Document:

LOAN ADMINISTRATION LIQUIDATION RETENTION & INCENTIVE PLAN

FINOVA 2005 Annual Incentive Plan Rules

February 2005

	Participants:  

All employees who are in good standing as at January 1st 2005

New hires may be subject to a probation period (no longer than 90 days) before being eligible to participate in the plan.  Upon satisfactory completion of the probation period new hire participation will be effective from the hire date and pro-rated for service during 2005.  Past employees who are re-hired are eligible for immediate participation.

	Performance Incentive Bonuses:

Incentive Amounts All participants may be paid a percentage of their earnings paid from January 1, 2005 to December 31, 2005.  Earnings include pay for regular time, overtime, holiday and PTO it excludes payments received for short-term disability, sick pay, payment under any recognition program or other bonus plan. The bonus percentage will be based on participant's pay grade and criticality.  The amount of the bonus will be subject to the recommendation of the participant's supervisor and the approval of the COO and CEO. 

Form and Timing of Incentive Payment.  All Incentive Bonuses will be paid as lump sums, less applicable taxes, by the last working day of February 2006.  Participants, whose employment involuntarily terminates during 2005, other than for cause or documented unsatisfactory performance, will receive any bonus award on the payroll covering the employee's last date of employment.  Payment of the bonus will be on the recommendation of the employee's supervisor and the approval of the COO after a review of performance and transition of duties before termination.  The amount of the bonus will be pro-rated according to the length of service during 2005.

	Other Key Provisions: 

Incentive Plan Bonus Payments The Plan has been specifically designed to be discretionary in nature.  Factors bearing on an employee's individual bonus award will be the achievement of the business unit's objectives and employee's personal performance. This includes, but is not limited to, the employee's attitude, commitment and support for others.  If the employee's performance meets expectations and the business unit has achieved its objectives, the employee may expect a bonus midway of the range of bonus opportunities.  Falling short of expectations will likely result in a lower bonus.  A bonus above the mid-point may be awarded if an employee's performance is exceptional. 

Resignations and Terminations for Cause or Performance.  Employees who voluntarily resign or are terminated for cause or documented unsatisfactory performance are not eligible to receive any amounts under this plan including severance benefits.

Leaves of Absence.  Performance Incentive Bonuses (if eligible) will be proportionately reduced for periods of time employees are on approved leaves of absence (e.g., medical, workers' compensation or personal), except as required by law.

Discretion.  Business Unit Managers in conjunction with the SVP-Human Resources have the authority to modify incentive bonus percentages if it is determined that individual performance warrants such actions.      The SVP-Human Resources and the COO must approve any increases in bonus percentage and any exceptions to this plan.  The CEO or COO has the discretion to increase or decrease bonus payments.  Any modification in bonus opportunity will be communicated to the employee in writing.

Preservation of Rights.  Nothing in this plan shall alter the "at will" nature of employment.  This includes employees' rights to resign at any time and for any reason and the company's right to terminate employees at any time and for any reason.

The 2005 Incentive Plan and its application shall be governed by the laws of the State of Arizona, without regard to its conflict of laws principles, and to the extent applicable, by Federal law.  References to an officer includes his or her successor.  Decisions of officers may be superseded by decisions of Senior Management or the Board of Directors of FINOVA Group or FINOVA Capital or their committees.LOAN ADMINISTRATION LIQUIDATION RETENTION & INCENTIVE PLAN

FINOVA 2004 Annual Incentive Plan Rules

February 2004

	Participants:  

All employees who are in good standing as at January 1st 2004

New hires may be subject to a probation period (no longer than 90 days) before being eligible to participate in the plan.  Upon satisfactory completion of the probation period new hire participation will be effective from the hire date and pro-rated for service during 2004.  Past employees who are re-hired are eligible for immediate participation.

	Performance Incentive Bonuses:

Incentive Amounts All participants may be paid a percentage of their earnings paid from January 1, 2004 to December 31, 2004.  Earnings include pay for regular time, overtime, holiday and PTO it excludes payments received for short-term disability, sick pay, payment under any recognition program or other bonus plan. The bonus percentage will be based on participant's pay grade and criticality.  The amount of the bonus will be subject to the recommendation of the participant's supervisor and the approval of the COO and CEO. 

