any third party for compensation or other
benefit, or (iii) engage in any other business activity.
(b) Executive agrees that during the term of his employment under
this Agreement, he will engage in no business or other activities, directly or
indirectly, which are or may be competitive with or which might place him in a
competing position to that of Company without obtaining the prior written
consent of Company.
4. TERMINATION OF EMPLOYMENT BY COMPANY.
(a) FOR CAUSE. Notwithstanding anything herein to the contrary,
Company may terminate this Agreement and Executive's employment hereunder at any
time, with or without notice, for cause. Termination of this Agreement and
Executive's employment hereunder shall be deemed to be "for cause" in the event
that Executive (i) violates any provision of this Agreement, (ii) willfully
fails or refuses to comply with the reasonable and lawful policies, standards or
regulations established from time to time by the Company and Executive's failure
to correct any such failure or refusal within thirty (30) days following notice
from the Company specifying the nature of such failure or refusal, (iii)
violates any laws or regulations, including, without limitation, any rules or
regulations of the Bureau of Alcohol, Tobacco and Firearms or any state or local
beverage control authority or agency other than immaterial violations which are
not likely to adversely affect the Company, or (iv) engages in criminal conduct
or engages in conduct with respect to the Company that is dishonest, fraudulent
or materially detrimental to the reputation, character or standing of the
Company. Upon said termination, Company shall be under no obligation to
Executive, except to pay his accrued and unpaid base salary through the date of
termination and vacation pay to the date of said termination. Company may, at
its option, elect to continue to pay Executive his base salary for one year
after said termination, in which event Executive agrees to comply with the
noncompetition requirements of Section 5(a) below. If, at any point during such
one year period, Executive breaches the noncompetition requirements of Section
5(a), Company may immediately terminate making such payments with no further
obligation to Executive.
(b) WITHOUT CAUSE. Company may terminate this Agreement and
Executive's employment hereunder at any time, with or without notice, without
cause. If such event occurs during the term of this Agreement, Executive may,
at his option, either (i) agree to comply with the noncompetition requirements
of Section 5(a) below, in which case
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Company shall continue to pay Executive his base salary for one year after said
termination, or (ii) decide not to comply with the non-competition requirements
of Section 5(a) below, in which case Executive shall receive only his accrued
and unpaid base salary through the date of termination and vacation pay to the
date of said termination. In either case, Executive shall be required to notify
Company in writing of his election within fifteen (15) days of his termination
by the Company without cause. If Executive fails to notify Company of his
election within the five day period provided above, Executive shall be deemed to
have opted not to comply as set forth in subparagraph (ii) above.
5. NON-COMPETITION.
(a) REQUIREMENTS. During the Covenant Period, as defined below,
Executive shall not:
(i) Whether or not for compensation, directly or indirectly
engage in the Craft Brewing Business, as defined below, or any part thereof, in
the Covenant Area, as defined below, or participate in or encourage or assist
any other person in such person's conduct of the Craft Brewing Business, or any
part thereof, in the Covenant Area, whether as a director, officer, employee,
consultant, adviser, independent contractor or otherwise; or
(ii) Hold a legal or beneficial interest in any person other
than Company which is engaged in the Craft Brewing Business or any part thereof
in the Covenant Area, whether such interest is as an owner, investor, partner,
creditor (other than as a trade creditor in the ordinary course of business),
joint venturer or otherwise; PROVIDED, HOWEVER, that nothing in the foregoing
shall prevent the Employee from owning not more than five percent of the
outstanding capital stock or other equity interests in any person with shares or
other equity interests registered pursuant to Section 12(b) or 12(g) of the
Securities Exchange Act of 1934, as amended; or
(iii) Solicit, divert or attempt to divert from Company, any
subsidiary, partner or parent of Company or any person deriving title to the
goodwill of any of the foregoing (an "Affiliate") any business in the Covenant
Area, or any customer in the Covenant Area, of any part of the Craft Brewing
Business then conducted by Company or any Affiliate.
(b) DEFINITIONS. For purposes of this Agreement, "Covenant Period"
shall mean the term of Executive's employment hereunder and, to the extent the
provisions of this Section 5 have been activated under Section 4, a period of
twelve (12) months from and after termination of his employment. For purposes
of this Agreement, "Covenant Area" shall mean the California counties of San
Francisco, Marin, Sonoma, Mendocino, Humboldt, Orange, Los Angeles and Alameda,
together with any other county or portion of California or any other state or
country in which Company, its predecessors and subsidiaries have done business
in the past three (3) years. For purposes of this Agreement, "Craft Brewing
Business" shall mean the development, brewing, marketing or distribution of
premium quality specialty beers, ciders or other brewed alcoholic beverages.
Categories of Craft
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Brewing include, but are not limited to: contract brews, regional craft brews,
microbrews, large brewer craft-style brews, and brewpub brews.
6. DISABILITY. In the event Executive shall become unable to perform his
duties in substantially the manner, and to the extent required hereunder, due to
physical or mental illness or disability, from any cause, and such failure to
perform said duties shall continue for the period of time required for Executive
to be entitled to benefits available under any long term disability plan that
the Company provides to its employees, then Company may give Executive notice of
termination of this Agreement. The termination of this Agreement will become
effective on the thirtieth day following receipt by Executive of the notice of
termination, provided that Executive shall not have returned to the full time
performance of his duties within thirty days of the receipt of said notice.
Executive's salary payable hereunder shall be paid up through the end of the
month in which the termination of this Agreement pursuant to this Section 6
becomes effective.
7. DEATH OF EXECUTIVE. In the event of the death of Executive during the
period of his employment hereunder, Executive's salary payable hereunder shall
be paid up through the end of the month in which the date of death occurs and
thereafter (except with respect to bonuses) Company's obligations hereunder
shall cease and this Agreement shall terminate. If Executive's death occurs on
or after the first day of the seventh month in a given bonus year, Executive
shall be entitled to a pro rata (based on the number of days in the year prior
to his death) portion of any bonus to which he would have been entitled had he
survived for the entire year. Executive's heirs or personal representatives
shall perform Executive's obligations under the Confidential Information and
Invention Assignment Agreement (the "Confidential Information Agreement")
between Company and Executive, dated as of the date hereof, to be executed by
Executive and attached hereto as Exhibit A, to return the materials therein
described to Company upon Company's request.
8. ASSIGNMENT AND TRANSFER.
(a) Executive's rights and obligations under this Agreement shall not
be transferable by assignment or otherwise, and any purported assignment,
transfer, or delegation thereof shall be void.
(b) This Agreement shall inure to the benefit of, and be enforceable
by, any purchaser of substantially all of Company's assets, any corporate
successor to Company or any assignee thereof.
9. OBLIGATIONS SURVIVING EXPIRATION OR TERMINATION. Executive's
obligations hereunder and under the Confidential Information Agreement shall
survive expiration or termination of this Agreement and termination of
employment hereunder for any reason with respect to Inventions (as defined in
the Confidential Information Agreement) conceived, developed or created and
Confidential Information (as defined in the Confidential Information Agreement)
acquired by or disclosed to Executive during Executive's employment with
Company. Executive's obligations under Section 4, Section 5, Section 12 and
Section 14(k) of this Agreement shall survive expiration or termination of this
Agreement and termination
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of employment hereunder for any reason to the extent therein provided. All such
obligations shall be binding upon Executive's heirs and personal representatives
and shall inure to the benefit of Company's successors and assigns.
10. NO INCONSISTENT OBLIGATIONS. Executive represents and warrants that
there exist no obligations, legal or otherwise, inconsistent with the terms of
this Agreement or with his undertaking employment with Company. Executive will
not disclose to Company, or use, or induce Company to use, any proprietary
information or trade secrets of others. Executive represents and warrants that
he has returned all property and confidential information belonging to all prior
employers.
11. OBLIGATIONS OF OR TO OTHER ENTITIES; INDEMNIFICATION. Executive
represents and warrants that (i) except with respect to Willamette Valley
Vineyards, Inc., there exist no obligations or liabilities of or claims against,
and that Executive has no obligation of any kind to, any corporation,
partnership or other business entity, of which Executive is or was a principal
shareholder, partner or principal owner, other than those that have been
disclosed in writing to Company, and (ii) that all prior employment agreements
between Executive and any of the Constituent Corporations have been terminated.
12. NON-SOLICITATION. For a period of one year from and after the
termination of his employment hereunder for any reason, Executive shall not,
without the prior written consent of Company, directly or indirectly employ,
solicit for employment, or advise or recommend to any other person that such
other person employ or solicit for employment, any full-time employee of the
Company or its affiliates during the period of such employee's employment by
Company or its affiliates. Neither shall Executive, during the same period,
induce or attempt to induce any officer, consultant, full-time or part-time
employee, agent, or independent contractor to leave the employ of Company or its
affiliates or to cease to provide the services then provided to Company or its
affiliates. Additionally, Executive shall not employ any full-time employee
until at least three months after such employee's voluntary, or involuntary but
without cause, termination from Company or its affiliates.
13. CONDITIONS PRECEDENT TO COMPANY'S OBLIGATIONS. The obligations of
Company under this Agreement shall be subject to the execution and delivery by
Executive of the Confidential Information Agreement attached hereto as Exhibit
A.
