Exhibit 10.3

                           THIRD FORBEARANCE AGREEMENT

         THIS THIRD FORBEARANCE AGREEMENT ("Agreement") is made and entered into
as of the 19th day of July, 1999, by and among FIRST UNION NATIONAL BANK,
successor by merger to Signet Bank (the "Bank"), the MARYLAND ECONOMIC
DEVELOPMENT CORPORATION ("MEDCO"), the MARYLAND INDUSTRIAL DEVELOPMENT FINANCING
AUTHORITY ("MIDFA") and FREDERICK BREWING CO. (the "Borrower").

                                R E C I T A L S

         R-1. Pursuant to and in accordance with Article 83A, Title 5, Subtitle
2 of the Annotated Code of Maryland, MEDCO issued and sold to the Bank its
Taxable Economic Development Revenue Bond (Frederick Brewing Co. Facility), 1996
Issue, dated July 19, 1996 in the original principal amount of $1,500,000 (as
amended, modified, supplemented, extended, renewed or restated from time to
time, the "Bond").

         R-2. The proceeds of the sale of the Bond were loaned to the Borrower
in accordance with the terms and conditions of a Loan and Financing Agreement
dated July 19, 1996 by and among the Bank, the Borrower and MEDCO (as amended,
modified, supplemented, extended, renewed or restated from time to time, the
"Loan Agreement").

         R-3. The loan by MEDCO to the Borrower of the proceeds of the sale of
the Bond is evidenced by a Promissory Note dated July 19, 1996 in the original
principal amount of $1,500,000.00 executed by the Borrower in favor of MEDCO and
assigned by MEDCO to the Bank (as amended, modified, supplemented, extended,
renewed or restated from time to time, the "Note").

         R-4. The Borrower's obligations under the Note and the Loan Agreement
are secured by, inter alia, a blanket security interest in the assets of the
Borrower, including, without limitation, the Borrower's present and future
accounts, contract rights, receivables, inventory, equipment, fixtures,
instruments and general intangibles (collectively, the "Collateral").

         R-5. MIDFA insures a portion of the Obligations (as hereafter defined)
pursuant to the terms of an Insurance Agreement dated July 19, 1996 (the
"Insurance Agreement").

         R-6. The terms of the Loan Agreement were modified pursuant to the
following (collectively, the "Modification Documents"): (a) Forbearance
Agreement dated February 27, 1997; (b) letter agreement dated January 9, 1998;
(c) Loan Modification Agreement dated May 27, 1998; (d) Forbearance Agreement
dated May 12, 1999; and (e) Second Forbearance Agreement dated June 4, 1999.


<PAGE>





         R-7. The Loan (as hereafter defined) matured on April 1, 1999 (the
"Maturity Date"). On the Maturity date, all of the Obligations (as hereafter
defined) became due and payable in full.

         R-8. As of July 13, 1999, the balance due and owing on the Loan (as
hereafter defined) was $1,278,376.76 (consisting of principal in the amount of
$1,183,199.98, accrued interest in the amount of $32,257.45 and late charges in
the amount of $458.49), plus attorneys' fees and expenses. In addition, interest
continues to accrue from July 13, 1999 at the per diem rate of $295.80.

         R-9. The Bond and the interest thereon are limited obligations of
MEDCO, the principal of, premium, if any, and interest on which are payable
solely from the security described in Section 2.7 of the Loan Agreement or from
the Property (as defined in the Loan Agreement); provided, however, that under
the Loan Agreement, MEDCO has reserved to itself, and has not pledged or
assigned, the Reserved Rights of the Issuer (as defined in the Loan Agreement).
Neither the Bond nor the interest thereon shall ever constitute an indebtedness
or a charge against the general credit or taxing powers of MEDCO, the State of
Maryland, the Maryland Department of Business and Economic Development, MIDFA,
any other public instrumentality or any public body within the meaning of any
constitutional or charter provision or statutory limitation, and neither shall
ever constitute or give rise to any pecuniary liability of MEDCO, the State of
Maryland, the Maryland Department of Business and Economic Development, MIDFA
(except in regard to the Insurance Agreement), any other public instrumentality
or any public body.

