UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14A
(RULE 14A-101)
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. ___)
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-12
MENDOCINO BREWING COMPANY, INC.
(Name of Registrant as Specified in its Charter)
N/A
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
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(1) Title of each class of securities to which transactions applies:
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pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined
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[ ] Fee paid previously with preliminary materials.
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Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
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MENDOCINO BREWING COMPANY, INC.
1601 Airport Road
Ukiah, California 95482
(800) 733-3871
September 9, 2005
Dear Shareholder:
I would like to personally invite you to attend the Annual Meeting of
Shareholders of Mendocino Brewing Company, Inc. (the "Company") to be held at 2
P.M., local time, on Tuesday, October 4, 2005, at our brewery located at 1601
Airport Road, Ukiah, California. Additional information about our Company and
about the Annual Meeting accompany this letter, and I urge each of you to read
through all this material carefully.
Your Company's products continue to claim accolades! In the 2004
California State Fair, Red Tail Ale, Blue Heron Pale Ale, Black Hawk Stout and
Kingfisher Premium Lager won Gold Medals, and Talon Barley Wine Ale won a Silver
Medal, each in their respective categories.
In the July 2004 issue, MEN'S JOURNAL magazine chose Red Tail Ale "one
of the 25 finest beers brewed in America", and "one of the 25 paragons of the
brewer's art". The MEN'S JOURNAL panel of experts represented some of the best
names in the beer industry. The selection was made from some 1400 breweries
producing more than 8,000 brands. Since its introduction in 1983, Red Tail Ale
has grown to be a legend. It gives us particular pride to be considered
excellent by some of those for whom Red Tail Ale sets the standard.
We continued to expand our product offerings in 2004. In May, we
extended the Red Tail product line with the introduction of Red Tail Ale
barbeque sauce in two flavors; Original Tangy, and, for a bit of a hot kick,
Spicy Chipotle. In the beginning of the year, we proudly introduced Talon True
Style Barley Wine Ale in California. Talon has a traditional warming malt
flavor, rich amber color, full robust body, and a delightful hop finish. We were
able to bring this product to the East Coast in the last quarter of the year.
As a seasonal offering, we made a Winter Ale Special Edition available
on the East Coast, and found it was well received by our customers. Your Company
also introduced a 22 oz. package of White Hawk Original IPA, and on the East
Coast, we launched Black Eye Ale in 22 oz. bottles and Kingfisher Light in six
pack cases.
Your Company continues to keep its focus on its core business and
capitalize on the brand equity of its product portfolio. We've placed a strong
emphasis on further penetrating our primary markets on both coasts. We expect to
continue building brand awareness and gaining market presence as a result of the
strength and variety of our brands, and the support of our marketing and
promotional programs.
I would like to express my personal gratitude to our management, our
many dedicated employees, and my colleagues on the Board of Directors, for their
tireless efforts and contributions during this period.
Finally, I want to thank you, our shareholders, for your support during
the last
year, which is so important to us as we continue to pursue our goal of
leadership in each of the Company's chosen markets.
Dr. Vijay Mallya
Chairman
MENDOCINO BREWING COMPANY, INC.
1601, Airport Road
Ukiah, CA 95482
(800) 733-3871
September 9, 2005
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of shareholders
of Mendocino Brewing Company, Inc. (the "Company") to be held at 2:00 p.m.,
local time, on Tuesday, October 4, 2005, at our brewery located at 1601 Airport
Road, Ukiah, California (the "Annual Meeting").
As described in the accompanying Proxy Statement, at the Annual Meeting
the shareholders will elect Directors of the Company for the forthcoming year.
Scott R. Heldfond, H. Michael Laybourn, Dr. Vijay Mallya, Jerome G. Merchant,
Sury Rao Palamand, Kent D. Price, and Yashpal Singh, all of whom are currently
members of the Company's Board of Directors have been nominated by the Board for
election to the Board this year.
Your Board of Directors recommends that you vote FOR the election of its
nominees for Director. You are encouraged to read the enclosed Proxy Statement,
which provides detailed information concerning the Proposal which is expected to
come before the Annual Meeting.
Your vote is important, regardless of the number of shares you own. On
behalf of your Board of Directors, I urge you to complete, date, and sign the
accompanying proxy and return it to the Company promptly. Doing so will not
prevent you from attending the Annual Meeting or voting in person, but it will
assure that your vote is counted if you are unable to attend the Annual Meeting.
You may revoke your proxy at any time, by submitting either a written notice of
revocation or a duly executed proxy bearing a later date to the Company's
Secretary at the Company's offices prior to the Annual Meeting, or by attending
the Annual Meeting and voting in person.
All of us at Mendocino Brewing Company look forward to seeing you at the
Annual Meeting.
Sincerely,
N. Mahadevan
Corporate Secretary
MENDOCINO BREWING COMPANY, INC.
1601 Airport Road
Ukiah, CA 95482
(800) 733-3871
---------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held on Tuesday, October 4, 2005
---------------------------------
NOTICE IS HEREBY GIVEN that the 2005 Annual Meeting of the Shareholders
of Mendocino Brewing Company, Inc., a California corporation (the "Company"),
will be held at 2:00 p.m., local time, on Tuesday, October 4, 2005, at our
brewery located at 1601 Airport Road, Ukiah, California, for the following
purposes:
1. To elect Directors of the Company, each to serve until the next
Annual Meeting of Shareholders and until his successor has been
elected or until his earlier resignation or removal. The Board
of Directors has nominated the following candidates: Scott R.
Heldfond, H. Michael Laybourn, Dr. Vijay Mallya, Jerome G.
Merchant, Sury Rao Palamand, Kent D. Price, and Yashpal Singh.
2. To transact such other business as may properly come before the
Annual Meeting or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on August 19,
2005 as the record date for the determination of shareholders entitled to notice
of and to vote at the Annual Meeting or any adjournment thereof. Only
shareholders of record at the close of business on that date are entitled to
notice of and to vote at the Annual Meeting or any adjournment or postponement
thereof.
To help us in planning for the Annual Meeting, please mark the
appropriate box on the accompanying proxy if you plan to attend. PLEASE NOTE
THAT THE ENCLOSED PROXY IS BEING SOLICITED BY THE COMPANY'S BOARD OF DIRECTORS.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ N. Mahadevan
--------------------------------------
Ukiah, California N. Mahadevan
September 9, 2005 Corporate Secretary
MENDOCINO BREWING COMPANY, INC.
1601 Airport Road
Ukiah, CA 95482
PROXY STATEMENT FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON OCTOBER 4, 2005
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Mendocino Brewing Company, Inc., a California
corporation (the "Company"), of proxies to be used at the Annual Meeting of the
Shareholders of the Company to be held at 2:00 p.m., local time, on Tuesday,
October 4, 2005, at our brewery located at 1601 Airport Road, Ukiah, California
, and at any adjournment or adjournments thereof (the "Annual Meeting"). The
approximate date on which this Proxy Statement and the accompanying Proxy were
mailed to stockholders is September 12, 2005. The mailing address of the
principal executive offices of the Company is: 1601 Airport Road, Ukiah, CA
95482, and its telephone number is: (800) 733-3871.
