0001493152-17-007878.txt : 20170717 0001493152-17-007878.hdr.sgml : 20170717 20170717172704 ACCESSION NUMBER: 0001493152-17-007878 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20170711 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20170717 DATE AS OF CHANGE: 20170717 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MENDOCINO BREWING CO INC CENTRAL INDEX KEY: 0000919134 STANDARD INDUSTRIAL CLASSIFICATION: MALT BEVERAGES [2082] IRS NUMBER: 680318293 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-13636 FILM NUMBER: 17968175 BUSINESS ADDRESS: STREET 1: 1601 AIRPORT ROAD CITY: UKIAH, STATE: CA ZIP: 95482 BUSINESS PHONE: 7077441015 MAIL ADDRESS: STREET 1: 1601 AIRPORT ROAD CITY: UKIAH, STATE: CA ZIP: 95482 8-K 1 form8-k.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-K

CURRENT REPORT PURSUANT

TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): July 11, 2017

MENDOCINO BREWING COMPANY, INC.

(Exact Name of Registrant as Specified in Charter)

California

(State or Other Jurisdiction of Incorporation)

0-22524		68-0318293
(Commission File No.)		(IRS Employer Identification Number)

1601 Airport Road, Ukiah, California		95482
(Address of Principal Executive Offices)		(Zip Code)

(707) 463-2627

(Registrant’s Telephone Number, Including Area Code)

N/A

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

	[ ]	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

	[ ]	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

	[ ]	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

	[ ]	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01. Entry into a Material Definitive Agreement

Catamaran Loan and Security Agreement

Effective July 11, 2017, Mendocino Brewing Company, Inc. (the “Company”), and Catamaran Services, Inc., a Delaware corporation (“Catamaran”), entered into a Loan and Security Agreement (the “Catamaran LSA”), pursuant to which, among other things, Catamaran shall make loans and advances available to the Company from time to time prior to July 1, 2018, in an aggregate amount up to Two Million Dollars ($2,000,000), on the terms and conditions set forth in the Catamaran LSA. Each loan installment shall be evidenced by a promissory note (each a “New Note” and collectively the “New Notes”) to be issued by the Company to Catamaran. Each New Note shall have a term of six months and bear interest at a rate equal to the lesser of (i) one and one-half percent (1.5%) per annum above the prime rate offered from time to time by the Bank of America Corporation in San Francisco, California, or (ii) ten percent (10%) per annum, until the outstanding principal thereunder is fully paid. No portion of principal or interest on any New Note will be payable or paid until the Obligations (as that term is defined in the Credit and Security Agreement dated as of June 23, 2011, as amended, modified, or supplemented from time to time, (the “Credit Agreement”), between the Company, Releta Brewing Company LLC, a Delaware limited liability company (“RBC” and, together with the Company, the “Borrowers”) and MB Financial Bank, N.A., successor in interest to Cole Taylor Bank (“Lender”)) have been paid and satisfied in full. If the Company is not able to satisfy its obligations under any New Note within six month following the date of issuance of such New Note, such New Note shall be automatically extended for an additional six month term.

Any New Note may be prepaid without penalty at the option of the Company; however, no payments on any New Note may be made unless the Obligations have been satisfied in full. Any New Note may be assigned to any third party by Catamaran.

Each New Note is secured by a security interest in all of the assets, real, personal and intangible, of the Borrowers (collectively “Property”), which security interest is subject and subordinated to the security interest held by Lender pursuant to the Credit Agreement, as further set forth in the Subordination Agreement (as defined below). Subject to senior rights of the Lender, the Company’s obligations under the Catamaran LSA are subject to acceleration upon the occurrence of an event of default under the Catamaran LSA.

The foregoing is not intended to be a complete description of the Catamaran LSA and is subject to, and qualified in its entirety by, the full text of the Catamaran LSA filed as Exhibit 10.1 to this current report on Form 8-K.

Catamaran Promissory Note Modification Agreement

Effective July 11, 2017, Catamaran and the Company entered into a Promissory Note Modification Agreement (the “Modification Agreement”) to modify the terms of each of the following previously issued unsecured promissory notes: (a) the promissory note dated January 22, 2014 in the original principal amount of $500,000, (b) the promissory note dated April 24, 2014 in the original principal amount of $500,000, (c) the promissory note dated February 5, 2015 in the original principal amount of $500,000, (d) the promissory note dated June 30, 2015 in the original principal amount of $500,000, (e) the promissory note dated March 14, 2016 in the original principal amount of $325,000, (f) the promissory note dated March 30, 2016 in the original principal amount of $75,000, and (g) the promissory note dated May 24, 2017 in the original principal amount of $200,000 (collectively the “Prior Notes”). The Modification Agreement, among other things, grants Catamaran a security interest in the Property securing the prompt and full satisfaction of the outstanding principal balance and all other sums due under the Prior Notes, which security interest is subject and subordinate to the security interest held by Lender pursuant to the Credit Agreement, as further set forth in the Subordination Agreement.

The foregoing is not intended to be a complete description of the Modification Agreement and is subject to, and qualified in its entirety by, the full text of the Modification Agreement filed as Exhibit 10.2 to this current report on Form 8-K.

New Secured Note

On July 17, 2017, the Company issued a New Note (the “New Secured Note”) to Catamaran in the principal amount of $500,000. The Company previously issued the Prior Notes to Catamaran as set forth above. The Prior Notes have been disclosed in the Company’s current reports on Form 8-K filed on January 28, 2014, April 24, 2014, February 11, 2015, July 7, 2015, March 18, 2016 as subsequently amended by the Company’s current report on Form 8-K/A filed on March 22, 2016 and on May 31, 2017; and quarterly reports on Form 10-Q filed on May 15, 2014, August 14, 2014, November 14, 2014, May 15, 2015, August 14, 2015 and November 16, 2015 and annual reports on Form 10-K filed on March 31, 2014, March 31, 2015 and April 14, 2016 (all of which are incorporated by reference herein to the extent they refer to such Prior Notes).

Pursuant to the terms of the New Secured Note, the Company promises to pay the principal sum of $500,000 with accrued interest, as described below, to Catamaran within six months following the date of the New Secured Note, subject to payment in full of the Obligations.

If the Company is not able to satisfy its obligations on the New Secured Note within the six month period following the date of the Secured Note, the Secured Note shall be automatically extended for additional six month terms until the New Secured Note is paid. Interest shall accrue on the unpaid principal of the New Secured Note at a rate equal to the lesser of (i) one and one-half percent (1.5%) per annum above the prime rate offered from time to time by the Bank of America Corporation in San Francisco, California, or (ii) ten percent (10%) per annum, until the principal is fully paid.

The New Secured Note may be prepaid without penalty at the option of the Company; however, no payments on the New Secured Note may be made unless the Obligations have been satisfied in full. The New Secured Note may be assigned to any third party by Catamaran.

The New Secured Note is secured by a security interest in the Property, which security interest is subject and subordinated to the security interest held by Lender pursuant to the Credit Agreement, as further set forth in the Subordination Agreement.

The foregoing is not intended to be a complete description of the New Secured Note and is subject to, and qualified in its entirety by, the full text of the New Secured Note which is filed as Exhibit 10.3 to this current report on Form 8-K.

Catamaran Subordination Agreement

Effective July 11, 2017, Borrowers entered into that certain Subordination Agreement with Catamaran and Lender (the “Subordination Agreement”). Pursuant to the Subordination Agreement, any and all amounts payable to Catamaran under the Prior Notes or any New Note (collectively, “Junior Debt”) shall be subordinate and subject to Lender’s right of payment in full of the Obligations and (b) the existing liens, and any hereafter acquired, of Lender in the Property securing the Obligations shall be senior to all existing liens, and any hereafter acquired, of Catamaran in the Property securing the Junior Debt. Furthermore, pursuant to the Subordination Agreement, in the event of Borrower’s insolvency, bankruptcy or other similar proceeding, the Obligations are to be paid in full prior to any repayment of the Junior Debt.

The foregoing is not intended to be a complete description of the Subordination Agreement and is subject to, and qualified in its entirety by, the full text of the Subordination Agreement filed as Exhibit 10.4 to this current report on Form 8-K.

Amendment of MB Financial Agreement

Effective July 11, 2017, the Borrowers and Lender entered into a Thirteenth Amendment (the “Thirteenth Amendment”) to the Credit Agreement.

The Thirteenth Amendment amends Section 1.02, Section 11.02 and Section 11.13 of the Credit Agreement to allow the Company to incur secured debt from Catamaran in an aggregate principal amount not to exceed Two Million Dollars ($2,000,000) pursuant to the Catamaran LSA. The Thirteenth Amendment also allows the Borrowers to grant security interests to Catamaran to secure the Junior Debt pursuant to Catamaran LSA and Modification Agreement, which security interests shall be subject and subordinate to the security interest held by Lender as further set forth in the Subordination Agreement. In connection with the Thirteenth Amendment, Borrowers paid a $3,000 amendment fee to the Lender, which was charged to the revolving line of credit provided by Lender under the Credit Agreement.

The Thirteenth Amendment also confirms the continuance of certain events of default under the Credit Agreement. The Borrowers have previously received notices from the Lender regarding the exercise of rights related to events of default on September 18, 2013, April 18, 2014 and August 18, 2014 (the “Default Notices”), as described in current reports on Form 8-K of the Company filed on September 24, 2013, April 24, 2014 and August 22, 2014, respectively. As previously disclosed in the Company’s current reports on Form 8-K filed on May 3, 2013, September 24, 2013, April 24, 2014, August 22, 2014, January 27, 2015, and June 9, 2015, quarterly reports on Form 10-Q filed on August 14, 2013, November 14, 2013, August 14, 2014, November 11, 2014, May 15, 2015, August 14, 2015, November 16, 2015, May 16, 2016, August 15, 2016 and November 14, 2016, annual reports on Form 10-K filed on March 31, 2014, March 31, 2015 and April 14, 2016 (which are incorporated by reference herein to the extent they refer to the Credit Agreement), the Borrowers have been in default under certain provisions of the Credit Agreement.

The Lender has not waived the events of default described in the Default Notices or the Thirteenth Amendment and has reserved the right to exercise all available rights and remedies. The Lender could declare the full amount owed under the Credit Agreement due and payable at any time for any reason or no reason. If the Lender exercises additional remedies, such exercise would have a material adverse effect on the Company’s financial condition and the Company’s ability to continue to operate.

As previously disclosed in the Company’s current report on Form 8-K filed on January 14, 2016, the Company engaged Gordian Group, LLC to assist it in evaluating, exploring and, if deemed appropriate by the Company, pursuing and implementing certain strategic and financial options and transactions, including refinancing the credit facility (a “Financial Transaction”). While the Company has commenced evaluating its available options, no conclusion as to any specific option or transaction has been reached, nor has any specific timetable been fixed for this effort, and there can be no assurance that any Financial Transaction will be presented, implemented or consummated. If the Company is unable to complete a Financial Transaction, or to otherwise refinance the credit facility or further extend the Credit Agreement, such events would have a material adverse effect on the Borrowers’ financial condition and their ability to continue to operate.

The foregoing is not intended to be a complete description of the Thirteenth Amendment and is subject to, and qualified in its entirety by, the full text of the Thirteenth Amendment filed as Exhibit 10.5 to this current report on Form 8-K.

Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

See Item 1.01 above.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits

Exhibit
Number		Description

10.1		Loan and Security Agreement, effective as of July 11, 2017, by and between Mendocino Brewing Company, Inc., a California corporation, and Catamaran Services, Inc., a Delaware corporation.

10.2		Promissory Note Modification Agreement, effective as of July 11, 2017 by and between Mendocino Brewing Company, Inc., a California corporation, and Catamaran Services, Inc., a Delaware corporation.