         R-10. The Borrower's obligations under the Bond, the Note, the Loan
Agreement and the other Loan Documents (as hereafter defined) are hereafter
collectively referred to as the "Obligations." The Bond, the Note, the Loan
Agreement, this Agreement and all documents previously, now or hereafter
executed and delivered to evidence, secure, guarantee or in connection with the
Obligations, as the same may from time to time be amended, modified,
supplemented, extended, renewed or restated, are hereafter collectively referred
to as the "Loan Documents." The loan evidenced by the Loan Documents is
hereafter referred to as the "Loan."

         R-11. The Borrower has requested that the Bank forbear from exercising
its rights and remedies under the Loan Documents. The Bank has agreed to this
request, subject to the terms and conditions of this Agreement.

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

         1. RECITALS.

         The recitals to this Agreement are true and correct, and are
incorporated into and made a substantive part of this Agreement.

                                      - 2 -



<PAGE>



         2. CONFIRMATION AND RATIFICATION OF LOAN DOCUMENTS.

         The Borrower agrees that the Loan Documents are in full force and
effect and that each Loan Document shall remain in full force and effect unless
and until modified or amended in writing in accordance with its terms. The
Borrower confirms and ratifies its obligations under the Loan Documents, and
agrees that the execution and delivery of this Agreement shall not in any way
diminish or invalidate any of its obligations under the Loan Documents. All
parties hereto consent to the execution and delivery of this Agreement, and to
all the provisions of this Agreement to the extent that such provisions may
modify the terms and provisions of any of the Loan Documents.

         3. ACKNOWLEDGMENT OF DEFAULT.

         The Borrower acknowledges and agrees that it has defaulted on its
obligations under the Loan Documents. The Borrower further acknowledges and
agrees that the Bank, in the absence of the specific agreement to forbear set
forth in this Agreement, would have the immediate and unconditional right to
exercise its rights and remedies under the Loan Documents and/or applicable law.

         4. FORBEARANCE.

         4.1. Forbearance Period. Subject to the terms and conditions of this
Agreement, the Bank agrees to forbear from exercising its rights and remedies
under the Loan Documents until August 15, 1999, or such earlier date upon which
an Event of Default (as hereafter defined) occurs under this Agreement (the
"Forbearance Period"). The Bank shall have no obligation to consider or grant
any extension of the Forbearance Period.

         4.2. Events of Default. The occurrence of one or more of the following
events (individually, an "Event of Default" and, collectively, the "Events of
Default") shall constitute defaults under this Agreement:

         (a) failure of the Borrower to timely make any payment required under
this Agreement;

         (b) failure of the Borrower To duly perform, comply with or observe, as
and when required, any of the other terms, conditions or covenants in this
Agreement or any document executed in connection with this Agreement;

         (c) if any representation or warranty made in this Agreement, or any
report, certificate, financial statement or other document provided to the Bank
in connection with this Agreement, should prove to have been materially false or
misleading as of the date on which it was made;

                                      - 3 -



<PAGE>





         (d) if the Borrower should make an assignment for the benefit of
creditors, admit in writing inability to pay debts as they mature, be or become
the subject, voluntarily or involuntarily, of any insolvency, adjustment of
debt, reorganization, liquidation, receivership or similar proceeding under any
present or future statute, law or regulation, or suffer the appointment of any
receiver, trustee, liquidator or other custodian;

         (e) if any other creditor of the Borrower, including any state or
federal taxing authority, should attach, garnish, levy, seize and/or assert a
lien interest in any property of the Borrower; or

         (f) a default (other than a payment default) should occur or exist
under any of the Loan Documents.

         4.3. Remedies Upon Event of Default. Immediately upon the occurrence of
any Event of Default, the Bank, without any requirement of notice to the
Borrower, shall have the right to exercise any and all rights and remedies
available to the Bank under the Loan Documents. All rights and remedies
available to the Bank may be asserted concurrently, cumulatively or
successively, from time to time, as long as the Borrower is indebted to the
Bank.

