REFUNDABLE DEPOSIT AGREEMENT
THIS REFUNDABLE DEPOSIT AGREEMENT (this "AGREEMENT"), dated as of May 2,
1997, is entered into by and between THE UB GROUP ("THE UB GROUP") and MENDOCINO
BREWING COMPANY, INC. ("MBC").
RECITALS
A. The UB Group and MBC are parties to that certain Letter of Intent,
dated as of the date hereof (the "LETTER OF INTENT"), pursuant to which they
have set out their intentions with respect to a proposed series of two linked
transactions. Capitalized terms used herein and not otherwise defined shall
have the meanings set forth in the Letter of Intent.
B. It is a condition to the execution by The UB Group and MBC of the
Letter of Intent that The UB Group shall have paid to MBC a refundable deposit
in the amount of TWO HUNDRED FIFTY THOUSAND DOLLARS ($250,000) (the "DEPOSIT")
as contemplated pursuant to SECTION F.7. of the Letter of Intent.
C. The UB Group and MBC wish to set forth their agreement relating to the
Deposit.
AGREEMENT
NOW, THEREFORE, The UB Group and MBC hereby agree as follows:
1. Concurrently with the execution and delivery by The UB Group and
MBC of the Letter of Intent, The UB Group hereby pays to MBC the Deposit.
2. MBC hereby accepts The UB Group's deposit of the Deposit and
agrees that the Deposit shall be used by MBC in accordance with the SECTION F.7.
of the Letter of Intent.
3. The Deposit is secured by a pledge to The UB Group by Michael
Laybourn and Norman Frank (collectively, the "SHAREHOLDERS") of the
"Collateral", as defined in, and pursuant to the terms of, those certain Pledge
Agreements, each dated as of the date hereof, executed by the Shareholders in
favor of The UB Group (collectively, the "PLEDGE AGREEMENTS").
4. In order to induce The UB Group to pay the Deposit to MBC, MBC
hereby represents and warrants to The UB Group as follows:
1
(a) MBC (i) is a corporation duly organized, validly existing and in
good standing under the laws of its state of incorporation and (ii) has the
power and authority to own, lease and operate its properties and carry on
its business as now conducted;
(b) MBC has full capacity to execute and deliver both this Agreement
and the Letter of Intent and no further action is necessary on the part of
MBC to make this Agreement or the Letter of Intent legal, valid and binding
upon MBC and enforceable in accordance with its terms;
(c) The execution, delivery and performance of this Agreement and the
Letter of Intent by MBC does not conflict with, violate, result in a breach
of, or cause a default, either immediately or with the passage of time or
the giving of notice or both, under (i) any provision of federal, state or
local law or regulation relating to MBC or MBC's assets, (ii) any provision
of any order, arbitration award, judgment or decree to which MBC or any
portion of MBC's assets are subject, (iii) any provision of any note, bond,
indenture, license, lease, mortgage, agreement or instrument to which MBC
or any portion of MBC's assets are subject, or (iv) any other restriction
of any kind or character to which MBC or any portion of MBC's assets are
subject;
(d) The execution, delivery and performance of this Agreement and the
Letter of Intent will not result in giving to others any interest or
rights, including rights of termination, acceleration or cancellation, in
or with respect to any of the properties, contracts, leases, mortgages,
commitments or other agreements of MBC, nor are any consents, approvals or
authorizations of, or declarations to or filings with, any governmental
authorities required in connection herewith or therewith; and
(e) The Annual Report on Form 10-KSB/A No. 1 for the fiscal year
ending December 31, 1996 does not contain any untrue statement of material
fact or omits to state a material fact necessary to make such
representation and warranty or any such statement therein not misleading.
MBC understands and acknowledges that The UB Group is paying the Deposit to MBC
in reliance on the representations and warranties of MBC set forth herein.
5. At the Closing, the Deposit shall be credited against the
purchase price of the Securities.
