RECORDATION REQUESTED BY:

SAVINGS BANK OF MENDOCINO COUNTY
   P.O. Box 3600
   200 N. School Street
   Ukiah, CA 95482

WHEN RECORDED MAIL TO:

SAVINGS BANK OF MENDOCINO COUNTY
   200 N. School Street
   P.O. Box 3600
   Ukiah, CA 95482                                  SPACE ABOVE THIS LINE IS FOR
                                                    RECORDERS'S USE ONLY
--------------------------------------------------------------------------------
Savings Bank
OF MENDOCINO COUNTY
    A Full Service Commercial Sank

                 HAZARDOUS SUBSTANCES CERTIFICATE AND INDEMNITY

THIS HAZARDOUS SUBSTANCES CERTIFICATE AND INDEMNITY AGREEMENT DATED DECEMBER 17,
1997, IS MADE BY Mendocino Brewing Company, a California  Corporation  (referred
to below as "Borrower",  sometimes as "Trustor"),  and SAVINGS BANK OF MENDOCINO
COUNTY (referred to below as "Lender"). For good and valuable  consideration and
to induce Lender to make a Loan to Borrower, each party executing this Agreement
hereby represents and agrees with Lender as follows:

DEFINITIONS.  The following words shall have the following meanings when used in
this  Agreement.  All  references to dollar amounts shall mean amounts in lawful
money of the United States of America.

      Agreement.   The  word   "Agreement"   means  this  Hazardous   Substances
      Certificate  and  Indemnity   Agreement,   as  this  Hazardous  Substances
      Certificate  and  Indemnity  Agreement  may be modified from time to time,
      together  with all  exhibits  and  schedules  attached  to this  Hazardous
      Substances Certificate and Indemnity Agreement,

      Borrower.   The  word  "Borrower"  means   individually  and  collectively
      Mendocino Brewing Company,  a California  Corporation,  its successors and
      assigns.

      Environmental Laws. The words "Environmental Laws" mean any and all state,
      federal and local  statutes,  regulations  and ordinances  relating to the
      protection  of  human  health  or  the  environment,   including   without
      limitation the Comprehensive  Environmental  Response,  Compensation,  and
      Liability  Act of 1980,  as  amended,  42  U.S.C.  Section  9601,  at seq.
      ("CERCLA"), the Superfund Amendments and Reauthorization Act of 1986, Pub.
      L. No. 99-499  ("SARA"),  the Hazardous  Materials Transportation  Act, 49
      U.S.C. Section 1801, et seq., the Resource  Conservation and Recovery Act,
      42 U.S.C.  Section 6901, et seq.,  Chapters 6.5 through 7.7 of Division 20
      of the  California  Health and Safety Code,  Section  25100,  et seq., and
      other  applicable  state or federal laws,  rules,  or regulations  adopted
      pursuant to any of the foregoing.

      Hazardous  Substance.  The words  "Hazardous  Substance" are used in their
      very  broadest  sense  and  refer  to  materials  that,  because  of their
      quantity,    concentration    or   physical    chemical   or    infectious
      characteristics,  may cause or pose a present or potential hazard to human
      health or the environment when improperly used, treated,  stored, disposed
      of, generated, manufactured,  transported or otherwise handled. "Hazardous
      Substances"  include  without  limitation  any and all  hazardous or toxic
      substances,  materials  or  waste  as  defined  by  or  listed  under  the
      Environmental  Laws.   "Hazardous   Substances"  also  includes,   without
      limitation,  petroleum and petroleum  by-products of any fraction  thereof
      and asbestos.

      Lender.  The word "Lender"  means SAVINGS BANK OF  MENDOCINO  COUNTY,  its
      successors and assigns.

      Loan. The word "Loan" or "Loans" means and includes without limitation any
      and all  commercial  loans and  financial  accommodations  from  Lender to
      Borrower,  whether  now or  hereafter  existing,  and  however  evidenced,
      including  without  limitation  those loans and  financial  accommodations
      described herein or described on any exhibit or schedule  attached to this
      Agreement from time to time.

      Occupant.  The word "Occupant"  means  individually  and  collectively all
      persons or entities occupying or utilizing the Property, whether as owner,
      tenant,  operator or other occupant.

      Property. The word "Property" means the following described real property,
      and all  improvements  thereon located in MENDOCINO  County,  the State of
      California:

          AS PER EXHIBIT "A" ATTACHED HERETO AND MADE A PART HEREOF.