10.3		Promissory Note of Mendocino Brewing Company, Inc. in favor of Catamaran Services, Inc. dated July 17, 2017.

10.4		Subordination Agreement effective as of July 11, 2017, by and among MB Financial Bank, N.A., successor in interest to Cole Taylor Bank, Catamaran Services, Inc., a Delaware corporation, Mendocino Brewing Company, Inc., a California corporation, and Releta Brewing Company LLC, a Delaware limited liability company.

10.5		Thirteenth Amendment to Credit and Security Agreement, effective as of July 11, 2017, by and among MB Financial Bank, N.A., successor in interest to Cole Taylor Bank, Mendocino Brewing Company, Inc., a California corporation, and Releta Brewing Company LLC, a Delaware limited liability company.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	MENDOCINO BREWING COMPANY, INC.
		(Registrant)

Date: July 17, 2017	By:	/s/ Mahadevan Narayanan
		Mahadevan Narayanan
		Chief Financial Officer & Corporate Secretary

EX-10.1 2 ex10-1.htm

LOAN AND SECURITY AGREEMENT

This Loan and Security Agreement (as amended, modified or supplemented from time to time, this “Agreement”) effective as of the 11th day of July 2017, by and between Catamaran Services, Inc., a Delaware corporation (“Catamaran” or “Holder”) and Mendocino Brewing Company, Inc., a California corporation (“MBC” or “Maker”).

1. LOAN:

Subject to the terms and conditions of the Agreement, from time to time prior to the July 1, 2018, Lender shall make loans and advances (the “Loans”) to MBC in an amount up to Two Million Dollars ($2,000,000) on the terms and conditions set-out in this Agreement.

2. REQUESTS FOR LOAN INSTALLMENT PAYMENTS:

A request for a Loan Installment shall be made in the following manner: MBC shall give Catamaran written notice at least fourteen (14) days prior to the proposed borrowing date of MBC’s request for a Loan Installment and shall specify the amount and the proposed borrowing date; the request shall be accompanied by a Promissory Note in the form attached hereto as Exhibit A. Each Loan Installment request shall be accompanied by a list of MBC’s intended uses of loan installment funds.

However, that no such Loan Installment request may be made, and Catamaran shall not be obligated to make a payment, at a time when there exists an Event of Default or an event which, with the passage of time or giving of notice, will become an Event of Default.

3. FIRST LOAN INSTALLMENT PAYMENT

Notwithstanding the provisions of Paragraph 2, the first Loan Installment payment shall be Five Hundred Thousand dollars ($500,000), and shall be disbursed by Catamaran to MBC, seven business days after receipt of the executed Loan and Security Agreement and Promissory Note Modification Agreement. A condition to the distribution of the payment is receipt by Catamaran of a Promissory Note executed by MBC in the form attached hereto as Exhibit A contemporaneously therewith.

4. MAKER’S PROMISE TO PAY.

In return for the Loans, MBC promises to pay the total amount of all Loan Installment payments made to MBC (the “Principal”) plus interest to the order of Catamaran or any other lawful holder of a Promissory Note.

All payments shall be in lawful money of the United States of America and in immediately available funds. Computations of interest shall be based on a year. of 365 days but shall be calculated for the actual number of days in the period for which interest is charged.

All payments under this Agreement or any Promissory Note shall be made to Catamaran as directed by Catamaran in writing.

Any Promissory Note issued under the terms of this Agreement may be prepaid in whole or in part, without penalty, at the option of MBC and without the consent of Catamaran. All payments shall be applied first to accrued and unpaid interest, and then to the principal balance outstanding.

MBC understands that Catamaran may transfer any Promissory Note. Catamaran or any party who takes a Promissory Note by transfer and who is entitled to receive payments under a Promissory Note shall be called the “Holder.”

5. INTEREST.

Interest shall accrue on the unpaid and outstanding principal balance from the date of each Promissory Note to Maker owing from time to time at a rate equal to the lesser of (i) one and one-half percent (1.50%) per annum above the prime rate offered from time to time by the Bank of America Corporation in San Francisco, California, or (ii) ten percent (10%) per annum, until the Principal is fully paid.

6. PAYMENTS.

All payments made pursuant to any Promissory Note are expressly subject to the following condition:

a) No portion of Principal or interest on this Note will be payable or paid until the Obligation (as that term is defined in the Credit and Security Agreement dated as of June 23, 2011, as amended, modified, or supplemented from time to time, (the “Credit Agreement”)between Maker, Releta Brewing Company LLC, and Cole Taylor Bank) to Cole Taylor Bank, now known as MB Financial Bank, N.A. (“Bank”) has been paid and satisfied in full (“Bank Loan”).

The full payment of any Promissory Note, and accompanying interest, shall be due six (6) months from the date of the Promissory Note. Should Maker not be able to satisfy a Promissory Note at the end of the original six (6) month term, the Promissory Note shall be extended for additional six (6) month terms until such time as the Bank Loan has been satisfied in full.

7. SECURITY INTEREST.

As security for the prompt and full satisfaction of the outstanding principal balance of each Promissory Note, and all other sums due under a Promissory Note, Maker agrees that Holder shall have, and Maker hereby grants to and creates in favor of Holder, a lien and security interest in any and all of the assets, real, personal and intangible of the Maker and Maker’s subsidiary Releta Brewing Company, LLC to the same extent as Maker has granted a security interest to the Bank in the property pursuant to the Credit Agreement (collectively “Property”). Except for that security interest in Maker’s Property granted pursuant to the Credit Agreement, and any Permitted Liens (as defined in the Credit Agreement), Maker agrees that it shall not, without the prior written consent of the Holder, grant or create or permit to attach or exist any mortgage, security interest, lien, judgment, or other encumbrance on or in any of the Property or any portion thereof. Maker agrees that to the fullest extent allowed by law, the Holder’s security interest in the Property shall be of the same nature and to the same extent at the security interest granted in the Credit Agreement. Maker agrees that it shall preserve and protect Holder’s security interest in the Property. In addition to all rights and remedies given to Holder by this Note, Holder shall have all the rights and remedies of a secured party under the Uniform Commercial Code (the “UCC”). The parties hereto agree that this Note constitutes a security agreement under the UCC. Maker agrees from time to time at the request of Holder to file or record, or cause to be filed or recorded, such instruments, documents or notices, including assignments, financing statements and continuation statements as the Holder may deem necessary or advisable from time to time in order to perfect, to continue perfected and to preserve the priority of such lien and security interest.

Holder agrees and acknowledges that the security interest granted to Holder by Maker in this Promissory Note is subject and subordinated to the security interest created pursuant to the Credit Agreement and the Subordination Agreement entered into by Maker, Releta Brewing Company LLC, Holder and Bank, dated July 11, 2017.

8. MAKER’S FAILURE TO PAY AS REQUIRED.

Subject to any senior rights of the Bank, upon the occurrence of any one of the following events (“Event of Default”), the entire principal amount outstanding and all accrued interest thereunder shall at the option of the Holder, without any prior notice, presentment or demand, become immediately due and payable in full:

(i) Failure of the Maker to make payments whenever due, and the continuation of such failure for a period of thirty (30) days; or

(ii) Failure of the Maker to perform or observe any of the Maker’s covenants or agreements under this Note and the continuation of such failure for a period of thirty (30) days; or

(iii) An assignment by the Maker of any of its assets for the benefit of the Maker’s creditors, or the commencement by or against the Maker of any bankruptcy, insolvency, liquidation, receivership or similar proceedings.

9. MAKER’S WAIVERS.

Maker waives the right to require the Holder to do certain things. Those things are: (a) to demand payment of amounts due (known as “presentment”); (b) to give notice that amounts due have not been paid (known as “notice of dishonor”), except as expressly provided in a Promissory Note; (c) to obtain an official certification of nonpayment (known as a “protest”). Anyone else who agrees to keep the promises made in a Promissory Note, or who agrees to make payments to the Holder if Maker fails to keep the promises under a Promissory Note, or who signs a Promissory Note to transfer it to someone else also waives these rights. These persons are known as “guarantors, sureties and endorsers.”

10. NO USURY.

Maker and Holder intend to comply at all times with applicable usury laws. If, at any time, such laws would render usurious any amounts under a Promissory Note, it is Maker’s and Holder’s express intention that Maker shall never be required to pay interest on a Promissory Note at a rate in excess of the maximum lawful rate then allowed. The provisions of this Section 10 shall control over all other provisions of any Promissory Note, which may be in apparent conflict hereunder. Any excess amount shall be immediately refunded by Holder to Maker, and the provisions hereof and any Promissory Note shall be immediately reformed, and the amounts thereafter collectible under any Promissory Note shall be reduced, without the necessity of the execution of any further documents, so as to comply with the then applicable law, but so as to permit the recovery of the fullest amount otherwise called for under the Section 10. Any such refund shall not cure or waive any default by Maker under a Promissory Note. Maker agrees that in determining whether or not any interest payable under a Promissory Note, exceeds the highest rate not prohibited by law, any non-principal payment (except payments specifically stated in this Note to be “interest”), including, without limitation, late charges, shall, to the maximum extent not prohibited by law, be an expense, fee, or indemnification amount rather than interest. The term “applicable law” as used in in this Section 10 shall mean the laws of the State of California or the laws of the United States, whichever laws allow the greater rate of interest, as such laws now exist or may be changed or amended or come into effect in the future.

11. GIVING OF NOTICES.

Any notice that must be given to Maker under this Agreement or a Promissory Note shall be given by hand delivery, by certified mail, or overnight mail addressed to Maker at 1601 Airport Road, Ukiah, California 95482. Notice shall be delivered or mailed to Maker at a different address only after Maker gives the Holder written notice of the different address.

Any notice that must be given to the Holder under this Agreement or a Promissory Note shall be given by hand delivery, by certified, or overnight mail addressed to Holder’s Registered Agent in C.A., M/s GKL CORPORATE/SEARCH, INC. ONE CAPITOL MALL STE 660, SACRAMENTO CA 95814, with an additional copy to 700 Larkspur Landing Circle, Suite 208, Larkspur, CA 94939. Notice shall be delivered or mailed to Holder at a different address only after Holder gives the Maker written notice of the different address.

12. EXTENSIONS/RENEWALS.

Holder may, without notice and without releasing the liability of Maker, grant extensions and/or renewals hereof from time to time or for any term or terms. No delay by Holder or their assignee in exercising any power or right hereunder, and no partial exercise of such power or right, shall operate in any way as a waiver of any subsequent exercise thereof. Holder shall not be liable for or prejudiced by failure to collect or lack of diligence in bringing suit on this Agreement or a Promissory Note or any renewal or extension thereof.

13. ASSIGNMENTS.

Maker agrees that its liability hereunder shall be binding upon its successors and assigns; provided, however that Maker may not assign or transfer its obligation hereunder or in any Promissory Note without the prior written consent of Holder. This Agreement and any Promissory Note may be assigned by Holder without the consent of Maker.

14. AMENDMENTS.

This Agreement may not be changed or amended orally, but only by an agreement in writing, signed by the party against whom enforcement is sought.

15. CAPTIONS.

All paragraph and subparagraph captions are for convenience of reference only and shall not affect the construction of any provision herein.

16. GOVERNING LAW.

Except as specifically provided in Section 10, this Agreement and any Promissory Note shall be construed in accordance with and governed by the laws of the State of California, without regard to any conflict of law principles.

17. SEVERABILITY.

If any provision of this Agreement shall for any reason be held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provision of this Agreement, but this Agreement shall be construed as if this Agreement had never contained the invalid or unenforceable provision.

NOTICE TO MAKER

Do not sign this Agreement if it contains blank spaces.

All spaces should be completed before you sign.

IN WITNESS WHEREOF, and intending to be legally bound hereby, this Agreement has been executed and delivered under seal as of the date first written above.