14. MISCELLANEOUS.
(a) ATTORNEYS' FEES. Should either party hereto, or any heir,
personal representative, successor or assign of either party hereto, resort to
litigation or arbitration to enforce this Agreement, the party or parties
prevailing in such litigation shall be entitled, in addition to such other
relief as may be granted, to recover its or their reasonable attorneys fees and
costs in such litigation from the party or parties against whom enforcement was
sought.
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(b) GOVERNING LAW. This Agreement shall be governed by and construed
according to the laws of the State of California without regard to the
principles thereof regarding conflict of laws.
(c) ENTIRE AGREEMENT. This Agreement contains the entire agreement
and understanding between the parties hereto and supersedes any prior or
contemporaneous written or oral agreements between them respecting the subject
matter hereof.
(d) AMENDMENT. This Agreement may be amended only by a writing
signed by Executive and a duly authorized representative of the Company.
(e) SEVERABILITY. If any term, provision, covenant, or condition of
this Agreement, or the application thereof to any person, place or circumstance,
shall be held to be invalid, unenforceable, or void, the remainder of this
Agreement and such term, provision, covenant, or condition as applied to other
persons, places and circumstances shall remain in full force and effect.
(f) CONSTRUCTION. The headings and captions of this Agreement are
provided for convenience only and are intended to have no effect in construing
or interpreting this Agreement. The language in all parts of this Agreement
shall be in all cases construed according to its fair meaning and not strictly
for or against Company or Executive.
(g) RIGHTS CUMULATIVE. The rights and remedies provided by this
Agreement are cumulative, and the exercise of any right or remedy by either
party hereto (or by its successor), whether pursuant to this Agreement, to any
other agreement, or to law, shall not preclude or waive its right to exercise
any or all other rights and remedies.
(h) NONWAIVER. No failure or neglect of either party hereto to any
instance to exercise any right, power or privilege hereunder or under law shall
constitute a waiver of any other right, power or privilege or of the same right,
power or privilege in any other instance. All waivers by either party hereto
must be contained in a written instrument signed by the party to be charged and,
in the case of Company, by Company's Chairman.
(i) REMEDY FOR BREACH. The parties hereto agree that, in the event
of breach or threatened breach of any covenants of Executive, the damage or
imminent damage to the value and the goodwill of Company's business shall be
inestimable, and that therefore any remedy at law or in damages shall be
inadequate. Accordingly, the parties hereto agree that Company shall be
entitled to injunctive relief against Executive in the event of any breach or
threatened breach of any of such provisions by Executive, in addition to any
other relief available to Company under this Agreement or under law.
(j) NOTICES. Any notice, request, consent or approval required or
permitted to be given under this Agreement or pursuant to law shall be
sufficient if in writing, and if and when delivered personally, by facsimile or
sent by certified or registered mail, with postage prepaid, to Executive's
residence (as noted in Company's records), or to Company's principle executive
office, as the case may be.
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(k) ASSISTANCE IN LITIGATION. Executive shall, during and after
termination of employment, upon reasonable notice, furnish such information and
proper assistance to Company as may reasonably be required by Company in
connection with any litigation in which it or any of its subsidiaries or
affiliates is, or may become, a party. If such assistance occurs after
termination of Executive's employment, the Company shall pay Executive
reasonable compensation if such assistance exceeds 20 hours.
(l) ARBITRATION. Any controversy, claim or dispute arising out of or
relating to this Agreement or to Executive's employment with the Company,
including claims for discrimination, unpaid wages, claims based on common law or
statute, either during the existence of the employment relationship or
afterwards, between the parties hereto, their assignees, their affiliates, their
attorneys, or agents, shall be settled by arbitration. Arbitration shall be
conducted in accordance with the then prevailing labor arbitration rules of the
American Arbitration Association, with the following exceptions if in conflict:
(a) one arbitrator may be agreed upon, otherwise there shall be three
arbitrators, one named in writing by each party within 20 days after demand for
arbitration is given, and a third chosen by the two appointed. Should either
party refuse or neglect to appoint said arbitrator or to furnish the arbitrators
with any papers or information demanded, he, she or they are empowered by both
parties to proceed ex parte. If there be one arbitrator his or her decision
shall be binding; if there be three arbitrators the decision of any two shall be
binding; (b) each party to the arbitration will pay its pro rata share of the
expenses and fees of the arbitrator(s), together with other expenses of the
arbitration incurred or approved by the arbitrator(s); and (c) arbitration may
proceed in the absence of any party if written notice (pursuant to the American
Arbitration Association's rules and regulations) of the proceedings has been
given to such party. The location of the arbitration shall be in San Francisco,
California. The parties agree to abide by all decisions and awards rendered in
such proceedings. Such decisions and awards rendered by the arbitrator shall be
final and conclusive and may be entered in any court having jurisdiction thereof
as a basis of judgment and of the issuance of execution for its collection. All
such controversies, claims or disputes shall be settled in this manner in lieu
of any action at law or equity; provided however, that nothing in this
subsection shall be construed as precluding the Company or Executive from
bringing an action for injunctive relief or other equitable relief. The parties
shall keep
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confidential the existence of the claim, controversy or disputes from third
parties (other than arbitrator(s)), and the determination thereof, unless
otherwise required by law.
IN WITNESS WHEREOF, the undersigned have executed this Agreement on the
date set forth below.
EXECUTIVE
- ---------------------------------
Jim Bernau
UNITED CRAFT BREWERS, INC.
By:
----------------------------
Name: Vijay Mallya
Title: Chairman and Chief
Executive Officer
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EXHIBIT A
EMPLOYEE CONFIDENTIALITY AND INVENTION ASSIGNMENT AGREEMENT
A-1
UNITED CRAFT BREWERS
CONFIDENTIAL INFORMATION AND
INVENTION ASSIGNMENT AGREEMENT
This CONFIDENTIAL INFORMATION AND INVENTION ASSIGNMENT AGREEMENT (the
"Agreement") is made as of this ____ day of _________, 1997, between United
Craft Brewers, Inc., a Delaware corporation (the "Company"), and Jim Bernau, the
undersigned individual.
In consideration of my employment with the Company, the receipt of
confidential information while associated with the Company, and other good and
valuable consideration, I, the undersigned individual, agree that:
1. CONFIDENTIAL INFORMATION.
(a) EXISTENCE OF CONFIDENTIAL INFORMATION. The Company owns and
has developed and compiled, and will develop and compile, certain proprietary
techniques and confidential information which have great value to its business
(referred to in this Agreement collectively as "Confidential Information").
Confidential Information includes not only information disclosed by the Company
to me, but also information developed or learned by me during the course of my
employment with the Company. Confidential Information is to be broadly defined,
and includes all information that has or could have commercial value or other
utility in the business in which the Company is engaged or contemplates
engaging, and all information of which the unauthorized disclosure could be
detrimental to the interests of the Company, whether or not such information is
identified as Confidential Information by the Company. By example and without
limitation, Confidential Information includes any and all information concerning
trade secrets, techniques, processes, formulas, computer programs, innovations,
discoveries, improvements, research, development, test results, specifications,
data, know-how, formats, marketing plans, business plans, strategies, forecasts,
unpublished financial information, budgets, projections, and customer and
supplier identities, characteristics, and agreements.
(b) PROTECTION OF CONFIDENTIAL INFORMATION. I will not,
directly or indirectly, use, make available, sell, disclose, or otherwise
communicate to any third party, other than in my assigned duties and for the
benefit of the Company, any of the Company's Confidential Information, either
during or after my employment with the Company. In the event I desire to
publish the results of my work for the Company through literature or speeches, I
will submit such literature or speeches to the Chairman and CEO at least 30 days
before dissemination of such information for a determination of whether such
disclosure may destroy trade secret status or be highly prejudicial to the
interests of the Company or whether disclosure may constitute an invasion of its
privacy. I agree not to publish, disclose, or otherwise disseminate such
information without the prior written approval of the CEO. I acknowledge that I
am aware that the unauthorized disclosure of Confidential Information of the
Company may be highly prejudicial to its interests, an invasion of privacy, and
an improper disclosure of trade secrets. Whenever the approval, designation,
specification, or
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other act of the CEO is required under this Agreement, the CEO may, by written
designation, authorize an agent of the Company to perform such act.
(c) DELIVERY OF CONFIDENTIAL INFORMATION. Upon request or when
my employment with the Company terminates, I will immediately deliver to the
Company all copies of any and all materials belonging to the Company including,
but not limited to, those which relate to or contain Confidential Information.
(d) SECRET INFORMATION BELONGING TO OTHERS. I represent that my
employment with the Company does not and will not breach any agreements with or
duties to a former employer or any other third party to keep secret confidential
information belonging to others or to assign Inventions (as defined below) to
them. I will not disclose to the Company or use in its behalf any confidential
information belonging to others.
2. INVENTIONS.
(a) ASSIGNMENT OF INVENTIONS. I hereby assign any present or
future rights I may have in any invention, improvement, discovery, idea,
process, writing, or computer program (referred to in this Agreement
collectively as "Inventions") made or conceived by me solely or jointly with
others which: (a) is developed in whole or in part on Company time or with the
use of the Company's equipment, supplies, materials, facilities, or Confidential
Information; (b) is suggested by or results from any task assigned to me or work
performed by me for or on behalf of the Company; or (c) relates in any manner to
the Company's business, or the Company's actual or anticipated research or
development.
(b) DISCLOSURE TO COMPANY. I will at all times, even after my
employment terminates, promptly advise the Company of any Inventions I have made
or conceived, either jointly or on my own, wholly or in part during my term of
employment. The Company will hold such disclosures in confidence unless the
Invention disclosed is transferred to the Company pursuant to Paragraph 2(a) of
this Agreement.