MATTERS FOR CONSIDERATION AT THE ANNUAL MEETING
At the Annual Meeting, Shareholders will be asked to consider and to
vote upon the following:
PROPOSAL NO. 1: To elect Directors of the Company, each to serve until
the next Annual Meeting of Shareholders and until his successor has been elected
and qualified or until his earlier resignation or removal. The Board of
Directors has nominated the following candidates: Scott R. Heldfond, H. Michael
Laybourn, Dr. Vijay Mallya, Jerome G. Merchant, Sury Rao Palamand, Kent D.
Price, and Yashpal Singh.
THE BOARD OF DIRECTORS OF THE CORPORATION UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" THE FOREGOING PROPOSAL.
1
TABLE OF CONTENTS
Caption Page No.
- ------- --------
INTRODUCTION...................................................................1
Matters for Consideration at the Annual Meeting............................1
GENERAL INFORMATION............................................................3
Persons Making the Solicitation............................................3
Voting Securities of the Company...........................................3
Solicitation of Proxies....................................................5
Revocability of Proxies....................................................5
Market Listing 6
Forward Looking Statements Regarding the Company...........................6
Available Information......................................................6
PROPOSAL NO. 1: ELECTION OF DIRECTORS..........................................6
Nominees for Director......................................................7
Directors and Executive Officers of the Company............................7
Board of Directors' Meetings and Committees................................7
Report of the Audit Committee..............................................9
Director Compensation......................................................9
Significant Employees.....................................................10
Security Ownership of Certain Beneficial Owners and Management............10
Executive Compensation....................................................12
Report of the Compensation Committee......................................12
Stock Option Grants.......................................................12
Certain Transactions......................................................13
Certain Other Agreements..................................................13
Section 16(a) Beneficial Ownership Reporting Compliance...................13
Comparative Performance Graph.............................................14
VOTE REQUIRED FOR THE ELECTION OF DIRECTORS...............................15
OTHER MATTERS.................................................................15
Independent Auditors......................................................15
Shareholder Communications with the Board of Directors....................17
Shareholder Proposals to be Presented at the Next Annual Meeting..........17
Availability of Form 10-K.................................................17
Other Matters to be Considered at the Annual Meeting......................17
Attached Documents:
Amendment No. 1 to 2004 Annual Report on Form 10-K/A
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GENERAL INFORMATION
PERSONS MAKING THE SOLICITATION
THIS SOLICITATION OF PROXIES IS BEING MADE BY THE COMPANY'S BOARD OF
DIRECTORS. The expenses of preparing, assembling, printing, and mailing this
Proxy Statement and the materials used in the solicitation of Proxies for the
Annual Meeting will be borne by the Company. It is contemplated that Proxies
will be solicited principally through the use of the mails, but officers,
Directors, and employees of the Company may solicit Proxies personally or by
telephone, without receiving special compensation therefor. The Company will
reimburse banks, brokerage houses, and other custodians, nominees, and
fiduciaries for their reasonable expenses in forwarding these Proxy materials to
shareholders whose stock in the Company is held of record by such entities.
VOTING SECURITIES OF THE COMPANY
All properly executed proxies delivered pursuant to this solicitation
and not revoked will be voted at the Annual Meeting in accordance with the
directions given, and shareholders may of course attend the Annual Meeting and
vote their shares in person. Proxies which are executed and returned to the
Company without contrary instructions will be voted "For" the election of each
of the Board's nominees for Director (as indicated in Proposal No. 1) and
otherwise in the discretion of the proxyholders.
OUTSTANDING SHARES; RECORD DATE. There were issued and outstanding
11,473,914 shares of the Company's Common Stock (the "Common Stock") and 227,600
shares of the Company's Series A Preferred Stock (the "Series A Preferred
Stock") at the close of business on August 19, 2005, which date has been fixed
as the record date for the purpose of determining shareholders entitled to
notice of, and to vote at, the Annual Meeting (the "Record Date").
VOTING GENERALLY.
HOLDERS OF COMMON STOCK. On any matter submitted to the vote of
the shareholders other than the election of Directors, each holder of Common
Stock will be entitled to one vote, in person or by Proxy, for each share of
Common Stock held of record on the Company's books as of the Record Date. With
respect to the special rules relating to the election of Directors, please see
below under the captions "Election of Directors" and "Cumulative Voting."
HOLDERS OF SERIES A PREFERRED STOCK. The Company's Series A
Preferred Stock does not normally carry with it the right to vote, and
accordingly the holders of the Series A Preferred Stock will not have the right
to vote on any matter scheduled to come before the Annual Meeting.
VOTING PROCEDURES. Holders of the Company's Common Stock may vote in
favor of or against any of the Proposals, or may abstain from voting on them, by
specifying their choice as indicated on the enclosed proxy card. If no specific
instructions are given with respect to any Proposal, however, the shares
represented by any signed
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proxy will be voted FOR that Proposal. Shareholders may also abstain from voting
on all of the Proposals by simply not returning any proxy card. If a shareholder
wishes to do so, he or she may also attend the Annual Meeting in person, and
either submit a signed proxy card at that time or vote by ballot at the Annual
Meeting.
VOTES REQUIRED FOR APPROVAL. Directors of the Company will be elected
(Proposal No. 1) by the vote of a plurality of the shares of Common Stock which
are present at the Annual Meeting, as discussed below under the heading
"Election of Directors." Thus, abstentions and broker non-votes could have an
indirect effect on the outcome of the election of Directors, since they will
enable a smaller number of votes to determine the outcome of the election.
ELECTION OF DIRECTORS. With respect to the election of Directors,
shareholders may vote in favor of all nominees, or withhold their votes as to
all nominees, or withhold their votes as to specific nominees, by following the
instructions on the enclosed proxy card. Directors will be elected by a
plurality of the votes cast by the holders of the Company's Common Stock, voting
in person or by proxy at the Annual Meeting.
A shareholder may choose to withhold from the proxyholders the authority
to vote for any of the individual candidates nominated by the Board of
Directors, by marking the appropriate box on the proxy card and writing in the
names of the disfavored candidates as they appear on the proxy card. In that
event, the proxyholders will not cast any of the shareholder's votes for
candidates whose names have been so indicated, whether or not cumulative voting
is called for at the Annual Meeting, but they will retain the authority to vote
for the candidates nominated by the Board of Directors whose names have not been
so indicated, and for any other candidates who may be properly nominated at the
Annual Meeting. If a shareholder wishes to specify the manner in which his or
her votes are allocated in the event of cumulative voting, then he or she must
appear and vote in person at the Annual Meeting. Ballots will be available at
the Annual Meeting for persons desiring to vote in person. All votes will be
tabulated by Computershare, the Company's Registrar and Transfer Agent, which
will act as the tabulating agent for the Annual Meeting.
