Mendocino Brewing Co Inc – ‘DEF 14A’ for 6/28/01

On:  Thursday, 5/10/01, at 9:59pm ET   ·   As of:  5/11/01   ·   For:  6/28/01   ·   Accession #:  1053949-1-500119   ·   File #:  1-13636

in

this entire Filing. an “Entity” Search.

Show

Documents searched

and

each “hit”. the 1st “hit”.

↓↑Hints

Definitive Proxy Solicitation Material   —   Schedule 14A
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: DEF 14A     Definitive Proxy Statement                           201    761K 

Document Table of Contents

DEF 14A
1st Page of 201
TOC
↑Top
Previous
Next
↓Bottom
Just 1st
 
SCHEDULE 14A
 Information Required In Proxy Statement

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )

Filed by the Registrant                              [X]                        
Filed by a party other than the Registrant           [ ]                        

Check the appropriate box:                                                      
[ ]      Preliminary Proxy Statement                                            
[ ]      Confidential, for Use of the Commission Only (as permitted by          
Rule 14a-6(e)(2))                                             
[X]      Definitive Proxy Statement                                             
[ ]      Definitive Additional Materials                                        
[ ]      Soliciting Material Pursuant to Section 240.14a-12                     

 Mendocino Brewing Company, Inc.
----------------------------------
(Name of Registrant as Specified in its Charter)

 N/A
----------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of filing fee (Check the appropriate box):                              

[ ]   No fee required.                                                          
[X]   Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.  
 (1)  Title of each class of securities to which transactions applies:
Common Stock                                    

(2)  Aggregate number of securities to which transactions applies:  
5,500,000 shares                                

(3)  Per unit price or other underlying value of transaction        
computed pursuant to Exchange Act Rule 0-11 (Set forth the
   amount on which the filing fee is calculated and state how it
was determined): Because there is no market value for the 
   securities being acquired, the filing fee is calculated based
    on the securities' book value as provided in Exchange Act Rule
0-11(a) (4). As of March 31, 2001, the book value of the  
  shares being acquired was equal to $974,297; and one-50th of
one percent of that book value was equal to $194.86.      

(4)  Proposed maximum aggregate value of transaction:               

Calculated based on book value: $194.86                   

(5)  Total fee paid:   $ 195.68                                     

[ ]   Fee paid previously with preliminary materials.                           

[X]   Check box if any part of the fee is offset as provided by Exchange Act    
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration   
 statement number, or the Form or Schedule and the date of its filing.

(1)  Amount previously paid:  $195.68                               

 (2)  Form, Schedule or Registration Statement No.:  Preliminary Proxy
Statement                                       

(3)  Filing party:  Mendocino Brewing Company, Inc.                 

(4)  Date filed:  November 9, 2000                                  

DEF 14A
2nd Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 2nd
 MENDOCINO BREWING COMPANY, INC.
 Post Office Box 400
 13351 Highway 101 South
 Hopland, California 95449
(800) 733-3871

                                                                    May 11, 2001

Dear Shareholder:                                                               

        You are cordially invited to attend the Annual Meeting of shareholders
of Mendocino Brewing Company, Inc. (the "Company") to be held at 11:00 a.m.,    
local time, on Thursday, June 28, 2001, at the Ukiah Valley Conference Center   
located at 200 South School Street, Ukiah, California (the "Annual Meeting").   

         As described in the accompanying Proxy Statement, at the Annual Meeting
you will be asked to consider a proposal to approve and adopt the Share Purchase
Agreement (the "Share Purchase Agreement"), between the Company and Inversiones 
Mirabel, S.A., a Panamanian corporation ("Inversiones"), pursuant to which, in  
exchange for 5,500,000 shares of to be issued Company Common Stock, the Company 
would acquire from Inversiones, in a related party transaction, all of the      
issued and outstanding capital stock of United Breweries International (UK)     
Limited, a company organized under the laws of England and Wales ("UBI"). The   
transaction would be considered a related party transaction, because Inversiones
is wholly owned by Golden Eagle Trust, an Isle of Man trust. Because the        
trustees who control Golden Eagle Trust have the ability to act in favor of Dr. 
Vijay Mallya, he may have a material financial interest in Golden Eagle Trust.  
Because Dr. Mallya is the Company's Chairman of the Board and Chief Executive   
Officer, he also has a material financial interest in the Company. The proposed 
transaction has therefore been reviewed and approved for the Company by a       
special committee of the Board of Directors consisting only of Directors who are
not personally interested in the transaction. Golden Eagle Trust will also      
guarantee certain of the representations and warranties made by Inversiones'    
under the Share Purchase Agreement.                                             

       Under the terms of the Share Purchase Agreement, the Company has been
asked to add another member to its Board of Directors, bringing the total number
up to eight. Since under the Company's Bylaws any increase in the number of     
Directors requires shareholder approval, you will be asked to approve an        
amendment to the Company's Bylaws increasing the size of the Board.             

      At the Annual Meeting, the shareholders will also elect Directors of
the Company for the forthcoming year. The following individuals have been       
nominated by the Board of Directors for election to the Board: Dr. Vijay Mallya,
H. Michael Laybourn, R.H.B. (Bobby) Neame, Kent D. Price, Sury Rao Palamand,    
Jerome G. Merchant, and Yashpal Singh. Assuming that the proposed Bylaw         
amendment described above is approved by the shareholders, the Board also       
intends to nominate David Townshend to serve as the Company's eighth Director.  

        You will also be asked to approve each of the following Proposals, all
of which have already been considered and (subject to shareholder approval)     
approved by your Board of Directors: (1) an amendment to the Company's 1994     
Stock Option Plan, to increase the number of shares for which options may be    
granted under the Plan from the current 200,000 shares to 1,000,000 shares, (2) 
a set of amendments to the Company's Articles of Incorporation, increasing the  
authorized number of shares of Common and Preferred Stock and making certain    
other changes, and (3) the appointment of Moss Adams L.L.P. as independent      
auditors of the Company for the current fiscal year. The Board of Directors does
not anticipate that any additional proposals will be presented for consideration
at the Annual Meeting.                                                          

DEF 14A
3rd Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 3rd
Shareholders of Mendocino Brewing Company                                       
May 11, 2001                                                                    

        The Proposal to amend the Company's Articles of Incorporation requires
the approval of all classes of the Company's outstanding stock, so the holders  
of the Company's Series A Preferred Stock will be entitled to vote on this      
Proposal (Proposal No. 5). The Series A Preferred Stock does not have voting    
rights with respect to any of the other Proposals which are expected to come    
before the Annual Meeting, however.                                             

   Your Board of Directors, which has unanimously approved the Share
Purchase Agreement, believes that the proposed transaction with Inversiones is  
in the best interests of the Company and its shareholders. The Board therefore  
recommends that you vote FOR approval of the Share Purchase Agreement and the   
related amendment to the Company's Bylaws. The Board of Directors also          
recommends that you vote FOR the election of its nominees for Director          
(including Mr. Townshend), FOR approval of the proposed amendment to the Stock  
Option Plan, FOR the proposed amendments to the Company's Articles of           
Incorporation, and FOR ratification of the appointment of Moss Adams, L.L.P. as 
the Company's independent auditors for the current fiscal year. You are         
encouraged to read the enclosed Proxy Statement which provides detailed         
information concerning all of the Proposals which are expected to come before   
the Annual Meeting.                                                             

