Exhibit 10.38
PATENT, TRADEMARK AND LICENSE MORTGAGE
THIS PATENT, TRADEMARK AND LICENSE MORTGAGE (the "Mortgage") made as of
this 24th day of September, 1998, by Mendocino Brewing Company, Inc., a
California corporation, having an address at 13351 Highway 101 South, P.O. Box
400, Hopland, California 95449 ("Mortgagor"), in favor of The CIT Group/Credit
Finance, Inc. with an office at 10 South LaSalle Street, Chicago, Illinois 60603
("Mortgagee"):
W I T N E S S E T H:
WHEREAS, Mortgagor and Mortgagee are parties to a certain Loan and
Security Agreement (the "Loan Agreement") and other related loan documents, each
of even date herewith (collectively, with the Loan Agreement, the "Loan
Agreements"), which Loan Agreements provide (i) for Mortgagee, from time to
time, to extend credit to or for the account of Mortgagor and (ii) for the grant
by Mortgagor to Mortgagee of a security interest in certain of Mortgagor's
assets, including, without limitation, its patents, patent applications,
trademarks, trademark applications, trade names, service marks, service mark
applications, goodwill and licenses;
NOW, THEREFORE, in consideration of the premises set forth herein and
for other good and valuable consideration, receipt and sufficiency of which are
hereby acknowledged, Mortgagor agrees as follows:
1. Incorporation of Loan Agreements. The Loan Agreements and the terms
and provisions thereof are hereby incorporated herein in their entirety by this
reference thereto. All terms capitalized but not otherwise defined herein shall
have the same meanings herein as in the Loan Agreements.
2. Mortgage of Patents, Trademarks and Licenses. To secure the complete
and timely satisfaction of all of Mortgagor's Obligations, Mortgagor hereby
grants, bargains, assigns, mortgages, pledges, sells, creates a security
interest in, transfers and conveys to Mortgagee, as and by way of a first
mortgage and security interest having priority over all other security
interests, with power of sale, to the extent permitted by law, upon the
occurrence of an Event of Default, in all of Mortgagor's right, title and
interest in and to all of its now existing and hereafter created or acquired:
(i) patents and patent applications, including, without
limitation, the inventions and improvements described and claimed
therein, and those patents listed on Exhibit A attached hereto and
hereby made a part hereof, and (a) the reissues, divisions,
continuations, renewals, extensions and continuations-in-part thereof,
(b) all income, damages and payments now and hereafter due or payable
under or with respect thereto, including, without
Exhibit 10.38 - 1
limitation, damages and payments for past or future infringements
thereof, (c) the right to sue for past, present and future
infringements thereof, and (d) all rights corresponding thereto
throughout the world, if any (all of the foregoing patents and
applications, together with the items described in clauses (a)-(d) of
this subsection 2(i), are sometimes hereinafter referred to
individually as a "Patent" and, collectively, as the "Patents");
(ii) trademarks, trademark registrations, trademark
applications, trade names and tradestyles, brand names, service marks,
service mark registrations and service mark applications, including,
without limitation, the trademarks, trade names, brand names, service
marks and applications and registrations thereof listed on Exhibit B
attached hereto and hereby made a part hereof, and (a) renewals or
extensions, thereof, (b) all income, damages and payments now and
hereafter due or payable with respect thereto, including, without
limitation, damages and payments for past or future infringements
thereof, (c) the right to sue for past, present and future
infringements thereof, and (d) all rights corresponding thereto
throughout the world (all of the foregoing trademarks, trade names and
tradestyles, brand names, service marks and applications and
registrations thereof, together with the items described in clauses
(a)-(d) of this subsection 2(ii), are sometimes hereinafter referred to
individually as a "Trademark" and, collectively, as the "Trademarks");
(iii) license agreements (to the extent such license
agreements may be assigned without violating the terms of any such
license agreement) with respect to any of the Patents or the Trademarks
or any other patent, trademark, service mark or any application or
registration thereof or any other trade name or tradestyle between
Mortgagor and any other party, whether Mortgagor is a licensor or
licensee under any such license agreement, including, without
limitation, the licenses listed on Exhibit C attached hereto and hereby
made a part hereof (all of the foregoing license agreements and
Mortgagor's rights thereunder are referred to collectively as the
"Licenses"); and
(iv) the goodwill of Mortgagor's business connected with and
symbolized by the Trademarks.