CUMULATIVE VOTING. In connection with the election of Directors (only),
shares may be voted cumulatively, but only for persons whose names have been
placed in nomination prior to the voting for election of Directors and only if a
shareholder present at the Annual Meeting gives notice at the Annual Meeting,
prior to the vote, of his or her intention to vote cumulatively. (Notice of
intention to vote cumulatively may not be given by simply marking and returning
a proxy.) If any Company shareholder gives such notice, then all shareholders
eligible to vote will be entitled to cumulate their votes in voting for election
of Directors. Cumulative voting allows a shareholder to cast a number of votes
equal to the number of shares held in his or her name as of the Record Date,
multiplied by the number of Directors to be elected. All of these votes may be
cast for any one nominee, or they may be distributed among as many nominees as
the shareholder sees fit. The nominees receiving the highest number of votes, up
to the number of places to be filled, shall be elected.
If one of the Company's shareholders gives notice of intention to vote
cumulatively, the persons holding the proxies solicited by the Board of
Directors will
4
exercise their cumulative voting rights, at their discretion, to vote the shares
they hold in such a way as to ensure the election of as many of the Board's
nominees as they deem possible. This discretion and authority of the
proxyholders may be withheld by checking the box on the proxy card marked
"withhold from all nominees." Such an instruction, however, will also deny the
proxyholders the authority to vote for any or all of the nominees of the Board
of Directors, even if cumulative voting is not called for at the Annual Meeting,
although it will not prevent the proxyholders from voting, at their discretion,
for any other person whose name may be properly placed in nomination at the
Annual Meeting.
Under California law, cumulative voting may not be used in connection
with any matter other than the election of Directors.
QUORUM. The presence of the persons entitled to vote a majority of the
voting shares of the Company at the Annual Meeting, whether those persons are
present in person or only by proxy, will constitute a quorum for the transaction
of business at the Annual Meeting. If a quorum is not present at the time the
Annual Meeting is convened, or if for any other reason the Company believes that
additional time should be allowed for the solicitation of proxies or
consideration of the issues raised at the Annual Meeting, the Company may
adjourn the Annual Meeting. If the Company proposes to adjourn the Annual
Meeting by a vote of the shareholders, the persons named in the enclosed form of
proxy will vote all shares for which they have voting authority in favor of such
adjournment.
VOTES CAST AT THE ANNUAL MEETINGS. Representatives of Computershare,
Inc., the Company's Registrar and Transfer Agent, will be in attendance at the
Annual Meeting in order to receive and tabulate any votes cast at that time.
SOLICITATION OF PROXIES
The expense of soliciting proxies in the form accompanying this Proxy
Statement will be paid by the Company. Following the original mailing of the
proxies and other soliciting materials, the Company and/or its agents may also
solicit proxies by mail, telephone or facsimile, or in person. The Company will
request that brokers, custodians, nominees, and other record holders of the
Company's Common Stock forward copies of the proxy and other soliciting
materials to persons for whom they hold such shares and request authority for
the exercise of proxies. In such cases, the Company, upon the request of the
record holders, will reimburse such holders for their reasonable expenses.
REVOCABILITY OF PROXIES
A form of Proxy for voting your shares at the Annual Meeting is
enclosed. Any shareholder who executes and delivers such a Proxy has the right
to, and may, revoke it at any time before it is exercised, by filing with the
Secretary of the Company an instrument revoking it or a duly executed Proxy
bearing a later date. In addition, if the person executing a Proxy is present at
the Annual Meeting, and elects to vote in person, the powers of the Proxy
holders will be superseded as to those Proposals on which the shareholder
actually votes at the Annual Meeting.
5
MARKET LISTING
The Company's Common Stock is quoted on the OTC Bulletin Board of The
Nasdaq Stock Market, Inc. under the symbol "MENB".
FORWARD LOOKING STATEMENTS REGARDING THE COMPANY
Certain information contained in this proxy statement which does not
relate to historical financial information may be deemed to constitute forward
looking statements. The words or phrases "will likely result," "are expected
to," "will continue," "is anticipated," "estimate," "project," "believe,"
"intend," "plan," "budget," or similar expressions identify "forward looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. This proxy statement contains certain forward-looking statements with
respect to the plans, objectives, future performance, and business of the
Company. Because such statements are subject to risks and uncertainties, actual
results may differ materially from historical results and those presently
anticipated or projected. The Company's shareholders are cautioned not to place
undue reliance on such statements, which speak only as of the date of this Proxy
Statement. The Company does not undertake any obligation to release publicly any
revisions to such forward-looking statements to reflect events or circumstances
after the date hereof or to reflect the occurrence of unanticipated events.
AVAILABLE INFORMATION
The Company is subject to the informational reporting requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith periodically files reports, proxy statements, and other
information with the Securities and Exchange Commission (the "Commission"). Such
reports, proxy statements and other information can be inspected and copies can
be made or obtained at or by writing to the public reference facilities of the
Commission at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington,
D.C. 20549. Such material may also be accessed electronically through the Edgar
filings by the Company, by means of the Commission's Internet Web site
(http://www.sec.gov).
PROPOSAL NO. 1: ELECTION OF DIRECTORS
At the Annual Meeting, Shareholders will elect Directors to hold office
until the next Annual Meeting of Shareholders and until their respective
successors have been elected or until their earlier resignation or removal.
Under the Company's Bylaws, the Company's Board may consist of between five and
nine members, with the exact number within that range being determined by the
Board of Directors. At present the Board has set the number of Directors at
seven.
Shares represented by the accompanying proxy will be voted for the
election of the nominees recommended by the Board unless the proxy is marked in
such a manner as to withhold authority so to vote. If any nominee for any reason
is unable to serve or for good cause will not serve, the proxies may be voted
for such substitute nominee as the proxy holder may determine. The Company is
not aware of any nominee who will be unable to, or for good cause will not,
serve as a Director.
6
NOMINEES FOR DIRECTOR
The Board has nominated seven individuals to serve as Directors of the
Company until the next Annual Meeting, all of whom are current members of the
Board. The Board's nominees are: Scott R. Heldfond, H. Michael Laybourn, Dr.
Vijay Mallya, Kent D. Price, Sury Rao Palamand, Jerome G. Merchant, and Yashpal
Singh. As of the date of this Proxy Statement, no other names had been placed in
nomination for consideration by the Shareholders at the Annual Meeting.
The Board has not adopted a charter or any other set of rules with
respect to the nominating process. While the Board would carefully consider the
nomination of any candidate for Director who may be recommended by the Company's
shareholders, due to the lack of such nominations in the past it has not felt
the need to adopt any specific policy in his regard. Similarly, it has not
adopted any specific minimum qualifications for candidates for election as
Director or identified any specific qualities or skills that such candidates
should possess.