    One further note. If you are a holder of Company Common Stock, you
should have received, along with this letter, a Notice of Annual Meeting, a     
Proxy Statement (with attachments), and a WHITE proxy card. Holders of the      
Company's Series A Preferred Stock should receive, along with this letter, the  
same Notice of Annual Meeting and Proxy Statement (with attachments), but a BLUE
proxy card instead of the WHITE one going to the Common Stockholders. Some of   
our shareholders hold both Common Stock and Series A Preferred Stock, and they  
should receive two packages, which should be identical except that one package  
should include a WHITE proxy card and the other should include a BLUE one. It is
important that each shareholder use only the correct proxy card(s) to record his
or her votes. All votes of Common Stock should be recorded only on the WHITE    
proxy cards, and votes of Series A Preferred Stock should be made only on the   
BLUE proxy cards, even if, in some cases, that requires you to return two proxy 
cards in order to cast all of your votes. Use of the wrong proxy card could     
invalidate your vote, so please be careful to use the right card when you cast  
your vote. If you have any questions about the voting procedures, please read   
the Proxy Statement carefully - it explains these matters more fully. Of course,
you may also call the Company directly with any particular questions you may    
have. Our main telephone number is (800) 733-3871.                              

        Your vote is important, regardless of the number of shares you own. On
behalf of your Board of Directors, I urge you to complete, date, and sign the   
accompanying proxy and return it to the Company promptly. Doing so will not     
prevent you from attending the Annual Meeting or voting in person, but it will  
assure that your vote is counted if you are unable to attend the Annual Meeting.
You may revoke your proxy at any time, by submitting either a written notice of 
revocation or a duly executed proxy bearing a later date to the Company's       
Secretary at the Company's offices prior to the Annual Meeting, or by attending 
the Annual Meeting and voting in person.                                        

      All of us at Mendocino Brewing Company look forward to seeing you at
the Annual Meeting.                                                             

                    Sincerely,

                           /s/ Yashpal Singh

                       Yashpal Singh
                   President

DEF 14A
4th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 4th
 MENDOCINO BREWING COMPANY, INC.
 Post Office Box 400
 13351 Highway 101 South
 Hopland, California 95449
(800) 733-3871

 ---------------------------------

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
to be held on Thursday, June 28, 2001 

 ---------------------------------

         NOTICE IS HEREBY GIVEN that the 2001 Annual Meeting of the Shareholders
of Mendocino Brewing Company, Inc., a California corporation (the "Company"),   
will be held on Thursday, June 28, 2001, at 11:00 a.m., local time, at the Ukiah
Valley Conference Center located at 200 South School Street, Ukiah, California, 
for the following purposes:                                                     

   1.  To approve a Share Purchase Agreement dated November 3, 2000,
          between the Company, Inversiones Mirabel, S.A., and Golden Eagle
Trust, and the transactions contemplated thereby.     

      2.  To amend the Company's Bylaws to allow for the election of up to
nine Directors.                                       

     3.  To elect Directors of the Company, each to serve until the next
         Annual Meeting of Shareholders and until his successor has been
            elected and qualified or until his earlier resignation or removal.
            The Board of Directors has nominated the following candidates: Dr.
          Vijay Mallya, H. Michael Laybourn, R.H.B. (Bobby) Neame, Kent D.
          Price, Sury Rao Palamand, Jerome G. Merchant, and Yashpal Singh,
             and (if Proposals No.1 and 2 are both approved by the shareholders)
David Townshend.                                      

      4.  To approve an amendment to the Company's 1994 Stock Option Plan,
          increasing the number of shares for which options may be granted
under the Plan to 1,000,000 shares.                   

 5.  To approve a set of amendments to the Company's Articles of
      Incorporation, increasing the authorized number of shares of
    Company Common Stock from 20,000,000 to 30,000,000 shares,
         increasing the authorized number of shares of Company Preferred
             Stock from 2,000,000 to 10,000,000 shares, and making certain other
changes.                                              

   6.  To ratify the appointment of Moss Adams L.L.P. as independent
        auditors of the Company for the year ending December 31, 2001.

     7.  To transact such other business as may properly come before the
    Annual Meeting or any adjournment or postponement thereof.

       The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.                                             

DEF 14A
5th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 5th
Shareholders of Mendocino Brewing Company                                       
Notice of Annual Meeting of Shareholders                                        

       The Board of Directors has fixed the close of business on May 8, 2001
as the record date for the determination of shareholders entitled to notice of  
and to vote at the Annual Meeting or any adjournment thereof. Only shareholders 
of record at the close of business on that date are entitled to notice of and to
vote at the Annual Meeting or any adjournment or postponement thereof.          

         YOU ARE URGED TO VOTE IN FAVOR OF MANAGEMENT'S PROPOSALS BY SIGNING AND
RETURNING THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE, WHETHER OR NOT YOU PLAN TO
ATTEND THE MEETING IN PERSON. THE ENCLOSED PROXY IS SOLICITED BY THE COMPANY'S  
BOARD OF DIRECTORS. ANY SHAREHOLDER GIVING A PROXY MAY REVOKE IT PRIOR TO THE   
TIME IT IS VOTED BY NOTIFYING THE SECRETARY OF THE COMPANY IN WRITING OF SUCH   
REVOCATION, BY FILING A DULY-EXECUTED PROXY BEARING A LATER DATE, OR BY         
ATTENDING THE ANNUAL MEETING IN PERSON AND VOTING BY BALLOT.                    

        If you are a holder of Company Common Stock, you should have received,
along with this Notice, a Proxy Statement (with attachments), and a WHITE proxy 
card. Holders of the Company's Series A Preferred Stock should have received the
same material but a BLUE proxy card instead of the WHITE one going to the Common
Stockholders. Some shareholders hold both Common Stock and Series A Preferred   
Stock, and they should receive two identical packages, except that one of them  
should include a WHITE proxy card and the other should include a BLUE one. It is
important that each shareholder use only the correct proxy card(s) to record his
or her votes. All votes of Common Stock should be recorded only on the WHITE    
proxy cards, and votes of Series A Preferred Stock should be made only on the   
BLUE proxy cards, even if, in some cases, that requires you to return two proxy 
cards in order to cast all of your votes. Use of the wrong proxy card could     
invalidate your vote, so please be careful to use the right proxy card when you 
cast your vote. If you have any questions about the voting procedures, please   
read the Proxy Statement carefully - it explains these matters more fully. Of   
course, you may also call the Company directly with any particular questions you
may have. Our main telephone number is (800) 733-3871.                          

To help us in planning for the Annual Meeting, please mark the
appropriate box on the accompanying proxy if you plan to attend.                