HOLDER	MAKER
Catamaran Services, Inc.	Mendocino Brewing Company, Inc.
a Delaware corporation.	a California corporation

/sd/	/sd/
Rajwinder Kaur, Director	Mahadevan Narayanan,
	Chief Financial Officer

AGREED AND CONSENTED TO:

Releta Brewing Company, LLC
By:	Mendocino Brewing
Company, Inc., its sole member

/sd/
Mahadevan Narayanan,
Chief Financial Officer

EXHIBIT A

PROMISSORY NOTE

$000,000.00

_________, 201_

Ukiah, California

FOR VALUE RECEIVED, Mendocino Brewing Company, Inc. (“Maker”), a California corporation, promises to pay to the order of Catamaran Services, Inc. (“Holder”), a Delaware corporation, the principal sum of ______ ($_______.00) (“Principal”), with interest as defined below.

Maker promises to pay interest to Holder from the date of this Promissory Note on unpaid Principal owing from time to time at a rate equal to the lesser of (i) one and one-half percent (1.50%) per annum above the prime rate offered from time to time by the Bank of America Corporation in San Francisco, California, or (ii) ten percent (10%) per annum, until the Principal is fully paid.

All payments shall be in lawful money of the United States of America and in immediately available funds. Computations of interest shall be based on a year of 365 days but shall be calculated for the actual number of days in the period for which interest is charged.

All payments under this Promissory Note shall be made to Holder as directed by the Holder in writing.

This Promissory Note may be prepaid in whole or in part, without penalty, at the option of Maker and without the consent of Holder. All payments shall be applied first to accrued and unpaid interest, and then to the principal balance outstanding.

All payments made pursuant to this Promissory Note are expressly subject to the following condition:

a) No portion of Principal or interest on this Promissory Note will be payable or paid until the Obligations(as that term is defined in the Credit and Security Agreement dated as of June 23, 2011, as amended, modified, or supplemented from time to time (the “Credit Agreement”), between Maker, Releta Brewing Company LLC, and Cole Taylor Bank) to Cole Taylor Bank, now known as MB Financial Bank, N.A. (“Bank”) has been paid and satisfied in full (“Bank Loan”).

The full payment of this Promissory Note, and accompanying interest, shall be due six (6) months from the date of the Promissory Note. Should Maker not be able to satisfy this Promissory Note at the end of the original six (6) month term, the Promissory Note shall be extended for additional six (6) month terms until such time as the Bank Loan has been satisfied in full.

This Promissory Note is secured. As security for the prompt and full satisfaction of the outstanding principal balance of this Promissory Note, and all other sums due under this Promissory Note, Maker agrees that Holder shall have, and Maker hereby grants to and creates in favor of Holder, a lien and security interest in any and all of the assets, real, personal and intangible of the Maker, Maker’s subsidiary Releta Brewing Company, LLC granted to the Bank in connection with the Credit Agreement and any Permitted Liens (as definedin the Credit Agreement), Maker agrees that it shall not, without the prior written consent of the Holder, grant or create or permit to attach or exist any mortgage, security interest, lien, judgment, or other encumbrance on or in any of the Property or any portion thereof. Maker agrees that to the fullest extent allowed by law, the Holder’s security interest in the Property shall be of the same nature and to the same extent at the security interest granted in the Credit Agreement. Maker agrees that it shall preserve and protect Holder’s security interest in the Property. In addition to all rights and remedies given to Holder by this Promissory Note, Holder shall have all the rights and remedies of a secured party under the Uniform Commercial Code (the “UCC”). The parties hereto agree that this Promissory Note constitutes a security agreement under the UCC. Maker agrees from time to time at the request of Holder to file or record, or cause to be filed or recorded, such instruments, documents or notices, including assignments, financing statements and continuation statements as the Holder may deem reasonablynecessary or advisable from time to time in order to perfect, to continue perfected and to preserve the priority of such lien and security interest.

Holder agrees and acknowledges that the security interest granted to Holder by Maker in this Agreement is subject and subordinated to the security interest ofthe Bank pursuant to the Credit Agreement.

Subject to any senior rights of the Bank, upon the occurrence of any one of the following events (“Events of Default”), the entire principal amount outstanding and all accrued interest thereunder shall at the option of the Holder, without any prior notice, presentment or demand, become immediately due and payable in full:

(i) Failure of the Maker to make payments whenever due, and the continuation of such failure for a period of thirty (30) days; or

(ii) Failure of the Maker to perform or observe any of the Maker’s covenants or agreements under this Note; and the continuation of such failure for a period of thirty (30) days;or

Maker waives the right to require the Holder to do certain things. Those things are: (a) to demand payment of amounts due (known as “presentment”); (b) to give notice that amounts due have not been paid (known as “notice of dishonor”), except as expressly provided elsewhere in this in a Promissory Note; (c) to obtain an official certification of nonpayment (known as a “protest”). Anyone else who agrees to keep the promises made in this a Promissory Note, or who agrees to make payments to the Holder if Maker fails to keep the promises under this a Promissory Note, or who signs this a Promissory Note to transfer it to someone else also waives these rights. These persons are known as “guarantors, sureties and endorsers.”

The terms and conditions of the CreditAgreementare hereby incorporated into this Promissory Note by this reference.

NOTICE TO MAKER

Do not sign this Promissory Note if it contains blank spaces.

All spaces should be completed before you sign.

IN WITNESS WHEREOF, and intending to be legally bound hereby, Maker, by its appropriate officers duly authorized, has executed this Promissory Note and affixed its corporate seal on this day and year first written above.

MAKER	ACCEPTED AND AGREED BY HOLDER
MENDOCINO BREWING COMPANY, INC.	CATAMARAN SERVICES, INC.
a California corporation.	a Delaware corporation


Mahadevan Narayanan,		Rajwinder Kaur, Director
Chief Financial Officer

EX-10.2 3 ex10-2.htm

PROMISSORY NOTE MODIFICATION AGREEMENT

THIS AGREEMENT is made as of the30th day of June 2017, by and between Catamaran Services, Inc., a Delaware corporation (the “Holder”) and Mendocino Brewing Company, Inc., a California corporation (the “Maker”).

RECITALS

A. Holder has loaned to Maker certain moneys evidenced by seven (7) promissory notes (individually a “Note” and collectively the “Notes”) as follows:

January 22, 2014	$	500,000
April 24, 2014	$	500,000
February 5, 2015	$	500,000
June 30, 2015	$	500,000
March 14, 2016	$	325,000
March 30, 2016	$	75,000
May 22, 2017	$	200,000
Total	$	2,600,000

B. The Notes are currently unsecured, not subject to any guarantee by any third party, nor has Maker granted a security interest in its property to Holder in relation to the Notes; and

C. In order to secure additional loans from Holder, Maker is willing to modify the Notes in order to grant to Holder a security interest in all of Makers property.

D. Notwithstanding any terms to the contrary in that Credit And Security Agreement, dated June 23, 2011 (the “Credit Agreement”), MB Financial Bank, N.A, successor in interested to Cole Taylor Bank, has agreed and acknowledged that Maker may grant to Holder the security interest in Maker’s property as described in this Agreement and in subsequent promissory notes by Maker in favor of Holder, as set forth in Subordination Agreement entered into July 11, 2017 and attached hereto as Attachment A.

NOW, THEREFORE, in consideration of the mutual covenants contained in this Agreement, Holder and Maker agree as follows:

AGREEMENT

1. Maker hereby acknowledges that as of June 30, 2017 the unpaid principal balance of the Notes is $$2,600,00 and accrued interest of $301,686, and that the interest on that sum is payable at the rate set out in the Notes and (a) agrees that any extensions, renewals, or forbearance of any portion of the obligations evidenced by the Notes shall in no way affect Maker’s liability under the Notes; and (b) agrees to pay all principal and interest of the Notes in the time and manner set forth in the Notes.

2. As security for the prompt and full satisfaction of the outstanding principal balances of the Notes, and all other sums due under the Notes, Maker agrees that Holder shall upon the execution of the Agreement have, and Maker hereby grants to and creates in favor of Holder, a lien and security interest in any and all of the assets, real, personal and intangible of the Maker and Maker’s subsidiary Releta Brewing Company, LLC (collectively “Property”). Except for that security interest in Maker’s Property granted to MB Business Credit, successor in interested to Cole Taylor Bank pursuant to the Credit Agreement, any Permitted Liens (as defined in the Credit Agreement), and any other security interests that may be granted to Holder now or in the future, Maker agrees that it shall not, without the prior written consent of the Holder, grant or create or permit to attach or exist any mortgage, security interest, lien, judgment, or other encumbrance on or in any of the Property or any portion thereof. Maker agrees that to the fullest extent allowed by law, the Holder’s security interest in the Property shall be of the same nature and to the same extent at the security interest granted pursuant to the Credit Agreement. Maker agrees that it shall preserve and protect Holder’s security interest in the Property. In addition to all rights and remedies given to Holder by this Agreement, Holder shall have all the rights and remedies of a secured party under the Uniform Commercial Code (the “UCC”). The parties hereto agree that this Agreement constitutes a security agreement under the UCC. Maker agrees from time to time at the request of Holder to file or record, or cause to be filed or recorded, such instruments, documents or notices, including assignments, financing statements and continuation statements as the Holder may deem reasonably necessary or advisable from time to time in order to perfect, to continue perfected and to preserve the priority of such lien and security interest.

3. Holder agrees and acknowledges that the security interest granted to Holder by Maker in this Agreement is subject and subordinated to the security interest of MB Business Credit, successor in interested to Cole Taylor Bank, as that security interest is described in the Credit Agreement.

4. Holder hereby agrees to the amendment of the terms of the Notes to the extent specifically set forth in this Agreement, but only on the conditions stated in Paragraphs 1, 2, and 3, above, and on the further condition that the amendment shall not prejudice any present or future rights, remedies, benefits, or powers belonging or accruing to Holder under the terms of the Notes as hereby amended.

5. Except as otherwise provided in this Agreement, the Notes shall remain unaffected, unchanged, and unimpaired by reason of the foregoing amendments.

6. If any provision of this Agreement or the Notes shall for any reason be held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provision(s) of this Agreement or Notes, but this Agreement and the Notes shall be construed as if this Agreement and the Notes had never contained the invalid or unenforceable provision(s).

5. In this Agreement, whenever the context so requires, the masculine gender includes the feminine and/or neuter, and the singular number includes the plural.

6. This Agreement shall be construed and governed by the laws of the State of California.

7. This Agreement shall be binding upon and inure to the benefit of Holder and Maker, their respective heirs, legal representatives, successors and assigns, without limitation. Holder and Maker and the persons signing below warrant that the person signing below on such Holder’s and Maker’s behalf is authorized to do so and to bind such party to the terms of this Agreement.

8. This Agreement constitutes the entire agreement and understanding between the parties with respect to the subject of this Agreement and shall supersede all prior written and oral agreements concerning this subject matter. This Agreement may not be amended, modified or otherwise changed in any respect whatsoever except by a writing duly executed by authorized representatives of the respective parties. Each party acknowledges that it has read this Agreement, fully understands all of this Agreement’s terms and conditions, and executes this Agreement freely, voluntarily and with full knowledge of its significance. This Agreement is entered into by the Parties with and upon advice of counsel. The interpretation of this Agreement shall be without regard to which party is the “drafting party” and the Parties waive the benefit of any law providing otherwise.

9. Counterparts. This Agreement may be executed in counterparts, including by facsimile or “pdf”, and such counterparts together shall constitute but one original of the Agreement. Each counterpart shall be equally admissible in evidence, and each original shall fully bind each party who has executed it.

HOLDER	MAKER
Catamaran Services, Inc.	Mendocino Brewing Company, Inc.
a Delaware corporation.	a California corporation

/sd/		/sd/
Rajwinder Kaur, Director		Mahadevan Narayanan,
		Chief Financial Officer

ATTACHMENT A

SUBORDINATION AGREEMENT

ATTACH SUBORDINATION AGREEMENTHERE

EX-10.3 4 ex10-3.htm

PROMISSORY NOTE

$500,000.00

July 17, 2017

Ukiah, California

FOR VALUE RECEIVED, Mendocino Brewing Company, Inc. (“Maker”), a California corporation, promises to pay to the order of Catamaran Services, Inc. (“Holder”), a Delaware corporation, the principal sum of Five Hundred Thousand dollars ($500,000.00) (“Principal”), with interest as defined below.