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth the names, ages as of September 1, 2005,
and certain information regarding each of the Company's current Directors and
executive officers, and each of the Board's nominees for Director:
Name Age Position Director
- ---- --- -------- Since
-----
Scott R. Heldfond 60 Director 2004
H. Michael Laybourn 67 Director 1993
Vijay Mallya, Ph.D. 50 Director and Chairman of the Board 1997
Jerome G. Merchant*+ 44 Director 1997
Mahadevan Narayanan 47 Chief Financial Officer and Secretary ----
Sury Rao Palamand, Ph.D.*+ 75 Director 1998
Kent D. Price*+ 62 Director 1998
Yashpal Singh 59 Director, Chief Executive Officer, and 1997
President
- -----------
* Member of the Audit/Finance Committee.
+ Member of the Compensation Committee.
Biographical information about all of the above-listed Directors of the
Company is incorporated by reference from the Company's Amendment No. 1 to 2004
Annual Report on Form 10-K/A which accompanies this Proxy Statement, under the
heading "Item 10 - Directors and Executive Officers of the Company".
BOARD OF DIRECTORS' MEETINGS AND COMMITTEES
During the fiscal year ended December 31, 2004, the Board of Directors
held one meeting. No Director attended fewer than 75% of the aggregate of the
total
7
number of meetings of the Board and the total number of meetings held by all
committees of the Board on which he served.
Directors are encouraged to attend the Annual Meeting of Shareholders.
At the 2004 Annual Meeting, all seven of our directors were in attendance.
Listed below are the committees of the Board of Directors, along with
Directors who served as members of each committee during 2004 and the first
eight months of 2005.
AUDIT AND FINANCE COMMITTEE. The Board has a standing Audit/Finance
Committee and a standing Compensation Committee.
Mr. Price serves as the Chairman and Messrs. Merchant and Palamand
presently serve as the members of the Audit/Finance Committee (established in
accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934),
which met five times during 2004. Mr. Palamand did not attend one of those
meetings. The Audit/Finance Committee reviews, acts on, and reports to the Board
of Directors with respect to various auditing, accounting and finance matters,
including the selection of the Company's auditors, the scope of the annual
audits, fees to be paid to the auditors, the performance of the Company's
auditors, and the accounting practices of the Company. In the judgment of the
Company's Board of Directors, Messrs. Price and Palamand are "Independent," as
that term is defined in Section 4200(a)(15) of the Rules of the National
Association of Securities Dealers, Inc, but Mr. Merchant is not.
NOMINATING COMMITTEE. Because of its limited size, the Board does not
have a nominating committee or a committee performing similar functions.
Instead, all of the Directors participate in the consideration of Director
nominees. Several of the Company's Directors would not be considered to be
"independent" under the rules of the New York Stock Exchange or any of the other
national securities exchanges.
SPECIAL COMMITTEE. The Special Committee, consisting of Directors Kent
D. Price (as Chairman), Sury Rao Palamand, Michael Laybourn and Jerome Merchant
(ex-officio member), was created by the Board in 2002 for the purpose of
advising the Board concerning certain potential acquisition by United Breweries
Holdings Limited ("UBHL"), an Indian corporation of some or all of the
outstanding shares of the Company. It continues to serve as a primary forum for
the review of transactions or potential transactions that could have a material
effect on the Company.
COMPENSATION COMMITTEE. Mr. Palamand serves as the Chairman and Messrs.
Merchant and Price presently serve as the members of the Compensation Committee,
which considers all matters of compensation with respect to the chief executive
officer, president, any vice president, and any other senior executives, and
makes recommendations to the Board regarding the compensation of such persons.
The Compensation Committee also makes determinations with respect to the
granting of stock options with respect to Directors who are also employees of
the Company. The Compensation Committee met once during 2004.
8
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION. Mr.
Merchant formerly served as the Company's Chief Financial Officer from November
1997 to October 1998.
REPORT OF THE AUDIT COMMITTEE
The following audit committee report is provided in accordance with the
rules and regulations of the Securities and Exchange Commission (the "SEC").
Pursuant to such rules and regulations, this report shall not be deemed to be
(i) "soliciting materials," (ii) filed with the SEC, (iii) subject to Regulation
14A or 14C, or (iv) subject to the liabilities of Section 18 of the Securities
Exchange Act of 1934, as amended.
The Board of Directors maintains an Audit/Finance Committee comprised of
three of the Company's outside directors. The Board of Directors and the
Audit/Finance Committee believe that the Audit/Finance Committee's current
member composition satisfies the rules of the National Association of Securities
Dealers, Inc. ("NASD") governing audit committee composition, including the
requirement that all audit committee members be "independent directors." The
Audit/Finance Committee has adopted a written charter, a copy of which is
attached hereto as Exhibit A.
The Audit/Finance Committee assists the Board of Directors with
fulfilling its oversight responsibility regarding the quality and integrity of
accounting, auditing, and financial reporting practices of the Company. In
discharging its oversight responsibilities regarding the audit process, the
Audit/Finance Committee has (i) reviewed and discussed the audited financial
statements with management, (ii) discussed with the independent auditors the
material required to be discussed by Statement on Auditing Standards no. 61, and
(iii) received and reviewed the written disclosures and the letter from the
independent auditors required by the Independence Standards Board's Standard No.
1, and discussed with the independent auditors any relationships that may impact
their objectivity and independence.
Based on the review and discussions referred to above, the Audit/Finance
Committee recommended to the Board of Directors that the audited financial
statements be included in the Company's Annual Report on Form 10-K for the years
ended December 31, 2003 and 2004, as filed with the SEC.
Approved by the Members of the Audit Committee:
Kent D. Price, Chairman
Jerome G. Merchant
Sury Rao Palamand
DIRECTOR COMPENSATION
The Company's policy with respect to compensation of outside Directors
for their services as Directors is as follows: each outside Director receives
$3,000 per Board meeting he attends and $1,000 per committee meeting he attends.
The outside Directors have opted to receive such compensation in shares of the
Company's
9
Common Stock which will be valued at the greater of $1.00 per share or book cost
as of the end of the fiscal year of the meeting for which the he is being
compensated.
Mr. Merchant receives a monthly fee of $4,000 in exchange for consulting
services he renders to the Company. This monthly fee is in lieu of the normal
Directors' fees of $3,000 per Board meeting and $1,000 per committee meting.