                          By Order of the Board of Directors

        /s/ N. Mahadevan
                                    --------------------------------------------
Hopland, California                     N. Mahadevan                            
May 11, 2001                            Corporate Secretary                     

DEF 14A
6th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 6th
 MENDOCINO BREWING COMPANY, INC.
 Post Office Box 400
 13351 Highway 101 South
 Hopland, California 95449

 PROXY STATEMENT FOR
ANNUAL MEETING OF SHAREHOLDERS
 TO BE HELD ON JUNE 28, 2001

INTRODUCTION

       This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of Mendocino Brewing Company, Inc., a California      
corporation (the "Company"), of proxies to be used at the Annual Meeting of the 
Shareholders of the Company to be held on Thursday, June 28, 2001, at 11:00     
a.m., local time, at the Ukiah Valley Conference Center located at 200 South    
School Street, Ukiah, California, and at any adjournment or adjournments thereof
(the "Annual Meeting"). The approximate date on which this Proxy Statement and  
the accompanying Proxy were mailed to stockholders is May 11, 2001. The mailing 
address of the principal executive offices of the Company is: Post Office Box   
400, 13351 Highway 101 South, Hopland, CA 95449, and its telephone number is:   
(800) 733-3871.                                                                 

Matters for Consideration at the Annual Meeting                                 

      At the Annual Meeting, Shareholders will be asked to consider and to
vote upon the following:                                                        

       Proposal No. 1: To approve a Share Purchase Agreement, dated November
3, 2000, between the Company, Inversiones Mirabel, S.A., and Golden Eagle Trust,
and the transactions contemplated thereby.                                      

         Proposal No. 2: To amend the Company's Bylaws to allow for the election
of up to nine Directors.                                                        

        Proposal No. 3: To elect Directors of the Company, each to serve until
the next Annual Meeting of Shareholders and until his successor has been elected
and qualified or until his earlier resignation or removal. The Board of         
Directors has nominated the following candidates: Dr. Vijay Mallya, H. Michael  
Laybourn, R.H.B. (Bobby) Neame, Kent D. Price, Sury Rao Palamand, Jerome G.     
Merchant, and Yashpal Singh, and (if Proposals No.1 and 2 are approved by the   
shareholders) David Townshend.                                                  

     Proposal No. 4: To approve an amendment to the Company's 1994 Stock
Option Plan, increasing the number of shares for which options may be granted   
under the Plan to 1,000,000 shares.                                             

      Proposal No. 5: To approve an amendment to the Company's Articles of
Incorporation, increasing the authorized number of shares of Company Common     
Stock from 20,000,000 to 30,000,000 shares, increasing the authorized number of 
shares of Company Preferred Stock from 2,000,000 to 10,000,000 shares, and      
making certain other changes.                                                   

    Proposal No. 6. To ratify the appointment of Moss Adams, L.L.P. to
serve as the Company's independent accountants for the year ending December 31, 
2001.                                                                           

       THE BOARD OF DIRECTORS OF THE CORPORATION UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" EACH OF THE FOREGOING PROPOSALS.                        

1 

DEF 14A
7th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 7th
 TABLE OF CONTENTS

                                                        [Enlarge/Download Table]

Caption                                                                               Page No.
-------                                                                               --------
                                                                                              
PROXY STATEMENT SUMMARY..............................................................     4   
   Proposal No. 1:  Acquisition Of United Breweries International (UK) Limited.......     4   
   Proposal No. 2:  Amendment of the Company's Bylaws................................     6   
   Proposal No. 3:  Election of Directors............................................     6   
   Proposal No. 4:  Amendment of Stock Option Plan...................................     7   
   Proposal No. 5:  Amendment of the Company's Articles of Incorporation.............     7   
   Proposal No. 6:  Ratification of Independent Auditors.............................     8   

GENERAL INFORMATION..................................................................     8   
   Persons Making the Solicitation...................................................     8   
   Voting Securities of the Company..................................................     8   
   Solicitation of Proxies...........................................................    11   
   Revocability of Proxies...........................................................    11   
   Market Listing....................................................................    11   
   Forward Looking Statements Regarding the Company..................................    11   
   Available Information.............................................................    12   

PROPOSAL NO. 1:  ACQUISITION OF UNITED BREWERIES INTERNATIONAL (UK) LIMITED..........    12   
   Description of the Proposed Acquisition...........................................    13   
    The Parties to the Agreement.....................................................    13   
    Description of the Transaction...................................................    13   
   Related Party Transaction.........................................................    15   
   The Company's Principal Reasons for the Acquisition...............................    15   
   Inversiones' Principal Reasons for the Acquisition................................    16   
   History of the Acquisition........................................................    17   
   Comparison of Shareholder Rights..................................................    19   
   Consequences of Failure to Approve the Acquisition................................    20   
   Fairness Opinion of the Company's Financial Advisor...............................    20   
   Accounting Treatment..............................................................    22   
   U.S. Federal Income Tax Consequences..............................................    23   
   Market Information................................................................    23   
   More Information about the Company................................................    23   
   Information about UBI and UBSN....................................................    24   
   Dissenters' Rights................................................................    29   
   Vote Required for Approval........................................................    30   

PROPOSAL NO. 2:  AMENDMENT OF THE COMPANY'S BYLAWS...................................    30   
   Vote Required for Approval........................................................    30   

PROPOSAL NO. 3:  ELECTION OF DIRECTORS...............................................    31   
   Nominees for Director.............................................................    31   
   Directors and Executive Officers of the Company...................................    31   
   Board of Directors' Meetings and Committees.......................................    33   
   Report of the Audit Committee.....................................................    34   
   Director Compensation.............................................................    35   
   Significant Employees.............................................................    36   
   Security Ownership of Certain Beneficial Owners and Management....................    36   

2 

DEF 14A
8th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 8th
                                                        [Enlarge/Download Table]

                                                                                             
   Executive Compensation............................................................     38 
   Stock Option Grants...............................................................     38 
   Employment Agreement..............................................................     39 
   Certain Transactions..............................................................     39 
   Change in UBA's Beneficial Ownership Interest.....................................     40 
   Section 16(a) Beneficial Ownership Reporting Compliance...........................     40 
   Vote Required for the Election of Directors.......................................     41 

PROPOSAL NO. 4:  AMENDMENT OF THE COMPANY'S 1994 STOCK OPTION PLAN...................     41 
   History of the 1994 Plan..........................................................     41 
   Options Now Outstanding Under the 1994 Plan.......................................     41 
   Description of the Proposed Amendment.............................................     42 
   New Plan Benefits.................................................................     42 
   Administration of the 1994 Plan...................................................     43 
   Options Available for Grant under the 1994 Plan...................................     43 
   Eligibility.......................................................................     43 
   Terms of Options..................................................................     44 
   Adjustment Upon Changes in Capitalization.........................................     45 
   Amendment and Termination.........................................................     46 
   Federal Income Tax Aspects of the 1994 Plan.......................................     46 
   Vote Required for Approval........................................................     47 

PROPOSAL NO. 5:  AMENDMENT OF THE COMPANY'S ARTICLES OF INCORPORATION................     48 
   Description of and Reasons for the Proposed Amendments............................     48 
   General Reasons for the Proposed Amendments.......................................     51 
   Effect of the Proposed Amendments on the Series A Preferred Stock.................     51 
   Potential Future Offering of Preferred Shares.....................................     51 
   Vote Required for Approval........................................................     52 

PROPOSAL NO. 6:  RATIFICATION OF INDEPENDENT AUDITORS................................     52 
   Vote Required for Approval........................................................     53 

