PROMISSORY NOTE
<TABLE>
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<CAPTION>
Principal   Loan Date     Maturity      Loan No.   Call    Collateral   Account   Officer   Initials
<S>          <C>           <C>           <C>
$600,000.00  12-01-1997    05-31-1998    203-00549
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<FN>
References  in the shaded area are for Lender's  use only and do not limit the applicability of this
document to any particular loan or item.
</FN>
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</TABLE>


Borrower: MENDOCINO BREWING COMPANY,INC.            Lender: WESTAMERICA BANK
          P.O. BOX 400                                      SONOMA CREDIT ADM.
          HOPLAND CA 95449                                  31 D ST. 2ND. FLOOR
                                                            SANTA ROSA, CA 95404
================================================================================

Principal Amount: $600,000.00                     Date of Note: December 1, 1997
                              Initial Rate: 10.000%

PROMISE TO PAY. MENDOCINO BREWING COMPANY,  INC. ("Borrower") promises to pay to
WESTAMERICA  BANK  ("Lender"), or order, in lawful money of the United States of
America,  the  principal  amount  of Six  Hundred  Thousand  &   00/100  Dollars
($600,000.00)  or so much as may be  outstanding,  together with interest on the
unpaid  outstanding  principal  balance  of  each  advance.  Interest  shall  be
calculated from the date of each advance until repayment of each advance.

PAYMENT.  Borrower will pay this loan on demand, or if no demand is made, in one
payment of all outstanding principal plus all accrued unpaid interest on May 31,
1998. In addition,  Borrower will pay regular monthly payments of accrued unpaid
interest beginning  December 31, 1997, and all subsequent  interest payments are
due on the last day of each month after that. The annual  interest rate for this
Note is  computed  on a 365/360  basis;  that is, by  applying  the ratio of the
annual  interest  rate over a year of 360 days,  multiplied  by the  outstanding
principal balance, multiplied by the actual number of days the principal balance
is outstanding.  Borrower will pay Lender at Lender's  address shown above or at
such other place as Lender may designate in writing.  Unless otherwise agreed or
required by applicable  law,  payments  will be applied first to accrued  unpaid
interest,  then to principal,  and any remaining amount to any unpaid collection
costs and late charges.

VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from
time to time based on changes in an index  which is the  Westamerica  Bank Index
Rate (the  "Index").  THE BANK'S  INDEX RATE IS  ESTABLISHED  BY BANK IN ITS SAN
RAFAEL HEADQUARTERS OFFICE AS OF THE DATE OF THIS NOTE, AND AS OF EACH DATE THAT
BANK MAY ADJUST  SUCH INDEX RATE.  LOANS MAY BE MADE BY BANK AT,  ABOVE OR BELOW
THE INDEX RATE. Lender will tell Borrower the current Index rate upon Borrower's
request. Borrower understands that Lender may make loans based on other rates as
well.  The  interest  rate change  will not occur more often than each Day.  The
Index  currently  is  8.500%.  The  interest  rate to be  applied  to the unpaid
principal balance of this Note will be at a rate of 1.500 percentage points over
the  Index,  resulting  in  an  initial  rate  of  10.000%.   NOTICE:  Under  no
circumstances  will the interest rate on this Note be more than the maximum rate
allowed by applicable law.

PREPAYMENT;  MINIMUM  INTEREST  CHARGE.  Borrower  agrees that all loan fees and
other  prepaid  finance  charges are earned fully as of the date of the loan and
will not be subject to refund  upon early  payment  (whether  voluntary  or as a
result of default), except as otherwise required by law. In any event, even upon
full prepayment of this Note, Borrower  understands that Lender is entitled to a
minimum interest charge of $50.00.  Other than Borrower's  obligation to pay any
minimum  interest  charge,  Borrower may pay all or a portion of the amount owed
earlier than it is due. Early  payments will not,  unless agreed to by Lender in
writing,  relieve Borrower of Borrower's obligation to continue to make payments
under the payment schedule.  Rather,  they will reduce the principal balance due
and may result in Borrower's making fewer payments.

DEFAULT.  Borrower  will be in  default  if any of the  following  happens:  (a)
Borrower  fails to make any payment when due.  (b)  Borrower  breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform when
due any other term, obligation, covenant, or condition contained in this Note or
any agreement  related to this Note, or in any other  agreement or loan Borrower
has with Lender.  (c)  Borrower  defaults  under any loan,  extension of credit,
security  agreement,  purchase or sales agreement,  or any other  agreement,  in
favor of any  other  creditor  or  person  that  may  materially  affect  any of
Borrower's  property  or  Borrower's  ability  to  repay  this  Note or  perform
Borrower's obligations under this Note or any of the Related Documents.  (d) Any
representation  or  statement  made or  furnished  to Lender by  Borrower  or on
Borrower's  behalf is false or misleading in any material  respect either now or
at the time made or furnished.  (e) Borrower  becomes  insolvent,  a receiver is
appointed for any part of Borrower's property,  Borrower makes an assignment for
the benefit of creditors,  or any proceeding is commenced  either by Borrower or
against Borrower under any bankruptcy or insolvency laws. (f) Any creditor tries
to take any of Borrower's  property on or in which Lender has a lien or security
interest. This includes a garnishment of any of Borrower's accounts with Lender.
(g) Any  guarantor  dies or any of the other  events  described  in this default
section  occurs  with  respect to any  guarantor  of this  Note.  (h) A material
adverse change occurs in Borrower's financial condition,  or Lender believes the
prospect of payment or performance of the indebtedness is impaired.