SIGNIFICANT EMPLOYEES
Don Barkley, 50, joined the Company in 1983 as Master Brewer and has
served in that capacity continuously since then. In 1993 Mr. Barkley was the
President and representative to the national board of governors of the Master
Brewers Association of the Americas, Northern California District. Mr. Barkley
holds a Bachelor of Science degree in fermentation science from the University
of California, Davis.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information known to the Company
regarding the beneficial ownership of the Company's Common Stock and Series A
Preferred Stock as of the close of business on September 1, 2005, for (a) each
shareholder known by the Company to own beneficially 5% or more of the
outstanding shares of its Common Stock or Series A Preferred Stock; (b) each
Director and executive officer; and (c) all Directors and executive officers of
the Company as a group. Except as noted, the Company believes that the
beneficial owners of the Common Stock and Series A Preferred Stock listed below,
based on information furnished by such owners, have sole investment and voting
power with respect to such shares, subject to community property laws where
applicable.
Shares Approximate
Name and Address of Beneficially Percentage
Beneficial Owner Owned(1) of Class
---------------- -------- --------
COMMON STOCK:
United Breweries of America, Inc.+ 3,087,818(2) 26.9%
Inversiones Mirabel S.A. 5,500,000 47.9%
Hong Kong Bank Building
6th Floor, Samuel Lewis Avenue
P O Box 6-4298, El Dorado
Panama City
Scott R. Heldfond -- --
H. Michael Laybourn++ 365,817(3) 3.2%
Vijay Mallya, Ph.D.+ 8,587,818(4) 74.8%
Jerome G. Merchant+ 153,742(3) 1.3%
Sury Rao Palamand, Ph.D. 149,094(3) 1.3%
50 Crestwood Executive
Center, Suite 207
St. Louis, MO 63126
10
Shares Approximate
Name and Address of Beneficially Percentage
Beneficial Owner Owned(1) of Class
---------------- -------- --------
Kent D. Price 186,973(3) 1.6%
c/o Parker Price Venture
Capital
101 California #2830
San Francisco, CA 94111
Yashpal Singh++ -- --
N. Mahadevan++ -- --
All Directors and executive officers
as a group (8 persons) 9,443,444(3) 80.9%
SERIES A PREFERRED STOCK:
H. Michael Laybourn 6,100 2.7%
All Directors and executive officers
as a group (8 persons) 6,100 2.7%
- --------------
+ 1050 Bridgeway, Sausalito, CA 94965
++ 1601 Airport Road, Ukiah, CA 95402
(1) Applicable percentages of ownership are based on 11,473,914 shares of
Common Stock outstanding and 227,600 shares of Series A Preferred Stock
outstanding. Shares of Common Stock subject to a contract of purchase or
options currently exercisable or exercisable within 60 days after the
date of this Statement are deemed outstanding for computing the
percentage ownership of the person obligated to purchase the shares or
holding the options but are not deemed outstanding for computing the
percentage of any other person.
(2) Does not include (i) 1,668,131 shares issuable upon conversion of
certain convertible notes issued to UBA.
(3) Includes 48,077 shares subject to options exercisable or that will be
exercisable within 60 days.
(4) Includes all shares held by UBA and Inversiones. Dr. Mallya may be
deemed to be a beneficial owner of UBA and Inversiones because they are
both controlled by Golden Eagle Trust, which in turn is controlled by
persons who may exercise discretion in Dr. Mallya's favor among others.
Dr. Mallya is also the Chairman and Chief Executive Officer of UBA. Does
not include 1,668,131 shares issuable upon conversion of certain
convertible notes issued to UBA.
11
EXECUTIVE COMPENSATION
The annual compensation, including salary, bonuses, and certain other
compensation, paid by the Company to its Chief Executive Officer and most
highly-compensated executive officers during each of the fiscal years ended
December 31, 2002, 2003, and 2004 is set forth in Amendment No. 1 to the
Company's 2004 Annual Report on Form 10-K/A, under the heading "Item 11 -
EXECUTIVE COMPENSATION - Summary Compensation Table," and that table is
incorporated into this Proxy Statement by reference.
During those years, there were no restricted stock awards or long-term
incentive program payouts, and none of the Company's other executive officers
received total compensation in excess of $100,000 in any of those years.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee determines the compensation for the Company's
President and Chief Executive officer, Yashpal Singh, and its Chief Financial
Officer and Secretary, N. Mahadevan. The Company entered into an employment
agreement with its current President and Chief Executive Officer, Yashpal Singh,
effective on April 1, 1998 which was extended during 2004 and will now expire in
2008 (but may be extended or terminated at any time, by either party, upon six
months notice). Mr. Singh's current base salary is $120,000. Mr. Singh is also
entitled to receive an annual bonus of up to 36% of his base salary. The Company
provides Mr. Singh with medical and dental benefits and $250,000 in life
insurance benefits. Mr. Mahadevan's current base salary is $75,000. Mr.
Mahadevan is also entitled to receive an annual bonus of up to 30% of base
salary. The Company provides Mr. Mahadevan with medical and dental benefits.
The Compensation Committee reviews annually, the performance of Mr.
Singh and Mr. Mahadevan to evaluate and approve bonus and salary revisions. The
Committee evaluates several performance factors to determine the compensation of
these executives. These factors include, but are not limited to, managing and
development of operations, general leadership qualities, effective management of
available resources including human resources, and the ability to anticipate and
prepare for future opportunities and problems.
Approved by the Members of the Compensation Committee:
Sury Rao Palamand, Chairman
Kent D. Price
Jerome G. Merchant
12
STOCK OPTION GRANTS
No stock options were held by, granted to, or exercised by any of the
Company's executive officers during the year ended December 31, 2004; and no
such options have been granted to or exercised by any executive officer to date
during 2005.
CERTAIN TRANSACTIONS
MASTER LINE OF CREDIT AGREEMENT
On August 31, 1999, the Company and UBA entered into a Master Line of
Credit Agreement, which was subsequently amended on April 28, 2000, and February
12, 2001 (the "Credit Agreement"). The terms of the Credit Agreement provide the
Company with a line of credit in the principal amount of up to $1,600,000.
UBA has made thirteen (13) separate advances to the Company under the
Credit Agreement, and one separate advance on terms substantially similar to
those of the Credit Agreement, each pursuant to an eighteen-month promissory
note, (collectively, the "UBA Notes"). On December 28, 2001, MBC and UBA entered
into a Confirmation of Waiver which confirms that as of August 13, 2001, UBA
waived its rights with regard to all conversion rate protection as set forth in
the UBA Notes.
As of the date of this Proxy Statement, the aggregate outstanding
principal amount of the UBA Notes is $1,915,371, and the accrued but unpaid
interest thereon is equal to approximately $586,825.
CERTAIN OTHER AGREEMENTS
In addition to the agreements referred to above, the Company has entered
into a number of other agreements and relationships with companies that may be
viewed as related entities, including among others a license agreements for the
Kingfisher trademark, an agreement for the distribution of lager and beer
products in Europe, and a brewing agreement and a loan agreement in connection
with the brewing and distribution of beers and related products sold under the
Kingfisher trademark in Europe. Descriptions of these transactions are
incorporated by reference to Item 13 of the Company's Amendment No. 1 to 2004
Annual Report on Form 10-K/A which accompanies this Proxy Statement, under the
headings " CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS - License of the
Kingfisher Trademark," "--Distribution Agreement," "--Market Development
Agreement," and "--Brewing License Agreement,".