OTHER MATTERS    ....................................................................     53 
   Shareholder Proposals to be Presented at the Next Annual Meeting..................     53 
   Availability of Form 10-KSB.......................................................     53 
   Other Matters to be Considered at the Annual Meeting..............................     53 
   Supplements and Other Attached Documents..........................................     54 

List of Supplements:                                                                         
         Supplement A - Share Purchase Agreement                                             
         Supplement B - Fairness Opinion                                                     
         Supplement C - Dissenters' Rights Information                                       
         Supplement D - Pro Forma and Consolidated Financial Statements of Mendocino Brewing 
                            Company, Inc. and United Breweries International (UK) Limited    
         Supplement E - Bylaws Amendment                                                     
         Supplement F - 1994 Stock Option Plan                                               
         Supplement G - Amended and Restated Articles of Incorporation                       

Documents Attached:                                                                          
         Mendocino Brewing Company, Inc. 2000 Annual Report on Form 10-KSB (Without Exhibits)

3 

DEF 14A
9th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 9th
 PROXY STATEMENT SUMMARY

        The following is a summary of the material contained elsewhere in this
Proxy Statement, and highlights certain information which is discussed more     
fully below in this Proxy Statement. This Summary is merely an overview of the  
full text of the Proxy Statement, therefore please refer to the Table of        
Contents, above, for the location in this Proxy Statement of the full text and  
description of each of the Proposals referred to in this Summary.               

Proposal No. 1:  Acquisition Of United Breweries International (UK) Limited     

    The following is a summary of the material discussed in this Proxy
Statement under the heading "PROPOSAL NO. 1: Acquisition of United Breweries    
International (UK) Limited" with respect to the Company's proposed acquisition  
of that company (the "Acquisition"). Since this Summary does not contain a      
complete description of the proposed Acquisition or all of the information about
that transaction and its consequences which may be important to you, you should 
read the rest of this Proxy Statement and the accompanying material with care,  
including the Share Purchase Agreement attached hereto as Supplement A, the     
Fairness Opinion of Sage Capital, LLC attached hereto as Supplement B, and the  
documents referred to under the heading "OTHER MATTERS -- Incorporation of      
Certain Documents by Reference," below. The following discussion of the         
Agreement is only a brief summary of the Agreement itself, therefore, there may 
be conflicts between the following description and the actual terms of the      
Agreement. As this discussion is only a summary of the Agreement, the actual    
terms of the Agreement will govern any conflict.                                

The Parties to the Acquisition Agreement                      

            o  Mendocino Brewing Company, Inc. (the "Company", "we", or "us"),

o  Inversiones Mirabel, SA, a Panamanian corporation  
      ("Inversiones"), which owns all of the stock of United
      Breweries International (UK) Limited, a United Kingdom
corporation ("UBI"), and                        

          o  Golden Eagle Trust, a trust formed under the laws of the Isle
           of Man (part of the United Kingdom) ("Golden Eagle"), which
owns all of the stock of Inversiones.           

          o  For more information please see "PROPOSAL NO. 1 - Description
            of the Proposed Acquisition - The parties to the Agreement,"
below.                                          

Relationships Among the Parties                               

           o  Golden Eagle is controlled by trustees who may act in favor of
          our Chairman of the Board and Chief Executive Officer, Dr.
      Vijay Mallya, therefore, Dr. Mallya himself may have a
material financial interest in Golden Eagle.    

      o  Inversiones is a wholly-owned subsidiary of Golden Eagle.

     o  Golden Eagle is also the parent of the controlling (97%)
           shareholder of United Breweries of America Inc., a Delaware
            corporation ("UBA") which is the Company's principal (55.3%)
shareholder.                                    

            o  For more information please see "PROPOSAL NO. 1 - Related Party
Transaction," below.                            

4 

DEF 14A
10th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 10th
Description of the Transaction.                               

       Pursuant to the Agreement, the Company has agreed to buy from
             Inversiones all of the outstanding shares of UBI (there are 100,000
          shares outstanding). The Company would pay for the UBI shares by
         issuing to Inversiones 5,500,000 shares of the Company's Common
    Stock. The shares of Common Stock proposed to be issued to
           Inversiones would constitute approximately 49.6% of the Company's
             outstanding Common Stock after the Acquisition is consummated. As a
         consequence of the Acquisition, UBI would become a wholly-owned
        subsidiary of the Company. The Company has also agreed to seek
     shareholder approval for the election or appointment of one
        Director to be nominated by Inversiones. (For more information
 please see "PROPOSAL NO.1 - Description of the Proposed
Acquisition," below.)                                 

Reasons for the Acquisition                                   

            The principal purpose of the Agreement, from our point of view, is
             to acquire all of the outstanding shares of UBI, which in turn owns
        100% of UBSN Ltd., a United Kingdom corporation ("UBSN"). UBSN
            markets, sells, and distributes Kingfisher Lager, primarily in the
          United Kingdom and elsewhere in the European Union. By acquiring
            UBI, we will obtain UBSN, a profitable company which is engaged in
           the sale and marketing of specialized beer in markets outside the
             United States, and holds the U.S. distribution rights to distribute
       Kingfisher Lager beer, a niche market beer which has thus far
  proved to be successful in its market segment. (For more
         information please see "PROPOSAL NO. 1--the Company's Principal
             Reasons for the Acquisition," and "--Inversiones' Principal Reasons
for the Transaction," below.)                         

What the Company is Paying for UBI                            

          o  In the Acquisition, we will be buying from Inversiones all of
                the outstanding shares of UBI. The entire purchase price for UBI
             will consist of 5,500,000 shares of our Common Stock. No cash
              will be paid for any of the UBI shares being purchased. If the
           Acquisition is consummated, the additional shares of Common
              Stock to be issued would constitute approximately 49.6% of our
    outstanding shares immediately after it takes place.

The Effect of the Acquisition on the Company's Shareholders   

          o  We would acquire a profitable company which is engaged in the
              sale and marketing of specialized beer primarily in the United
            Kingdom and European markets, as well as the U.S., Canadian,
              European, and Japanese distribution rights to Kingfisher Lager
            beer, an international brand which has proven success in its
respective market segment.                      

         o  We would issue to Inversiones 5,500,000 shares of our Common
         Stock, as described below. The new Common Stock would, by
   itself, amount to approximately 49.6% of all of the
             outstanding Common Stock of the Company after the Acquisition
      takes place. As a result of this issuance, our current
             shareholders would experience immediate and material dilution
           in the percentage of our Common Stock that their shares now
           represent. As an example, 10,000 shares of Common Stock now
              represents about 1.8% of the Company's Common Stock today, but
          it would represent only about 0.9% of the Company's voting
power afterwards.                               

        o  After the Acquisition, Inversiones would hold approximately
            49.6% of all of the outstanding Common Stock of the Company.
           Inversiones is controlled by the same entity - Golden Eagle
      Trust - which controls UBA, our principal shareholder.
Together,                                       

5 

DEF 14A
11th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 11th
     Inversiones and UBA would own, after the Acquisition,
  approximately 78% of our outstanding Common Stock.

            o  For more information please see "PROPOSAL NO. 1 - Comparison of
Shareholder Rights," below.                     