All payments under this Promissory Note shall be made to Holder as directed by the Holder in writing.

All payments made pursuant to this Promissory Note are expressly subject to the following condition:

This Promissory Note is secured. As security for the prompt and full satisfaction of the outstanding principal balance of this Promissory Note, and all other sums due under this Promissory Note, Maker agrees that Holder shall have, and Maker hereby grants to and creates in favor of Holder, a lien and security interest in any and all of the assets, real, personal and intangible of the Maker, Maker’s subsidiary Releta Brewing Company, LLC granted to the Bank in connection with the Credit Agreement and any Permitted Liens (as defined in the Credit Agreement), Maker agrees that it shall not, without the prior written consent of the Holder, grant or create or permit to attach or exist any mortgage, security interest, lien, judgment, or other encumbrance on or in any of the Property or any portion thereof. Maker agrees that to the fullest extent allowed by law, the Holder’s security interest in the Property shall be of the same nature and to the same extent at the security interest granted in the Credit Agreement. Maker agrees that it shall preserve and protect Holder’s security interest in the Property. In addition to all rights and remedies given to Holder by this Promissory Note, Holder shall have all the rights and remedies of a secured party under the Uniform Commercial Code (the “UCC”). The parties hereto agree that this Promissory Note constitutes a security agreement under the UCC. Maker agrees from time to time at the request of Holder to file or record, or cause to be filed or recorded, such instruments, documents or notices, including assignments, financing statements and continuation statements as the Holder may deem reasonably necessary or advisable from time to time in order to perfect, to continue perfected and to preserve the priority of such lien and security interest.

(i) Failure of the Maker to make payments whenever due, and the continuation of such failure for a period of thirty (30) days; or

(ii) Failure of the Maker to perform or observe any of the Maker’s covenants or agreements under this Note; and the continuation of such failure for a period of thirty (30) days;or

Maker waives the right to require the Holder to do certain things. Those things are: (a) to demand payment of amounts due (known as “presentment”); (b) to give notice that amounts due have not been paid (known as “notice of dishonor”), except as expressly provided elsewhere in this in a Promissory Note; (c) to obtain an official certification of nonpayment (known as a “protest”). Anyone else who agrees to keep the promises made in this a Promissory Note, or who agrees to make payments to the Holder if Maker fails to keep the promises under this a Promissory Note, or who signs this a Promissory Note to transfer it to someone else also waives these rights. These persons are known as “guarantors, sureties and endorsers.”

The terms and conditions of the Credit Agreement are hereby incorporated into this Promissory Note by this reference.

NOTICE TO MAKER

Do not sign this Promissory Note if it contains blank spaces.

All spaces should be completed before you sign.

MAKER	ACCEPTED AND AGREED BY HOLDER
MENDOCINO BREWING COMPANY, INC.	CATAMARAN SERVICES, INC.
a California corporation.	a Delaware corporation

/sd/		/sd/

Mahadevan Narayanan,		Rajwinder Kaur, Director
Chief Financial Officer

EX-10.4 5 ex10-4.htm

SUBORDINATION AGREEMENT

THIS SUBORDINATION AGREEMENT (this “Agreement”) is entered into as of July 11, 2017, by and among Catamaran Services, Inc., a Delaware corporation (“Junior Creditor”), Mendocino Brewing Company, Inc., a California corporation, (“MBC”), Releta Brewing Company, LLC, a Delaware limited liability company (“RBC”; RBC and MBC are collectively referred to as “Borrowers” and, each individually, as a “Borrower”), and MB Financial Bank, N.A., successor in interest to Cole Taylor Bank (“Senior Lender”).

RECITALS

A. Borrowers and Senior Lender have entered into that certain Credit and Security Agreement dated as of June 23, 2011 (as the same has been amended, supplemented or otherwise modified from time to time, the “Senior Credit Agreement”) pursuant to which, among other things, Senior Lender has agreed, subject to the terms and conditions set forth in the Senior Credit Agreement, to make certain loans and financial accommodations to Borrowers.

B. Junior Creditor is entering into a Loan and Security Agreement dated as of July 11, 2017 with MBC (“LSA”) and receiving from MBC one or more Promissory Notes and a Promissory Note Modification Agreement as referenced in the LSA (collectively, the “Catamaran Debt Documents”), whereby one or more of the Borrowers are granting a security interest in its property to Junior Creditor to secure the obligations of MBC to Junior Creditor for the repayment of (i) up to an aggregate principal amount of $2,600,000 of existing loans of Junior Creditor to MBC and (ii) up to an aggregate principal amount of $2,000,000 of new loans to MBC, the first installment of which will be a loan of $500,000.

C. As an inducement to and as one of the conditions precedent to the agreement of Senior Lender to continue the extension of credit to Borrowers, Senior Lender has required the execution and delivery of this Agreement by the Junior Creditor and Borrowers.

NOW, THEREFORE, in order to induce Senior Lender to continue the extension of credit to Borrowers, and for other good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, the parties hereto hereby agree as follows:

AGREEMENT

1. Definitions. All capitalized terms used in this Agreement without definition shall have the meanings ascribed to such terms in the Senior Credit Agreement. In addition, the following terms shall have the following meanings in this Agreement:

1.1 “Collateral” shall mean all assets and properties of any kind whatsoever (including proceeds thereof), real or personal, tangible or intangible, whether now existing or arising in the future, and wherever located, of MBC and/or RBC.

1.2 “Enforcement Action” means (a) to demand, sue for, take or receive from or on behalf of Junior Creditor, a Borrower or any guarantor of the Junior Debt, by setoff or in any other manner, the whole or any part of any moneys which may now or hereafter be owing by Borrower or any such guarantor with respect to the Junior Debt, (b) to initiate or participate with others in any suit, action or proceeding against any Borrower or any such guarantor to (i) enforce payment of or to collect the whole or any part of the Junior Debt or (ii) commence judicial enforcement of any of the rights and remedies under any Junior Debt Document or applicable law with respect to the Junior Debt, (c) to accelerate any Junior Debt, (d) to exercise any put option or redemption rights or to cause any Borrower or any such guarantor to honor any redemption, repurchase, mandatory prepayment, or similar obligation under any Junior Debt Document, (e) to cause any Borrower or any such guarantor to exercise any call option, redemption rights, repurchase rights, or similar rights under any Junior Debt Document, or (f) to take any action to realize upon any of the Collateral or to exercise any other right or remedy with respect to the Collateral.

1.3 “Junior Debt” means (a) all of the obligations of MBC to Junior Creditor evidenced by the Junior Debt Documents and all other amounts now or hereafter owed by MBC to Junior Creditor and (b) all rights of Junior Creditor to receive cash and obligations of MBC to pay cash under any put option, call option, redemption right, repurchase right, or similar right or obligation contained in the Junior Debt Documents.

1.4 “Junior Debt Documents” means the Catamaran Debt Documents (as defined in the above Recital) and all other documents and instruments evidencing or pertaining to all or any portion of the Junior Debt and any additional rights, benefits, remedies or privileges conferred upon Junior Creditor in its capacity as holder of any debt or equity issued by Borrower.

1.5 “Junior Default” means a default in the payment of the Junior Debt or in the performance of any term, covenant or condition contained in the Junior Debt Documents or any other occurrence permitting Junior Creditor to accelerate the payment of, put or cause the redemption of all or any portion of the Junior Debt.

1.6 “Junior Default Notice” means a written notice from the Junior Creditor or MBC to Senior Lender pursuant to which Senior Lender is notified of the occurrence of a Junior Default, which notice incorporates a reasonably detailed description of such Junior Default.

1.7 “Lien” means any security interest, mortgage, deed of trust, pledge, lien, charge, encumbrance, title retention agreement or analogous instrument or device, including the interest of each lessor under any capitalized lease and the interest of any bondsman under any payment or performance bond, in, of or on any assets or properties of a Person, whether now owned or hereafter acquired and whether arising by agreement or operation of law.

1.8 “Payment in Full” or “Paid in Full” means the indefeasible payment in full in cash of the Senior Debt and the termination of the Senior Credit Agreement.

1.9 “Proceeding” means any voluntary or involuntary insolvency, bankruptcy, receivership, custodianship, liquidation, dissolution, reorganization, assignment for the benefit of creditors, appointment of a custodian, receiver, trustee or other officer with similar powers or any other proceeding for the liquidation, dissolution or other winding up of a Person.

1.10 “Reorganization Subordinated Securities” means any debt or equity securities of any Borrower or any other Person that are distributed to Junior Creditor in respect of the Junior Debt owing to Junior Creditor pursuant to a confirmed plan of reorganization or adjustment and that (a) are subordinated in right of payment to the Senior Debt (or any debt or equity securities issued in substitution of all or any portion of the Senior Debt) to at least the same extent as the Junior Debt is subordinated to the Senior Debt, (b) do not have the benefit of any obligation of any Person (whether as issuer, guarantor or otherwise) unless the Senior Debt has at least the same benefit of the obligation of such Person and (c) do not have any terms, and are not subject to or entitled to the benefit of any agreement or instrument that has terms, that are more burdensome to the issuer of or other obligor on such debt or equity securities than are the terms of the Senior Debt.

1.11 “Senior Debt” is used herein in its most comprehensive sense and means any and all advances, debts, obligations and liabilities of the Borrowers to the Senior Lender, heretofore, now or hereafter made, incurred or created, whether voluntary or involuntary and however arising, whether due or not due, absolute or contingent, liquidated or unliquidated, determined or undetermined, including under any swap, derivative, foreign exchange, hedge, deposit, treasury management or other similar transaction or arrangement at any time entered into by the Borrowers with the Senior Lender, and whether the Borrowers may be liable individually or jointly with others, or whether recovery upon such Indebtedness may be or hereafter becomes unenforceable.

1.12 “Senior Debt Documents” means the Senior Credit Agreement and all other documents and instruments evidencing or pertaining to all or any portion of the Senior Debt.

1.13 “Senior Default” means any Event of Default under the Senior Credit Agreement.

2. Subordination.

2.1 Subordination of Junior Debt to Senior Debt. Each Borrower covenants and agrees, and Junior Creditor by its acceptance of the Junior Debt Documents (whether upon original issue or upon transfer or assignment) likewise covenants and agrees, that (a) the payment of any and all of the Junior Debt shall be subordinate and subject in right of payment, to the extent and in the manner hereinafter set forth, to the prior Payment in Full of the Senior Debt and (b) the existing and hereafter acquired Liens of Senior Lender in the Collateral securing all or any portion of the Senior Debt shall be senior, regardless of the time, order, or method of perfection, to all existing and hereafter acquired Liens of Junior Creditor (or any agent therefore) in the Collateral securing all or any portion of the Junior Debt. The priorities of the Liens provided in this Agreement shall not be altered or otherwise affected by any amendment, modification, supplement, extension, renewal or restatement of the Senior Debt in compliance with the terms of this Agreement nor by any action or inaction which Senior Lender may take or fail to take in respect of the Collateral. Each holder of Senior Debt, whether now outstanding or hereafter created, incurred, assumed or guaranteed, shall be deemed to have acquired Senior Debt in reliance upon the provisions contained in this Agreement.