Form and Timing of Incentive Payment.  All Incentive Bonuses will be paid as lump sums, less applicable taxes, by the last working day of February 2005.  Participants, whose employment involuntarily terminates during 2004, other than for cause or documented unsatisfactory performance, will receive any bonus award on the payroll covering the employee's last date of employment.  Payment of the bonus will be on the recommendation of the employee's supervisor and the approval of the COO after a review of performance and transition of duties before termination.  The amount of the bonus will be pro-rated according to the length of service during 2004.

	Other Key Provisions: 

Incentive Plan Bonus Payments The Plan has been specifically designed to be discretionary in nature.  Factors bearing on an employee's individual bonus award will be the achievement of the business unit's objectives and employee's personal performance. This includes, but is not limited to, the employee's attitude, commitment and support for others.  If the employee's performance meets expectations and the business unit has achieved its objectives, the employee may expect a bonus midway of the range of bonus opportunities.  Falling short of expectations will likely result in a lower bonus.  A bonus above the mid-point may be awarded if an employee's performance is exceptional. 

Resignations and Terminations for Cause or Performance.  Employees who voluntarily resign or are terminated for cause or documented unsatisfactory performance are not eligible to receive any amounts under this plan including severance benefits.

Leaves of Absence.  Performance Incentive Bonuses (if eligible) will be proportionately reduced for periods of time employees are on approved leaves of absence (e.g., medical, workers' compensation or personal), except as required by law.

Discretion.  Business Unit Managers in conjunction with the SVP-Human Resources have the authority to modify incentive bonus percentages if it is determined that individual performance warrants such actions.      The SVP-Human Resources and the COO must approve any increases in bonus percentage and any exceptions to this plan.  The CEO or COO has the discretion to increase or decrease bonus payments.  Any modification in bonus opportunity will be communicated to the employee in writing.

Preservation of Rights.  Nothing in this plan shall alter the "at will" nature of employment.  This includes employees' rights to resign at any time and for any reason and the company's right to terminate employees at any time and for any reason.

The 2004 Incentive Plan and its application shall be governed by the laws of the State of Arizona, without regard to its conflict of laws principles, and to the extent applicable, by Federal law.  References to an officer includes his or her successor.  Decisions of officers may be superseded by decisions of Senior Management or the Board of Directors of FINOVA Group or FINOVA Capital or their committees.<PAGE>

                           CONVERTIBLE PROMISSORY NOTE
                         MENDOCINO BREWING COMPANY, INC.
--------------------------------------------------------------------------------

Name of Issuer:  Mendocino Brewing Company, Inc.       Dated:  March 2, 2005
Maturity Date:   September 1, 2006
--------------------------------------------------------------------------------

        1.      PROMISE. Mendocino Brewing Company, Inc., a California
corporation having its principal office at 1601 Airport Road, Ukiah, California
95482 and any successor (the "Company"), for value received, promises to pay to
United Breweries of America Inc., a Delaware corporation or to its registered
successors or assigns (the "Holder") the principal sum of Four Hundred Thousand
Dollars ($400,000.00) on presentation and surrender of this Convertible Note
("Note") on August 31, 2006 (the "Maturity Date"), and to pay interest on that
principal sum 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 in San Francisco, California, or (ii) ten percent (10%). Interest
payments shall be paid quarterly on the first day of the months of April, July,
October, and January of each year. The Company may use any of the funds borrowed
from the Holder for any corporate purposes of the Company, including paying
obligations owed by the Company to the Holder.

        2.      FORM OF PAYMENT. All payments under this Note shall be made in
lawful money of the United States of America. The Company waives diligence,
presentment, protest, demand and notice of protest, dishonor, and nonpayment of
this Note.