Fairness Opinion                                              

         We have retained Sage Capital, LLC, an independent investment
            banking firm, to evaluate the Acquisition. Sage Capital, LLC has
           given its opinion that the proposed transaction is fair, from a
            financial point of view, to us and to our shareholders, and that
             opinion is attached to this Proxy Statement as Supplement B. (For
             more information please see "PROPOSAL NO. 1 - Fairness Opinion of
the Company's Financial Advisor," below.)           

Dissenters' Rights                                            

           Any holders of the Company's Common Stock as of the record date
            (which is May 8, 2001) for the Annual Meeting who do not vote in
          favor of Proposal No. 1 (either in person or by proxy) will be
           entitled, under California law, to exercise certain dissenters'
           rights with respect to this transaction. Those shareholders are
        referred to herein as "Dissenting Shareholders." (Holders of
          Preferred Stock do not have dissenters' rights with respect to
           this Proposal.) We are required to offer to purchase the Common
             Stock of any Dissenting Shareholder for cash, at a price of $0.81
            per share. If you wish to preserve the right to have us purchase
             your dissenting shares, you must either vote against Proposal No.
             1, either in person at the Annual Meeting or by proxy, or refrain
            from voting in favor of the Proposal, again either personally or
    by proxy. (For more information please see "PROPOSAL NO.
1 - Dissenters' Rights," below.)                    

Proposal No. 2:  Amendment of the Company's Bylaws                              

        The Company's Bylaws currently authorize a number of Directors between
five and seven, allowing the Board of Directors to fix the exact number within  
that range. At present, the Board consists of seven Directors, so that all the  
available spaces on the Board are currently filled. At the Annual Meeting, the  
Shareholders are being asked to approve an amendment to Article II, Section 2.2 
of the Bylaws to increase the range of authorized Directors to between five and 
nine, with the exact number within that range to be set by the Board. The       
proposed text of the amended Section 2.2 of the Company's Bylaws is attached to 
this Proxy Statement as Supplement E. The reason for this Proposal is that,     
under the terms of the Agreement with Inversiones described above, the Company  
has given Inversiones the right to nominate one Director to the Company's Board.
If both the transaction with Inversiones and the proposed Bylaw amendment are   
approved by the Shareholders, therefore, the Board intends to increase the size 
of the Board to eight, making one additional place available for the new        
Director. Inversiones has proposed that David Townshend to fill the place thus  
created.                                                                        

Proposal No. 3:  Election of Directors                                          

     At the Annual Meeting, Shareholders will elect Directors. Under the
Company's current Bylaws the Company's Board may consist of between five and    
seven members, with the current number set at seven, but if Proposals No. 1 and 
2 above, are approved, this range will be increased to between five and nine.   
Either seven or eight nominees will be elected at the Annual Meeting to be the  
Directors of the Company, depending on the outcome of the vote on Proposals 1   
and 2, above. The Board has nominated its current seven members to serve as     
Directors of the Company until the next Annual Meeting. Assuming that Proposals 
No. 1 and 2 will both be approved, the Board has, at the request of Inversiones,
nominated                                                                       

6 

DEF 14A
12th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 12th
Mr. David Townshend (this nomination will be withdrawn, however, if either      
Proposal No. 1 or Proposal No.2 are not approved by the shareholders.           

Proposal No. 4:  Amendment of Stock Option Plan                                 

   The Board of Directors has proposed that the Company's 1994 Stock
Option Plan be amended to increase the total number of options available to be  
granted under the Plan from the current 200,000 shares to 1,000,000 shares. A   
copy of the 1994 Stock Option Plan is attached to this Proxy Statement as       
Supplement F. The Board believes that this increase is appropriate because as   
the Plan is now structured there are no more options available for grant under  
the Plan, and additional options should be granted in the future in order to    
continue to provide appropriate incentives to persons who are making significant
contributions to the Company's continued growth and development (all assuming   
that Proposals No. 1 and 2 are approved by the shareholders).                   

Proposal No. 5:  Amendment of the Company's Articles of Incorporation           

     The Board of Directors has approved some proposed amendments to the
Company's Articles of Incorporation, which are being submitted to the           
shareholders of the Company for their approval at the Annual Meeting. If        
approved by the shareholders, the proposed amendments would:                    

          o  increase the number of authorized shares of Common Stock from
20,000,000 to 30,000,000;                       

             o  increase the number of authorized shares of Preferred Stock from
2,000,000 to 10,000,000; and                    

          o  permit the future issuance of one or more series of Preferred
         Stock which would have voting rights and /or the right to
             share in the Company's assets in the event of any liquidation
or dissolution of the Company.                  

        The proposed amendments to the Company's Articles of Incorporation are
not intended or expected to have any effect on the rights of the holders of     
Company's currently outstanding Series A Preferred Stock. A copy of the proposed
Amended and Restated Articles of Incorporation for the Company is attached to   
this Proxy Statement as Supplement G. The Board of Directors believes that the  
proposed amendments are appropriate because the terms of the Company's current  
Articles are so restrictive with respect to the rights of any future series of  
Preferred Stock as to make it extremely difficult for the Company to be able to 
raise capital through the issuance and sale of any new series of Preferred      
Stock. Further, in the event that the shareholders approve Proposals No. 1 and  
No. 2, which are described elsewhere in this Proxy Statement and will also be   
submitted to the shareholders for their approval at the Annual Meeting, the     
Company will have issued or reserved for issuance over half of the shares of    
Common Stock it is authorized to issue under the current Articles of            
Incorporation, thus further restricting the Company's ability to raise capital  
in the future through the issuance and sale of its shares. It is the Board's    
intention to seek to raise additional funds by issuing a new series of Preferred
Stock, possibly later this year, and although no specific details of such a     
private placement have yet been determined, the Board believes that in order to 
make such an offering successful it will be necessary to increase the number of 
shares of Common and Preferred Stock it is authorized to issue, and to make the 
other changes to the Company's Articles which are part of Proposal No. 5.       

    Holders of the Company's Series A Preferred Stock will be asked to
approve the proposed amendments along with the holders of the Company's Common  
Stock, although the holders of the Series A Preferred Stock do not have the     
right to vote on any of the other Proposals described in this Proxy Statement.  

7 

DEF 14A
13th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 13th
Proposal No. 6:  Ratification of Independent Auditors                           

 The Company has appointed Moss Adams, L.L.P. as its independent
auditors to perform the audit of the Company's financial statements for the     
current fiscal year, and the shareholders are being asked to ratify such        
appointment. Moss Adams, L.L.P. also audited the Company's 1999 and 2000        
financial statements.                                                           

 GENERAL INFORMATION

Persons Making the Solicitation                                                 

      This solicitation of Proxies is being made by the Company's Board of
Directors. The expenses of preparing, assembling, printing, and mailing this    
Proxy Statement and the materials used in the solicitation of Proxies for the   
Annual Meeting will be borne by the Company. It is contemplated that Proxies    
will be solicited principally through the use of the mails, but officers,       
Directors, and employees of the Company may solicit Proxies personally or by    
telephone, without receiving special compensation therefor. The Company will    
reimburse banks, brokerage houses, and other custodians, nominees, and          
fiduciaries for their reasonable expenses in forwarding these Proxy materials to
shareholders whose stock in the Company is held of record by such entities. In  
addition, the Company will use the services of Corporate Investor               
Communications, Inc., a company it does not regularly employ, in connection with
this solicitation of Proxies.                                                   

Voting Securities of the Company                                                

       All properly executed proxies delivered pursuant to this solicitation
and not revoked will be voted at the Annual Meeting in accordance with the      
directions given, and shareholders may of course attend the Annual Meeting and  
vote their shares in person. Proxies which are executed and returned to the     
Company without contrary instructions will be voted "For" Proposals 1, 2, 4, 5, 
and 6, "For" the election of each of the Board's nominees for Director, and     
otherwise in the discretion of the proxyholders.                                