(c) PRIOR INVENTIONS. Except as listed in Exhibit 1 to this
Agreement, I presently have no right, title or interest in any Inventions. I
agree that any Invention not so indicated by me in Exhibit 1 at this time is
subject to the provisions of Paragraph 2(a) of this Agreement.
(d) EXCLUSIONS OF CERTAIN INVENTIONS. As provided in California
Labor Code Section 2870, the provisions of Paragraph 2(a) of this Agreement do
not apply to any Invention: (a) developed entirely on my own time; (b)
developed without the use of the Company's equipment, supplies, facilities, or
Confidential Information; (c) which in no way relates to the Company's business,
or actual or anticipated research or development; and (d) which does not result
from any work performed by me for the Company. I understand that I bear the
full burden of proving to the Company that an Invention qualifies fully under
Section 2870. By signing this Agreement, I acknowledge receipt of a copy of
this Agreement and of written notification of the provisions of Section 2870, a
copy of which is attached to this Agreement as Exhibit 2.
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(e) ASSISTANCE TO COMPANY. I will at all times during and after
my employment with the Company do whatever the Company requests of me to assign
any Inventions to the Company or to assist the Company in filing patent
applications or otherwise gaining or securing title, right to use, copyrights,
patents or the like for any Inventions described in Paragraph 2(a) of this
Agreement.
3. PRIOR COMMITMENTS. I have no other agreements, relationships or
commitments to any other person or entity which conflict with my obligations to
the Company under this Agreement.
4. INJUNCTIVE RELIEF. I acknowledge that my failure to carry out
any obligation under this Agreement, or a breach by me of any provision herein,
will constitute immediate and irreparable damage to the Company, which cannot be
fully and adequately compensated in money damages and which will warrant
preliminary and other injunctive relief, an order for specific performance, and
other equitable relief. I also understand that other action may be taken and
remedies enforced against me.
5. MODIFICATION. No modification of this Agreement shall be valid
unless made in writing and signed by both parties.
6. BINDING EFFECT. This Agreement shall be binding upon me, my
heirs, executors, assigns and administrators and is for the benefit of the
Company and its successors and assigns.
7. GOVERNING LAW. This Agreement shall be interpreted under the
laws of California without regard to the principles thereof regarding conflict
of laws.
8. ENTIRE UNDERSTANDING. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter of the
Agreement, superseding all prior or contemporaneous agreements and
understandings (whether oral or written) between the parties with respect to the
subject matter.
9. NOT EMPLOYMENT AGREEMENT. This Agreement is not an employment
agreement. I understand that the Company may terminate my association or
employment with it at any time, with or without cause, subject to any rights
under a separate written employment agreement.
10. CONSTRUCTION. The headings of the paragraphs of this Agreement
are inserted for convenience only and do not constitute part of and shall not be
used to interpret this Agreement. The language in all parts of this Agreement
shall be in all cases construed according to its fair meaning and not strictly
for or against the Company or me.
11. ATTORNEYS' FEES. Should either I or the Company, or any heir,
personal representative, successor or assign of either party, resort to
litigation or arbitration to enforce this Agreement, the party or parties
prevailing in such litigation shall be entitled, in addition to such other
relief as may be granted, to recover its or their reasonable
3
attorneys' fees and costs in such litigation from the party or parties against
whom enforcement was sought.
12. SEVERABILITY. If any term, provision, covenant, or condition of
this Agreement, or the application thereof to any person, place or circumstance,
shall be held to be invalid, unenforceable, or void, the remainder of this
Agreement and such term, provision, covenant, or condition as applied to other
persons, places and circumstances shall remain in full force and effect.
13. RIGHTS CUMULATIVE. The rights and remedies provided by this
Agreement are cumulative, and the exercise of any right or remedy by either the
Company or me (or by that party's successor), whether pursuant to this
Agreement, to any other agreement, or to law, shall not preclude or waive that
Party's right to exercise any or all other rights and remedies.
14. NONWAIVER. The failure of either the Company or me, whether
purposeful or otherwise, to exercise in any instance any right, power or
privilege under this Agreement or under law shall not constitute a waiver of any
other right, power or privilege, nor of the same right, power or privilege in
any other instance. Any waiver by the Company or by me must be in writing and
signed by either myself, if I am seeking to waive any of my rights under this
Agreement, or by an officer of the Company (other than me) or some other person
duly authorized by the Company.
15. NOTICES. Any notice, request, consent, or approval required or
permitted to be given under this Agreement or pursuant to law shall be
sufficient if it is in writing, and if and when it is hand delivered or sent by
regular mail, with postage prepaid, to my residence (as noted in the Company's
records), or to the Company's principal office, as the case may be.
16. ARBITRATION. Any controversy, claim or dispute arising out of or
relating to this Agreement, either during the existence of the employment
relationship or afterwards, between the parties hereto, their assignees, their
affiliates, their attorneys, or agents, shall be settled by arbitration.
Arbitration shall be conducted in accordance with the then prevailing labor
arbitration rules of the American Arbitration Association, with the following
exceptions if in conflict: (a) one arbitrator may be agreed upon, otherwise
there shall be three arbitrators, one named in writing by each party within 20
days after demand for arbitration is given, and a third chosen by the two
appointed. Should either party refuse or neglect to appoint said arbitrator or
to furnish the arbitrators with any papers or information demanded, he, she or
they are empowered by both parties to proceed ex parte. If there be one
arbitrator his or her decision shall be binding; if there be three arbitrators
the decision of any two shall be binding; (b) each party to the arbitration will
pay its pro rata share of the expenses and fees of the arbitrator(s), together
with other expenses of the arbitration incurred or approved by the
arbitrator(s); and (c) arbitration may proceed in the absence of any party if
written notice (pursuant to the American Arbitration Association's rules and
regulations) of the proceedings has been given to such party. The location of
the arbitration shall be in San Francisco, California. The parties agree to
abide by all decisions
4
and awards rendered in such proceedings. Such decisions and awards rendered by
the arbitrator shall be final and conclusive and may be entered in any court
having jurisdiction thereof as a basis of judgment and of the issuance of
execution for its collection. All such controversies, claims or disputes shall
be settled in this manner in lieu of any action at law or equity; provided
however, that nothing in this subsection shall be construed as precluding the
Company or Executive from bringing an action for injunctive relief or other
equitable relief. The parties shall keep confidential the existence of the
claim, controversy or disputes from third parties (other than arbitrator(s)),
and the determination thereof, unless otherwise required by law.
---------------------------------------
Jim Bernau
UNITED CRAFT BREWERS, INC.
Dated: _______ ___, 1997 By:
----------------------------------
Name: Vijay Mallya
Title: Chairman and Chief
Executive Officer
5
Exhibit 1 to Confidential Information
and invention assignment agreement
-------------------------------------
I represent that I have indicated in this Exhibit all Inventions (as
defined in the Agreement) in which I own or have owned any right or interest
prior to my employment with the Company. I agree that any present or future
Inventions not listed in this Exhibit are subject to assignment under Paragraph
2(a) of the attached Confidential Information and Invention Assignment
Agreement.
Brief Description of Rights, Title or Interest
Inventions and Date Acquired
-------------------- -------------------------
None
6
Exhibit 2 to Confidential Information
and invention assignment agreement
-------------------------------------
CALIFORNIA LABOR CODE SECTION 2870
(a) Any provision in an employment agreement which provides that an
employee shall assign, or offer to assign, any of his or her rights in an
invention to his or her employer shall not apply to an invention that the
employee developed entirely on his or her own time without using the employer's
equipment, supplies, facilities, or trade secret information except for those
inventions that either:
(1) Relate at the time of conception or reduction to practice of the
invention to the employer's business, or actual or demonstrably
anticipated research or development of the employer; or
(2) Result from any work performed by the employee for the employer.
(b) To the extent a provision in an employment agreement purports to
require an employee to assign an invention otherwise excluded from being
required to be assigned under subdivision (a), the provision is against the
public policy of this state and is unenforceable.
7
EXHIBIT B
OPTION AGREEMENT
B-1
OH&S DRAFT
7/21/97
UNITED CRAFT BREWERS, INC.
STOCK OPTION AND AWARD PLAN
NONQUALIFIED STOCK OPTION AWARD AGREEMENT
1. GRANT OF OPTION. United Craft Brewers, Inc. (the "Company")
hereby grants to Jim Bernau (the "Participant") under the United Craft Brewers,
Inc. Stock Option and Award Plan (the "Plan"), as a separate incentive in
connection with his or her employment or service with the Company or a
Subsidiary and not in lieu of any fees or other compensation for his or her
services, a nonqualified stock option to purchase, on the terms and conditions
set forth in this Agreement and the Plan, all or any part of an aggregate of
[4% on a Fully-Diluted Basis] shares of authorized but unissued or treasury
shares of the Company's common stock, $0.001 par value ("Shares"), at the
purchase price set forth in Paragraph 2 of this Agreement as of _____________,
the effective date of this Agreement (the "Grant Date"). The option granted
hereby is not intended to be an incentive stock option (within the meaning of
section 422 of the Internal Revenue Code of 1986, as amended).
2. OPTION PRICE. The purchase price per Share for this option (the
"Option Price") shall be $5.25, which is one hundred percent (100%) of the Fair
Market Value per Share as reflected in the Investment Agreement dated January
30, 1997, as amended, with United Brewers of America, Inc.