2.2 Proceedings. In the event of any Proceeding involving any Borrower, (a) all Senior Debt first shall be Paid in Full before any payment of or with respect to the Junior Debt shall be made (other than a distribution of Reorganization Subordinated Securities if Junior Creditor and Senior Lender shall have entered into such supplements to or modifications to this Agreement as Senior Lender may reasonably request to reflect the continued subordination of the Reorganization Subordinated Securities to the Senior Debt (or notes or other securities issued in substitution of all or a portion thereof) to the same extent as provided herein); (b) any payment or distribution, whether in cash, property or securities which, but for the terms hereof, otherwise would be payable or deliverable in respect of the Junior Debt (other than a distribution of Reorganization Subordinated Securities if Junior Creditor and Senior Lender shall have entered into such supplements to or modifications to this Agreement as Senior Lender may reasonably request to reflect the continued subordination of the Reorganization Subordinated Securities to the Senior Debt (or notes or other securities issued in substitution of all or a portion thereof) to the same extent as provided herein), shall be paid or delivered directly to Senior Lender (to be held and/or applied by Senior Lender in accordance with the terms of the Credit Agreement) until all Senior Debt is Paid in Full, and Junior Creditor irrevocably authorizes, empowers and directs all receivers, trustees, liquidators, custodians, conservators and others having authority in the premises to effect all such payments and distributions, and Junior Creditor also irrevocably authorizes, empowers and directs Senior Lender to demand, sue for, collect and receive every such payment or distribution; and (c) Junior Creditor agrees to execute and deliver to Senior Lender or its representative all such further instruments confirming the authorization referred to in the foregoing clause (b).

2.3 Payments. Borrowers may not make and Junior Creditor may not receive any payment or distribution with respect to the Junior Debt; provided that interest due on the Junior Debt at the non-default rate may accrue as PIK (payment in kind) but may not be paid until the Senior Debt is Paid in Full.

2.4 Restriction on Action by Junior Creditor. Until the Senior Debt is Paid in Full, Junior Creditor will not take any Enforcement Action with respect to the Junior Debt. Notwithstanding the foregoing, Junior Creditor may file proofs of claim against any Borrower in any Proceeding involving any Borrower.

2.5 Incorrect Payments and Revival of Obligations.

(a) If any payment or distribution on account of the Junior Debt not permitted to be made by a Borrower or received by Junior Creditor under this Agreement is received by Junior Creditor before all Senior Debt is Paid in Full, such payment or distribution shall not be commingled with any asset of Junior Creditor, shall be held in trust by Junior Creditor for the benefit of Senior Lender and shall be promptly paid over to Senior Lender, or its designated representative, for application (in accordance with the Senior Credit Agreement) to the payment of the Senior Debt then remaining unpaid, until all of the Senior Debt is Paid in Full.

(b) To the extent that any payment or payments made to the Senior Lender under the Senior Debt Documents, or any payment or proceeds of any Collateral received by Senior Lender in the reduction of the indebtedness evidenced therein or with respect to any of the allocations evidenced by the Senior Debt Documents are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to a trustee, to a Borrower, or any other person liable for any of the obligations evidenced and/or secured by the Senior Debt Documents, whether directly or indirectly, as a debtor-in-possession or to a receiver or any other party under any bankruptcy law, state or federal law, common law or equitable cause, then the portion of the indebtedness of a Borrower or such other liable person intended to have been satisfied by such payment or proceeds (“Invalidated Payments”), will be revived and will continue in full force and effect as if such Invalidated Payments had never been received by the Senior Lender and for purposes of this Agreement, the Senior Lender will not be deemed to be Paid in Full to the extent of the Invalidated Payments and all costs and expenses in connection therewith.

2.6 Sale; Transfer; etc. Junior Creditor shall not sell, assign, pledge, dispose of or otherwise transfer all or any portion of the Junior Debt or any Junior Debt Document (a) without giving prior written notice of such action to Senior Lender and (b) unless prior to the consummation of any such action, the transferee thereof shall execute and deliver to Senior Lender an agreement substantially identical to this Agreement, providing for the continued subordination and forbearance of the Junior Debt to the Senior Debt as provided herein and for the continued effectiveness of all of the rights of Senior Lender arising under this Agreement. Notwithstanding the failure to execute or deliver any such agreement, the subordination effected hereby shall survive any sale, assignment, pledge, disposition or other transfer of all or any portion of the Junior Debt, and the terms of this Agreement shall be binding upon the successors and assigns of Junior Creditor, as provided in Section 17 below.

2.7 Legends. Until the Senior Debt is Paid in Full, the Junior Debt Documents will at all times shall contain in a conspicuous manner the following legend:

“This [instrument] [note] [certificate] and the rights and obligations evidenced hereby are subordinate in the manner, on the terms and to the extent set forth in that certain Subordination Agreement (the “Subordination Agreement”) dated as of July __, 2017, by and among Mendocino Brewing Company, Inc. (“MBC”), Releta Brewing company, LLC (“RBC”; RBC and MBC, each a “Borrower” and collectively, the “Borrowers”), Catamaran Services, Inc. and MB Financial Bank, N.A. (“Senior Lender”), to the indebtedness (including interest) owed or to be owing by the Borrowers pursuant to that certain Credit and Security Agreement dated June 23, 2011 by and among the Borrowers and Senior Lender, as such Credit and Security Agreement has and may hereafter be amended, supplemented or otherwise modified from time to time.”

2.8 Release of Liens. In the event that Senior Lender is required pursuant to the terms of the Senior Credit Agreement or any other Senior Debt Document to release its Liens on any of the Collateral securing the Senior Debt, or in the event that Senior Lender voluntarily elects to release its Liens on any of the Collateral securing the Senior Debt, Junior Creditor shall release, on a prompt basis, any Liens which it may have in such Collateral. To facilitate the foregoing, to the extent that Junior Creditor fails or refuses to provide such lien releases promptly upon request by Senior Lender, Senior Lender shall be empowered (which power is coupled with an interest and is irrevocable during the term of this Agreement) as Junior Creditor’s attorney-in-fact, solely for the limited purpose set forth in this Section 2.8, to execute, file and deliver such releases for and on behalf of Junior Creditor in its name, and to bind Junior Creditor thereby.

2.9 Subrogation. Junior Creditor expressly waives any and all rights of subrogation which it may now or hereafter have against a Borrower or against any Collateral arising from the existence, performance or enforcement of Junior Creditor’s obligations and liabilities under this Agreement until Payment in Full of the Senior Debt, at which time Junior Creditor will be deemed to be subrogated to the rights of the holder(s) of the Senior Debt to receive payments or distributions of cash, property or securities of a Borrower applicable to the Senior Debt until the Junior Debt is paid in full; and, for the purposes of such subrogation, no such payments or distributions to the holder(s) of the Senior Debt by or on behalf of a Borrower (or by or on behalf of Junior Creditor by virtue of this Agreement) which otherwise would have been made to Junior Creditor will, as between a Borrower and Junior Creditor, be deemed to be a payment by or on behalf of a Borrower to or on account of the Senior Debt.

3. Modifications to Debt.

3.1 Amendments. Until the Senior Debt is Paid in Full and notwithstanding anything contained in the Junior Debt Documents, the Senior Credit Agreement or any of the other Senior Debt Documents to the contrary, Junior Creditor shall not, without the prior written consent of Senior Lender, agree to any amendment, modification or supplement to the Junior Debt Documents including, without limitation, any amendment, modification or supplement the effect of which is to (a) increase the maximum principal amount of the Junior Debt or rate of interest on any of the Junior Debt, (b) change the dates upon which payments of principal or interest on the Junior Debt are due, (c) change or add any event of default or any covenant with respect to the Junior Debt, (d) change any redemption or prepayment provisions of the Junior Debt, (e) alter the subordination provisions with respect to the Junior Debt, including, without limitation, subordinating the Junior Debt to any other debt, (f) change the maturity date of any of the Junior Debt or otherwise to alter the repayment terms of the Junior Debt, (g) take any Liens on any assets of any Person other than a Borrower or any assets securing the Senior Debt other than the Collateral of a Borrower or (h) change or amend any other term of the Junior Debt Documents if such change or amendment would result in Senior Default, increase the obligations of any Borrower or any guarantor of the Junior Debt or confer additional material rights on Junior Creditor or any other holder of the Junior Debt in a manner materially adverse to any Borrower or any such guarantor or in a manner adverse to Senior Lender.

3.2 Senior Lender Amendments. Senior Lender may at any time and from time to time without the consent of or notice to Junior Creditor, without incurring liability to Junior Creditor and without impairing or releasing the obligations of Junior Creditor under this Agreement, change the maturity date of the Senior Debt, change the manner or place of payment or extend the time of payment of or renew or alter any of the terms of the Senior Debt, or otherwise amend in any manner any agreement, note, guaranty or other instrument evidencing or securing or otherwise relating to the Senior Debt.

4. Bankruptcy Matters.

4.1 Limit of Actions. In the event of any Proceeding involving any Borrower, (a) Junior Creditor agrees not to initiate or prosecute or encourage any other Person to initiate or prosecute any claim, action or other proceeding challenging the enforceability of the Senior Debt or any Liens securing the Senior Debt, (b) Junior Creditor agrees that Senior Lender shall be entitled to credit bid all or any portion of the Senior Debt in a sale conducted pursuant to the Bankruptcy Code; (c) Junior Creditor agrees not to object to any use of cash collateral by any Borrower under Section 363 of the Bankruptcy Code permitted by Senior Lender or any borrowing by any Borrower from Senior Lender, or to any grant of a Lien by any Person in favor of Senior Lender (or any agent therefore), under Section 364 of the Bankruptcy Code; and (d) Junior Creditor agrees to execute, verify, deliver and file any proofs of claim in respect of the Junior Debt requested by Senior Lender in connection with any such Proceeding and hereby irrevocably authorizes, empowers and appoints Senior Lender as their agent and attorney-in-fact to (i) execute, verify, deliver and file such proofs of claim upon the failure of Junior Creditor promptly to do so (and, in any event, prior to 30 days before the expiration of the time to file any such proof) and (ii) vote such claim in any such Proceeding upon the failure of Junior Creditor to do so prior to fifteen (15) days before the expiration of the time to vote any such claim; provided Senior Lender shall have no obligation to execute, verify, deliver, file and/or vote any such proof of claim. In the event that Senior Lender votes any claim in accordance with the authority granted hereby, Junior Creditor shall not be entitled to change or withdraw such vote. The Senior Debt shall continue to be treated as Senior Debt and the provisions of this Agreement shall continue to govern the relative rights and priorities of Senior Lender and Junior Creditor even if all or part of the Senior Debt or the Liens securing the Senior Debt are subordinated, set aside, avoided or disallowed in connection with any such Proceeding and this Agreement shall be reinstated if at any time any payment of any of the Senior Debt is rescinded or must otherwise be returned by any holder of Senior Debt or any representative of such holder.

4.2 No Contest. Junior Creditor will not contest, protest, or object to, and consents and will be deemed to have consented pursuant to Section 363(f) of the Bankruptcy Code, to any sale or other disposition of the Collateral free and clear of its Lien or other interests under Section 363 of the Bankruptcy Code if Senior Lender consents to the sale or disposition in writing.

5. Continued Effectiveness of this Agreement. The terms of this Agreement, the subordination effected hereby, and the rights and the obligations of Junior Creditor, any Borrower and Senior Lender arising hereunder shall not be affected, modified or impaired in any manner or to any extent by: (a) any amendment or modification of or supplement to the Senior Credit Agreement, any of the other Senior Debt Documents or any of the Junior Debt Documents; (b) the validity or enforceability of any of such documents; or (c) any exercise or non-exercise of any right, power or remedy under or in respect of the Senior Debt or the Junior Debt or any of the instruments or documents referred to in clause (a) above. The Junior Creditor and each other holder of Junior Debt hereby acknowledges that the provisions of this Agreement are intended to be enforceable at all times, whether before the commencement of, after the commencement of, in connection with or premised on the occurrence of a Proceeding.