    Outstanding Shares; Record Date. There were issued and outstanding
5,580,498 shares of the Company's Common Stock (the "Common Stock") and 227,600 
shares of the Company's Series A Preferred Stock (the "Series A Preferred       
Stock") on May 8, 2001, which date has been fixed as the record date for the    
purpose of determining shareholders entitled to notice of, and to vote at, the  
Annual Meeting (the "Record Date").                                             

Voting Generally.                                             

                Holders of Common Stock. On any matter submitted to the vote
of the shareholders other than the election of Directors, each holder of Common 
Stock will be entitled to one vote, in person or by Proxy, for each share of    
Common Stock held of record on the Company's books as of the Record Date. With  
respect to the special rules relating to the election of Directors, please see  
below under the captions "Election of Directors" and "Cumulative Voting."       
Holders of Common Stock will receive a WHITE proxy card together with this Proxy
Statement.                                                                      

               Holders of Series A Preferred Stock. Although the Company's
Series A Preferred Stock does not normally carry with it the right to vote,     
because of the nature of the proposed amendments to the Company's Articles of   
Incorporation which are included in Proposal No. 5, the holders of the Series A 
Preferred Stock will have the right to vote on that Proposal along with the     
holders of the Common Stock.                                                    

8 

DEF 14A
14th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 14th
Each holder of a share of Series A Preferred Stock will be entitled to one vote 
on Proposal No. 5, in person or by Proxy, for each such share held of record on 
the Record Date. The holders of the Series A Preferred Stock will not, however, 
have the right to vote on any matter expected to come before the Annual Meeting 
other than Proposal No. 5. Holders of Series A Preferred Stock will receive a   
BLUE proxy card together with this Proxy Statement.                             

              Casting Your Votes: WHITE and BLUE Proxy Cards. Holders of
Common Stock may cast their Common Stock votes only on the WHITE proxy card     
which accompanies this Proxy Statement. Holders of Series A Preferred Stock will
receive a BLUE proxy card, for the purpose of voting their Series A Preferred   
Stock. Some stockholders, who own both Common Stock and Series A Preferred      
Stock, will receive two Proxy Statements, one enclosing a WHITE proxy card for  
voting their shares of Common Stock and the other containing a BLUE proxy card  
for the purpose of voting their shares of Series A Preferred Stock. Whatever    
proxy card or cards you receive, the Company cannot accept any votes of Common  
Stock which are received on a BLUE proxy card, or any votes of Series A         
Preferred Stock which are received on a WHITE proxy card, so if you receive both
a WHITE proxy card and a BLUE one please be sure to vote only your Common Stock 
on the WHITE card, and only your Series A Preferred Stock on the BLUE card. If  
you believe that you have received the wrong color card for the shares you own, 
please contact the Company's Manager of Investor Relations, Sarah McDaniel at   
(800) 733-3871, and you will be promptly sent a replacement proxy card (or      
cards) at your request.                                                         

        Voting Procedures. Shareholders may vote in favor of or against any of
the Proposals on which they are entitled to vote (keeping in mind that holders  
of Common Stock may vote on all of the Proposals; holders of Series A Preferred 
Stock may only vote on Proposal No. 5), or may abstain from voting on them, by  
specifying their choice as indicated on the appropriate proxy card. If no       
specific instructions are given with respect to any Proposal, however, the      
shares represented by any signed proxy will be voted FOR that that Proposal.    
Shareholders may also abstain from voting on all of the Proposals by simply not 
returning any proxy card. If a shareholder wishes to do so, he or she may also  
attend the Annual Meeting in person, and either submit a signed proxy card at   
that time or vote by ballot at the Annual Meeting.                              

  Votes Required for Approval. Ratification of Proposal No. 1 (the
acquisition of UBI), Proposal No. 2 (the Bylaws amendment), Proposal No. 4 (the 
increase in the number of shares reserved for issuance pursuant to the Company's
Option Plan), and Proposal No. 6 (approval of the auditors for fiscal 2001) will
require only the affirmative vote of the holders of a majority of the shares of 
Common Stock of the Company voting in person or by proxy at the Annual Meeting. 
(The holders of the Series A Preferred Stock are not entitled to vote those     
shares on these Proposals.) Thus, abstentions and broker non-votes, although    
they will be counted in determining whether a quorum is present for the vote on 
all matters to come before the Annual Meeting, will have no direct effect on the
outcome of the votes on those Proposals.                                        

       Directors of the Company will be elected (Proposal No. 3) by the vote
of a plurality of the shares of Common Stock which are present at the Annual    
Meeting, as discussed below under the heading "Election of Directors." (The     
holders of the Series A Preferred Stock are not entitled to vote those shares on
the election of Directors.) Thus, abstentions and broker non-votes could have an
indirect effect on the outcome of the election of Directors, since they will    
enable a smaller number of votes to determine the outcome of the election.      

  Adoption of the proposed amendments to the Company's Articles of
Incorporation (Proposal No. 5) will require the approval of a majority of all of
the outstanding shares of the Company's Common Stock, voting as a single class, 
as well as a majority of the shares of the Company's Series A Preferred Stock,  
also voting as a class, but separately from the votes of the Common             
Stockholders. (The                                                              

9 

DEF 14A
15th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 15th
holders of Series A Preferred Stock are entitled to vote such shares on Proposal
No. 5, although not on any of the other Proposals.) Thus, abstentions and broker
non-votes will have the same effect as votes against Proposal No. 5.            

   Election of Directors. With respect to the election of Directors,
shareholders may vote in favor of all nominees, or withhold their votes as to   
all nominees, or withhold their votes as to specific nominees, by following the 
instructions on the enclosed proxy card. Directors will be elected by a         
plurality of the votes cast by the holders of the Company's Common Stock, voting
in person or by proxy at the Annual Meeting.                                    

A shareholder may choose to withhold from the proxyholders the
authority to vote for any of the individual candidates nominated by the Board of
Directors, by marking the appropriate box on the proxy card and striking out the
names of the disfavored candidates as they appear on the proxy card. In that    
event, the proxyholders will not cast any of the shareholder's votes for        
candidates whose names have been crossed out, whether or not cumulative voting  
is called for at the Annual Meeting, but they will retain the authority to vote 
for the candidates nominated by the Board of Directors whose names have not been
struck out, and for any other candidates who may be properly nominated at the   
Annual Meeting. If a shareholder wishes to specify the manner in which his or   
her votes are allocated in the event of cumulative voting, then he or she must  
appear and vote in person at the Annual Meeting. Ballots will be available at   
the Annual Meeting for persons desiring to vote in person. All votes will be    
tabulated by Boston Equiserve, Inc., the Company's Registrar and Transfer Agent,
which will act as the tabulating agent for the Annual Meeting.                  