      The Real Property or its address is commonly  known as 1601 Airport Blvd.,
      UKIAH CA 95482.  The  Assessor's  Parcel Number for the Real  Property  is
      180-110-07.

      Trustor. The word "Trustor" means individually and collectively  Mendocino
      Brewing Company, a California Corporation.

REPRESENTATIONS. The following  representations  are made to  Lender, subject to
disclosures made and accepted by Lender in writing:

      Use Of  Property.  After due inquiry and  investigation,  Borrower  has no
      knowledge, or reason to believe, that there has been any use,


<PAGE>
12-17-1997       HAZARDOUS SUBSTANCES CERTIFICATE AND INDEMNITY           Page 2
Loan No 973101R                 (Continued)
================================================================================

      generation,  manufacture, storage, treatment, refinement,  transportation,
      disposal, release, or threatened release of any Hazardous Substance by any
      person on, under, or about the Property.

      Hazardous Substances. After due inquiry and investigation, Borrower has no
      knowledge,  or reason to believe, that the Property,  whenever and whether
      owned by previous  Occupants,  has ever contained  asbestos,  PCB or other
      Hazardous  Substances,  whether  used in  construction  or  stored  on the
      Property.

      No Notices. Borrower has received no summons, citation,  directive, letter
      or other communication,  written or oral, from any agency or department of
      any county or state or the U.S.  Government  concerning any intentional or
      unintentional  action or omission on, under,  or about the Property  which
      has  resulted  in the  releasing,  spilling,  leaking,  pumping,  pouring,
      emitting,  emptying or dumping of Hazardous Substances  into any waters or
      onto any lands or where  damage may have  resulted  to the lands,  waters,
      fish, shellfish, wildlife, biota, air or other natural resources.

AFFIRMATIVE  COVENANTS.  Subject to  disclosures  made and accepted by Lender in
writing, Borrower hereby covenants with Lender as follows:

      Use Of  Property.  Borrower  will not use and  does not intend  to use the
      Property to generate, manufacture, refine, transport, treat, store, handle
      or dispose of any Hazardous Substances.

      Compliance with Environmental  Laws. Borrower shall cause the Property and
      the operations conducted thereon to comply with all Environmental Laws and
      orders  of any  governmental  authorities  having  jurisdiction  under any
      Environmental  Laws and shall  obtain,  keep in effect and comply with all
      governmental  permits and  authorizations  required by Environmental  Laws
      with respect to such Property or operations. Borrower shall furnish Lender
      with copies of all such permits and  authorizations  and any amendments or
      renewals  thereof and shall notify Lender of any  expiration or revocation
      of such permits or authorizations.

      Preventive,  Investigatory  and Remedial  Action.  Borrower shall exercise
      extreme  care  in  handing  Hazardous   Substances  if  Borrower  uses  or
      encounters any. Borrower,  at Borrower's expense,  shall undertake any and
      all  preventive,  investigatory  or remedial action  (including  emergency
      response, removal,  containment and other remedial action) (a) required by
      any applicable  Environmental Laws or orders by any governmental authority
      having  jurisdiction under Environmental Laws, or (b) necessary to prevent
      or minimize property damage (including damage to Occupant's own property),
      personal  injury or damage to the  environment,  or the threat of any such
      damage or injury,  by releases of or exposure to Hazardous  Substances  in
      connection  with  the  Property  or  operations  of  any  Occupant  on the
      Property.  In the  event  Borrower  fails  to  perform  any of  Borrower's
      obligations under this section of the Agreement, Lender may (but shall not
      be required to) perform such obligations at Borrower's  expense.  All such
      costs and expenses  incurred by Lender  under this  section and  otherwise
      under this Agreement shall be reimbursed by Borrower to Lender upon demand
      with  interest at the Loan  default  rate,  or in the absence of a default
      rate, at the Loan interest  rate.  Lender and Borrower  intend that Lender
      shall have full recourse to Borrower for any sum at any time due to Lender
      under this  Agreement.  In performing  any such  obligations  of Borrower,
      Lender  shall at all times be deemed to be the agent of Borrower and shall
      not  by  reason  of  such   performance  be  deemed  to  be  assuming  any
      responsibility  of Borrower  under any  Environmental  Law or to any third
      party.   Borrower  hereby   irrevocably   appoints  Lender  as  Borrower's
      attorney-in-fact with full power to perform such of Borrower's obligations
      under  this  section  of the  Agreement  as  Lender  deems  necessary  and
      appropriate.