        3.      CONVERSION/REDEMPTION/RENEWAL.

                (a)     The Holder has the right, at the holder's option, at any
time on or after the Maturity Date, to convert all or any portion of this Note
into fully paid and nonassessable shares of common stock ("Common Stock") of the
Company at the rate of one share of such Common Stock for each One Dollar and
50/100 ($1.50) (the "Conversion Rate") principal amount of this Note and any
accrued but unpaid interest. The Holder agrees that all shares of Common Stock
of the Company, issued by the Company upon the conversion of all or any part of
this Note shall be restricted securities within the meaning of Rule 144(a) of
the Securities Act of 1933.

                (b)     The conversion right set forth in this Section 3 is
subject to any adjustment of the Conversion Rate set forth in Section 5 and
Section 6, and is only exercisable upon the surrender of this Note for
conversion at the office or agency to be maintained by the Company accompanied
by instruments of transfer, in form satisfactory to the Company, duly executed
by the registered holder. No fractional shares are issuable on any conversion,
but in lieu of issuing fractional shares the Company shall pay for such
fractional shares in cash.

                (c)     At any time prior to seventeen (17) months from the date
of this Note, the Holder may provide written notice to the Company requiring the
Company to commence repayment of the outstanding principal balance of this Note,
together with any accrued but

<PAGE>

unpaid interest thereon, to the Holder. In such case, commencing on the Maturity
Date, Company shall pay the Holder equal monthly installments of principal,
together with any unpaid interest, over a period of five (5) years until all
amounts due hereunder shall be repaid in full.

                (d)     If the Holder does not convert or redeem any or all of
the principal amount of the Note into Common Stock on the Maturity Date, the
Holder has the right to extend the term of this Note for a period of time
mutually agreed upon between the Holder and the Company. At any time during such
extension period, the Holder shall have the right to convert all or any part of
the outstanding principal amount of the Note plus accrued and unpaid interest
into Common Stock as set forth in this Section 3. Moreover, at any time during
such extension period, the Holder shall have the right to require the Company to
repay all or any part of the outstanding principal balance of this Note,
together with any accrued but unpaid interest thereon, to the Holder within
sixty (60) days.

        4.      COMPANY REDEMPTION. Prior to the Maturity Date, this Note may be
redeemed by the Company, in whole or in part, at any time after sixty (60) days
written notice ("Redemption Notice") to the Holder. During such sixty (60) day
period, the Holder shall have the right to convert all or any part of the
outstanding principal amount of the Note plus accrued and unpaid interest into
Common Stock, as set forth in Section 3. If the Holder does not convert all
outstanding amounts into Common Stock, the Company may redeem any remaining
amounts at any time during a thirty (30) day period commencing with the date of
expiration of the sixty (60) day period provided for in the Redemption Notice.
Thereafter, the Company shall be required to provide the Holder with a new
Redemption Notice, and the Holder shall have a new sixty (60) day period within
which to convert all or any part of the outstanding principal amounts plus
accrued and unpaid interest into Common Stock, as set forth in Section 3.

        5.      ANTI-DILUTION.

                (a)     If at any time there is a capital reorganization of the
Company's Common Stock, including any combination, reclassification, exchange,
or subdivision of shares, a merger or consolidation of the Company with or into
another corporation, or the sale of all or substantially all the Company's
properties and assets as, or substantially as, an entirety to another person,
then, as a part of such reorganization, merger, consolidation, or sale, lawful
provision shall be made so that the Holder shall thereafter be entitled to
receive on conversion of this Note, during the period specified in this Note,
the number of shares of Common Stock of the Company, or of the successor
corporation resulting from such merger or consolidation, to which a holder of
the Common Stock deliverable on conversion of this Note would have been entitled
on that event if this Note had been converted immediately before that event. In
any such case, appropriate adjustment (as determined by the Company's board of
directors) shall be made in applying this Note to the rights and the percentage
interests of the Holder after the reorganization, merger, consolidation, or sale
to the end that this Note (including adjustment of the Conversion Rate) shall be
applicable after that event, as near as reasonably may be, in relation to the
shares of Common Stock deliverable after that event on conversion of this Note.
The Company shall, not later than thirty (30) days prior to making such
adjustment, give written notice ("Notice") by courier to the Holder at the
address of Holder shown on the Company's books.