3. NUMBER OF SHARES. The number and class of Shares specified in
Paragraph 1 of this Agreement, and/or the Option Price, are subject to
appropriate adjustment by the Committee in the event of any merger,
reorganization, consolidation, recapitalization, separation, liquidation, stock
dividend, split-up, Share combination or other change in the corporate structure
of the Company affecting the Shares; provided, however, that the number of
Shares subject to this option shall always be a whole number. Subject to any
required action of the stockholders of the Company, if the Company is the
surviving corporation in any merger or consolidation, this option (to the extent
that it is still outstanding) shall pertain to and apply to the securities to
which a holder of the same number of Shares that are then subject to the option
would have been entitled.
4. VESTING SCHEDULE. The right to exercise this option shall accrue
as to twenty-five percent (25%) of the Shares subject thereto on the Grant Date,
and as to an additional twenty-five percent (25%) on each succeeding anniversary
date of the Grant Date, until the right to exercise the option shall have
accrued with respect to one hundred percent (100%) of the Shares subject
thereto. Notwithstanding the previous sentence, the right to exercise this
option shall accrue as to 100% of the Shares subject thereto if the Company
terminates the Participant's Employment Agreement dated as of _______, ___, 1997
without cause pursuant to Section 4(b) of such Agreement.
5. EXPIRATION OF OPTION. In the event of the Participant's
Termination of Service for any reason other than death, the Participant may,
within five (5) years after the date of the Termination, or within ten (10)
years from the Grant Date, whichever shall first occur, exercise any vested but
unexercised portion of this option.
6. DEATH OF THE PARTICIPANT. In the event that the Participant dies
while in the employ or service of the Company or a Subsidiary, or during the
five (5) year period referred to in Paragraph 5 of this Agreement, the
Participant's designated beneficiary or beneficiaries, or if no beneficiary
survives the Participant, the administrator or executor of the Participant's
estate, may, within one (1) year after the date of the Participant's death,
exercise any vested but unexercised portion of this option. Any such transferee
must furnish the Company (a) written notice of his or her status as a
transferee, (b) evidence satisfactory to the Company to establish the validity
of the transfer of this option and compliance with any laws or regulations
pertaining to such transfer, and (c) written acceptance of the terms and
conditions of this option as set forth in this Agreement.
7. PERSONS ELIGIBLE TO EXERCISE. This option shall be exercisable
during the Participant's lifetime only by the Participant. This option is not
transferable, except that the Participant may transfer this option (a) by a
valid beneficiary designation made in a form and manner acceptable to the
Committee, or (b) by will or the applicable laws of descent and distribution.
8. EXERCISE OF OPTION. This option may be exercised by the person
then entitled to do so as to any Shares which may then be purchased (a) by
giving written notice of exercise to the Secretary of the Company (or his or her
designee), specifying the number of full Shares to be purchased and accompanied
by full payment of the Option Price thereof (and the amount of any income tax
the Company is required by law to withhold by reason of such exercise), and
(b) by giving satisfactory assurances in writing if requested by the Company,
signed by the person exercising the option, that the Shares to be purchased upon
such exercise are being purchased for investment and not with a view to the
distribution thereof. The Option Price shall be payable in the legal tender of
the United States or, in the discretion of the Committee, in Shares or in a
combination of such legal tender or Shares.
9. SUSPENSION OF EXERCISABILITY. If at any time the Committee shall
determine, in its discretion, that (a) the listing, registration or
qualification of the Shares upon any securities exchange or under any domestic
or foreign law, or (b) the consent or approval of any governmental regulatory
authority, is necessary or desirable as a condition of the purchase of Shares
hereunder, this option may not be exercised, in whole or in part, unless and
until such listing, registration, qualification, consent or approval shall have
been effected or obtained free of any conditions not acceptable to the
Committee. The Company shall make reasonable efforts to meet the requirements
of any such domestic or foreign law or securities exchange and to obtain any
such consent or approval of any such governmental authority.
10. NO EFFECT ON EMPLOYMENT OR SERVICE. Nothing in this Agreement or
the Plan shall interfere with or limit in any way the right of the Company or
any Subsidiary to terminate the Participant's employment or service at any time,
with or without cause.
2
11. WITHHOLDING. Whenever Shares are to be issued to the Participant
(or any transferee) in satisfaction of the rights conferred hereby, the Company
shall have the right to require the Participant (or transferee) to remit to the
Company an amount sufficient to satisfy applicable federal, state and local
withholding tax requirements prior to the delivery of any certificate or
certificates for such Shares.
12. ADDRESSES FOR NOTICES. Any notice to be given to the Company
under the terms of this Agreement shall be addressed to the Company, in care of
its Secretary, at One Harbor Drive, Suite 102, Sausalito, California 94965, or
at such other address as the Company may hereafter designate in writing. Any
notice to be given to the Participant shall be addressed to the Participant at
the address set forth beneath the Participant's signature hereto, or at such
other address as the Participant may hereafter designate in writing.
13. OPTION IS NOT TRANSFERABLE. Except as otherwise provided herein,
this option and the rights and privileges conferred hereby shall not be
transferred, assigned, pledged or hypothecated in any way (whether by operation
of law or otherwise) and shall not be subject to sale under execution,
attachment or similar process. Upon any attempt to transfer, assign, pledge,
hypothecate or otherwise dispose of this option, or of any right or privilege
conferred hereby, or upon any attempted sale under any execution, attachment or
similar process, this option and the rights and privileges conferred hereby
immediately shall become null and void.
14. MAXIMUM TERM OF OPTION. Notwithstanding any contrary provision
of this Agreement, this option is not exercisable after the expiration of ten
(10) years from the Grant Date.
15. BINDING AGREEMENT. Subject to the limitation on the
transferability of this option contained herein, this Agreement shall be binding
upon and inure to the benefit of the heirs, legatees, legal representatives,
successors and assigns of the parties hereto.
16. PLAN GOVERNS. This Agreement is subject to all of the terms and
provisions of the Plan. In the event of a conflict between one or more
provisions of this Agreement and one or more provisions of the Plan, the
provisions of the Plan shall govern. Capitalized terms and phrases used and not
defined in this Agreement shall have the meaning set forth in the Plan.
17. COMMITTEE AUTHORITY. The Committee shall have the power to
interpret the Plan and this Agreement and to adopt such rules for the
administration, interpretation and application of the Plan as are consistent
therewith. All actions taken and all interpretations and determinations made by
the Committee in such connection shall be final and binding upon the
Participant, the Company and all other interested persons, and shall be given
the maximum deference permitted by law. No member of the Committee shall be
personally liable for any action, determination or interpretation made in good
faith with respect to the Plan or this Agreement.
3
18. CAPTIONS. The captions provided herein are for convenience only
and are not to serve as a basis for interpretation or construction of this
Agreement.
19. AGREEMENT SEVERABLE. In the event that any provision in this
Agreement shall be held invalid or unenforceable, such provision shall be
severable from, and such invalidity or unenforceability shall not be construed
to have any effect on, the remaining provisions of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement,
in duplicate, effective as of the Grant Date.
UNITED CRAFT BREWERS, INC.
By
------------------------------------
Title: Chairman and Chief
Executive Officer
- -----------------------------------
Participant Signature
Jim Bernau
- -----------------------------------
- -----------------------------------
Address
- -----------------------------------
Social Security Number
4
EXHIBIT C
REGISTRATION RIGHTS AGREEMENT
C-1
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is entered into
as of ____________, 1997, by and among United Craft Brewers, Inc., a Delaware
corporation (the "Company"), United Breweries of America, Inc. ("Purchaser"),
and James W. Bernau ("Bernau").