6. No Contest by Junior Creditor; No Additional Security for Junior Debt. Junior Creditor agrees that it will not at any time contest the validity, perfection, priority or enforceability of the Senior Debt, the Senior Debt Documents, or the Liens of Senior Lender in the Collateral securing the Senior Debt. Junior Creditor shall not accept any security or Lien for the Junior Debt at any time other than the Liens in existence on the date of this Agreementor accept any guaranty of the Junior Debt.

7. Representations and Warranties. With respect to Section 7.1 through Section 7.6, Junior Creditor hereby represents and warrants to Senior Lender as follows, and with respect to Section 7.7, MBC hereby represents and warrants:

7.1 Existence and Power. Junior Creditor is a Delaware corporation duly organized, validly existing and in good standing under the laws of the State of its formation.

7.2 Authority. Junior Creditor has the power and authority to enter into, execute, deliver and carry out the terms of this Agreement and the execution, delivery and performance of this Agreement, have been duly authorized by all proper and necessary action on the part of Junior Creditor and are not prohibited by its organizational documents.

7.3 Binding Agreements. This Agreement, when executed and delivered, will constitute the valid and legally binding obligations of Junior Creditor enforceable against Junior Creditor in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and by equitable principles.

7.4 Conflicting Agreements; Litigation. No provisions of any mortgage, indenture, contract, agreement, statute, rule, regulation, judgment, decree or order binding on Junior Creditor conflicts with, or requires any consent which has not already been obtained under, or would in any way prevent the execution, delivery or performance of the terms of this Agreement by Junior Creditor. The execution, delivery and carrying out of the terms of this Agreement will not constitute a default under, or result in the creation or imposition of, or obligation to create, any Lien on the property of Junior Creditor pursuant to the terms of any such mortgage, indenture, contract or agreement. No pending or, to the best of Junior Creditor’s knowledge, threatened, litigation, arbitration or other proceedings could reasonably be expected in any way to prevent the performance of the terms of this Agreement by Junior Creditor.

7.5 No Divestiture. Junior Creditor is the sole owner, beneficially and of record, of the Junior Debt.

7.6 Default under Junior Note. No Junior Default exists under or with respect to the Junior Debt Documents.

7.7 Holders of Junior Debt. MBC hereby represents and warrants that Junior Creditor is the only holder of the Junior Debt.

8. Agent for Perfection. In the event that Senior Lender or Junior Creditor takes possession or has “control” (as such term is used in the UCC as in effect in each applicable jurisdiction) over any Collateral for purposes of perfection its Lien therein, Senior Lender or Junior Creditor, as applicable, shall be deemed to be holding such Collateral as representative for Senior Lender and Junior Creditor, solely for purposes of perfection of its Lien under the UCC. It is understood and agreed that this Section 8 is intended solely to assure continuous perfection of the Liens granted under the applicable Senior Debt Documents and Junior Debt Documents, and nothing in this Section 8 shall be deemed or construed as altering the priorities or obligations set forth elsewhere in this Agreement. Upon the Payment in Full of the Senior Debt, notwithstanding the provisions of Section 22, Senior Lender shall (a) deliver to Junior Creditor, at the expense of Borrowers, all such Collateral in Senior Lender’s possession or control, together with any necessary endorsements (without recourse or representation), and (b) Senior Lender shall take such other actions as Junior Creditor may reasonably request in writing, at no expense to Senior Lender, necessary to enable Junior Creditor to preserve or obtain a perfected Lien on the Collateral and all other rights and remedies related thereto, subject to such third party control or other agreements or if otherwise contrary to law.

9. Marshalling. Junior Creditor waives the right to assert the doctrine of marshalling with respect to any of the Senior Lender’s Collateral, and consents and agrees that Senior Lender may proceed against any or all of the Senior Lender’s Collateral in such order as Senior Lender shall determine in its sole discretion.

10. Junior Default Notice. Junior Creditor and each Borrower each shall provide Senior Lender with a Junior Default Notice upon the occurrence of each Junior Default, and Junior Creditor shall notify Senior Lender in the event such Junior Default is cured or waived.

11. Cumulative Rights, No Waivers. Each and every right, remedy and power granted to Senior Lender hereunder shall be cumulative and in addition to any other right, remedy or power specifically granted herein, in the Senior Credit Agreement or the other Senior Debt Documents or now or hereafter existing in equity, at law, by virtue of statute or otherwise, and may be exercised by Senior Lender, from time to time, concurrently or independently and as often and in such order as Senior Lender may deem expedient. Any failure or delay on the part of Senior Lender in exercising any such right, remedy or power, or abandonment or discontinuance of steps to enforce the same, shall not operate as a waiver thereof or affect the rights of Senior Lender thereafter to exercise the same, and any single or partial exercise of any such right, remedy or power shall not preclude any other or further exercise thereof or the exercise of any other right, remedy or power, and no such failure, delay, abandonment or single or partial exercise of the rights of Senior Lender hereunder shall be deemed to establish a custom or course of dealing or performance among the parties hereto.

12. Modification. Any modification or waiver of any provision of this Agreement, or any consent to any departure by Junior Creditor therefrom, shall not be effective in any event unless the same is in writing and signed by Senior Lender, and then such modification, waiver or consent shall be effective only in the specific instance and for the specific purpose given. Any notice to or demand on Junior Creditor in any event not specifically required of Senior Lender hereunder shall not entitle Junior Creditor to any other or further notice or demand in the same, similar or other circumstances unless specifically required hereunder.

13. Additional Documents and Actions. Junior Creditor at any time, and from time to time, after the execution and delivery of this Agreement, promptly will execute and deliver such further documents and do such further acts and things as Senior Lender reasonably may request that may be necessary in order to effect fully the purposes of this Agreement.

14. Independent Credit Investigations. None of Senior Lender nor its directors, members, managers, officers, agents or employees shall be responsible to Junior Creditor for a Borrower’s solvency, financial condition or ability to repay the Junior Debt or for statements of any Borrower or any other obligor, oral or written, or for the validity, sufficiency or enforceability of the Senior Debt, the Senior Debt Documents or any Liens granted by any Borrower or any other obligor to Senior Lender in connection therewith. Junior Creditor has entered into its financing arrangements with the Borrowers based on its own independent investigation and does not rely upon any representation of Senior Lender with respect to matters identified or referred to in this section. If Senior Lender, in its sole discretion, undertakes, at any time or from time to time, to provide any information of the type described herein to Junior Creditor, Senior Lender shall be under no obligation to subsequently update any such information or to provide any such information to Junior Creditor on any subsequent occasion.

15. Notices. Unless otherwise specifically provided herein, any notice or other communication required or permitted to be given shall be in writing addressed to the respective party as set forth below and may be personally served, faxed or sent by overnight courier service or certified or registered United States mail and shall be deemed to have been given (a) if delivered in person, when delivered; (b) if delivered by fax, on the date received if received on a Business Day before 4:00 p.m. (Chicago, Illinois time) or, if not, on the next succeeding Business Day; (c) if delivered by overnight courier, one Business Day after delivery to such courier properly addressed; or (d) if by United States mail, four Business Days after deposit in the United States mail, postage prepaid and properly addressed.

Notices shall be addressed as follows:

(a) If to Junior Creditor:

Catamaran Services, Inc.

700 Larkspur Landing Circle, Suite 208

Larkspur, CA 94939

Attention: Rajwinder Kaur, Director

(b) If to Borrowers:

601 Airport Road

Ukiah, CA 95482

Attention: Mahadevan Narayanan, Chief Financial Officer

Fax: 707 463 2465

MB Financial Bank, N.A.

6111 N. River Road, 3^rd Floor

Rosemont, Illinois 60018

Attention: Martha Gaskin, Senior Vice President

Fax: 847-698-5718

With a copy to:

McGuireWoods LLP

1800 Century Park East, 8^th floor

Los Angeles, CA 90067

Attention: Gary Samson, re: MB Bank

Fax: 310-956-3148

or in any case, to such other address as the party addressed shall have previously designated by written notice to the serving party, given in accordance with this Section 15. A notice not given as provided above shall, if it is in writing, be deemed given if and when actually received by the party to whom given.

16. Severability. In the event that any provision of this Agreement is deemed to be invalid, illegal or unenforceable by reason of the operation of any law or by reason of the interpretation placed thereon by any court or governmental authority, the validity, legality and enforceability of the remaining provisions of this Agreement shall not in any way be affected or impaired thereby, and the affected provision shall be modified to the minimum extent permitted by law so as most fully to achieve the intention of this Agreement.

17. Successors and Assigns. This Agreement shall inure to the benefit of the successors and assigns of Senior Lender and shall be binding upon the successors and assigns of Junior Creditor and Borrowers.

18. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which taken together shall be one and the same instrument.

19. Defines Rights of Junior Creditor and Senior Lender; No Third Party Beneficiaries. The provisions of this Agreement are solely for the purpose of defining the relative rights of Junior Creditor and Senior Lender and shall not be deemed to create any rights or priorities in favor of any other Person, including, without limitation the Borrowers.

20. Conflict. In the event of any conflict between any term, covenant or condition of this Agreement and any term, covenant or condition of any of the Junior Debt Documents, the provisions of this Agreement shall control and govern. For purposes of this Section 20, to the extent that any provisions of any of the Junior Debt Documents provide rights, remedies and benefits to Senior Lender that exceed the rights, remedies and benefits provided to Senior Lender under this Agreement, such provisions of the applicable Junior Debt Documents shall be deemed to supplement (and not to conflict with) the provisions hereof.

21. Headings. The paragraph headings used in this Agreement are for convenience only and shall not affect the interpretation of any of the provisions hereof.

22. Termination. This Agreement shall terminate upon the Payment in Full of the Senior Debt.

23. Applicable Law. This Agreement shall be governed by and shall be construed and enforced in accordance with the internal laws of the State of Illinois, without regard to conflicts of law principles.

24. CONSENT TO JURISDICTION. EACH OF JUNIOR CREDITOR AND BORROWER HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF COOK, STATE OF ILLINOIS AND IRREVOCABLY AGREES THAT, SUBJECT TO SENIOR LENDER’S ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE JUNIOR DEBT DOCUMENTS OR THE SENIOR DEBT DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS. EACH OF JUNIOR CREDITOR AND BORROWER EXPRESSLY SUBMITS AND CONSENTS TO THE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS. EACH OF JUNIOR CREDITOR AND BORROWER HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS AND AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE UPON IT BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO JUNIOR CREDITOR AND BORROWERS AT THEIR RESPECTIVE ADDRESSES SET FORTH IN THIS AGREEMENT AND SERVICE SO MADE SHALL BE COMPLETE TEN (10) DAYS AFTER THE SAME HAS BEEN POSTED.

25. WAIVER OF JURY TRIAL. JUNIOR CREDITOR, EACH BORROWER AND SENIOR LENDER HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, ANY OF THE JUNIOR DEBT DOCUMENTS OR ANY OF THE SENIOR DEBT DOCUMENTS. EACH OF JUNIOR CREDITOR, BORROWER AND SENIOR LENDER ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT AND THE SENIOR DEBT DOCUMENTS AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS. EACH OF JUNIOR CREDITOR, BORROWER AND SENIOR LENDER WARRANTS AND REPRESENTS THAT EACH HAS HAD THE OPPORTUNITY OF REVIEWING THIS JURY WAIVER WITH LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS.