         5. PAYMENT OBLIGATIONS.

         On or before July 31, 1999, the Borrower shall deliver to the Bank a
payment in the amount of $25,000.

         6. MINIMUM ACCOUNTS RECEIVABLE.

         During the Forbearance Period, the Borrower shall maintain minimum
Eligible Accounts Receivable of $213,500. For purposes of this Agreement,
"Eligible Accounts Receivable" means any trade account meeting all the following
specifications: (a) it is lawfully owned by the Borrower and subject to no lien,
security interest or prior assignment, and the Borrower has the right of
assignment thereof and the power to grant a security interest therein; (b) it is
a valid and enforceable account, representing the undisputed indebtedness of an
account debtor to the Borrower that is owing less than 90 days past the original
invoice date, and the entire balance of any account of any single account debtor
will be ineligible whenever the portion of the account which has not been paid
within ninety (90) days from the original invoice date is in excess of fifty
percent (50%) of the total amount outstanding on the account; (c) it is not
subject to any defense, set-off, counter-claim, credit, allowance or adjustment;
(d) no substantial part of any goods, the sale of which has given rise to the
account, has been returned, rejected, lost or damaged; (e) if it arises from
sale of goods by the Borrower, such sale was an absolute sale and not on a
future sale or advance basis or on consignment or on approval or on a sale or
return basis nor subject to any other repurchase, return or rebate agreement,
and such goods have been shipped to the account debtor; (f) it arose in the
ordinary course of the Borrower's business; (g) no notice of the bankruptcy,
receivership, reorganization, insolvency or financial embarrassment of the
account debtor has been received; (h) the account debtor is not a subsidiary or
affiliate of

                                - 4 -





<PAGE>



the Borrower, does not control the Borrower, and is not under the control of or
under common control with the Borrower, (i) the account debtor is not an account
debtor whose chief executive office or principal place of business is outside
the United States; (j) the account meets such other specifications and
requirements which the Bank may reasonably establish from time to time; (k) if
it arises from sale of goods by the Borrower, such sale is not a "future" sale,
nor a sale based on extended payment terms; (l) it is not a receivable arising
out of the sales of catalogs; and (m) it is not a receivable arising out of
finance charges. The term "account" as used herein shall have the meaning set
forth in the Uniform Commercial Code as adopted in the State of Maryland.

         7. REPLACEMENT FINANCING.

         During the Forbearance Period, the Borrower shall use best efforts to
secure debt and/or equity financing in an amount sufficient to pay in full the
Obligations prior to August 15, 1999.

         8. FINANCIAL REPORTING.

         During the Forbearance Period, the Borrower shall continue to provide
to the Bank the same financial documents as the Borrower is currently providing
to the Bank and, further, shall provide to the Bank such other financial
documents as the Bank may request from time to time. Without limiting the
generality of the foregoing, during the Forbearance Period, the Borrower shall
provide to the Bank detailed accounts receivable aging and listing reports as of
July 15, 1999 (to be delivered to the Bank on or before July 20, 1999) and as of
July 31, 1999 (to be delivered to the Bank on or before August 5, 1999).

         9. FEES AND EXPENSES.

         The Borrower shall be responsible for all fees and expenses, including
all attorneys' fees and expenses, incurred by the Bank in connection with the
negotiation and preparation of this Agreement and with the enforcement of the
Bank's rights under the Loan Documents, which fees and expenses shall be
considered part of the Obligations. As of July 13, 1999, the Bank's attorneys'
fees and expenses total $28,513.45.

         10. BORROWER'S REPRESENTATIONS AND WARRANTIES.

         As inducement to enter into this Agreement, the Borrower hereby
represents and warrants to the Bank as follows:

         10.1. Authorization and Validity. The execution and delivery of this
Agreement and any related documents by the Borrower and the performance of its
obligations hereunder have been duly authorized, and this Agreement constitutes
the legal, valid and binding obligation of the Borrower in accordance with its
terms.