WHEREAS, Purchaser and Bernau are parties to the Investment Agreement,
dated January 30, 1997 (the "Investment Agreement"), pursuant to which
Nor'Wester Brewing Company, Inc., North Country Joint Venture, LLC, Willamette
Valley, Inc. Microbreweries Across America ("WVI") and each of the subsidiaries
of WVI specified in the Investment Agreement agreed to consolidate so that each
of such companies became a wholly owned subsidiary of the Company;
WHEREAS, pursuant to the Investment Agreement, the Company desires to
issue and sell to Purchaser shares of its Common Stock (the "Purchase Shares");
WHEREAS, pursuant to the Investment Agreement, the Company desires to
issue shares of its equity securities to Purchaser upon any conversion of the
Bridge Loans (the "Bridge Loan Shares");
WHEREAS, Purchaser desires, upon the terms and conditions provided in
the Investment Agreement, to purchase the Purchase Shares from the Company and
to have the Bridge Loan Shares issued to it by the Company;
WHEREAS, pursuant to the Investment Agreement, Bernau has agreed to
transfer to Purchaser certain shares of the Company's Common Stock (the
"Transfer Shares" and, together with the Purchase Shares and the Bridge Loan
Shares, the "Shares");
WHEREAS, after the Consolidation and the transfer of the Transfer
Shares, Bernau will own ________________ shares of the Company's Common Stock
(the "Bernau Shares"); and
WHEREAS, the Investment Agreement requires that certain registration
rights be granted to Purchaser with respect to the Shares and the Executive
Employment Agreement dated as of the date hereof with Bernau requires that
certain registration rights be granted to Bernau with respect to the Bernau
Shares.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein, the parties hereto hereby agree as
follows:
1. CERTAIN DEFINED TERMS. For purposes of this Agreement:
(a) The terms "register," "registered," and "registration"
refer to a registration effected by preparing and filing a registration
statement or similar document in compliance with the Securities Act, and the
declaration or ordering of effectiveness of such registration statement or
document;
(b) The term "Registrable Securities" means: (i) as to the
Purchaser, any Shares issued or transferred on or after the date hereof to
Purchaser pursuant to the Investment Agreement, any other shares of the
Company's Common Stock held or acquired by Purchaser (or its permitted assigns)
on or after the date hereof and any securities issued or issuable to Purchaser
(or its permitted assigns) in respect of any Registrable Securities by way of
any stock split or stock dividend or in connection with any combination of
shares, recapitalization, merger, consolidation, reorganization or otherwise;
and (ii) as to Bernau, fifty percent (50%) of the Bernau Shares and any
securities issued or issuable to Bernau in respect of any Registrable Securities
by way of any stock split or stock dividend or in connection with any
combination of shares, recapitalization, merger, consolidation, reorganization
or otherwise. As to any particular Registrable Securities, such securities
shall only be treated as Registrable Securities if and so long as (A) they have
not been sold to or through a broker or dealer or underwriter in a public
distribution or a public securities transaction, (B) they have not been sold in
a transaction exempt from the registration and prospectus delivery requirements
of the Securities Act under Section 4(1) thereof so that all transfer
restrictions and restrictive legends with respect thereto are removed upon the
consummation of such sale and (C) if the holder of the Registrable Securities
holds less than seven and one-half percent (7 1/2%) of the outstanding Common
Stock of the Company, such Registrable Securities are not eligible for resale
without restriction (including legending) under Rule 144(k) of the Securities
Act;
(c) The term "Securities Act" means the Securities Act of
1933, as amended, and any successor statute;
(d) The term "Exchange Act" means the Securities Exchange
Act of 1934, as amended, and any successor statute;
(e) The term "SEC" means the Securities and Exchange
Commission; and
(f) The term "Person" means a corporation, an association,
a limited liability company, a partnership, an organization, a business, an
individual, a government or a subdivision thereof, or a governmental agency or
authority.
2. SHELF REGISTRATION. Upon receipt of a written request from
Purchaser, the Company shall file with the SEC a registration statement under
the Securities Act on Form S-1 or S-3 with respect to the Registrable
Securities. The Company shall use its best efforts to cause such registration
statement to become effective at the earliest practicable date following the
filing thereof and, subject to the following, to remain continuously effective
for a period of two years from and after the effective date of such registration
statement. During the period that such
2
registration statement is effective, it shall be available for use by Purchaser
only for a period of 30 days following a filing by the Company of (i) a
quarterly report on Form 10-Q or (ii) an annual report on Form 10-K.
Notwithstanding the foregoing, the Company may suspend the effectiveness of such
registration statement from time to time at any time upon the good faith
determination of the Company's board of directors that such action is desirable
in connection with any proposed acquisition, transaction or other matters. If
the Company so elects to suspend the effectiveness of any registration
statement, the obligation of the Company to maintain the effectiveness of such
registration statement shall be reinstated at the conclusion of such suspension
and shall be extended such that the period during which the registration
statement is actually effective totals not less than two years.
3.1. DEMAND REGISTRATION.
(a) Upon receipt of a written request from Purchaser to
register under the Securities Act (whether for purposes of a public offering, an
exchange offer or otherwise) all or part of the Registrable Securities held by
Purchaser, the Company shall as expeditiously as reasonably possible (but in any
event not later than sixty (60) days after receipt of such request) prepare and
file, and use its best efforts to cause to become effective as soon thereafter
as practicable, a registration statement under the Securities Act to effect the
offering of such Registrable Securities in the manner specified in such request.
(b) Purchaser shall be entitled to select and retain one or
more investment bankers or managers reasonably acceptable to the Company in
connection with any underwritten offerings made pursuant to this Section 3.1.
(c) Subject to the terms and conditions set forth in
Section 3.2 below, Purchaser may request the Company to register Registrable
Securities under the Securities Act pursuant to this Section 3.1 at any time and
from time to time; PROVIDED, HOWEVER, that Purchaser may not request the Company
to register Registrable Securities pursuant to this Section 3.1 more than once
in any 365-day period.
3.2. TERMS AND CONDITIONS OF DEMAND REGISTRATION.
Notwithstanding anything to the contrary contained in this Agreement, the
registration rights granted to Purchaser in Section 3.1 above are expressly
subject to the following terms and conditions:
(a) Purchaser shall only be entitled to three (3) requests
to register Registrable Securities under the terms of Section 3.1. For purposes
of this provision, a "request" shall be deemed to have occurred only upon
completion of a requested registration and the subsequent sale of Registrable
Securities under that registration.
(b) In no event shall the number of Registrable Securities
to be offered under a registration statement prepared and filed pursuant to
Section 3.1 constitute less than five percent (5%) of the then outstanding
shares of common stock of the Company.
(c) The Company shall be entitled to defer for a reasonable
period of time, but not in excess of ninety (90) days, the filing of any
registration statement otherwise
3
required to be prepared and filed by it under Section 3.1 above if the Company
notifies Purchaser within five (5) business days after Purchaser requested the
registration that the Company (i) is at such time conducting or about to conduct
an underwritten public offering of its securities for its own account (other
than a registration statement relating to a Rule 145 transaction, an offering
solely to employees or any other registration statement which is not appropriate
for the registration of Registrable Securities) and the Board of Directors of
the Company determines in good faith that such offering would be materially
adversely affected by the registration requested by Purchaser or (ii) would, in
the opinion of its counsel, be required to disclose in such registration
statement information not otherwise then required by law to be publicly
disclosed and, in the good faith judgement of the Board of Directors of the
Company, such disclosure might adversely affect any material business
transaction or negotiation in which the Company is then engaged. The foregoing
notwithstanding, the Company shall not be entitled to defer the filing of any
registration statement under this Section 3.2(c) more than once in any twelve
(12) month period. If the Company elects to defer the filing of a registration
statement pursuant to this Section 3.2(c), Purchaser may withdraw its request,
in writing, during the time of such deferral and such request shall not be
counted toward the limit on requests set forth in Section 3.2(a).
(d) Purchaser shall not exercise its rights pursuant to
Section 3.1 during the 60-day period immediately following the effective date of
any registration statement filed by the Company under the Securities Act (other
than a registration of securities in a Rule 145 transaction or with respect to
an employee benefit plan) in respect of an offering or sale of securities of the
Company for its own account.
4.1. PIGGYBACK REGISTRATION. If at any time or from time to time
the Company shall propose to register any of its Common Stock for public sale
under the Securities Act, the Company shall, at such time, promptly give
Purchaser and Bernau written notice of such registration. Upon the written
request of Purchaser or Bernau given within 20 days after the mailing of such
notice by the Company, the Company shall, subject to the provisions of this
Agreement (including, without limitation, Section 4.2 below), cause to be
registered under the Securities Act any and all Registrable Securities as
Purchaser or Bernau shall request; PROVIDED, HOWEVER, that the Company may at
any time prior to the effectiveness of any such registration statement, in its
sole discretion and without the consent of Purchaser or Bernau, abandon the
proposed offering; and PROVIDED, FURTHER, that Purchaser and Bernau shall be
entitled to withdraw any or all Registrable Securities included in a
registration statement pursuant to this Section 4.1 at any time prior to the
date on which the registration statement with respect to such Registrable
Securities is declared effective by the SEC. The Company shall be entitled to
select the investment bankers and/or managers, if any, to be retained in
connection with any registration referred to in this Section 4.1, provided such
investment bankers and/or managers are reasonably acceptable to Purchaser and
Bernau.
4.2. UNDERWRITING REQUIREMENTS IN PIGGYBACK REGISTRATIONS. In
connection with any offering involving an underwriting covered by Section 4.1
hereof:
(a) The Company shall not be required to include any of
Purchaser's or Bernau's Registrable Securities in such underwriting unless
Purchaser and Bernau,
4
respectively, accept the terms of the underwriting agreement between the Company
and the underwriters selected by it (an "Underwriting Agreement"), and then only
in such quantity as the underwriters determine will not jeopardize the success
of the offering by the Company. If the total amount of securities (including
Registrable Securities) requested by Purchaser and Bernau to be included in such
offering exceeds the amount of securities to be sold other than by the Company
that the underwriters determine is compatible with the success of the offering,
then the Company shall be obligated to include in the offering only that number
of such securities (including Registrable Securities) which the underwriters
determine will not jeopardize the success of the offering (the Registrable
Securities so included to be apportioned pro rata among Purchaser and Bernau
according to the total amount of securities owned by Purchaser and Bernau and
the number of Registrable Securities requested by Purchaser or Bernau pursuant
hereto to be sold in such offering shall be reduced prior to any reduction in
the number of securities requested to be sold by the Company).
(b) The Company shall not be obligated to include any
Registrable Securities in any registration by the Company of any of its Common
Stock in connection with any merger, acquisition, exchange offer or any other
business combination, including any transaction within the scope of Rule 145
promulgated pursuant to the Securities Act, subscription offer, dividend
reinvestment plan or stock option or other director or employee incentive or
benefit plan.