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires each of the Company's executive Directors and
officers, and each person who or which is a beneficial owner of more than 10% of
the Company's Common Stock, to file forms with the Securities and Exchange
Commission ("SEC") reports of ownership and changes in ownership of the
Company's shares. These
13
persons are required by SEC regulation to furnish the Company with copies of all
such forms they file.
Based solely on a review of written statements of the Company's insiders
and Forms 3, 4, and 5 furnished to the Company, no reports required by Section
16 of the Exchange Act was required to be filed with respect to the Company's
2004 fiscal year.
COMPARATIVE PERFORMANCE GRAPH
Set forth below is a graph comparing the cumulative total return to
shareholders on the Company's Common Stock with the cumulative total return of
the Russell 2000 Index and an index comprised of other publicly-traded craft
beer companies (the "Peer Group") for the period beginning on December 31, 1999
and ended on December 31, 2004. The total return on the Company's Common Stock,
the Russell 2000 Index and the Peer Group Index assumes the value of each
investment was $100 on December 31, 1999, and that any dividends were
reinvested. The points represent fiscal year-end index levels based on the last
trading day in each fiscal year. Return information is historical and not
necessarily indicative of future performance.
[PERFORMANCE GRAPH]
- ----------------------- ------------ ------------ ------------ ------------ ------------ ------------
1999 2000 2001 2002 2003 2004
- ----------------------- ------------ ------------ ------------ ------------ ------------ ------------
MENDOCINO BREWING 100 130 83 53 32 27
- ----------------------- ------------ ------------ ------------ ------------ ------------ ------------
PEER GROUP 100 117 225 190 240 268
- ----------------------- ------------ ------------ ------------ ------------ ------------ ------------
RUSSEL 2000 INDEX 100 96 97 76 110 129
- ----------------------- ------------ ------------ ------------ ------------ ------------ ------------
The Company's Peer Group is comprised of three publicly traded craft
beer companies. As required, the returns of each of the component companies in
the Peer
14
Group return are calculated and weighted according to their respective market
capitalization at the beginning of the period. The Peer Group is composed of:
Red Hook Ale Brewery, Inc. (NASDAQ: HOOK), The Boston Beer Company, Inc. (NYSE:
SAM), and Pyramid Breweries Inc. (Nasdaq: PMID).
VOTE REQUIRED FOR THE ELECTION OF DIRECTORS
The affirmative vote of the holders of a plurality of the shares of
Common Stock present and voting at the Annual Meeting is required to elect each
of the nominees for Director. Each share of Common Stock which is represented,
in person or by proxy, at the Annual Meeting will be accorded one vote on each
nominee for Director, unless one or more shareholders express an intention to
exercise the right of cumulative voting, in which case all shares will be
accorded the cumulative voting rights. For purposes of this vote, abstentions
and broker non-votes will in effect not be counted. Please see "GENERAL
INFORMATION -- Voting Securities of the Company - Cumulative Voting," above, for
a brief description of the voting procedures in the event that cumulative voting
is requested at the Annual Meeting in connection with the election of Directors.
The Board of Directors recommends that shareholders vote FOR the
election of all seven of the nominees named above.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
EACH OF THE NOMINEES FOR DIRECTOR DESCRIBED ABOVE.
OTHER MATTERS
INDEPENDENT AUDITORS
The Company had appointed Moss Adams, L.L.P. ("Moss Adams"), as its
independent auditors to perform the audit of the Company's financial statements
for the year 2004, and the shareholders approved that appointment at last year's
Annual Meeting. The Company's Amendment No. 1 to Annual Report on Form 10-K/A
for the year ended December 31, 2004, which incorporates the 2004 financial
statements, is included (without Exhibits) with this Proxy Statement.
LETTER OF TERMINATION
On September 2, 2005, the Company received a letter from Moss Adams
stating that Moss Adams would not stand for reappointment as the Company's
independent auditor for the year ending December 31, 2005. Moss Adams will cease
to perform services for the Company upon the completion of the SAS 100 review
associated with the filing of the Company's Form 10-Q for the quarterly period
ending September 30, 2005. At the time the Company received the letter stating
Moss Adams's determination not to stand for reappointment, neither the Company's
audit committee nor board of directors had previously recommended or approved
Moss Adams's decision.
15
NO DISAGREEMENTS OR REPORTABLE EVENTS
Neither of Moss Adams's reports on the Company's financial statements
during the last two years contained an adverse opinion or disclaimer of opinion,
or was qualified or modified as to uncertainty, audit scope, or accounting
principles.
During the Company's past two fiscal years (2003 and 2004) and the
interim period of 2005 preceding the date of this report (collectively, the
"Preceding Period"), the Company did not have any disagreements with Moss Adams
on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which, if not resolved to the
satisfaction of Moss Adams, would have caused it to make reference to the
subject matter of the disagreements in connection with its report.
During the Preceding Period, Moss Adams never advised the Company of
either of the following: (1) that the internal controls necessary for the
Company to develop reliable financial statements did not exist; or (2) that
information had come to its attention that led it to no longer be able to rely
on the Company's management's representations, or that made it unwilling to be
associated with the financial statements prepared by management.
In addition, Moss Adams did not, during the Preceding Period, advise the
Company of the need to expand significantly the scope of its audit, or that
information had come to its attention that had, or if further investigated may
have (1) materially impacted the fairness or reliability of either: a previously
issued audit report or the underlying financial statements; or the financial
statements issued or to be issued in connection with any current or future
report (including information that, unless resolved to Moss Adams's
satisfaction, would prevent it from rendering an unqualified audit report on
those financial statements); or (2) caused it to be unwilling to rely on the
Company's management's representations, or that made it unwilling to be
associated with the Company's financial statements.
NO SUCCESSOR HAS BEEN APPOINTED
Because the Company just recently received notice of Moss Adams's
decision, it has not yet identified an independent public accountant to succeed
Moss Adams. The Company shall file a separate Current Report on Form 8-K to
announce the appointment of its independent public accountant for the year ended
December 31, 2005.
As Moss Adams will not serve as the Company's independent auditor for
the year ended December 31, 2005, representatives of Moss Adams, L.L.P. will not
be present at the Annual Meeting as they have in the past.
FEES AND SERVICES
All audit and other services performed by Moss Adams on behalf of the
Company are approved in advance by the Audit Committee, on a case-by-case basis.
Descriptions of the fees paid to Moss Adams are incorporated by
reference to Item 14 of the Company's Amendment No. 1 to 2004 Annual Report on
Form 10-K/A which accompanies this Proxy Statement, under the heading "
PRINCIPAL ACCOUNTING FEES AND SERVICES.