3. Warranties and Representations. Except as disclosed in Exhibits A, B
and C hereto, Mortgagor warrants and represents to Mortgagee that:
(i) no Patent, Trademark or License has been adjudged invalid
or unenforceable nor has any such Patent, Trademark or License been
canceled, in whole or in part and each such Patent, Trademark and
License is presently subsisting;
(ii) each Patent, Trademark and License Material to the
Mortgagor's business is valid and enforceable;
Exhibit 10.38 - 2
(iii) Mortgagor is the sole and exclusive owner of the entire
and unencumbered right, title and interest as they may appear in and to
each Patent, Trademark and License, free and clear of any liens,
charges and encumbrances, including without limitation licenses, shop
rights and covenants by Mortgagor not to sue third persons;
(iv) Mortgagor has adopted, used and is currently using all of
the Trademarks;
(v) Mortgagor has no notice of any suits or actions commenced
or threatened with reference to the Patents, Trademarks or Licenses;
and
(vi) Mortgagor has the unqualified right to execute and
deliver this Mortgage and perform its terms.
4. Restrictions on Future Agreements. Mortgagor agrees that until all
Obligations shall have been satisfied in full and the Loan Agreements shall have
been terminated, Mortgagor shall not, without the prior written consent of
Mortgagee, sell or assign its interest in, or grant any license or sublicense
under the Patents, Trademarks or Licenses, or enter into any other agreement
with respect to the Patents, Trademarks or Licenses, and Mortgagor further
agrees that it shall not take any action or permit any action to be taken by
others subject to its control, including licensees, or fail to take any action
which would affect the validity of the rights transferred to Mortgagee under
this Mortgage.
5. New Patents, Trademarks, and Licenses. Mortgagor represents and
warrants that the Patents, Trademarks and Licenses listed on Exhibits A, B and
C, respectively, constitute all of the Patents, Trademarks, and Licenses now
owned by Mortgagor. If, before all Obligations shall have been satisfied in full
or before the Loan Agreements have been terminated, Mortgagor shall (i) become
aware of any existing Patents, Trademarks or Licenses of which Mortgagor has not
previously informed Mortgagee, (ii) obtain rights to any new patentable
inventions, Patents, Trademarks or Licenses, or (iii) become entitled to the
benefit of any Patents, Trademarks or Licenses which benefit is not in existence
on the date hereof, the provisions of this Mortgage above shall automatically
apply thereto and Mortgagor shall give to Mortgagee prompt written notice
thereof. Mortgagor hereby authorizes Mortgagee to modify this Mortgage by
amending Exhibits A, B and C, as applicable, to include any such Patents,
Trademarks and Licenses.
6. Royalties; Terms. The term of the mortgages granted herein shall
extend until the earlier of (i) the expiration of each of the respective
Patents, Trademarks and Licenses assigned hereunder, and (ii) the payment in
full of all Obligations and the termination of the Loan Agreements. Mortgagor
agrees that upon the occurrence of an Event of Default, the use by Mortgagee of
all Patents, Trademarks and Licenses shall be worldwide, except as limited by
their terms, and without any liability for royalties or other related charges
from Mortgagee to Mortgagor.
Exhibit 10.38 - 3
7. Grant of License to Mortgagor. Unless and until an Event of Default
shall have occurred, Mortgagee hereby grants back to Mortgagor the exclusive,
nontransferable right and license to use the Trademarks in the ordinary course
of its business, to exercise Mortgagee's rights under the Licenses, and to make,
have made, use and sell the inventions disclosed and claimed in the Patents for
Mortgagor's own benefit and account and for none other. Mortgagor agrees not to
sell or assign its interest in, or grant any sublicense under, the license
granted to Mortgagor in this Section 7, without the prior written consent of
Mortgagee. From and after the occurrence of an Event of Default, Mortgagor's
license with respect to the Patents, Trademarks and Licenses set forth in this
Section 7 shall terminate upon receipt by Mortgagor of written notice of such
termination from Mortgagee, and Mortgagee shall have, in addition to all other
rights and remedies given it by this Mortgage, those allowed by law and the
rights and remedies of a secured party under the Uniform Commercial Code as
enacted in Illinois.