(c) The Company shall use all commercially reasonable
efforts to cause the managing underwriter or underwriters of a proposed
underwritten offering to permit the Registrable Securities requested to be
included in a registration pursuant to Section 4.1 above to be included on the
same terms and conditions as any similar securities included therein.
(d) No Registrable Securities excluded from the
underwriting by reason of this Section 4.2 shall be included in the Registration
Statement.
(e) In the event that some, but less than all, of
Purchaser's or Bernau's Registrable Securities are included in an offering
contemplated by a registration statement pursuant to Section 4.1 above,
Purchaser and Bernau shall, at the Company's or underwriters' request, execute a
"lockup" letter, in customary form, setting forth the agreement of Purchaser and
Bernau, respectively, not to offer for sale, sell, grant any option for the sale
of, or otherwise dispose of, directly or indirectly, any Registrable Securities
not included in the offering for a period of 90 days from the date such offering
commences.
5. PURCHASER'S RIGHT OF FIRST REFUSAL. (a) If Bernau shall
request the registration of any Registrable Securities pursuant to Section 4.1
above, Purchaser shall have the right, upon the delivery of written notice to
Bernau at any time prior to the date on which the applicable Underwriting
Agreement is entered into by the Company and the underwriters, to purchase all
or any part of such Registrable Securities from Bernau at the price to be paid
by the underwriters for Registrable Securities under the applicable Underwriting
Agreement. The purchase of the Registrable Securities by Purchaser shall occur
simultaneously with the closing of the purchases provided for in the
Underwriting Agreement and Purchaser's obligation to
5
purchase the Registrable Securities shall be subject to the same terms and
conditions as the underwriters' obligations to purchase securities under the
Underwriting Agreement.
(b) If Bernau proposes to sell any Registrable Securities owned by
Bernau, other than pursuant to Section 4.1 above or Section 5.2(c) below, upon
receipt by Bernau of an acquisition proposal from a bona fide creditworthy
purchaser that is subject only to customary closing conditions, which Bernau
desires to accept (an "Acquisition Proposal"), Bernau shall offer (the "Offer"),
by written notice to Purchaser, to sell the Registrable Securities referred to
in the Acquisition Proposal for the price and on the terms set forth in the
Acquisition Proposal. The Offer shall be delivered to Purchaser and shall state
(i) the number of Registrable Securities to be sold pursuant to the Acquisition
Proposal, the consideration to be paid therefor, the price to be paid for the
Registrable Securities and the closing date under the Acquisition Proposal and
(ii) contain a true and complete copy of the Acquisition Proposal. If the
consideration to be paid for the Registrable Securities referred to in the
Acquisition Proposal is other than cash, then for purposes of this section only,
the price per share for such Registrable Securities shall be determined by the
volume weighted average closing sale price of the Company's Common Stock as
reported by The Nasdaq Stock Market for the 20 business days preceding the Offer
(the "Volume Weighted Market Price"). Within 20 days from the receipt of the
Offer, Purchaser may elect to purchase from Bernau, at the price and on the
terms specified in the Acquisition Proposal, any or all of the Registrable
Securities offered in the Offer, by providing written notice to Bernau prior to
the expiration of the 20-day exercise period. Bernau shall be free to transfer
any of the Registrable Securities referred to in the Acquisition Proposal, which
Purchaser has elected not to purchase pursuant to this section, for a period of
30 days following the expiration of the 20-day exercise period but only on the
terms set forth in the Acquisition Proposal.
(c) If Bernau proposes to sell any Registrable Securities owned by
Bernau under Rule 144 promulgated under the Securities Act (except Rule 144(k)),
Bernau shall first offer (the "Rule 144 Offer"), by written notice to Purchaser,
to sell for cash the Registrable Securities referred to in the Rule 144 Offer at
the Volume Weighted Market Price (based on the 20 business days preceding the
Rule 144 Offer). Within 20 days from receipt of the Rule 144 Offer, Purchaser
may elect to purchase from Bernau any or all of the Registrable Securities
offered in the Rule 144 Offer, by providing written notice to Bernau prior to
the expiration of the 20-day exercise period. Bernau shall be free to transfer
any of the Registrable Securities referred in the Rule 144 Offer, which
Purchaser has elected not to purchase pursuant to this section, for a period of
30 days following the expiration of the 20-day exercise period, but only
pursuant to Rule 144 (except Rule 144(k)).
6. FAVORED STATUS/CONFLICTING RIGHTS. Except as herein provided,
the Company shall not provide registration rights to any other party that, taken
as a whole, are more favorable than those provided to Purchaser hereunder
without also offering to Purchaser such more favorable rights. The Company
shall give Purchaser notice, within 15 days after the execution of any such
agreement, of any agreement between the Company and a third party that triggers
a right of Purchaser to invoke the favored status provisions of this Section 6.
In the event that any rights of Purchaser under this Agreement conflict with or
diminish any rights granted to a third party under another agreement with the
Company, Purchaser's rights under
6
this Agreement shall be deemed superior to, and shall take precedence over, the
rights of any such third party. The Company covenants and agrees that in the
event it grants registration rights to any third party or parties, the
instrument or instruments granting such rights shall contain a provision
referencing this Agreement and the precedence and superiority of Purchaser's
registration rights as against the registration rights of such third party.
7.1. COVENANTS OF THE COMPANY. In the case of each registration
effected by the Company pursuant to this Agreement, the Company will keep
Purchaser advised in writing as to the initiation of each registration and as to
the completion thereof. Whenever Purchaser has requested that any Registrable
Securities be registered pursuant to this Agreement, the Company will at its
expense and as expeditiously as possible:
(a) Prepare and file with the Commission such amendments
and post-effective amendments to the registration statement as may be necessary
to keep the registration statement effective for a period of not less than 120
days, or such shorter period which will terminate when all Registrable
Securities covered by such registration statement have been sold or withdrawn at
the request of Purchaser (except for any registration statement referred to in
Section 2, which shall be kept effective in accordance with the terms thereof);
and cause the prospectus to be supplemented by any required prospectus
supplement, and as so supplemented to be filed pursuant to Rule 424 under the
Securities Act;
(b) Furnish to Purchaser and to each managing underwriter,
if any, (i) at least two (2) business days prior to filing with the SEC, any
registration statement covering any Registrable Securities, any amendment or
supplement thereto, and any prospectus used in connection therewith, which
documents will be subject to the reasonable review of Purchaser and such
underwriter, and, with respect to a registration statement prepared pursuant to
Section 2 or Section 3.1, the Company shall not file any such documents with the
SEC to which Purchaser shall reasonably object; and (ii) a copy of any and all
transmittal letters or other correspondence with the SEC or any other
governmental agency or self-regulatory body or other body having jurisdiction
(including any domestic or foreign securities exchange) relating to such
offering of Registerable Securities;
(c) Furnish to Purchaser and each managing underwriter, if
any, such number of copies of such registration statement, each amendment and
supplement thereto (in each case including all exhibits thereto and documents
incorporated by reference therein) and the prospectus included in such
registration statement (including each preliminary prospectus and prospectus
supplement) as Purchaser or such underwriter may reasonably request in order to
facilitate the sale of the Registerable Securities;
(d) After the filing of such registration statement,
promptly notify Purchaser of any stop order issued or, to the knowledge of the
Company, threatened to be issued by the SEC and promptly take all reasonable
actions to prevent the entry of such stop order or to obtain its withdrawal if
entered;
(e) Use its commercially reasonable efforts to qualify such
Registerable Securities for offer and sale under the securities, "blue sky" or
similar laws of such jurisdictions
7
(including any foreign country or any political subdivision thereof in which
shares of the Company's common stock are then listed) as Purchaser or any
underwriter shall reasonably request and use its commercially reasonable efforts
to obtain all appropriate registrations, permits and consents required in
connection therewith, except that the Company shall not for any such purpose be
required to qualify generally to do business as a foreign corporation in any
jurisdiction wherein it is not so qualified, or to subject itself to taxation or
to file a general consent to service of process in any such jurisdiction;
(f) Furnish to each managing underwriter, if any, an
opinion of counsel for the Company addressed to each of them, dated as of the
date of the closing of the offering of Registerable Securities, and a "comfort"
letter or letters signed by the Company's independent public accountants, each
in reasonable and customary form and covering such matters of the type
customarily covered by opinions or comfort letters delivered by such parties in
underwritten public offerings, and use its commercially reasonable efforts to
have such opinions and comfort letters addressed to and delivered to Purchaser;
(g) Furnish unlegended certificates representing ownership
of the Registerable Securities being sold in such denominations as shall be
requested by Purchaser or the managing underwriter, if any, provided such
request is made at least two (2) business days prior to the closing of the sale
of such Registerable Securities;
(h) Promptly inform Purchaser (i) in the case of any
offering of Registerable Securities in respect of which a registration statement
is filed under the Securities Act, of the date on which such registration
statement or any post-effective amendment thereto becomes effective and, if
applicable, of the date of filing a Rule 430A prospectus (and, in the case of an
offering abroad of Registerable Securities, of the date when any required filing
under the securities and other laws of such foreign jurisdictions shall have
been made and when the offering may be commenced in accordance with such laws)
and (ii) of any request by the SEC, any securities exchange, government agency,
self regulatory body or other body having jurisdiction for any amendment of or
supplement to any registration statement or preliminary prospectus or prospectus
included therein or any offering memorandum or other offering document relating
to such offering;
(i) Subject to subparagraph (k) below, until the earlier of
(i) such time as all of the Registerable Securities being offered have been
disposed of in accordance with the intended method of disposition by Purchaser
set forth in the registration statement or other offering document (and the
expiration of any prospectus delivery requirements in connection therewith) or
(ii) the expiration of nine (9) months after such registration statement or
other offering document becomes effective (unless the offering is a continuous
offering of securities under Rule 415, in which case until the earliest of the
date the offering is completed and the second anniversary of such effective
date), keep effective and maintain any registration, qualification or approval
obtained in connection with the offering of the Registerable Securities, and
amend or supplement the registration statement or prospectus or other offering
document used in connection therewith to the extent necessary in order to comply
with applicable securities laws;
8
(j) Use its commercially reasonable efforts to have the
Registerable Securities listed on any domestic and foreign securities exchanges
on which the common stock of the Company is then listed;
(k) As promptly as practicable, notify Purchaser at any
time when a prospectus relating to the sale of Registerable Securities is
required by law to be delivered in connection with sales by an underwriter or
dealer, of the occurrence of an event requiring the preparation of a supplement
or amendment to such prospectus so that, as thereafter delivered to the
purchasers of such shares, such prospectus will not contain an untrue statement
of a material fact or omit to state any 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, and as promptly as
practicable make available to Purchaser and to each managing underwriter, if
any, any such supplement or amendment; in the event the Company shall give such
notice, the Company shall extend the period during which such registration
statement shall be maintained effective as provided in Section 7.1(i) above by
the number of days during the period from and including the date of the giving
of such notice to the date when the Company shall make available to Purchaser
such supplemented or amended prospectus;
(l) Make available for inspection during the normal
business hours of the Company by Purchaser, any underwriter participating in
such offering, and any attorney, accountant or other agent retained by Purchaser
or any such underwriter in connection with the sale of Registerable Securities
(an "Inspector"), all relevant financial and other records, pertinent corporate
documents and properties of the Company as shall be reasonably necessary to
enable them to exercise their due diligence responsibility, and cause the
officers, directors and employees of the Company to supply all information
reasonably requested by any such Inspector in connection with such registration
statement; PROVIDED, HOWEVER, that (i) in connection with any such inspection,
any such Inspector shall cooperate to the extent reasonably practicable to
minimize any disruption to the operation of the Company's business and (ii) any
records, information or documents shall be kept confidential by such Inspector,
unless (1) such records, information or documents are in the public domain or
otherwise publicly available or (2) disclosure of such records, information or
documents is required by a court or administrative order or by applicable law
(including, without limitation, the Securities Act);
(m) Enter into usual and customary agreements (including an
underwriting agreement in usual and customary form) and take such other actions
as are reasonably required in order to expedite or facilitate the sale of the
Registerable Securities.