16
The Audit Committee has determined that the provision of the services
rendered above is compatible with the maintenance of Moss Adams' independence.
The Company is not aware that any significant amount of the work done
during the course of Moss Adams' audit of the Company's 2004 Financial
Statements was performed by persons other than Moss Adams' full-time, permanent,
employees.
SHAREHOLDER COMMUNICATIONS WITH THE BOARD OF DIRECTORS
The Board of Directors has a process by which shareholders may
communicate with the Board, the non-management Directors, or with any individual
Director concerning the Company. Shareholders wishing to do so may write to the
Board or to the Director or Directors at issue care of: N. Mahadevan, Corporate
Secretary, Mendocino Brewing Company, Inc., 1601 Airport Road, Ukiah, CA 95482.
The envelope should indicate that it contains a shareholder communication. All
such communications relating to the Company will be forwarded to the Director or
Directors to whom they are addressed.
SHAREHOLDER PROPOSALS TO BE PRESENTED AT THE NEXT ANNUAL MEETING
Any proposal which a shareholder wishes to have presented at the next
annual meeting and included in the management proxy materials relating to such
meeting must be received at the main office of the Company a reasonable time
before the Company begins to print and mail its proxy material in connection
with that meeting. The Company will advise its shareholders of the date of its
next (2006) Annual Meeting of Shareholders, once that date has been set, through
its Quarterly Reports on Form 10-Q or by a Current Report on Form 8-K. If a
shareholder proposal for consideration at the 2006 Annual Meeting is in
compliance with all of the requirements of Rule 14a-8 promulgated under the
Securities Exchange Act of 1934, it will be included in the proxy statement for
that meeting, and set forth on the form of proxy issued for the 2005 Annual
Meeting of Shareholders.
If a shareholder of the Company wishes to present a proposal before the
Company's next annual meeting but does not wish to have the proposal considered
for inclusion in the Company's proxy statement and proxy card, such shareholders
must give written notice to the Secretary of the Company at its main office.
Such a notice must be received a reasonable time before the 2006 Annual Meeting.
It is urged that any shareholder proposals be sent by certified mail,
return receipt requested.
AVAILABILITY OF FORM 10-K
Included with this Proxy Statement, and partially incorporated herein,
is a copy of the Company's Amendment No. 1 to Annual Report on Form 10-K/A for
the year ended December 31, 2004 (without exhibits). THE COMPANY WILL PROVIDE TO
ANY SHAREHOLDER, UPON WRITTEN REQUEST AND WITHOUT CHARGE, AN ADDITIONAL COPY OF
THIS REPORT (also without Exhibits). Such written requests should be made to the
Company at Mendocino Brewing Company, Inc., Attn: Sarah T.
17
McDaniel, Manager, Shareholder Relations, 1601 Airport Road, Ukiah, CA 95482,
Telephone: (800) 733-3871.
OTHER MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING
The Board of Directors does not presently intend to present matters
other than the foregoing for action by the shareholders at the Annual Meeting,
and, so far as is known to the Board of Directors, no matters are to be brought
before the Annual Meeting except as specified herein. As to any business that
may properly come before the Annual Meeting, however, it is intended that
proxies, in the form accompanying this Proxy Statement, will be voted in
accordance with the judgment of the persons voting such proxies.
ATTACHED DOCUMENTS
A copy of the Company's Amendment No. 1 to 2004 Annual Report on Form
10-K/A (not including the Exhibits thereto) accompanies this Proxy Statement.
The Company hereby incorporates into this Proxy Statement by reference the
following parts of the Company's Amendment No. 1 to 2004 Annual Report on Form
10-K/A, as described above:
1. Biographical information about the Directors of the Company is
incorporated by reference from ""Item 10 - DIRECTORS AND EXECUTIVE OFFICERS OF
THE COMPANY".
2. The Summary Compensation Table is incorporated by reference from
"Item 11 - EXECUTIVE COMPENSATION - Summary Compensation Table".
3. Descriptions of certain transactions are incorporated by
reference from Item 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
4. Descriptions of the fee paid to Moss Adams are incorporated by
reference from Item 14 - " PRINCIPAL ACCOUNTING FESS AND SERVICES.
The information specifically incorporated by reference herein is deemed
to be a part of this Proxy Statement; but only to the extent that any statements
or information contained therein have not been superseded or corrected by
statements or information provided in this Proxy Statement.
18
EXHIBIT A
MENDOCINO BREWING COMPANY, INC.
CHARTER OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
I. Purpose
The purpose of the Audit Committee (the "Committee") of the Board of
Directors (the "Board") of Mendocino Brewing Company, Inc. (the "Company") is to
assist the Board in fulfilling its statutory and fiduciary oversight
responsibilities relating to the Company's financial accounting, reporting and
controls. The Committee's principal functions are to:
o monitor the periodic reviews of the adequacy of the accounting
and financial reporting process and systems of internal control
that are conducted by the Company's independent auditors and the
Company's financial and senior management;
o review and evaluate the independence and performance of the
Company's independent auditors; and
o facilitate communication among the Company's independent
auditors, the Company's financial and senior management, and the
Board.
The Committee will fulfill these functions primarily by carrying out the
activities enumerated in Part IV of this charter. In order to serve these
functions, the Committee shall have unrestricted access to Company personnel and
documents, and shall have authority to direct and supervise an investigation
into any matters within the scope of its duties, including the power to retain
outside counsel in connection with any such investigation.
While the Audit Committee has the responsibilities and powers set forth
in this charter, it is not the duty of the Committee to plan or conduct audits
or to determine that the Company's financial statements are complete and
accurate and are in accordance with generally accepted accounting principles.
This is the responsibility of the management and the Company's independent
auditors. Nor is the duty of the Committee to conduct investigations, to resolve
disagreements, if any, between management and its independent auditors or to
assure compliance with laws and regulations and the Company's policies and
procedures.
II. Membership
All members of the Committee will be appointed by, and shall serve at
the discretion of, the Board. Unless a Chair is elected by the full Board, the
members of the Committee may designate a Chair by majority vote of the Committee
membership.
As of the date this charter is adopted, the Committee shall consist of
1
three or more members of the Board, with the exact number being determined by
the Board. Each member of the Committee shall be "independent" as defined by the
rules of The Nasdaq Stock Market, as they may be amended from time to time (the
"Rules"), except as otherwise permitted by such Rules. Each member of the
Committee shall have the ability to read and understand fundamental financial
statements (or become able to do so within a reasonable time after joining the
Committee) and at least one member shall have prior experience in accounting,
financial management or financial oversight, as required by the Rules.
III. Meetings
Meetings of the Committee shall be held from time to time as determined
by the members of the Committee. The Committee should periodically meet with the
independent auditors out of the presence of management about internal controls,
the fullness and accuracy of the Company's financial statements and any other
matters that the Committee or these groups believe should be discussed privately
with the Committee. The Committee members, or the Chairman of the Committee on
behalf of all of the Committee members, should communicate with management and
the independent auditors on a quarterly basis in connection with their review of
the Company's financial statements.