         Cumulative Voting. In connection with the election of Directors (only),
shares may be voted cumulatively, but only for persons whose names have been    
placed in nomination prior to the voting for election of Directors and only if a
shareholder present at the Annual Meeting gives notice at the Annual Meeting,   
prior to the vote, of his or her intention to vote cumulatively. (Notice of     
intention to vote cumulatively may not be given by simply marking and returning 
a proxy.) If any Company shareholder gives such notice, then all shareholders   
eligible to vote will be entitled to cumulate their votes in voting for election
of Directors. Cumulative voting allows a shareholder to cast a number of votes  
equal to the number of shares held in his or her name as of the Record Date,    
multiplied by the number of Directors to be elected. All of these votes may be  
cast for any one nominee, or they may be distributed among as many nominees as  
the shareholder sees fit. The nominees receiving the highest number of votes, up
to the number of places to be filled, shall be elected.                         

        If one of the Company's shareholders gives notice of intention to vote
cumulatively, the persons holding the proxies solicited by the Board of         
Directors will exercise their cumulative voting rights, at their discretion, to 
vote the shares they hold in such a way as to ensure the election of as many of 
the Board's nominees as they deem possible. This discretion and authority of the
proxyholders may be withheld by checking the box on the proxy card marked       
"withhold from all nominees." Such an instruction, however, will also deny the  
proxyholders the authority to vote for any or all of the nominees of the Board  
of Directors, even if cumulative voting is not called for at the Annual Meeting,
although it will not prevent the proxyholders from voting, at their discretion, 
for any other person whose name may be properly placed in nomination at the     
Annual Meeting.                                                                 

   Under California law and the Company's Articles of Incorporation,
cumulative voting may not be used in connection with any matter other than the  
election of Directors.                                                          

        Quorum. The presence of the persons entitled to vote a majority of the
voting shares of the Company at the Annual Meeting, whether those persons are   
present in person or only by proxy, will constitute a quorum for the transaction
of business at the Annual Meeting. If a quorum is not present at                

10

DEF 14A
16th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 16th
the time the Annual Meeting is convened, or if for any other reason the Company 
believes that additional time should be allowed for the solicitation of proxies 
or consideration of the issues raised at the Annual Meeting, the Company may    
adjourn the Annual Meeting. If the Company proposes to adjourn the Annual       
Meeting by a vote of the shareholders, the persons named in the enclosed form of
proxy will vote all shares for which they have voting authority in favor of such
adjournment.                                                                    

         Votes Cast at the Annual Meetings. Representatives of Boston Equiserve,
Inc., the Company's Registrar and Transfer Agent, will be in attendance at the  
Annual Meeting in order to receive and tabulate any votes cast at that time.    

Solicitation of Proxies                                                         

       The expense of soliciting proxies in the form accompanying this Proxy
Statement will be paid by the Company. Following the original mailing of the    
proxies and other soliciting materials, the Company and/or its agents may also  
solicit proxies by mail, telephone or facsimile, or in person. The Company will 
request that brokers, custodians, nominees, and other record holders of the     
Company's Common and Series A Preferred Stock forward copies of the proxy and   
other soliciting materials to persons for whom they hold such shares and request
authority for the exercise of proxies. In such cases, the Company, upon the     
request of the record holders, will reimburse such holders for their reasonable 
expenses. The Company also expects to use the services of Corporate Investor    
Communications, Inc., a proxy solicitation firm, in connection with the         
solicitation of proxies for the Annual Meeting. Although the exact cost of these
services is not known at this time, it is anticipated that the cost will not    
exceed $8,000.                                                                  

Revocability of Proxies                                                         

 A form of Proxy for voting your shares at the Annual Meeting is
enclosed. Any shareholder who executes and delivers such Proxy has the right to,
and may, revoke it at any time before it is exercised, by filing with the       
Secretary of the Company an instrument revoking it or a duly executed Proxy     
bearing a later date. In addition, if the person executing a Proxy is present at
the Annual Meeting, and elects to vote in person, the powers of the Proxy       
holders will be superseded as to those Proposals on which the shareholder       
actually votes at the Annual Meeting.                                           

Market Listing                                                                  

         The Company's Common Stock is listed on the Pacific Exchange and trades
under the symbol "MBR."                                                         

Forward Looking Statements Regarding the Company                                

      Certain information contained in this proxy statement which does not
relate to historical financial information may be deemed to constitute forward  
looking statements. The words or phrases "will likely result," "are expected    
to," "will continue," "is anticipated," "estimate," "project," "believe,"       
"intend," "plan," "budget," or similar expressions identify "forward looking    
statements" within the meaning of the Private Securities Litigation Reform Act  
of 1995. This proxy statement contains certain forward-looking statements with  
respect to the plans, objectives, future performance, and business of the       
Company. Because such statements are subject to risks and uncertainties, actual 
results may differ materially from historical results and those presently       
anticipated or projected. The Company's shareholders are cautioned not to place 
undue reliance on such statements, which speak only as of the date of this Proxy
Statement. The Company does not undertake any obligation to release publicly any
revisions to such forward-looking statements to reflect events or circumstances 
after the date hereof or to reflect the occurrence of unanticipated events.     

11

DEF 14A
17th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 17th
Available Information                                                           

       The Company is subject to the informational reporting requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in    
accordance therewith periodically files reports, proxy statements, and other    
information with the Securities and Exchange Commission (the "Commission"). Such
reports, proxy statements and other information can be inspected and copies made
at the public reference facilities of the Commission at Room 1024, 450 Fifth    
Street, N.W., Washington, D.C. 20549, and the Commission's regional offices at  
Seven World Trade Center, Suite 1300, New York, New York 10048 and Citicorp     
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of 
such material can also be obtained from the Public Reference Section of the     
Commission at its Washington, D.C. address at prescribed rates. Such material   
may also be accessed electronically by means of the Commission's Web site at    
http://www.sec.gov.                                                             

PROPOSAL NO. 1:   ACQUISITION OF UNITED BREWERIES INTERNATIONAL (UK) LIMITED    

      At the Annual Meeting, the Shareholders will have the opportunity to
vote to approve the proposed acquisition of all of the issued and outstanding   
capital stock of United Breweries International (UK) Limited, a company         
organized under the laws of England and Wales ("UBI"), which is currently       
wholly-owned by Inversiones Mirabel, S.A., a Panamanian corporation             
("Inversiones"), in exchange for stock in the Company (the "Acquisition"). As a 
consequence of the Acquisition, UBI would become a wholly-owned subsidiary of   
the Company. The Company would not be required to pay any cash to acquire UBI.  
The entire purchase price would consist of five million five hundred thousand   
(5,500,000) newly issued shares of the Company's Common Stock The principal     
terms of the Acquisition will be presented by management at the Annual Meeting, 
and a copy of the Share Purchase Agreement is attached to this Proxy Statement  
as Supplement A (the "Agreement").                                              

         Inversiones is a wholly-owned subsidiary of Golden Eagle Trust, an Isle
of Man trust ("Golden Eagle") which is controlled by a corporation, CAS         
Nominees, Ltd. ("CAS"). The Company's Chairman of the Board and Chief Executive 
Officer, Dr. Vijay Mallya, may be deemed to be a beneficial owner of, and       
therefore have a material financial interest in, Golden Eagle because as        
trustees, CAS may exercise discretion in Dr. Mallya's favor. Golden Eagle has   
agreed to guarantee the representations and warranties made by Inversiones under
the Share Purchase Agreement.                                                   

     The principal purpose of the Agreement, from the Company's point of
view, is the acquisition of UBSN Ltd., a United Kingdom corporation ("UBSN")    
which is 100% owned by UBI. UBSN markets, sells, and distributes Kingfisher     
Lager beer, primarily in the United Kingdom and elsewhere in the European Union.
Currently, the Kingfisher beer is brewed for UBSN by a third party, Shepherd    
Neame Limited, under a contract manufacturing agreement.                        