      Notices.  Borrower shall immediately  notify Lender upon becoming aware of
      any of the following:

          (a) Any spill,  release or disposal of a Hazardous Substance on any of
          the  Property,  or in  connection  with any of its  operations if such
          spill,  release  or  disposal  must be  reported  to any  governmental
          authority under applicable  Environmental Laws.

          (b) Any  contamination,  or imminent threat of  contamination,  of the
          Property by Hazardous  Substances,  or any violation of  Environmental
          Laws in  connection  with the  Property  operations  conducted  on the
          Property.

          (c) Any order,  notice of violation,  fine or penalty or other similar
          action by any governmental  authority relating to Hazardous Substances
          or Environmental Laws and to the Property or the operations  conducted
          on the Property.

          (d)  Any  judicial  or  administrative   investigation  or  proceeding
          relating to  Hazardous  Substances  or  Environmental  Laws and to the
          Property or the operations conducted on the Property.

          (e) Any matters relating to Hazardous Substances or Environmental Laws
          that would give a reasonably prudent Lender cause to be concerned that
          the value of Lender's security interest in the Property may be reduced
          or  threatened or that may impair,  or threaten to impair,  Borrower's
          ability to perform any of its  obligations  under this  Agreement when
          such performance is due.

      Access to Records.  Borrower shall deliver to Lender, at Lender's request,
      copies of any and all  documents in  Borrower's  possession or to which it
      has access relating to Hazardous  Substances or Environmental Laws and the
      Property and the operations  conducted on the Property,  including without
      limitation  results of laboratory  analyses, site  assessments or studies,
      environmental  audit reports and other  consultants'  studies and reports.

      Inspection.  Lender  reserves  the  right to inspect and  investigate  the
      Property  and  operations  thereon at any time and from time to time,  and
      Borrower  shall  cooperate  fully  with  Lender  in  such  inspection  and
      investigations.  If Lender at any time has reason to believe that Borrower
      or any  Occupants of the Property are not  complying  with all  applicable
      Environmental  Laws or with the  requirements  of this Agreement or that a
      material spill,  release or disposal of Hazardous  Substances has occurred
      on or under the Property, Lender may require Borrower to furnish Lender at
      Borrower's  expense  an  environmental  audit  or a site  assessment  with
      respect to the  matters of  concern  to Lender.  Such audit or  assessment
      shall be  performed  by a qualified  consultant  approved  by Lender.  Any
      inspections  or tests made by Lender shall be for Lender's  purposes  only
      and shall not be  construed to create any  responsibility  or liability on
      the part of Lander to Borrower or to any other person.

      BORROWER'S  WAIVER AND  INDEMNIFICATION.  Borrower hereby  indemnifies and
      holds  harmless  Lender and Lender's  officers,  directors,  employees and
      agents, and Lender's successors and assigns and their officers, directors,
      employees  and  agents  against  any  and  all  claims,  demands,  losses,
      liabilities,  costs and expenses (including without limitation  attorneys'
      fees at trial and on any appeal or petition  for review)  incurred by such
      person (a) arising out of or  relating  to any  investigatory  or remedial
      action involving the Property, the operations conducted on the Property or
      any  other  operations  of  Borrower  or  any  Occupant  and  required  by
      Environmental  Laws or by  orders  of any  governmental  authority  having
      jurisdiction under any Environmental  Laws, or (b) on account of injury to
      any  person  whatsoever  or  damage  to any  property  arising  out of, in
      connection  with, or in any way relating to (i) the breach of any covenant
      contained in this Agreement, (ii) the violation of any Environmental Laws,
      (iii) the use, treatment,  storage,  generation,  manufacture,  transport,
      release,  spill disposal or other handling of Hazardous  Substances on the
      Property,  (iv) the  contamination  of any of the  Property  by  Hazardous
      Substances  by any means  whatsoever  (including  without  limitation  any
      presently  existing  contamination  of the  Property),  or (v)  any  costs
      incurred  by  Lender  pursuant  to  this  Agreement. In  addition  to this
      indemnity,  Borrower  hereby  releases  and waives all  present and future
      claims against Lender for indemnity or  contribution in the event Borrower
      becomes


<PAGE>
12-17-1997      HAZARDOUS SUBSTANCES CERTIFICATE AND INDEMNITY            Page 3
Loan No 973101R                  (Continued)
================================================================================

liable for cleanup or other costs under any Environmental Laws.