8. Mortgagee's Right to Inspect. Mortgagee shall have the right, at any
time and from time to time during normal business hours and prior to payment in
full of all Obligations and termination of the Loan Agreements, to inspect
Mortgagor's premises and to examine Mortgagor's books, records and operations,
including, without limitation, Mortgagor's quality control processes. Upon the
occurrence of an Event of Default, Mortgagor agrees that Mortgagee, or a
conservator appointed by Mortgagee, shall have the right to establish such
additional product quality controls as Mortgagee, or said conservator, in its
sole judgment, may deem necessary to assure maintenance of the quality of
products sold by Mortgagor under the Trademarks. The foregoing notwithstanding,
unless and until an Event of Default shall have occurred, Mortgagee agrees to
hold confidential and not disclose or use any information regarding any Patent,
Trademark or License unless such disclosure is required by applicable law or
court order. This obligation shall survive the termination of this Agreement,
the release of the mortgage herein and such reassignment of the Patents,
Trademarks or Licenses, as applicable, unless such termination is due to an
Event of Default.
9. Release of Mortgage. This Mortgage is made for collateral purposes
only. Upon payment in full of all Obligations and termination of the Loan
Agreements, Mortgagee shall execute and deliver to Mortgagor all deeds,
assignments and other instruments, and shall take such other actions, as may be
necessary or proper to re-vest in Mortgagor full title to the Patents,
Trademarks and Licenses, subject to any disposition thereof which may have been
made by Mortgagee pursuant to the Loan Agreements.
10. Expenses. All expenses incurred in connection with the performance
of any of the agreements set forth herein shall be borne by Mortgagor. All fees,
costs and expenses, of whatever kind or nature, including attorneys' and
paralegals' fees and legal expenses, incurred by Mortgagee in connection with
the filing or recording of any documents (including all taxes in connection
therewith) in public offices, the payment or discharge of any taxes, counsel
fees, maintenance fees, encumbrances or otherwise in protecting, maintaining or
preserving the Patents, Trademarks and Licenses, or in defending or prosecuting
any actions or proceedings arising out of or related to the Patents, Trademarks
and Licenses, shall be borne by and paid by Mortgagor on demand by Mortgagee and
until so paid shall be added to the principal amount of
Exhibit 10.38 - 4
the Obligations and shall bear interest at the rate for Revolving Loans.
11. Duties of Mortgagor. Subject to Mortgagor's reasonable business
judgement and in the ordinary course of Mortgagor's business, Mortgagor shall
have the duty (i) to file and prosecute diligently any patent, trademark or
service mark applications pending as of the date hereof or hereafter until all
Obligations shall have been paid in full and the Loan Agreements have been
terminated, (ii) to make application on unpatented but patentable inventions and
on trademarks and service marks, (iii) to preserve and maintain all rights in
the Patents, Trademarks and Licenses, and (iv) to ensure that the Patents,
Trademarks and Licenses are and remain enforceable. Any expenses incurred in
connection with Mortgagor's obligations under this Section 11 shall be borne by
Mortgagor. Mortgagor shall not abandon any right to file a patent, trademark or
service mark application, or abandon any pending patent application, or any
other Patent, Trademark or License without the consent of Mortgagee.
12. Mortgagee's Right to Sue. After an Event of Default, Mortgagee
shall have the right, but shall in no way be obligated, to bring suit in its own
name to enforce the Patents, Trademarks and Licenses, and, if Mortgagee shall
commence any such suit, Mortgagor shall, at the request of Mortgagee, do any and
all lawful acts and execute any and all proper documents required by Mortgagee
in aid of such enforcement and Mortgagor shall promptly, upon demand, reimburse
and indemnify Mortgagee for all costs and expenses incurred by Mortgagee in the
exercise of its rights under this Section 12.
13. Waivers. No course of dealing between Mortgagor and Mortgagee, nor
any failure to exercise, nor any delay in exercising, on the part of Mortgagee,
any right, power or privilege hereunder or under the Loan Agreements shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, power or privilege hereunder or thereunder preclude any other or further
exercise thereof or the exercise of any other right, power or privilege.
14. Severability. The provisions of this Mortgage are severable, and if
any clause or provision shall be held invalid and unenforceable in whole or in
part in any jurisdiction, then such invalidity or unenforceability shall affect
only such clause or provision, or part thereof, in such jurisdiction, and shall
not in any manner affect such clause or provision in any other jurisdiction, or
any other clause or provision of this Mortgage in any jurisdiction.