(n) Make "generally available to its security holders"
(within the meaning of Rule 158 of the Securities Act) an earnings statement
satisfying the provisions of Section 11(a) of the Securities Act and Rule 158
thereunder no later than 45 days after the end of the 12-month period beginning
with the first day of the Company's first fiscal quarter commencing after the
effective date of the registration statement, which earnings statement shall
cover said 12-month period;
(o) If requested by any managing underwriter or
underwriters or the Purchaser, promptly incorporate in a prospectus supplement
or post-effective amendment such
9
information as the managing underwriter or underwriters or Purchaser, as the
case may be, reasonably requests to be included therein, including, without
limitation, information with respect to the number of Registerable Securities
being sold by Purchaser to any underwriter or underwriters, the purchase price
being paid therefor by such underwriter or underwriters and with respect to any
other terms of an underwritten offering of the Registerable Securities to be
sold in such offering, and promptly make all required filings of such prospectus
by supplement or post-effective amendment;
(p) As promptly as practicable after the filing with the
SEC of any document that is incorporated by reference in a prospectus contained
in a registration statement, deliver a copy of such document to Purchaser; and
(q) Cause all such Registerable Securities to be listed on
each securities exchange on which similar securities issued by the Company are
then listed or, if not then listed, cause such Registerable Securities to be
included in a national automated quotation system.
(r) Provide a transfer agent and registrar for all
Registerable Securities and a CUSIP number for all such Registerable Securities,
in each case not later than the effective date of such registration.
(s) Take all other steps necessary to effect the
registration of the Registerable Securities contemplated hereby.
7.2. COVENANT OF STOCKHOLDERS. Purchaser agrees and covenants
that, upon receipt of any notice from the Company of the happening of any event
of the kind described in Section 7.1(k) above, Purchaser will forthwith
discontinue disposition of Registerable Securities pursuant to the registration
statement covering such Registerable Securities until Purchaser receives copies
of the supplemented or amended prospectus contemplated by Section 7.1(k) above,
and, if so directed by the Company, Purchaser will deliver to the Company all
copies, other than permanent file copies, then in Purchaser's possession of the
most recent prospectus covering such Registerable Securities at the time of
receipt of such notice.
8. RULE 144 REPORTING. With a view to making available to
Purchaser the benefits of certain rules and regulations of the SEC which may
permit Purchaser to sell securities of the Company to the public without
registration, the Company agrees to:
(a) Make and keep public information available as those
terms are understood and defined in Rule 144 under the Securities Act;
(b) Use its commercially reasonable best efforts to file
with the Commission in a timely manner all reports and other documents required
of the Company under the Securities Act and the Exchange Act; and
(c) So long as Purchaser owns any Registrable Securities,
furnish to Purchaser forthwith upon request a written statement by the Company
as to its compliance with the reporting requirements of Rule 144, the Securities
Act and the Exchange Act, a copy of the
10
most recent annual or quarterly report of the Company, and such other reports
and documents so filed as Purchaser may reasonably request in availing itself of
any rule or regulation of the SEC allowing Purchaser to sell any such securities
without registration.
9. RESTRICTIONS ON PUBLIC SALE. The Company agrees:
(a) Not to effect any public sale or distribution of any
securities during the 90-day period commencing on the effective date of a
registration statement filed pursuant to Section 3.1, except in connection with
any merger, acquisition, exchange offer, or any other business combination,
including any transaction within the scope of Rule 145 promulgated pursuant to
the Securities Act, subscription offer, dividend reimbursement plan or stock
option or other director or employee incentive or benefit plan;
(b) That any agreement entered into after the date hereof
pursuant to which the Company grants registration rights with respect to the
Company's securities shall contain a provision under which holders of such
securities agree, to the extent not inconsistent with applicable laws, not to
effect any public sale or distribution of any such securities (excluding any
sale in accordance with Rule 144 under the Securities Act) during the period
commencing with the effective date of a registration statement pursuant to
Section 3.1 through the 90-day period beginning on the date that the
registration statement filed pursuant to Section 3.1 becomes effective.
10. FURNISH INFORMATION. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Agreement with
respect to the Registrable Securities that Purchaser and Bernau shall furnish to
the Company such information regarding themselves, the Registrable Securities
held by each of them, and the intended method of disposition of such securities
as shall be required to effect the registration of the Registrable Securities.
11. EXPENSES OF REGISTRATION. Except as set forth below, the
Company shall bear and pay all expenses incurred in connection with any
registration, filing, listing and qualification of Registrable Securities
effected pursuant to this Agreement, including, without limitation, all
registration, filing, listing and qualification fees, printers' and accounting
fees relating or apportionable thereto, rating agency fees, costs of appraisals
and other reports, the fees and disbursements of counsel for the Company and the
reasonable fees and disbursements of counsel for each of Purchaser and Bernau
selected by Purchaser and Bernau, respectively, but excluding underwriting
discounts and commissions relating to Registrable Securities.
12. INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under this Agreement:
(a) To the extent permitted by law, the Company shall
indemnify and hold harmless Purchaser, Bernau, any underwriter (as defined in
the Securities Act) for Purchaser or Bernau and each Person, if any, who
controls Purchaser or such underwriter within the meaning of the Securities Act
or the Exchange Act, against any losses, claims, damages, or liabilities (joint
or several) to which they may become subject under the Securities Act, or the
11
Exchange Act or other federal or state law, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereof) arise out of or are
based upon any of the following statements, omissions, or violations
(collectively a "Violation"): (i) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under the Securities Act,
the Exchange Act or any state securities law; and, subject to the provisions of
subsection (c) below, the Company shall pay to Purchaser, Bernau, such
underwriter or controlling Person, as incurred, any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability, or action; PROVIDED, HOWEVER, that the
indemnity agreement contained in this subsection (a) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld), nor shall the Company be liable in any such case
for any such loss, claim, damage, liability, or action to the extent that it
arises out of or is based upon a Violation which occurs (A) in reliance upon and
in conformity with written information furnished expressly for use in connection
with such registration by Purchaser, Bernau or any such underwriter or
controlling Person or (B) as a result of the failure of Purchaser, Bernau or any
underwriter or controlling Person to deliver a prospectus in connection with the
offer and sale of Registrable Securities when legally required to do so.
(b) To the extent permitted by law, Purchaser shall
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each Person, if any, who
controls the Company within the meaning of the Securities Act, any underwriter,
and any controlling Person of any such underwriter, against any losses, claims,
damages, or liabilities (joint or several) to which any of the foregoing Persons
may become subject under the Securities Act, or the Exchange Act or other
federal or state law, insofar as such losses, claims, damages, or liabilities
(or actions in respect thereof) arise out of or are based upon any Violation, in
each case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by Purchaser
expressly for use in connection with such registration; and, subject to the
provisions of subsection (d) below, Purchaser shall pay any legal or other
expenses reasonably incurred by any Person intended to be indemnified pursuant
to this subsection (b) in connection with investigating or defending any such
loss, claim, damage, liability, or action; PROVIDED, HOWEVER, that the indemnity
agreement contained in this subsection (b) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of Purchaser, which consent shall not
be unreasonably withheld; PROVIDED, FURTHER, that, in no event shall any
indemnity under this subsection (b) exceed the gross proceeds from the offering
received by Purchaser.