         10-2. Compliance With Other Instruments. The Borrower is not in default
under any provision of its articles of incorporation, by-laws or other
organizational documents, if

                                      - 5 -





<PAGE>



applicable, or of any existing judgment, decree, law, governmental order, rule
or regulation applicable to it, or of any agreement or other instrument to which
it is a party or by which its assets are bound. The execution and delivery by
the Borrower of this Agreement and related documents, the consummation of the
transactions herein and therein contemplated, and the compliance with the terms
and provisions hereof and thereof: (a) has not and will not constitute or result
in a breach of the Borrower's articles of incorporation, by-laws or other
organizational documents, if applicable, any presently existing applicable law,
order, writ, injunction or decree of any court or governmental department,
commission, board, bureau, agency or instrumentality or (b) conflict or be
inconsistent with or result in any breach of any of the terms, covenants,
conditions or provisions thereof, or constitute a default under any indenture,
mortgage, deed of trust, lease, sublease, instrument, document, agreement or
contract of any kind to which the Borrower is a party or by which the Borrower
may be bound or subject.

         10.3. Taxes. The Borrower has paid or caused to be paid all federal,
state, local and foreign taxes, to the extent that such taxes have become due
and have filed or caused to be filed all federal, state, local and foreign tax
returns which the Borrower is currently required to file.

         10.4. Title to Collateral and Existing Liens on Collateral. The
Borrower has good and marketable title to the collateral that secures the
Borrower's liability to the Bank, and the collateral is not subject to any
existing liens or encumbrances except those disclosed to the Bank in writing.

         10.5 Litigation. There is no litigation, at law or in equity, nor any
proceeding before any federal, state or other governmental or administrative
agency or any arbitrator pending or threatened against the Borrower, except as
has been disclosed to the Bank in writing.

         10.6. Benefit. The Borrower has derived direct or indirect benefit from
this Agreement and the transactions contemplated hereby.

         10.7. Truth of Representations. Any and all documents, reports,
certificates and statements provided to the Bank by or on behalf of the Borrower
in connection with the Loan Documents or this Agreement are true, correct and
complete, do not contain any untrue statements of material fact and do not omit
any facts to make information contained therein not misleading.

         10.8. No Claims, Defenses or Setoffs. The Borrower does not have any
claims, defenses or setoffs with respect to the Loan Documents, or with respect
to the debt evidenced or secured thereby or with respect to the collection or
enforcement of any of the same (and to the extent any such claim, setoff or
defense exists, they are each waived and relinquished in their entirety).

         10.9. No Representations by Bank. The Bank has made no representations
or commitments, oral or written, or undertaken any obligations other than as
expressly set forth in this Agreement.

                                     - 6 -


<PAGE>





         10. 10. Arm's Length Agreement. The Borrower acknowledges: (a) that it
has had access to independent legal counsel in the negotiation of the terms of
and in the preparation and execution of this Agreement, and that it has had the
opportunity to review, analyze and discuss with counsel this Agreement, and the
underlying factual matters relevant to this Agreement, for a sufficient period
of time before the execution and delivery hereof; (b) that all of the terms of
this Agreement were negotiated at arm's-length; (e) that this Agreement was
prepared and executed without fraud, duress, undue influence, or coercion of any
kind exerted by any of the parties upon the others; and (d) that the execution
and delivery of this Agreement is the free and voluntary act of each party.