IV. Responsibilities and duties
The following shall be the principal recurring process of the Committee
in carrying out its oversight responsibilities. These processes are set forth as
a guide with the understanding that the Committee may supplement them as
appropriate and may establish policies and procedures from time to time that it
deems necessary or advisable in fulfilling its responsibilities.
1. Review the Company's quarterly and annual financial statements,
including any report or opinion by the independent auditors,
prior to distribution to the public or filing with the
Securities and Exchange Commission.
2. In connection with the Committee's review of the financial
statements:
o Discuss with the independent auditors and management the
financial statements and the results of the independent
auditors' audit of the financial statements.
o Discuss any items required to be communicated by the
independent auditors in accordance with SAS 61, as
amended. These discussions should include the
independent auditors' judgement about the quality and
appropriateness of the Company's accounting principles,
the reasonableness of significant judgements, the
clarity of disclosures in the Company's financial
statements and any significant difficulties encountered
during the course of the audit, including any
restrictions on the scope of work or access to
2
required information.
3. In connection with the Committee's review of the quarterly
financial statements:
o Discuss with the independent auditors and management the
results of the independent auditors' SAS 71 review of
the quarterly financial statements.
o Discuss significant issues, events and transactions and
any significant changes regarding accounting principles,
practices, judgements or estimates with management and
the independent auditors, including any significant
disagreements among management and the independent
auditors.
4. Discuss any comments or recommendations of the independent
auditors outlined in their annual management letter. Approve a
schedule for implementing any recommended changes and monitor
compliance with the schedule.
5. Discuss with the independent auditors and management their
periodic reviews of the adequacy of the Company's accounting and
financial reporting processes and systems of internal control,
including the adequacy of the systems of reporting to the Audit
Committee by each group.
6. Periodically consult with the independent auditors out of the
presence of management about internal controls, the fullness and
accuracy of the Company's financial statements and any other
matters that the Committee or these groups believe should be
discussed privately with the Committee.
7. Review the independence and performance of the independent
auditors. Recommend to the Board the appointment or discharge of
the independent auditors.
8. Communicate with the Company's independent auditors about the
Company's expectations regarding its relationship with the
auditors, including the following; (i) the independent auditors'
ultimate accountability to the Board and the Committee, as
representatives of the Company's stockholders; and (ii) the
ultimate authority and responsibility of the Board and the
Committee to select, evaluate and, where appropriate, replace
the independent auditors.
9. Review and approve processes and procedures to ensure the
continuing independence of the Company's independent auditors.
These processes shall include obtaining and reviewing, on an
annual basis, a letter from the independent auditors describing
all relationships between the independent auditors and the
Company required to be disclosed by Independence Standards Board
Standard No.1, reviewing the nature and
3
scope of such relationships and discontinuing any relationships
that the Committee believes could compromise the independence of
the auditors.
10. Review the independent auditor's audit plan.
11. Approve the fees and other significant compensation to be paid
to the independent auditors.
12. Periodically review the status of any legal matters that could
have a significant impact on the Company's financial statements.
13. Annually prepare a report to the Company's stockholders for
inclusion in the Company's annual proxy statement as required to
by the rules and regulations of the Securities and Exchange
Commission, as they may be amended from time to time.
14. Maintain minutes and periodically report to the Board on
significant matters related to the Committee's responsibilities.
15. Review and reassess the adequacy of the Committee's charter at
least annually.
16. Perform any other activities required by applicable law, rules
or regulations, including the rules of the Securities and
Exchange Commission and any stock exchange or market on which
the Company's Common Stock is listed, and perform other
activities that are consistent with this charter, the Company's
Bylaws, and governing laws, as the Committee or the Board deems
necessary or appropriate.
4
[MENCM - MENDOCINO BREWING COMPANY] [FILE NAME: ZMEN82.ELX] [VERSION - (3)] [09/08/05] [orig. 08/22/05]
DETACH HERE ZMEN82
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
MENDOCINO BREWING COMPANY, INC.
The undersigned holder of shares of Common Stock of MENDOCINO BREWING COMPANY, INC., a California corporation (the
"Company") hereby acknowledges receipt of the Notice of Annual Meeting of Shareholders and Proxy Statement, each dated September 12,
2005, and appoints Dr. Vijay Mallya, Jerome Merchant and Yashpal Singh, and each of them, as proxy of the undersigned, with power of
substitution and revocation, to represent the undersigned at the Annual Meeting of the Shareholders of the Company to be held at
2:00 p.m., local time, on Tuesday, October 4, 2005, at the Company's brewery located at 1601 Airport Road, Ukiah, California, and at
any adjournment thereof, and to vote all shares of Common Stock which the undersigned would be entitled to vote as if the
undersigned were present and voting the shares.
THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR THE ELECTION OF THE NOMINEES NAMED IN PROPOSAL NO. 1 AS DESCRIBED IN THE ACCOMPANYING PROXY STATEMENT. IN THEIR
DISCRETION, THE PROXY HOLDERS ARE ALSO AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
IF YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS, JUST SIGN ON THE REVERSE SIDE. YOU NEED NOT
MARK ANY BOXES.
- ---------------- ----------------
SEE REVERSE SEE REVERSE
SIDE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
- ---------------- ----------------
MENDOCINO BREWING COMPANY
C/O COMPUTERSHARE
P.O. BOX 8694
EDISON, NJ 08818-8694
[MENCM - MENDOCINO BREWING COMPANY] [FILE NAME: ZMEN81.ELX] [VERSION - (2)] [09/08/05] [orig. 08/22/05]
DETACH HERE ZMEN81
Please mark
|X| votes as in
this example.
- ------------------------------------------------------------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 1.
- ------------------------------------------------------------------------------------------------------------------------------------
1. Election of the 7 Directors nominated by the Board (or if any nominee is not
available for election, such substitute(s) as the Board of Directors may designate).
Nominees: (01) Scott Heldfond, (02) H. Michael Laybourn, (03) Vijay Mallya,
(04) Jerome G. Merchant, (05) Sury Rao Palamand, (06) Kent D. Price
and (07) Yashpal Singh
FOR WITHHOLD
ALL | | | | FROM ALL
NOMINEES NOMINEES
| |__________________________________________________________
To withhold authority to vote for any individual nominee write
that nominee's name in the space provided above and mark the box.
- ------------------------------------------------------------------------------------------------------------------------------------
MARK HERE MARK HERE
FOR ADDRESS | | | | IF YOU PLAN
CHANGE AND TO ATTEND
NOTE AT LEFT THE MEETING
Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such. Signature: Date: Signature: Date:
Signature: _____________________________ Date: _______________ Signature: ___________________________________ Date: ________________