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                             SECURED PROMISSORY NOTE





$200,000.00                                                    DECEMBER 27, 2005





     FOR VALUE RECEIVED, MENDOCINO BREWING COMPANY, INC., A(N) CALIFORNIA

CORPORATION AND RELETA BREWING COMPANY LLC, A DELAWARE LIMITED LIABILITY COMPANY

(individually and collectively "Borrower"), promises to pay to BFI BUSINESS

FINANCE, a California corporation ("Lender"), or order, at Lender's place of

business at 1655 The Alameda, San Jose, CA 95126, or at such other place as may

be designated in writing to Borrower by the holder of this Secured Promissory

Note (this "Note"), the principal sum of TWO HUNDRED THOUSAND AND 00/100 DOLLARS

($200,000.00) OR SO MUCH OF SAID AMOUNT AS SHALL HAVE BEEN ADVANCED HEREUNDER

(as such amount shall change from time to time the "Loan Amount"), which shall

be subject to and disbursed under the terms and conditions of that certain

EQUIPMENT SECURITY AGREEMENT DATED MAY 5, 2005 (as amended the "Security

Agreement"), together with interest from the date hereof on the unpaid principal

balance at a rate (the "Rate") of THREE AND THREE QUARTERS PERCENTAGE POINT(S)

(3.75%) PER ANNUM over and above the rate announced as the "prime" rate in the

Western Edition of the Wall Street Journal which is in effect from time to time

(the "Prime Rate"); provided that the Prime Rate shall at all times be deemed to

be not less than FIVE AND THREE QUARTERS PERCENT (5.75%) PER ANNUM (the "Deemed

Prime Rate"). In the event that the Prime Rate is changed, the adjustment in the

interest rate charged shall be made on the day such change occurs. The Prime

Rate is a rate used by certain financial institutions as one of their index

rates and serves as a basis upon which effective rates of interest are

calculated for loans making reference thereto and may not be the lowest of such

financial institutions' index rates. Upon the occurrence of a default or an

event of default under this Note, the rate of interest on the Note shall be

increased at the option of Lender to an additional three percent (3.0%) in

excess of the then applicable interest rate. Interest shall be computed on the

basis of a 360-day year and shall be charged to Borrower's account on the first

day of the following month, and, if not so paid, it shall thereafter bear like

interest as the principal.



1.      Lender may, at its option, charge Borrower's account for the principal,

interest, and fees hereunder, which are due and payable on the dates and in the

manner that follows:



        (a)     Interest payments will be due and payable in arrears commencing

on the first day of the first month following disbursement and continuing on the

first day of each month thereafter while amounts hereunder are due and owing;



        (b)     Principal payments will be due and payable commencing on JANUARY

6, 2006, and continuing on each Friday of each of the next consecutive

TWENTY-EIGHT (28) weeks thereafter, each in the amount of SIX THOUSAND SIX

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