15. Modification. This Mortgage cannot be altered, amended or modified
in any way, except as specifically provided in Section 5 hereof or by a writing
signed by the parties hereto.
16. Cumulative Remedies; Power of Attorney; Effect on Loan Agreements.
All of Mortgagee's rights and remedies with respect to the Patents, Trademarks
and Licenses, whether established hereby or by the Loan Agreements, or by any
other agreements or by law shall be cumulative and may be exercised singularly
or concurrently. Mortgagor hereby authorizes Mortgagee upon the occurrence of an
Event of Default, to make, constitute and appoint any officer or agent of
Mortgagee as Mortgagee may select, in its sole discretion, as Mortgagor's true
and lawful attorney-in-fact, with power to (i) endorse Mortgagor's name on all
applications, documents, papers and instruments necessary or desirable for
Mortgagee in the
Exhibit 10.38 - 5
use of the Patents, Trademarks and Licenses, or (ii) take any other actions with
respect to the Patents, Trademarks and Licenses as Mortgagee deems to be in the
best interest of Mortgagee, or (iii) grant or issue any exclusive or
non-exclusive license under the Patents, Trademarks or Licenses to anyone, or
(iv) assign, pledge, convey or otherwise transfer title in or dispose of the
Patents, Trademarks or Licenses to anyone. Mortgagor hereby ratifies all that
such attorney shall lawfully do or cause to be done by virtue hereof. This power
of attorney shall be irrevocable until all Obligations shall have been paid in
full and the Loan Agreements have been terminated. Mortgagor acknowledges and
agrees that this Mortgage is not intended to limit or restrict in any way the
rights and remedies of Mortgagee under the Loan Agreements but rather is
intended to facilitate the exercise of such rights and remedies. Mortgagee shall
have, in addition to all other rights and remedies given it by the terms of this
Mortgage and the Loan Agreements, all rights and remedies allowed by law and the
rights and remedies of a secured party under the Uniform Commercial Code as
enacted in Illinois.
17. Binding Effect; Benefits. This Mortgage shall be binding upon
Mortgagor and its respective successors and assigns, and shall inure to the
benefit of Mortgagee, its successors, nominees and assigns.
18. Governing Law. This Mortgage shall be governed by and construed in
accordance with the internal laws of the State of Illinois.
19. Headings. Paragraph headings used herein are for convenience only
and shall not modify the provisions which they precede.
20. Further Assurances. Mortgagor agrees to execute and deliver such
further agreements, instruments and documents, and to perform such further acts,
as Mortgagee shall reasonably request from time to time in order to carry out
the purpose of this Mortgage and agreements set forth herein.
21. Survival of Representations. All representations and warranties of
Mortgagor contained in this Mortgage shall survive the execution and delivery of
this Mortgage and shall be remade on the date of each borrowing under the Loan
Agreements.
[SIGNATURE PAGE FOLLOWS]
Exhibit 10.38 - 6
IN WITNESS WHEREOF, Mortgagor has duly executed this Mortgage in favor
of Mortgagee, as of the date first written above.
ATTEST: MENDOCINO BREWING COMPANY, INC.
/s/ Yashpal Singh By: /s/ P.A. Murali
- -------------------------- --------------------------
Its: C.O.O. Its: Secretary
-------------------- --------------------
Agreed and Accepted as of this
24th day of September, 1998
THE CIT GROUP/CREDIT FINANCE, INC.
By: /s/ Richard Simons
----------------------------
Its: Senior V.P.
---------------------------
Exhibit 10.38 - 7
STATE OF California )
) SS.
COUNTY OF Mendocino )
The foregoing Patent, Trademark and License Mortgage was executed and
acknowledged before me this 16 day of Sept., 1998, by P.A. Murali and Yashpal
Singh, personally known to me to be the Secretary and C.O.O. of Mendocino
Brewing Company, Inc., a California corporation, on behalf of such corporation.
/s/ Sharon Cline
------------------------------
Notary Public
THIS INSTRUMENT PREPARED BY AND
AFTER FILING RETURN TO:
Michael A. Nemeroff, Esq.
Vedder, Price, Kaufman & Kammholz
222 North LaSalle Street
Chicago, Illinois 60601
Exhibit 10.38 - 8
EXHIBIT A
PATENTS
None
Exhibit 10.38 - A1
EXHIBIT B
Mendocino Brewing Company, Inc.