         11. RELEASE OF BANK, MEDCO AND MIDFA.

         The Borrower, for itself and its current or former owners, directors,
officers, partners, members, employees, representatives, insurers, attorneys,
agents, successors and assigns, and any affiliates, subsidiaries and related
entities of the Borrower and their current or former owners, directors,
officers, partners, members, employees, representatives, insurers, attorneys,
agents, successors and assigns (individually and collectively, the "Borrower
Group"), hereby RELEASES and FOREVER WAIVES and RELINQUISHES all claims,
demands, obligations, liabilities and causes of action of whatsoever kind or
nature, whether known or unknown, which it has, may have, or might have or
assert now or in the future against the Bank, MEDCO or MIDFA and/or their
current or former owners, directors, officers, partners, members, employees,
representatives, insurers, attorneys, agents, successors or assigns, or any
affiliates, subsidiaries or related entities of the Bank, MEDCO or MIDFA and/or
their current or former owners, directors, officers, partners, members,
employees, representatives, insurers, attorneys, agents, successors or assigns
(individually and collectively, the "Bank Group"), directly or indirectly,
arising out of, based upon or in any manner connected with any Prior Related
Event. For purposes of this Agreement, "Prior Related Event" means any
transaction, event, circumstance, action, failure to act or occurrence of any
sort or type, whether known or unknown, which occurred, existed, was taken,
permitted or begun prior to the execution of this Agreement arising out of or
related in any way to the Loan, the Obligations, the Bond, the Note, all or any
of the Loan Documents, the Collateral, the Bank, MEDCO, MIDFA, the Insurance
Agreement, the Modification Documents and/or the relationship by and among all
or any members of the Borrower Group and all or any members of the Bank Group.
The execution of this Agreement by the Bank, MEDCO and MIDFA shall not
constitute an acknowledgment or admission by the Bank, MEDCO or MIDFA of any
liability for any matter or precedent upon which any liability may be asserted.

         12. GENERAL PROVISIONS.

         12.1. Headings. The headings and subheadings in this Agreement are
intended for convenience only and shall not be used or deemed to limit or
diminish any of the provisions hereof.

                                      - 7 -





<PAGE>




         12.2. Construction. Unless the context requires otherwise, singular
nouns and pronouns used in this Agreement shall be deemed to include the plural,
and pronouns of one gender shall be deemed to include the equivalent pronoun of
the other gender.

         12.3. Interpretation. The parties to this Agreement acknowledge that
each of them has participated in the negotiation of this Agreement, and no
provision of this Agreement shall be construed against or interpreted to the
disadvantage of any party hereto by any court or other governmental or judicial
authority by reason of such party having or being deemed to have structured,
dictated or drafted such provision.

         12.4. Further Assurances and Corrective Instruments. The parties to
this Agreement shall execute, acknowledge and deliver, or cause to be executed,
acknowledged and delivered, from time to time, such supplements hereto and such
further instruments and documents as may be required to facilitate the carrying
out of the intentions of the parties to this Agreement.

         12.5. Survival; Successors and Assigns. Whenever in this Agreement any
of the parties hereto is referred to, such reference shall be deemed to include
the successors and assigns of such party. All covenants, agreements,
representations and warranties made herein, and in any documents executed in
connection with this Agreement, shall survive this Agreement and continue in
full force and effect.

         12.6. Waiver of Jury Trial. The parties to this Agreement agree that
any suit, action or proceeding brought or instituted by any party hereto or any
successor or assign of any party which in any way relates, directly or
indirectly, to Loan, the Obligations, the Bond, the Note, all or any of the Loan
Documents, the Collateral, the Bank, MEDCO, MIDFA, the Insurance Agreement, the
Modification Documents and/or the relationship by and among all or any members
of the Borrower Group and all or any members of the Bank Group shall be tried
only by a court and not a jury. EACH PARTY HEREBY EXPRESSLY WAIVES ANY RIGHT TO
A TRIAL BY JURY IN ANY SUCH SUIT, ACTION OR PROCEEDING. The Borrower represents,
acknowledges and agrees that this provision is a specific and material aspect of
this Agreement, and that the Bank would not agree to the terms of this Agreement
if this waiver of jury trial provision were not a part of this Agreement. The
Borrower further represents, acknowledges and agrees that this waiver is
knowingly, intelligently and voluntarily made, that neither the Bank nor any
person acting on behalf of the Bank has made any representations to induce this
waiver, that the Borrower has been represented (or has had the opportunity to be
represented) in the signing of this Agreement and in the making of this waiver
by independent legal counsel selected by the Borrower and that the Borrower has
had the opportunity to discuss this waiver with counsel.