6. In the event the negotiations between the parties with respect to
the consummation of the transactions set out in the Letter of Intent are
terminated by either party for any reason other than as provided below, the
Deposit shall be returned by MBC to The UB Group within sixty (60) days after
such termination (such sixty (60) day period to be hereinafter referred to as
the "REPAYMENT PERIOD"). In addition, if a "REFUND EVENT" (as defined below)
occurs, the Deposit shall be immediately due and payable by MBC to The UB Group
without presentment, demand, protest or any other notice of any kind, all of
which
2
are expressly waived by MBC. A Refund Event shall occur if (a) MBC fails to
observe or perform any covenant, obligation, condition or agreement contained in
this Agreement or SECTIONS F.1, H, I, J AND K of the Letter of Intent, or any
representation or warranty made or furnished by MBC in or in connection with
this Agreement or the Letter of Intent shall be materially false, incorrect,
incomplete or misleading in any material respect when made or furnished;
(b) either Shareholder fails to observe or perform any covenant, obligation,
condition or agreement contained in the Pledge Agreements, or any representation
or warranty made by either Shareholder in Section 3 of the Pledge Agreements
shall be materially false, incorrect, incomplete or misleading in any material
respect when made or furnished; (c) MBC makes a general assignment for the
benefit of creditors or admits in writing its inability to pay its debts
generally as they become due, any voluntary petition is filed by MBC under the
federal or similar state bankruptcy laws, or MBC consents to the filing of any
such petition or consents to the appointment of a receiver, liquidator or
trustee in bankruptcy; (d) a court of competent jurisdiction enters an order or
decree under the federal or any similar state bankruptcy law (i) for the
appointment of a receiver, liquidator, trustee or assignee in bankruptcy or
insolvency of MBC of all or substantially all of its assets or for the winding
up or liquidation of its affairs, or (ii) adjudicating MBC a bankrupt or
insolvent or approving a petition seeking reorganization of MBC under any
bankruptcy law, and in any event such order or decree has continued in force
undischarged and unstayed for a period of sixty (60) days; or (e) either
Shareholder shall contest the enforceability of his respective Pledge Agreement,
or assert that his respective Pledge Agreement does not constitute the legal,
valid and binding obligation of such Shareholder enforceable against him in
accordance with its terms.
7. MISCELLANEOUS.
(a) All notices, requests, demands, consents, instructions or other
communications to or upon MBC or The UB Group under this Agreement shall be
in writing and faxed, mailed or delivered at its respective facsimile
number or address set forth below (or to such other facsimile number or
address for either party as indicated in any notice given by that party to
the other party). All such notices and communications shall be effective
(i) when sent by Federal Express or other overnight service of recognized
standing, on the second day following the deposit with such service; (ii)
when mailed, first class postage prepaid and addressed as aforesaid through
the United States Postal Service, upon receipt; (iii) when delivered by
hand, upon delivery; and (iv) when faxed, upon confirmation of receipt.
The UB Group: THE UB GROUP
One Harbor Drive, Suite 102
Sausalito, California 94965
Attn: Vijay Mallya
Telephone: (415) 289-1400
Facsimile: (415) 289-1409
3
MBC: MENDOCINO BREWING COMPANY, INC.
13351 South Highway 101
Hopland, CA 95449
Telephone: (707) 744-1015
Facsimile: (707) 744-1910
(b) MBC shall pay on demand all reasonable fees and expenses,
including reasonable attorneys' fees and expenses, incurred by The UB Group
in the enforcement or the attempted enforcement of this Agreement, the
Pledge Agreements or any of MBC's obligations hereunder not performed when
due (including, without limitation, all such fees and expenses incurred in
connection with any refund demand made with respect to the occurrence of
any Refund Event.
(c) This Agreement may not be amended or modified, nor may any of its
terms be waived, except by written instruments signed by MBC and The UB
Group. Each waiver or consent under any provision hereof shall be
effective only in the specific instances for the purpose for which given.
(d) This Agreement shall be governed by and construed in accordance
with the laws of the State of California without reference to conflicts of
law rules.
4
IN WITNESS WHEREOF, the undersigned have executed and delivered this
Agreement as of the date first above written.
THE UB GROUP
________________________________
Vijay Mallya
Chairman
MENDOCINO BREWING COMPANY, INC.
________________________________
Michael Laybourn
President
5