26. CALIFORNIA JUDICIAL REFERENCE; OTHER WAIVERS. IF ANY ACTION IS COMMENCED OR MAINTAINED IN ANY COURT IN THE STATE OF CALIFORNIA, AND THE WAIVER OF JURY TRIAL SET FORTH IN SECTION 25 ABOVE IS NOT ENFORCEABLE, AND EACH PARTY TO SUCH ACTION DOES NOT SUBSEQUENTLY WAIVE IN AN EFFECTIVE MANNER UNDER CALIFORNIA LAW ITS RIGHT TO A TRIAL BY JURY, THE PARTIES HERETO HEREBY ELECT TO PROCEED AS FOLLOWS:

(a) WITH THE EXCEPTION OF THE ITEMS SPECIFIED IN CLAUSE (b) BELOW, ANY CONTROVERSY, DISPUTE OR CLAIM (EACH, A “CONTROVERSY”) BETWEEN ANY OF THE PARTIES ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT WILL BE RESOLVED BY A REFERENCE PROCEEDING IN ACCORDANCE WITH THE PROVISIONS OF SECTIONS 638, ET SEQ. OF THE CCP OR THEIR SUCCESSOR SECTIONS, WHICH SHALL CONSTITUTE THE EXCLUSIVE REMEDY FOR THE RESOLUTION OF ANY CONTROVERSY, INCLUDING WHETHER THE CONTROVERSY IS SUBJECT TO THE REFERENCE PROCEEDING. EXCEPT AS OTHERWISE PROVIDED ABOVE, VENUE FOR THE REFERENCE PROCEEDING WILL BE IN ANY COURT IN WHICH VENUE IS APPROPRIATE UNDER APPLICABLE LAW (THE “COURT”).

(b) THE MATTERS THAT SHALL NOT BE SUBJECT TO A REFERENCE ARE THE FOLLOWING: (A) NON-JUDICIAL FORECLOSURE OF ANY SECURITY INTERESTS IN REAL OR PERSONAL PROPERTY; (B) EXERCISE OF SELF HELP REMEDIES (INCLUDING SET-OFF); (C) APPOINTMENT OF A RECEIVER; AND (D) TEMPORARY, PROVISIONAL OR ANCILLARY REMEDIES (INCLUDING WRITS OF ATTACHMENT, WRITS OF POSSESSION, TEMPORARY RESTRAINING ORDERS OR PRELIMINARY INJUNCTIONS). THIS AGREEMENT DOES NOT LIMIT THE RIGHT OF ANY PARTY TO EXERCISE OR OPPOSE ANY OF THE RIGHTS AND REMEDIES DESCRIBED IN CLAUSES (A) AND (B) OR TO SEEK OR OPPOSE FROM A COURT OF COMPETENT JURISDICTION ANY OF THE ITEMS DESCRIBED IN CLAUSES (C) AND (D). THE EXERCISE OF, OR OPPOSITION TO, ANY OF THOSE ITEMS DOES NOT WAIVE THE RIGHT OF ANY PARTY TO A REFERENCE PURSUANT TO THIS AGREEMENT.

(c) THE REFEREE SHALL BE A RETIRED JUDGE OR JUSTICE SELECTED BY MUTUAL WRITTEN AGREEMENT OF THE PARTIES. IF THE PARTIES DO NOT AGREE WITHIN TEN (10) DAYS OF A WRITTEN REQUEST TO DO SO BY ANY PARTY, THEN, UPON REQUEST OF ANY PARTY, THE REFEREE SHALL BE SELECTED BY THE PRESIDING JUDGE OF THE COURT (OR HIS OR HER REPRESENTATIVE). A REQUEST FOR APPOINTMENT OF A REFEREE MAY BE HEARD ON AN EX PARTE OR EXPEDITED BASIS, AND THE PARTIES AGREE THAT IRREPARABLE HARM WOULD RESULT IF EX PARTE RELIEF IS NOT GRANTED. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, THE REFEREE SHALL DETERMINE THE MANNER IN WHICH THE REFERENCE PROCEEDING IS CONDUCTED INCLUDING THE TIME AND PLACE OF HEARINGS, THE ORDER OF PRESENTATION OF EVIDENCE, AND ALL OTHER QUESTIONS THAT ARISE WITH RESPECT TO THE COURSE OF THE REFERENCE PROCEEDING. ALL PROCEEDINGS AND HEARINGS CONDUCTED BEFORE THE REFEREE, EXCEPT FOR TRIAL, SHALL BE CONDUCTED WITHOUT A COURT REPORTER, EXCEPT THAT WHEN ANY PARTY SO REQUESTS, A COURT REPORTER WILL BE USED AT ANY HEARING CONDUCTED BEFORE THE REFEREE, AND THE REFEREE WILL BE PROVIDED A COURTESY COPY OF THE TRANSCRIPT. THE PARTY MAKING SUCH A REQUEST SHALL HAVE THE OBLIGATION TO ARRANGE FOR AND PAY THE COURT REPORTER. SUBJECT TO THE REFEREE’S POWER TO AWARD COSTS TO THE PREVAILING PARTY, THE PARTIES WILL EQUALLY SHARE THE COST OF THE REFEREE AND THE COURT REPORTER AT TRIAL.

(d) THE REFEREE SHALL BE REQUIRED TO DETERMINE ALL ISSUES IN ACCORDANCE WITH EXISTING APPLICABLE CASE LAW AND STATUTORY LAW. THE RULES OF EVIDENCE APPLICABLE TO PROCEEDINGS AT LAW IN THE COURT WILL BE APPLICABLE TO THE REFERENCE PROCEEDING. THE REFEREE SHALL BE EMPOWERED TO ENTER EQUITABLE AS WELL AS LEGAL RELIEF, ENTER EQUITABLE ORDERS THAT WILL BE BINDING ON THE PARTIES AND RULE ON ANY MOTION THAT WOULD BE AUTHORIZED IN A COURT PROCEEDING. THE REFEREE SHALL ISSUE A DECISION AT THE CLOSE OF THE REFERENCE PROCEEDING WHICH DISPOSES OF ALL CLAIMS OF THE PARTIES THAT ARE THE SUBJECT OF THE REFERENCE. PURSUANT TO CCP SECTION 644, SUCH DECISION SHALL BE ENTERED BY THE COURT AS A JUDGMENT OR AN ORDER IN THE SAME MANNER AS IF THE ACTION HAD BEEN TRIED BY THE COURT AND ANY SUCH DECISION WILL BE FINAL, BINDING AND CONCLUSIVE. THE PARTIES RESERVE THE RIGHT TO APPEAL FROM THE FINAL JUDGMENT OR ORDER OR FROM ANY APPEALABLE DECISION OR ORDER ENTERED BY THE REFEREE. THE PARTIES RESERVE THE RIGHT TO FINDINGS OF FACT, CONCLUSIONS OF LAWS, A WRITTEN STATEMENT OF DECISION, AND THE RIGHT TO MOVE FOR A NEW TRIAL OR A DIFFERENT JUDGMENT, WHICH NEW TRIAL, IF GRANTED, IS ALSO TO BE A REFERENCE PROCEEDING UNDER THIS PROVISION.

27. Loan Document. Borrowers and Senior Lender agree that as between them, this Agreement is a Loan Document for all purposes.

[Signature Page Follows]

IN WITNESS WHEREOF, Junior Creditor, Borrowers, and Senior Lender have caused this Agreement to be executed as of the date first above written.

JUNIOR CREDITOR:	CATAMARAN SERVICES, INC.

	By:	/sd/
	Name:	Rajwinder Kaur
	Title:	Director

BORROWERS:	MENDOCINO BREWING COMPANY, INC.

	By:	/sd/
	Name:	Mahadevan Narayanan
	Title:	Chief Financial Officer

	RELETA BREWING COMPANY, LLC

	By:	MENDOCINO BREWING BREWING COMPANY, INC., its sole member

	By:	/sd/
	Name:	Mahadevan Narayanan
	Title:	Chief Financial Officer

SENIOR LENDER:	MB FINANCIAL BANK, N.A.

	By:	/sd/
	Name:	Martha Gaskin
	Title	Senior Vice President

EX-10.5 6 ex10-5.htm

THIRTEENTH AMENDMENT TO CREDIT AND SECURITY AGREEMENT

This Thirteenth Amendment to Credit and Security Agreement (this “Amendment”) is made effective as of July 11, 2017, by and among MB FINANCIAL BANK, N.A., successor in interest to Cole Taylor Bank (“Lender”), MENDOCINO BREWING COMPANY, INC., a California corporation (“MBC”), and RELETA BREWING COMPANY, LLC, a Delaware limited liability company (“RBC”; RBC and MBC are collectively referred to as “Borrowers” and, each individually, as a “Borrower”).

RECITALS:

A. WHEREAS, pursuant to that certain Credit and Security Agreement dated as of June 23, 2011 (as amended, restated, or otherwise modified from time to time, the “Credit Agreement”) by and among the Borrowers and Lender, the Lender has agreed to extend certain credit facilities to the Borrowers.

B. WHEREAS, MBC previously executed seven (7) unsecured promissory notes in favor of Catamaran Services, Inc., a Delaware corporation (“Catamaran”), in an aggregate principal amount of Two Million Six Hundred Thousand Dollars ($2,600,000), which was modified by that certain Promissory Note Modification Agreement dated as of July 11, 2017 to grant a lien and security interest in favor of Catamaran, subject and subordinated to the security interests of Lender.

C. WHEREAS, Borrowers have requested from Catamaran the ability for MBC to incur additional secured debt from Catamaran in an aggregate principal amount not to exceed Two Million Dollars ($2,000,000) pursuant to the Catamaran LSA as defined below.

D. WHEREAS, the granting of security interests to Catamaran and the incurrence of such additional debt will constitute Events of Default under Section 13.01(b) of the Credit Agreement, as such granting of liens and incurrence of debt are prohibited under Sections 11.03 and 11.02 of the Credit Agreement, respectively.

E. WHEREAS, as a result of such potential Events of Default, the Borrowers have requested that Lender permit the Borrowers incur the additional debt and make certain other changes to the Credit Agreement as set forth herein and Lender is agreeable on the terms and subject to the conditions set forth herein.

NOW THEREFORE, in consideration of the premises and mutual covenants and agreements contained herein and for other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

AGREEMENTS:

1. Recitals. The Borrowers hereby agree that the Recitals set forth above are accurate, represent the intent of the parties hereto and are incorporated herein by reference.

2. Terms Defined. Unless otherwise defined in this Amendment, capitalized terms used herein will have the same meaning in this Amendment as set forth in the Credit Agreement (as may be amended by this Amendment).

3. Amendments to Section 1.02 of the Credit Agreement. Section 1.02 of the Credit Agreement is hereby amended as follows:

(a) The following new definitions are hereby added to Section 1.02 of the Credit Agreement in alphabetical order to read in their respective entireties as follows:

‘“Catamaran’ means Catamaran Services, Inc., a Delaware corporation.”

‘“Catamaran LSA’ means that certain Loan and Security Agreement dated as of July 11, 2017 by and between Catamaran and MBC.”

‘“Catamaran Modification Agreement’ means that certain Promissory Note Modification Agreement dated as of July 11, 2017 by and between MBC and Catamaran, which secures and subordinates the Catamaran Prior Debt.”

“Catamaran New Debt’ means the Indebtedness owing by MBC to Catamaran in an aggregate original principal amount of $2,000,000, pursuant to the Catamaran LSA.

‘“Catamaran Prior Debt’ means the Indebtedness owing by MBC to Catamaran in an aggregate original principal amount of $2,600,000, evidenced by seven (7) promissory notes.”

‘“Catamaran Subordinated Debt’ means the Indebtedness owing by MBC to Catamaran, in an aggregate original principal amount not to exceed $4,600,000, consisting of (a) the Catamaran Prior Debt and (b) the Catamaran New Debt, evidenced by the Catamaran Subordinated Promissory Notes.”

‘“Catamaran Subordinated Loan Documents’ means the Catamaran LSA, Catamaran Subordination Agreement, Catamaran Modification Agreement, Catamaran Subordinated Promissory Notes, as the same may from time to time be amended, restated, supplemented or modified.”