                                        2
<PAGE>

                (b)     Any Notice that is sent pursuant to Section 5(a) shall
set forth, in reasonable detail, the event requiring the adjustment and the
method by which the adjustment was calculated and shall specify the Conversion
Rate then in effect after the adjustment and the increased or decreased number
of shares of Common Stock to be received upon conversion of this Note. When
appropriate, advance notice may be given and included as part of the notice
required under other provisions of this Note.

        6.      CONVERSION RATE PROTECTION.

                (a)     If at any time, or from time to time, the Company issues
or sells shares of Common Stock without consideration or for a consideration per
share less than the Conversion Rate in effect immediately before that issue or
sale, then and in each such case:

                        (i)     the Conversion Rate then in effect and the
Conversion Rate applicable for any subsequent period shall be adjusted to a
price (calculated to the nearest cent) determined by dividing: (y) the sum of
(aa) the number of shares of Common Stock outstanding immediately before that
issue or sale multiplied by the Conversion Rate in effect immediately before
that issue or sale, plus (bb) the consideration, if any, received by the Company
on that issue or sale, by (z) the number of shares of the Company's Common Stock
outstanding immediately after that issue or sale; and

                        (ii)    the Holder shall after that issue or sale, on
conversion of this Note, be entitled to receive the number of shares of Common
Stock equal to the number of shares that would otherwise, but for the adjustment
provided for in Section 6(a)(i), be issuable on such conversion multiplied by a
fraction, the numerator of which is the Conversion Rate then in effect and the
denominator of which is the Conversion Rate in effect immediately after the
adjustment provided for in Section 6(a)(i) on the date of conversion. No such
adjustment shall be made in an amount less than Five Cents ($0.05), but any such
amount shall be carried forward and given effect in the next adjustment, if any.

                (b)     If the Company (i) grants any rights or options to
subscribe for, purchase, or otherwise acquire shares of Common Stock, or (ii)
issues or sells any security, other than this Note, which is convertible into
shares of Common Stock, then the price per share of Common Stock issuable on the
exercise of the rights or options or the conversion of the securities shall be
calculated by dividing: (y) the total amount, if any, received or receivable by
the Company as consideration for the granting of the rights or options or the
issue or sale of the convertible securities, plus the minimum aggregate amount
of additional consideration payable to the Company on exercise of the
convertible securities, by (z) the maximum number of shares of Common Stock
issuable on the exercise or conversion.

                        (i)     If the price per share so calculated is less
than the Conversion Rate of this Note in effect immediately before the rights or
options are granted or the convertible securities are issued or sold, the
granting or issue or sale shall be considered to be an issue or sale for cash of
the maximum number of shares of Common Stock so issuable on exercise or
conversion at the price per share determined under this provision, and the
Conversion Rate of this Note shall be adjusted as provided above to reflect (on
the basis of that determination) the issue or sale. No further adjustment of the
Conversion Rate shall be made as a result of the actual issuance of shares of
Common Stock on the exercise of any such rights or options or the conversion of
any such convertible securities.

                                        3

<PAGE>

                        (ii)    If such rights or options or convertible
securities by their terms provide, with the passage of time or otherwise, for
any increase in the amount of additional consideration payable to the Company or
any decrease in the number of shares of Common Stock issuable on such exercise
or exchange (by change of rate or otherwise), the Conversion Rate shall, when
each such increase or decrease becomes effective, be readjusted to reflect the
increase or decrease as far as it affects rights of exercise or conversion that
have not expired before that time.

                        (iii)   If, on the expiration of such rights or options
or the rights of conversion of such convertible securities, any of them shall
not have been exercised, the Conversion Rate shall be readjusted and will then
be the same as it would have been had it originally been adjusted (or had the
original adjustment not been required, as the case may be), on the basis that
(y) the only shares of Common Stock so issued were the shares of Common Stock,
if any, actually issued or sold on the exercise of such rights or options or
rights of conversion of such convertible securities, and (z) such shares of
Common Stock, if any, were issued or sold for the consideration actually
received by the Company on such exercise plus the consideration, if any,
actually received by the Company for granting all such rights or options or for
issuing or selling all such convertible securities.