         12.7. Modification. No modification of any provision of this Agreement,
or of any document executed in connection with this Agreement, shall in any
event be effective unless the same is in writing, and then such modification
shall be effective only in the specific instance or for the purpose for which
given.




                                     - 8 -
<PAGE>





         12.8. Waiver. Neither any failure nor any delay on the part of any of
the parties in exercising any right, power or remedy under this Agreement, any
documents executed in connection with this Agreement or under applicable law
shall operate as a waiver thereof, nor shall a single or partial exercise
thereof preclude any other or further exercises thereof or the exercise of any
other right, power or remedy.

         12.9. Severability. If any term, provision or condition, or any part
thereof, of this Agreement, or any of the documents executed in connection with
this Agreement, shall for any reason be found or held to be invalid or
unenforceable by any court or governmental agency of competent jurisdiction,
such invalidity or unenforceability shall not affect the remainder of such term,
provision or condition or any other term, provision or condition, and this
Agreement, and all documents executed in connection with this Agreement, shall
survive and be construed as if such invalid or unenforceable term, provision or
condition had not been contained therein.

         12.10. Merger and Integration. This Agreement, and the documents
executed in connection with this Agreement, contain the entire agreement of the
parties hereto with respect to the matters covered and the transactions
contemplated hereby, and no other agreement, statement or promise made by any
party hereto, or any employee, officer, attorney, agent or other representative
of any party hereto, shall be valid or binding.

         12.11. No Novation. Nothing contained in this Agreement is intended to
or shall act to nullify, discharge or release any obligation incurred in
connection with the Loan and/or the Loan Documents or to waive or release any
collateral which secures the Loan, nor shall this Agreement be deemed or
considered to operate as a novation of the Loan Documents. Except to the extent
of any express conflict with this Agreement, all of the terms and conditions of
the Loan Documents shall remain in full force and effect. In the event of any
express conflict between the terms and conditions of the Loan Documents and this
Agreement, this Agreement shall be controlling and the terms and conditions of
the Loan Documents shall be deemed to be amended to conform with this Agreement.

         12.12. Notices. Any notice required or permitted by or in connection
with this Agreement shall be in writing and shall be made by one of the
following means: (a) hand delivery; (b) overnight delivery service; or (c)
certified mail, unrestricted delivery, return receipt requested. Notice shall be
directed to the appropriate address set forth below or to such other address as
may be hereafter specified by written notice. Notice shall be considered given
as of the date of the hand delivery, one (1) calendar day after delivery to the
overnight delivery service, or three (3) calendar days after the date of
mailing, independent of the date of actual delivery or whether delivery is ever
in fact made, as the case may be, provided the giver of notice can establish
that notice was given as provided herein.

                                      - 9 -




<PAGE>





If to the Bank:                    First Union National Bank
                                   1970 Chain Bridge Road
                                   7th Floor, South Tower
                                   McLean, Virginia 22102
                                   ATTN: Mr. David A. Dix, Vice President

      with a copy to:              Richard M. Kremen, Esquire
                                   Piper & Marbury L.L.P.
                                   Charles Center South
                                   36 South Charles Street
                                   Baltimore, Maryland 21201

If to MEDCO:                       Maryland Economic Development Corporation
                                   Suite 1911
                                   36 South Charles Street
                                   Baltimore, Maryland 21201
                                   ATTN: Mr. Hans F. Mayer
                                         Executive Director

      with a copy to:              John R. Devine, Esquire
                                   Miles & Stockbridge P.C.
                                   10 Light Street
                                   Baltimore, Maryland 21202

If to MIDFA:                       Maryland Industrial Development Financing
                                    Authority
                                   22nd Floor
                                   217 East Redwood Street
                                   Baltimore, Maryland 21202
                                   ATTN: Mr. Charles E, Kohlerman
                                         Manager, Special Assets Division

      with a copy to:              James G. Davis, Esquire
                                   Suite 1105
                                   217 East Redwood Street
                                   Baltimore, Maryland 21202

If to the Borrower:                Frederick Brewing Co.
                                   4607 Wedgewood Boulevard
                                   Frederick, Maryland 21703
                                   ATTN: Mr. Kevin E. Brannon, Chairman
                                         and Chief Executive Officer

                                     - 10 -



<PAGE>





      with a copy to:              --------------------------------------
                                   --------------------------------------
                                   --------------------------------------
                                   --------------------------------------

         12.13. Applicable Law. The performance, construction and enforcement
of this Agreement and the documents executed in connection with this Agreement
shall be governed by the laws of the State of Maryland.