PAYMENT: FULL RECOURSE TO BORROWER. Lender and Borrower intend that Lender shall
have full  recourse to Borrower  for  Borrower's  obligations  hereunder as they
become due to Lender under this  Agreement.  Such  liabilities  losses,  claims,
damages and expenses shall be reimbursable to Lender as Lender's  obligations to
make payments  with respect  thereto are incurred,  without any  requirement  of
waiting for the ultimate outcome of any litigation,  claim or other  proceeding,
and Borrower shall pay such liability  losses,  claims,  damages and expenses to
Lender as so incurred  within thirty (30) days after written notice from Lender.
Lender's notice shall contain a brief itemization of the amounts incurred to the
date of such  notice.  In  addition to any remedy  available  for failure to pay
periodically  such amounts,  such amounts shall  thereafter bear interest at the
Loan default  rate,  or in the absence of a default  rate,  at the Loan interest
rate.

SURVIVAL. The  covenants  contained  in this  Agreement  shall  survive  (a) the
repayment of the Loan, (b) any foreclosure,  whether judicial or nonjudicial, of
the Property, and (c) any delivery of a deed in lieu of foreclosure to Lender or
any successor of Lender. The covenants  contained in this Agreement shall be for
the  benefit of Lender and any  sucessor  to Lender,  as holder of any  security
interest in the Property or the indebtedness secured thereby, or as owner of the
Property following foreclosure or the delivery of a deed in lieu of foreclosure.

MISCELLANEOUS  PROVISIONS.  The following miscellaneous provisions are a part of
the Agreement:

      Applicable  Law. This  Agreement has been delivered to Lender and accepted
      by Lender in the State of California.  This Agreement shall be governed by
      and construed in accordance with the laws of the State of California.

      Attorneys'  Fees;  Expenses.  Borrower  agrees to pay upon  demand  all of
      Lender's costs and expenses,  including attorneys' fees and Lender's legal
      expenses,  incurred in connection  with the enforcement of this Agreement.
      Lender may pay someone else to help enforce this  Agreement,  and Borrower
      shall pay the costs and expenses of such  enforcement.  Costs and expenses
      include  Lender's  attorneys' fees and legal expenses whether or not there
      is a lawsuit,  including attorneys' fees and legal expenses for bankruptcy
      proceedings (and including  efforts to modify or vacate any automatic stay
      or injunction),  appeals,  and any anticipated  post-judgement  collection
      services. Borrower also shall pay all court costs and such additional fees
      as may be directed by the court.

      Severability.  If a court of competent jurisdiction finds any provision of
      this  Agreement  to be  invalid  or  unenforceable  as to  any  person  or
      circumstance,  such  finding  shall not render that  provision  invalid or
      unenforceable as to any other persons or circumstances.  If feasible,  any
      such offending  provision  shall be deemed to be modified to be within the
      limits of enforceability or validity;  however, if the offending provision
      cannot be so modified,  it shall be stricken and all other  provisions  of
      this Agreement in all other respects shall remain valid and enforceable.

      Waivers and Consents. Lender shall not be deemed to have waived any rights
      under  this  Agreement  unless  such  waiver is in  writing  and signed by
      Lender. No delay or omission on the part of Lender in exercising any right
      shall  operate as a waiver of such right or any other  right.  A waiver by
      any party of a provision of this  Agreement  shall not constitute a waiver
      of or prejudice  the party's right  otherwise to demand strict  compliance
      with that provision or any other provision. No prior waiver by Lender, nor
      any course of dealing  between  Lender and  Borrower,  shall  constitute a
      waiver of any of Lender's  rights or any of Borrower's  obligations  as to
      any future  transactions.  Whenever  consent by Lender is required in this
      Agreement,  the granting of such  consent by Lender in any instance  shall
      not  constitute  continuing  consent to  subsequent  instances  where such
      consent is required.  Borrower  hereby waives notice of acceptance of this
      Agreement by Lender.

EACH PARTY TO THIS AGREEMENT ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS
AGREEMENT,  AND EACH  AGREES TO ITS  TERMS.  NO FORMAL  ACCEPTANCE  BY LENDER IS
NECESSARY TO MAKE THIS AGREEMENT EFFECTIVE.

INDEBTOR:

Mendocino Brewing Company, a California Corporation

By:  /s/ Michael Laybourn           By: /s/ Jerome Merchant
    -----------------------------       ----------------------------------
     Michael Laybourn, President        Jerome Merchant, Chief Financial Officer

LENDER:

SAVINGS BANK OF MENDOCINO COUNTY

By:
   ------------------------------
   Authorized Officer