                        (iv)    No adjustment of the Conversion Rate as provided
in this Section 6(b) shall occur upon the granting or issuance of stock, stock
options, or warrants to employees or directors of the Company in the aggregate
amount of less than six hundred thousand (600,000) shares of Common Stock.

        7.      SUBORDINATION.

                (a)     Upon the written agreement of Holder, this Note may be
subordinated to any or all debt owed by the Company to banks and other financial
institutions, other than to the extent debt to any such bank or financial
institution involves the issuance of shares of the Company's stock or notes,
warrants, options or any other security convertible into such stock.

                (b)     The payment of the indebtedness evidenced by this
instrument is subordinated to (i) the payment of the "Senior Debt" defined and
described in the Subordination Agreement, dated as of September 24, 1998,
between United Breweries of America Inc. and the CIT Group/Credit Finance, Inc.,
as amended, and reference is made to such Agreement for a full statement of the
terms and conditions of such subordination, and (ii) the payment of any debt to
any lender that the Company incurs in refinancing all or any part of the Senior
Debt referred to above, on substantially the same terms and conditions of
subordination.

                (c)     The payment of the indebtedness evidenced by this
instrument is subordinated to the payment of the "Senior Debt" defined and
described in the Subordination Agreement, dated on or about November 15, 1998,
between United Breweries of America Inc. and the Savings Bank of Mendocino,
Inc., and reference is made to such Agreement for a full statement of the terms
and conditions of such subordination.

                                        4
<PAGE>

        8.      ENFORCEMENT. The Company agrees to reimburse the Holder for all
costs of collection or enforcement of this Note, whether or not suit is filed
(including, but not limited to, reasonable attorney fees), incurred by the
Holder.

        9.      GOVERNING LAW. This Note shall be governed by and construed in
accordance with the laws, without regard to the laws as to choice or conflict of
laws, of the State of California.

        10.     DEFAULT. If Company fails to pay any installment of principal or
interest when due, then, or at any time during such default, the entire amount
of the unpaid principal and interest shall, at the election of Holder, become
immediately due and payable.

        11.     WAIVER. No previous waiver and no failure or delay by Holder in
acting with respect to the terms of this Note shall constitute a waiver of any
subsequent breach, default or failure of condition under this Note. A waiver of
any term of this Note must be in writing and shall be limited to the express
written terms of such waiver. No delay or omission on the part of Holder in
exercising any right under this Note shall operate as a waiver of such right or
of any other right.

        12.     RESERVATION OF STOCK. The Company covenants that it will at all
times reserve and keep available, solely for issuance on conversion of this
Note, all shares of Common Stock from time to time issuable upon exercise of
this Note.

        13.     REPLACEMENT. Upon receipt of evidence reasonably satisfactory to
the Company, of the loss, theft, destruction, or modification of this Note and,
in the event of such occurrence, on delivery of an indemnity agreement or Note
reasonably satisfactory in form and amount to the Company or in the case of
mutilation, on surrender and cancellation of this Note, the Company at its
expense will execute and deliver, in lieu of this Note, a new Note of like
tender.

        14.     TRANSFER. NO SALE OR TRANSFER OF THIS NOTE SHALL BE EFFECTIVE
UNLESS AND UNTIL ALL OF THE FOLLOWING STEPS ARE COMPLIED WITH:

                (a)     The transferor and the transferee shall execute the form
of Transfer Statement attached to this Note (or a similar statement which shall
then be attached to this Note);

                (b)     This Note and the executed Transfer Statement, together
with a United States Internal Revenue Service Form W-8 "Certificate of Foreign
Status" OR a Form W-9 "Request for Taxpayer Identification Number and
Certification" completed and executed by the transferee, shall be delivered to
the Company at the Company's address as provided above; and

                                        5
<PAGE>

                (c)     If the Company is satisfied that the information
contained in the Transfer Statement is consistent with the information contained
in the completed and executed Form W-8 or W-9, as applicable, the Company shall
enter the transfer on a Note Holder Ledger maintained by the Company for this
purpose.