(c) To the extent permitted by law, Bernau shall indemnify
and hold harmless the Company, each of its directors, each of its officers who
has signed the registration statement, each Person, if any, who controls the
Company within the meaning of the Securities Act, any underwriter, and any
controlling Person of any such underwriter, against any losses,
12
claims, damages, or liabilities (joint or several) to which any of the foregoing
Persons may become subject under the Securities Act, or the Exchange Act or
other federal or state law, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of or are based upon any
Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished by Bernau expressly for use in connection with such registration; and,
subject to the provisions of subsection (d) below, Bernau shall pay any legal or
other expenses reasonably incurred by any Person intended to be indemnified
pursuant to this subsection (c) in connection with investigating or defending
any such loss, claim, damage, liability, or action; PROVIDED, HOWEVER, that the
indemnity agreement contained in this subsection (c) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of Bernau, which consent shall not be
unreasonably withheld; PROVIDED, FURTHER, that, in no event shall any indemnity
under this subsection (c) exceed the gross proceeds from the offering received
by Bernau.
(d) Promptly after receipt by an indemnified party under
this Section 12 of notice of the commencement of any action (including any
governmental action), such indemnified party shall, if a claim in respect
thereof is to be made against any indemnifying party under this Section 12,
deliver to the indemnifying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; PROVIDED, HOWEVER, that an indemnified party
(together, in the case of the Purchaser or Bernau, with all control Persons who
are indemnified parties and, in the case of an underwriter, with all other
underwriters and control Persons who are indemnified parties) shall have the
right to retain separate counsel, with the fees and expenses to be paid by the
indemnifying party, if representation of such indemnified party or parties by
the counsel retained by the indemnifying party would be inappropriate due to
actual or potential differing interests between such indemnified party or
parties and the indemnifying party. The failure to deliver written notice to
the indemnifying party within a reasonable time of the commencement of any such
action shall relieve such indemnifying party of any liability to the indemnified
party under this Section 11 to the extent such failure shall be prejudicial to
its ability to defend such action, but the omission so to deliver written notice
to the indemnifying party shall not relieve it of any liability that it may have
to any indemnified party otherwise than under this Section 12.
(e) The obligations of the Company, Purchaser and Bernau
under this Section 12 shall survive the completion of any offering of
Registrable Securities in a registration statement under this Agreement, and
otherwise.
13.1. ASSIGNMENT OF RIGHTS. Subject to Section 13.2 below, the
rights of Purchaser and Bernau under this Agreement with respect to any
Registerable Securities may be assigned to any person who acquires Registrable
Securities from Purchaser and/or Bernau, as the case may be, and thereafter
holds Registrable Securities in an amount equal to seven and one-half percent (7
1/2%) of the then outstanding shares of Common Stock of the Company, except that
any person who acquires such Registrable Securities (a) pursuant to a public
offering registered under the Securities Act, or (b) pursuant to a transfer made
in accordance with Rule
13
144 under the Securities Act (or any similar successor provision) may not be
assigned rights hereunder with respect to such Registrable Securities.
Notwithstanding the foregoing, rights to cause one or more demand registrations
under Section 3.1 may only be assigned if such rights are expressly assigned in
writing by Purchaser. Any assignment of registration rights pursuant to this
Section 13.1 shall be effective upon receipt by the Company of written notice
from Purchaser or Bernau, as the case may be, (i) stating the name and address
of any assignee, (ii) describing the manner in which the assignee acquired
Registrable Securities, (iii) if from the Purchaser, stating the number of
"requests," as defined in Section 3.2(a) above, being assigned by Purchaser to
any assignee, which, in any event, shall not result in the total number of
requests to which Purchaser and any assignee together are entitled being greater
than three, and (iv) identifying the Registerable Securities with respect to
which the rights under this Agreement are being assigned.
13.2. SCOPE OF ASSIGNMENT. The rights of an assignee under Section
13.1 shall be the same rights granted to the Purchaser or to Bernau, as the case
may be, under this Agreement, except that in no event shall the Company's
obligations hereunder be increased due to any such assignment. In connection
with any such assignment, the term "Purchaser" as used herein shall, where
appropriate to assign the rights and obligations of Purchaser hereunder to such
assignee, be deemed to refer to the assignee. After any such assignment,
Purchaser shall retain its rights under this Agreement with respect to all other
Registerable Securities owned by Purchaser.
14. MISCELLANEOUS.
14.1. NOTICES. All notices, requests, demands, or other
communications which 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 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.
One Harbor Drive, Suite 102
Sausalito, CA 94965
Attn.: Vijay Mallya
Facsimile: (415) 289-1409
Bernau: James W. Bernau
8800 Enchanted Way, S.E.
Turner, OR 97392
Facsimile: (503) 588-8894
Company: United Craft Brewers, Inc.
One Harbor Drive, Suite 102
Sausalito, CA 94965
Attn.: Vijay Mallya
Facsimile: (415) 289-1409
14
Copy to: Orrick, Herrington & Sutcliffe LLP
Old Federal Reserve Bank Building
400 Sansome Street
San Francisco, CA 94111
Attn.: Alan Talkington
Facsimile: (415) 773-5759
or to such other address as any party may designate for itself by notice given
as provided in this Agreement.
14.2. INJUNCTIONS. Irreparable damage would occur in the event that
any of 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.
14.3. SEVERABILITY. If any term or provision of this Agreement is
held by a court of competent jurisdiction to be invalid, void, or unenforceable,
the remainder of the terms and provisions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and
the parties hereto shall use their best efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term or provision.
14.4. FURTHER ASSURANCE. Subject to the specific terms of this
Agreement, Purchaser, Bernau and the Company shall make, execute, acknowledge
and deliver such other instruments and documents, and take all such other
actions, as may be reasonably required in order to effectuate the purposes of
this Agreement and to consummate the transactions contemplated hereby.
14.5. ENTIRE AGREEMENT; MODIFICATION. This Agreement contains the
entire understanding of the parties with respect to the transactions
contemplated hereby and supersedes all agreements and understandings entered
into prior to the execution hereof. Any provision of this Agreement may be
amended only with the written consent of the Company and Purchaser. No breach
of any covenant, agreement, warranty or representation shall be deemed waived
unless expressly waived in writing by or on behalf of the party who might assert
such breach.
14.6. COUNTERPARTS. For the convenience of the parties hereto, any
number of counterparts of this Agreement may be executed by the parties hereto,
but all such counterparts shall be deemed one and the same instrument.
14.7. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA
WITHOUT REGARD TO ANY CHOICE OF LAW PRINCIPLES WHICH MIGHT REQUIRE OR PERMIT THE
APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.
15
14.8. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and shall inure to the benefit of and be enforceable by and against the
successors and permitted assigns of the parties hereto. Except as provided
herein, the parties may not assign their rights under this Agreement and the
Company may not delegate its obligations under this Agreement. Any attempted
assignment or delegation prohibited hereby shall be void.
14.9. PARTIES IN INTEREST. Except as otherwise specifically
provided herein, nothing in this Agreement expressed or implied is intended or
shall be construed to confer any right or benefit upon any person, firm or
corporation other than Purchaser, Bernau and the Company and their respective
successors and permitted assigns.
14.10. ATTORNEYS' FEES. In the event of any legal action or
proceeding to 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.
14.11. EFFECT OF HEADINGS. The section headings herein are for
convenience only and shall not affect the construction or interpretation of this
Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first above written.
UNITED CRAFT BREWERS, INC.
By:
------------------------------------
Name:
Title:
UNITED BREWERIES OF AMERICA, INC.
By:
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Name: Vijay Mallya
Title: Chairman
JAMES W. BERNAU
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16
SCHEDULE 2(j)
BERNAU PERSONAL GUARANTEES
1. Equipment financing lease of a Krones bottling line by and between Mile
High Brewing Company, Inc. and CIT Group/Equipment Financing, Inc.
($600,000 amount financed, $288,000 still owed).
2. Industrial Real Estate Lease dated May 10, 1995, by and between Intrawest
Properties Partnership, U.S. and Aviator Ales, Inc. (approximately $5,585
per month for 10 years).
3. Industrial/Commercial Lease dated June 17, 1996, by and between Richard C.
Hunsaker, Trustee of the Hunsaker Family Trust and Bayhawk Ales, Inc.
(approximately $933.50 per month for 1 1/2 years).
4. Severance Agreement dated August 23, 1996, by and between Willamette
Valley, Inc. Microbreweries Across America and Brad Tuski ($60,000 payable
pursuant to the Agreement, $34,125 still owed to Mr. Tuski).
5. Line of Credit Agreement dated December 13, 1996, by and between North
Country Joint Venture, LLC and Adirondak Trust Company for a $50,000 line
of credit.
6. Mr. Bernau has guaranteed License Bonds obtained by the Constituent
Corporations from the Ohio Casualty Insurance Company in the aggregate
amount of $93,500 in connection with obtaining state liquor permits.