‘“Catamaran Subordinated Promissory Notes’ means, collectively, the following promissory notes made by MBC to Catamaran: (a) the promissory note dated January 22, 2014 in the original principal amount of $500,000, (b) the promissory note dated April 24, 2014 in the original principal amount of $500,000, (c) the promissory note dated February 5, 2015 in the original principal amount of $500,000, (d) the promissory note dated June 30, 2015 in the original principal amount of $200,000, (e) the promissory note dated March 14, 2016 in the original principal amount of $325,000, (f) the promissory note dated March 30, 2016 in the original principal amount of $75,000, (g) the promissory note dated May 22, 2017 in the original principal amount of $200,000 (which promissory notes described in the foregoing clauses (a) through (g) collectively were secured and subordinated pursuant to the Catamaran Modification Agreement and Catamaran Subordination Agreement, respectively), and (h) one or more promissory note(s) executed pursuant to the Catamaran LSA, the aggregate original principal amount of which shall not exceed $2,000,000 (as such promissory note(s) described in the foregoing clauses (a) through (h) are subordinated pursuant to the Catamaran Subordination Agreement).”

‘“Catamaran Subordination Agreement’ means that certain Subordination Agreement dated as of July 11, 2017, by and among Catamaran, MBC and Lender.”

(b) The definition of “Subordinated Debt” in Section 1.02 of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

“Subordinated Debt’ means (a) the Indebtedness of Borrowers in favor of UNITED BREWERIES OF AMERICA INC., a Delaware corporation, which is in an outstanding amount as of May 31, 2011 of $3,262,388.87 and (b) the Catamaran Subordinated Debt, which is in an outstanding amount as of June 30, 2017 of $2,901,686.13.”

(c) The definition of “Subordinated Loan Documents” in Section 1.02 of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

“Subordinated Loan Documents’ means the Catamaran Subordinated Loan Documents and any and all promissory notes, agreements, documents or instruments now or at any time evidencing, securing, guarantying or otherwise executed and delivered in connection with the Subordinated Debt, as the same may from time to time be amended, restated, supplemented or modified.”

(d) The definition of “Subordination Agreement” in Section 1.02 of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

‘“Subordination Agreement” means, individually or collectively as the context may require, (a) that certain Subordination Agreement dated as of June 23, 2011, by and among United Breweries of America Inc., a Delaware corporation, the Borrowers and the Lender (as the same may be from time to time amended, restated, supplemented or modified), and (b) the Catamaran Subordination Agreement (as the same may be from time to time amended, restated, supplemented or modified).”

4. Amendment to Section 11.02 of the Credit Agreement. Section 11.02 of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

“11.02 Indebtedness. No Borrower shall create, incur, assume or become obligated (directly or indirectly), for any loans or other Indebtedness other than the Loans, except that a Borrower may (a) borrow money from a Person other than Lender on an unsecured and subordinated basis so long as a subordination agreement in favor of Lender and in form and substance satisfactory to Lender is executed and delivered to Lender prior to any borrowing of money by such Borrower; (b) incur Hedging Obligations in favor of Lender; (c) maintain its present Indebtedness listed on Schedule 9.14 hereto; (d) incur unsecured indebtedness to trade creditors in the ordinary course of business; (e) incur purchase money indebtedness or capitalized lease obligations in connection with Capital Expenditures permitted pursuant to Section 12.03 hereof; (f) incur operating lease obligations; (g) incur indebtedness to an insurance premium financer; (h) incur unsecured indebtedness owing to Great Western Malting Company, Canada Malting Company, Hop Union LLC, S.S. Steiner, Inc., or additional contractors that the Borrowers may engage in the future, from time to time for the purchase of hops and malt payable in installments, without interest, as provided in the respective supply agreement; and (i) incur the Catamaran Subordinated Debt pursuant and subject to the Catamaran Subordinated Loan Documents.”

5. Amendment to Section 11.13 of the Credit Agreement. Section 11.13 of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

“11.13 Subordinated Debt. No Borrower shall, nor shall any Borrower permit any Subsidiary to make: (a) any payment of principal of any of the Subordinated Debt; (b) any payment of interest on any of the Subordinated Debt, if a Default or an Event of Default then exists hereunder or would result from such payment; (c) any payment of the principal or interest due on the Subordinated Debt as a result of acceleration thereunder or a mandatory prepayment thereunder; or (d) any amendment or modification of or supplement to the documents evidencing or securing the Subordinated Debt other than an extension of the maturity date thereunder. Notwithstanding the foregoing, no payments of principal, interest or fees may be made on the Catamaran New Debt or the Catamaran Subordinated Debt except for accrued PIK (payment in kind) interest as more particularly set forth in the Catamaran Subordination Agreement.”

6. Reservation of Rights; No Waiver. All new advances continue to be in the sole discretion of Lender and neither the entering into this Amendment nor the making of additional advances by Lender waives any of the default rights and remedies of Lender under Section 13.02 of the Credit Agreement or otherwise. All default rights and remedies of Lender are therefore reserved.

7. Conditions Precedent to Effectiveness of this Amendment. The following are conditions precedent to the effectiveness of this Amendment, notwithstanding anything contained herein to the contrary:

(a) Lender shall have received a fully executed copy of this Amendment, in form and substance satisfactory to Lender;

(b) Lender shall have received a fully executed copy of the Catamaran Modification Agreement, in form and substance satisfactory to Lender;

(d) Lender shall have received fully executed copies of each of the Catamaran Subordinated Promissory Notes, as modified and subordinated by the Catamaran Modification Agreement and Catamaran Subordination Agreement, each in form and substance satisfactory to Lender;

(e) Lender shall have received a fully executed Catamaran Subordination Agreement, in form and substance satisfactory to the Lender;

(f) Lender shall have received payment from Borrowers of all amounts due to Lender in connection with this Amendment, including the Amendment Fee (defined below); and

(g) Lender shall have received such other documents, certificates and information that the Lender shall require each in form and substance satisfactory to the Lender in its reasonable credit judgment.

8. Expenses. Immediately upon request, Borrowers shall pay all reasonable expenses and costs of Lender (including, without limitation, the reasonable attorney fees of counsel for Lender and reasonable expenses of counsel for Lender) in connection with the preparation, negotiation, execution and approval of this Amendment and any and all other documents, instruments and things contemplated hereby, whether or not such transactions are consummated, together with all other reasonable expenses and costs incurred by Lender chargeable to Borrowers pursuant to the terms of the Credit Agreement which are unpaid at such time.

9. Amendment Fee. The Borrowers shall pay to the Lender, in addition to all other fees and charges set forth in the Credit Agreement, a non-refundable amendment fee equal to $3,000 (the “Amendment Fee”). The Amendment Fee may be charged by the Lender to the Borrowers’ loan account. The Borrowers hereby acknowledge and agree that the foregoing Amendment Fee is fully-earned as of the date hereof and non-refundable for any reason.

10 Ratification; Estoppel; Reaffirmation.

(a) Each Borrower reaffirms the Credit Agreement and other Loan Documents, and ratifies the Credit Agreement and the other Loan Documents, as amended, modified, and supplemented.

(b) Each Borrower reaffirms to Lender each of the representations, warranties, covenants and agreements set forth in Sections 9 through 12 of the Credit Agreement and the other Loan Documents with the same force and effect as if each were separately stated herein and made as of the date hereof to Lender.

(c) Each Borrower further represents and warrants that, as of the date hereof, there are no counterclaims, defenses or offsets of any nature whatsoever to the Loans or any of the Loan Documents and that, as of the date hereof, no Event of Default (other than the Existing Defaults) has occurred or exists under any of the Loan Documents.

(d) Each Borrower ratifies, affirms and agrees that the Credit Agreement and other Loan Documents, as amended, modified, and supplemented hereby by this Amendment, represent the valid, enforceable and collectible obligations of Borrower.

11. Release. Each Borrower does hereby release, remise, acquit and forever discharge Lender and Lender’s employees, agents, representatives, consultants, attorneys, fiduciaries, servants, officers, directors, partners, predecessors, successors and assigns, subsidiary corporations, parent corporation, and related corporate divisions (all of the foregoing hereinafter called the “Released Parties”), from any and all action and causes of action, judgments, executions, suits, debts, claims, demands, liabilities, obligations, damages and expenses of any and every character, known or unknown, direct and/or indirect, at law or in equity, of whatsoever kind or nature, whether heretofore or hereafter arising, for or because of any matter or things done, omitted or suffered to be done by any of the Released Parties prior to and including the date of execution hereof, and in any way directly or indirectly arising out of or in any way connected to this Amendment, the Credit Agreement and the other Loan Documents (all of the foregoing hereinafter called the “Released Matters”). Each Borrower acknowledges that the agreements in this paragraph are intended to be in full satisfaction of all or any alleged injuries or damages arising in connection with the Released Matters. Each Borrower represents and warrants to Lender that it has not purported to transfer, assign or otherwise convey any right, title or interest of such Borrower in any Released Matter to any other Person and that the foregoing constitutes a full and complete release of all Released Matters.

EACH BORROWER INTENDS THE ABOVE RELEASE TO COVER, ENCOMPASS, RELEASE, AND EXTINGUISH, INTER ALIA, ALL CLAIMS, DEMANDS, AND CAUSES OF ACTION THAT MIGHT OTHERWISE BE RESERVED BY THE CALIFORNIA CIVIL CODE SECTION 1542, (OR ITS EQUIVALENT UNDER ILLINOIS LAW) WHICH PROVIDES AS FOLLOWS:

“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.”

EACH BORROWER ACKNOWLEDGES THAT IT MAY HEREAFTER DISCOVER FACTS DIFFERENT FROM OR IN ADDITION TO THOSE NOW KNOWN OR BELIEVED TO BE TRUE WITH RESPECT TO SUCH CLAIMS, DEMANDS, OR CAUSES OF ACTION, AND AGREES THAT THIS AMENDMENT AND THE ABOVE RELEASE ARE AND WILL REMAIN EFFECTIVE IN ALL RESPECTS NOTWITHSTANDING ANY SUCH DIFFERENCES OR ADDITIONAL FACTS

12. No Cancellation. This Amendment evidences the same indebtedness as evidenced by the Credit Agreement and other Loan Documents (as modified hereby). This Amendment is secured by the Collateral as provided in the Credit Agreement including all amendments and modifications thereto. This Amendment is an extension, modification and amendment of the prior documents and the execution hereof does not evidence a cancellation of the indebtedness evidenced by the prior documents.

13. Miscellaneous.

(a) No inference in favor of, or against, any party will be drawn from the fact that such party has drafted any portion of this Amendment, the Credit Agreement, or any other Loan Document, as each may be amended.

(b) This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which, when so executed and delivered, shall be deemed an original, but all of which counterparts together shall constitute but one agreement. Delivery of an executed counterpart of a signature page of this Amendment by facsimile or in electronic (i.e., “pdf” or “tif”) format shall be effective as delivery of a manually executed counterpart of this Amendment. Any party who chooses to deliver its signature in such manner agrees to provide promptly to the other parties a copy of this Amendment with its inked signature, but the party’s failure to deliver a copy of this Amendment with its inked signature shall not affect the validity, enforceability and binding effect of this Amendment.

(c) This Amendment shall be governed and controlled by the internal laws of the State of Illinois as to interpretation, enforcement, validity, construction, effect, and in all other respects.

(d) This Amendment will be binding upon and will inure to the benefit of the parties hereto and to their respective successors and assigns.

(e) Sections 16.03 and 16.09 of the Credit Agreement are specifically incorporated herein as though set forth in full.

(f) This Amendment is a Loan Document.

[Signature Page Follows]

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the date first written above.

LENDER:	MB FINANCIAL BANK, N.A.

	By:	/sd/
	Name:	Martha Gaskin
	Title:	Senior Vice President

BORROWERS:	MENDOCINO BREWING COMPANY, INC.,
	a California corporation

	By:	/sd/
	Name:	Mahadevan Narayanan
	Title:	Chief Financial Officer

	RELETA BREWING COMPANY, LLC,
	a Delaware limited liability company

	By:	MENDOCINO BREWING COMPANY,
		a California corporation,
		its sole member

	By:	/sd/
	Name:	Mahadevan Narayanan
	Title:	Chief Financial Officer