Any purported transfer with respect to which all of the above steps have note
been complied with shall be null and void and of no force or effect.

        15.     ENTIRE AGREEMENT; WRITTEN MODIFICATION ONLY. This Agreement
contains the entire agreement of the parties, and constitutes the complete,
final and exclusive embodiment of their agreement with respect to its subject
matter. This Agreement supersedes any and all prior correspondence,
arrangements, representations and understandings, whether written or oral,
express or implied, with respect to its subject matter. This Agreement may not
be modified except by a written agreement, which specifically sets forth each
modification and is signed by a duly authorized representative of both parties.
This Agreement is executed without reliance upon any promise, warranty or
representation by the parties or any of their representatives, other than such
promises, warranties or representations as are expressly contained in this
Agreement.

        16.     SEVERABILITY. If any provision of this Agreement is deemed or
held invalid or unenforceable in whole or in part, for any reason, that
provision shall be deemed severed from the remainder of this Agreement, and
shall in no way affect or impair the validity or enforceability of any portion
or all of this Agreement, which otherwise shall remain in full force and effect.

IN WITNESS WHEREOF, the Company has caused this Convertible Note to be executed
in its corporate name by the signature of its president and its chief financial
officer and secretary.

                                MENDOCINO BREWING COMPANY, INC.,
                                a California corporation

                                By:   /s/ Yashpal Singh
                                      ----------------------------------
                                      Yashpal Singh
                                Its:  President

                                By:   /s/ N. Mahadevan
                                      ----------------------------------
                                      N. Mahadevan
                                Its:  Secretary and Chief Financial Officer

                                        6

<PAGE>

                                CONVERSION NOTICE

CONVERSION NOTICE TO:  MENDOCINO BREWING COMPANY, INC.

        The undersigned holder of this Note, hereby irrevocably exercises the
option to convert this Note or the portion of it designated below into shares of
Common Stock of the Company, in accordance with the terms of the Note, and
directs that the shares issuable and deliverable on the conversion, together
with any check in payment of fractional shares, be issued and delivered to the
undersigned unless a different name is specified below. If shares of Common
Stock are to be issued in the name of anyone other than the undersigned, the
undersigned will pay all transfer taxes payable on this conversion and issuance.

Dated:_________________________________   ____________________________________
                                          Signature

If the shares are to be issued other      Portion to be converted (in multiples)
than to a registered holder, print        of $1,000 if less than all:
name, address, city, state  and zip
code of issuee:                           $___________________________________

                                          Social Security Number of other
                                          identifying number of issuers:

_______________________________________   ____________________________________
_______________________________________
_______________________________________
_______________________________________

NOTICE: THE SIGNATURE OF THESE INSTRUCTIONS TO CONVERT MUST CORRESPOND WITH THE
          NAME AS WRITTEN ON THE FACE OF THIS NOTE IN EVERY PARTICULAR,
            WITHOUT ALTERATION, ENLARGEMENT, OR ANY CHANGE WHATSOEVER

                                        7
<PAGE>

                               TRANSFER STATEMENT

NOTICE TO:   MENDOCINO BREWING COMPANY, INC.

        FOR VALUE RECEIVED, the undersigned, the holder of that certain
Convertible Note initially executed on the Effective Date (as defined below) by
Mendocino Brewing Company, Inc. (the "Company") to the Initial Holder (as
defined below) in the Face Value set forth below (the "Note"), hereby sells,
assigns, transfers and conveys all of the rights of the undersigned under the
Note, subject to the terms of the Note, unto the Transferee (as described
below):

        NAME OF TRANSFEREE            ADDRESS           FACE VALUE OF NOTE
        ------------------            -------           ------------------

The following terms have the following meanings:

Effective Date: ____________________, 200_

Initial Holder: __________________________

Dated:____________________________            TRANSFEROR:
                                              [Name of Transferor]

                                              By:_____________________________

                                              Name:___________________________

                                              Its:____________________________

ACKNOWLEDGMENT OF THE COMPANY:

MENDOCINO BREWING COMPANY, INC.

By:_______________________________

Name:_____________________________

Its:______________________________

                                        8

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