CHANGE IN TERMS AGREEMENT


Borrower:   MENDOCINO BREWING COMPANY, INC.        Lender:  WEST AMERICA BANK
            P.O. BOX 400                                    SONOMA CREDIT ADM.
            HOPLAND, CA 95449                               31 D ST. 2ND FLOOR
                                                            SANTA ROSA, CA 95404
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   Principal Amount: $600,000.00                 Date of Agreement: May 13, 1997

   DESCRIPTION OF EXISTING INDEBTEDNESS.

   THAT CERTAIN NOTE DATED MAY 17, 1996 IN THE  ORIGINAL  AMOUNT OF  $600,000.00
   CURRENTLY  MATURING ON APRIL 30, 1997 WITH AN OUTSTANDING  BALANCE AS OF THIS
   DATE OF $600,000.00.

   DESCRITION OF COLLATERAL.

   THIS NOTE IS SECURED BY THAT CERTAIN COMMERCIAL  SECURITY AGREEMENT DATED MAY
   17, 1996.

   DESCRIPTION OF CHANGE IN TERMS.

   EFFECTIVE THE DATE OF THIS  AGREEMENT THE MATURITY DATE IS CHANGED FROM APRIL
   30, 1997 TO AUGUST 31, 1997.

   ACCRUED INTEREST SHALL BE PAYABLE ON THE LAST DAY OF EACH MONTH BEGINNING MAY
   31, 1997 AND ON AUGUST 31, 1997 ALL  OUTSTANDING  PRINCIPAL  PLUS ALL ACCRUED
   BUT UNPAID INTEREST SHALL BE DUE AND PAYABLE.

   BORROWER  AGREES THAT UPON EXECUTION OF THIS AGREEMENT TO PAY A DOCUMENTATION
   FEE OF $150.00.

   CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms
   of the original obligation or obligations, including all agreements evidenced
   or securing the obligation(s), remain unchanged and in full force and effect.
   Consent by Lender to this  Agreement  does not waive Lender's right to strict
   performance of the obligation(s) as changed,  nor obligate Lender to make any
   future  change  in  terms.  Nothing  in  this  Agreement  will  constitute  a
   satisfaction of the obligation(s). It is the intention of Lender to retain as
   liable  parties  all  makers and  endorsers  of the  original  obligation(s),
   including  accommodation  parties,  unless a party is  expressly  released by
   Lender in writing.  Any maker or endorser,  including  accommodation  makers,
   will not be  released by virtue of this  Agreement.  If any person who signed
   the original  obligation does not sign this Agreement below, then all persons
   signing below acknowledge that this Agreement is given  conditionally,  based
   on the  representation  to Lender that the non-signing  party consents to the
   changes and provisions of this Agreement or otherwise will not be released by
   it. This waiver applies not only to any initial  extension,  modification  or
   release, but also to all such subsequent actions.

   PRIOR  TO  SIGNING  THIS  AGREEMENT,  BORROWER  READ AND  UNDERSTOOD  ALL THE
   PROVISIONS OF THIS  AGREEMENT.  BORROWER AGREES TO THE TERMS OF THE AGREEMENT
   AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE AGREEMENT.

   BORROWER:

   MENDOCINO BREWING COMPANY, INC.

   By:   /s/ H. Michael Laybourn          By:  /s/ Norman H. Franks
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         H. MICHAEL LAYBOURN,                  NORMAN H. FRANKS,
         PRESIDENT                             CHIEF FINANCIAL OFFICER