A. Registered Trademarks.
1. Red Tail Ale (and design)(1)
2. Blue Heron Pale Ale (and design)(2)
3. Black Hawk Stout(3)
4. Eye of the Hawk Select Ale (and design)
5. Yuletide Porter(4)
6. Peregrine Pale Ale(5)
7. Springtide Pale Ale
8. Frolic Shipwreck Ale 1850(6)
9. Carmel Amber Ale
10. Carmel Wheat Hefe-Weizen
11. Brewsletter
12. Mendocino Brewing Company
B. Unregistered Trademarks.
1. American Classic
2. California's First Brewpub Since Prohibition(7)
3. Eye of the Hawk
4. Eye of the Hawk Select
5. Eye of the Hawk Select
6. Frolic
7. Frolic Shipwreck
8. Frolic Shipwreck 1850
9. Hops cluster design
10. Mendocino Brewing Company scroll and hops and barley
design
11. Peregrine(8)
12. Purple Haze(9)
13. Red Tail
14. Springtide(10)
- ---------------
(1) Possible infringement by Clarks Crossing Brewpub and the Fox and Hound
Brewpub in Saskatoon, Saskatchewan, Canada (both market Red Tail Ale); and
Al Frisco's in Toronto, Canada (Red Tail Lager).
(2) Cannot be used in the States of Oregon, Idaho, Washington, and Montana.
(3) Per an agreement with Hiram Walker & Sons, Inc. the trademark can only be
used in connection with the words Mendocino Brewing Company.
(4) Possible infringement by Crooked River Brewing Co. and Louisiana Jack's
Silo Brewpub (both market Yuletide Ale)
(5) Registration in process. Mark has never been affixed to goods, although has
been used at the Hopland Brewery.
(6) Mendocino County Museum prints the labels under an agreement with MBC.
(7) May not be attached to a product.
(8) Used in connection with the sale of a product on a menu or tap handle, but
not actually attached to a product.
(9) Not actually attached to a product.
Exhibit 10.38 - B1
15. Springtide Celebration(11)
16. Strawberry Blonde(12)
17. The Legend
18. The Legend Grows
19. Yuletide
Note: In addition to the above, MBC is aware that the following brands could be
deemed to be similar to the brands of MBC:
Eugene City Brewing Co/West Brothers Bar-B-Q Black Hole Stout
Flagstaff Brewing Co Blackbird Porter
Redhook Ale Brewery (No 2) Blackhook
Redhook Ale Brewery Blackhook Porter
Blue Ridge Brewing Co Hawksbill Golden
Harrison Hollow Brewhouse Nighthawk Snowfest
Arrowhead Brewing Co Red Feather Pale Ale
Eugene City Brewing Co/West Brothers Bar-B-Q Red Tape Ale
Blue Cat Brew Pub Red Toad
Twenty Tank Brewery Red Top
Rohrbach Brewing Co Red Wing
Big Buck Brewery and Steakhouse Redbird Ale
Redhook Ale Brewery Redhook ESB
Redhook Ale Brewery Redhook Rye
Mishawaka Brewing Co Silver hawks Pilsner
Padre Island Brewing Co Tailing Red Amber
Hereford and Hops White Tail Ale
Wisconsin Brewing Co White Tail Cream Ale
Copper Tank Brewing Co/Austin Microbrewers LLC White Tail Pale Ale
Mickey Finn's Brewery/Libertyville Brewing Co White Tail Wheat Ale
Whitetail Brewing Inc Whitetail Ale
Whitetail Brewing Inc Whitetail Brown Ale
Whitetail Brewing Inc Whitetail Maple Wheat
Whitetail Brewing Inc Whitetail Stout
Whitetail Brewing Inc Whitetail Wheat
Montana Brewing Co Yellowtail Pale Ale
Redwood Coast Brewing Co Yule Tied
- --------------------------------------------------------------------------------
(10) Used in connection with the sale of a product on a menu or tap handle, but
not actually attached to a product.
(11) This mark has been claimed by Mendocino Brewing Company, Inc., but the
Company has ceases using the mark in light of claims made by Sierra Nevada
that the mark conflicts with its Celebration Ale.
(12) Belmont Brewing Company markets a Strawberry Blonde fruit ale.
Exhibit 10.38 - B2
Exhibit 10.38 - B3
EXHIBIT C
LICENSE AGREEMENTS
None
Exhibit 10.38 - C1