         12.14. Time of Essence. Time is of the essence.

         12.15. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same agreement.

         12.16. Binding Effect. This Agreement shall have no effect unless and
until it has been executed by all parties hereto.

         IN WITNESS WHEREOF, the parties hereto have executed or caused to be
executed, this Agreement under seal as of the day and year first written above.

WITNESS/ATTEST:                        FIRST UNION NATIONAL BANK,
                                       successor by merger to Signet Bank

/s/ [illegible]                        By: /s/ [illegible]          (SEAL)
---------------------------               --------------------------
                                       Name:   [illegible]
                                             ---------------------------
                                       Title:  Vice President
                                             ---------------------------



WITNESS/ATTEST:                        MARYLAND ECONOMIC DEVELOPMENT
                                         CORPORATION


                                       By:                          (SEAL)
---------------------------               --------------------------
                                       Name:
                                             ---------------------------
                                       Title:
                                             ---------------------------



                                     - 11 -
<PAGE>





      with a copy to:              --------------------------------------
                                   --------------------------------------
                                   --------------------------------------
                                   --------------------------------------

         12.13. Applicable Law. The performance, construction and enforcement of
this Agreement and the documents executed in connection with this Agreement
shall be governed by the laws of the State of Maryland.

         12.14. Time of Essence. Time is of the essence.

         12.15. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same agreement.

         12.16. Binding Effect. This Agreement shall have no effect unless and
until it has been executed by all parties hereto.

         IN WITNESS WHEREOF, the parties hereto have executed or caused to be
executed, this Agreement under seal as of the day and year first written above.


WITNESS/ATTEST:                        FIRST UNION NATIONAL BANK,
                                       successor by merger to Signet Bank

                                       By:                          (SEAL)
---------------------------               --------------------------
                                       Name:
                                             ---------------------------
                                       Title:
                                             ---------------------------



WITNESS/ATTEST:                        MARYLAND ECONOMIC DEVELOPMENT
                                         CORPORATION


/s/ [illegible]                        By:/s/ Hans F. Mayer         (SEAL)
---------------------------               --------------------------
                                       Name:  Hans F. Mayer
                                             ---------------------------
                                       Title: Executive Director
                                             ---------------------------



                                     - 11 -

<PAGE>





WITNESS/ATTEST:                        MARYLAND INDUSTRIAL DEVELOPMENT
                                         FINANCING AUTHORITY

 /s/ [illegible]                       By:   /s/ D. Gregory Cole    (SEAL)
---------------------------               --------------------------
                                       Name:  D. Gregory Cole
                                             ---------------------------
                                       Title: Executive Director
                                             ---------------------------



WITNESS/ATTEST:                        FREDERICK BREWING CO.



                                       By:                          (SEAL)
---------------------------               --------------------------
                                       Name:
                                             ---------------------------
                                       Title:
                                             ---------------------------
















                                     - 12 -
<PAGE>









WITNESS/ATTEST:                        MARYLAND INDUSTRIAL DEVELOPMENT
                                         FINANCING AUTHORITY


                                       By:                          (SEAL)
---------------------------               --------------------------
                                       Name:
                                             ---------------------------
                                       Title:
                                             ---------------------------



WITNESS/ATTEST:                        FREDERICK BREWING CO.



 /s/ [illegible]                       By: /s/ Kevin E. Brannon     (SEAL)
---------------------------               --------------------------
                                       Name:  Kevin E. Brannon
                                             ---------------------------
                                       Title: Chief Executive Director
                                             ---------------------------



                                     - 12 -