LENDER'S  RIGHTS.  Upon default,  Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest  immediately  due,  without
notice,  and then Borrower will pay that amount.  Upon Borrower's failure to pay
all amounts declared due pursuant to this section, including failure to pay upon
final maturity,  Lender, at its option,  may also, if permitted under applicable
law, increase the variable interest rate on this Note to 5.500 percentage points
over the Index. Lender may hire or pay someone else to help collect this Note if
Borrower does not pay. Borrower also will pay Lender that amount. This includes,
subject  to any  limits  under  applicable  law,  Lender's  attorneys'  fees and
Lender's legal expenses whether or not there is a lawsuit,  including attorneys'
fees and legal expenses for bankruptcy  proceedings (including efforts to modify
or vacate  any  automatic  stay or  injunction),  appeals,  and any  anticipated
post-judgment  collection  services.  Borrower also will pay any court costs, in
addition to all other sums  provided  by law.  This Note has been  delivered  to
Lender and accepted by Lender in the State of California. If there is a lawsuit,
Borrower  agrees  upon  Lender's  request to submit to the  jurisdiction  of the
courts of MARIN  County,  the State of  California.  Lender and Borrower  hereby
waive the right to any jury trial in any  action,  proceeding,  or  counterclaim
brought by either  Lender or  Borrower  against  the  other.  This Note shall be
governed  by  and  construed  in  accordance  with  the  laws  of the  State  of
California.

DISHONORED  ITEM FEE.  Borrower  will pay a fee to Lender of $15.00 if  Borrower
makes a payment on Borrower's  loan and the check or  preauthorized  charge with
which Borrower pays is later dishonored.

COLLATERAL.  This Note is secured by THAT CERTAIN COMMERCIAL  SECURITY AGREEMENT
DATED MAY 17, 1996.

LINE OF CREDIT.  This Note evidences a revolving line of credit.  Advances under
this Note may he requested orally by Borrower or by an authorized person. Lender
may, but need not,  require that all oral requests be confirmed in writing.  All
communications,  instructions, or directions by telephone or otherwise to Lender
are to be  directed to Lender's  office  shown  above.  The  following  party or
parties are authorized to request advances under the line of credit until Lender
receives  from  Borrower  at Lender's  address  shown  above  written  notice of
revocation  of their  authority:  H. MICHAEL  LAYBOURN,  PRESIDENT;  and YASHPAL
SINGH,  CHIEF  OPERATING  OFFICER.  Borrower  agrees to be  liable  for all sums
either: (a) advanced in accordance with the instructions of an authorized person
or (b) credited to any of Borrower's  accounts with Lender. The unpaid principal
balance owing on this Note at any time may be evidenced by  endorsements on this
Note or by Lender's  internal  records,  including  daily  computer  print-outs.
Lender will have no obligation to advance funds under this Note if: (a) Borrower
or any  guarantor  is in default  under the terms of this Note or any  agreement
that Borrower or any guarantor has with Lender,  including any agreement made in
connection  with the signing of this Note; (b) Borrower or any guarantor  ceases
doing  business or is insolvent;  (c) any guarantor  seeks,  claims or otherwise
attempts to limit,  modify or revoke such guarantor's  guarantee of this Note or
any other loan with Lender;  or (d) Borrower has applied funds provided pursuant
to this Note for purposes other than those authorized by Lender.


<PAGE>

12-01-1997                      PROMISSORY NOTE
Loan No 203-00549                 (Continued)                             Page 2
================================================================================

GENERAL  PROVISIONS.  This Note is payable on demand.  The inclusion of specific
default  provisions  or rights of Lender  shall not preclude  Lender's  right to
declare payment of this Note on its demand.  Lender may delay or forgo enforcing
any of its rights or remedies under this Note without losing them.  Borrower and
any other  person who signs,  guarantees  or endorses  this Note,  to the extent
allowed by law, waive any applicable statute of limitations, presentment, demand
for  payment,  protest and notice of  dishonor.  Upon any change in the terms of
this Note, and unless otherwise  expressly stated in writing, no party who signs
this Note, whether as maker, guarantor,  accommodation maker or endorser,  shall
be released  from  liability.  All such  parties  agree that Lender may renew or
extend  (repeatedly  and for any length of time) this loan, or release any party
or guarantor or collateral;  or impair, fail to realize upon or perfect Lender's
security interest in the collateral;  and take any other action deemed necessary
by Lender  without the  consent of or notice to anyone.  All such  parties  also
agree that  Lender  may modify  this loan  without  the  consent of or notice to
anyone other than the party with whom the modification is made.

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


BORROWER:

MENDOCINO BREWING COMPANY, INC.

    COPY
BY: /s/ H. MICHAEL LAYBOURN, PRESIDENT    By: /s/ YASHPAL SINGH
   -----------------------------------       -----------------------------------
        H. MICHAEL LAYBOURN, PRESIDENT    YASHPAL SINGH, CHIEF OPERATING OFFICER
--------------------------------------------------------------------------------