       Holders of the Company's Common Stock who do not vote in favor of the
proposed Acquisition will be entitled, under California law, to exercise certain
dissenter's rights. See "PROPOSAL NO. 1 -Dissenters' Rights," below, for a more 
complete description of the rights and responsibilities of shareholders wishing 
to exercise such dissenter's rights.                                            

12

DEF 14A
18th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 18th
Description of the Proposed Acquisition                                         

The Parties to the Agreement                                                    

        The Company. Mendocino Brewing Company, Inc., a California corporation
(the "Company"), has historically brewed four ales and one stout, one seasonal  
ale, and one seasonal porter. The Company's brands include Red Tail Ale, Blue   
Heron Pale Ale, Eye of the Hawk Select Ale, Black Hawk Stout, Peregrine Golden  
Ale, and two seasonals for the domestic craft beer market. The Company operates 
two brewing facilities: one in Ukiah, California and another in Saratoga        
Springs, New York.                                                              

     Golden Eagle. Golden Eagle Trust ("Golden Eagle") is a trust formed
under the laws of the Isle of Man (part of the United Kingdom). Among its other 
assets, Golden Eagle holds 100% of the outstanding stock of Inversiones. Golden 
Eagle will guaranty the performance and accuracy of Inversiones' representations
and warranties, and its indemnity obligations, under the Agreement.             

       Inversiones. Inversiones Mirabel, S.A. ("Inversiones"), which is 100%
owned by Golden Eagle, is a holding company organized under the laws of Panama. 
Its sole function is to hold shares in various companies, including UBI.        

      UBI and UBSN. United Breweries International (UK) Limited ("UBI") is
100% owned by Inversiones and owns, in turn, 100% of UBSN Ltd., a United Kingdom
corporation ("UBSN"). Because UBI is a wholly-owned subsidiary of Inversiones,  
neither UBI nor UBSN is, or needs to be, a party to the Agreement.              

Description of the Transaction                                                  

       The following summary of the Agreement is modified in its entirety by
reference to the terms of the Agreement itself, a copy of which is attached to  
this Proxy Statement at Supplement A. Any conflict between the following        
description and the actual terms of the Agreement shall be resolved by reference
to, and in favor of, the actual Agreement.                                      

       Acquisition of UBI: Pursuant to the Agreement, the Company has agreed
to buy from Inversiones all of the outstanding shares of UBI (there are 100,000 
shares outstanding). The Company would pay for the UBI shares by issuing to     
Inversiones 5,500,000 shares of the Company's Common Stock. The shares of Common
Stock proposed to be issued to Inversiones would constitute approximately 49.6% 
of the Company's outstanding Common Stock after the Acquisition is consummated. 
As a consequence of the Acquisition, UBI would become a wholly-owned subsidiary 
of the Company.                                                                 

       Election of Director: The Company has also agreed to seek shareholder
approval for the election or appointment of one Director to be nominated by     
Inversiones.                                                                    

    Guaranty: Under the terms of the Agreement, Inversiones has made a
number of representations and warranties with respect to UBI and UBSN. Each of  
these representations and warranties, and the performance by Inversiones of its 
indemnity obligations with respect thereto, are unconditionally indemnified and 
guaranteed by Golden Eagle, which must indemnify and hold the Company harmless  
against any and all losses, damages, costs, and expenses suffered or incurred by
the Company as the result of any breach by Inversiones of any of such           
representations, warranties, or indemnities.                                    

         Further, Inversiones and Golden Eagle have jointly and severally agreed
to indemnify UBI against any and all claims, losses, and liabilities which UBI  
may incur arising out of a guarantee                                            

13

DEF 14A
19th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 19th
previously given by UBI to an unrelated third party in connection with a lease  
of certain property by a former affiliate of UBI's.                             

Covenants of Inversiones: The Agreement imposes a series of   
restrictions on certain activities by Inversiones for a period of two (2) years 
following the closing, including the following:                                 

          o  No competition: Inversiones will not, directly or indirectly,
              engage in any business which competes with the business of UBI
          or UBSN in any country in which UBI or UBSN has carried on
          that business during the year preceding the closing of the
Agreement.                                      

          o  No solicitation of customers: Inversiones will not solicit or
            entice away the business of any customer of UBI or UBSN that
            has been a customer of UBI or UBSN during the year preceding
the closing of the Agreement                    

           o  No solicitation of employees and contractors: Inversiones will
      not solicit, engage, or employ any person who has been
          employed in a managerial, supervisory, technical, or sales
            capacity by, or been engaged as a consultant to, UBI or UBSN
    as of the closing or during the six (6) month period
   immediately preceding the closing of the Agreement.

 In addition to the foregoing covenants, Inversiones may not (i)
disclose, divulge, or use any of the confidential information of UBI or UBSN; or
(ii) use any name or trademark that is likely to be confused with any name or   
trademark (including but not limited to the "Kingfisher" trademark) that is     
owned by, or licensed to, UBI or UBSN in connection with a business of brewing  
or trading lager beer, or a business which is substantially similar to such     
brewing or trading business carried out by UBI or UBSN.                         

         Conditions to Closing: The closing of the Agreement, and the obligation
of the Company to go forward with the acquisition of the shares of UBI, are     
subject to the satisfaction or waiver of each of the following conditions:      

      o  A majority of the Company's shareholders must approve the
Acquisition                                     

           o  All of the representations and warranties given by Inversiones
     in the Agreement must be true as of the closing  date

           o  Inversiones must have complied with certain obligations during
             the period between the date on which the Agreement was signed
and the closing date                            

           o  The Company must have received a "fairness opinion", in a form
         satisfactory to the Special Committee and its independent
             counsel, Baker & McKenzie, regarding the proposed acquisition
         transaction from Sage Capital LLC (the Board of Directors
         believes that the opinion which is attached to this Proxy
        Statement as Supplement B will satisfy this obligation).

      In addition, under the terms of the Agreement if the holders of more
than 123,457 shares of the Company's Common Stock elect to exercise their       
dissenters' rights with respect to the Acquisition, by not voting in favor of   
Proposal No. 1 and complying with their other responsibilities as described     
below under the heading "Dissenters' Rights", then the Company may, in the      
discretion of its Board of Directors, elect not to proceed with the Acquisition.

14

DEF 14A
20th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 20th
Related Party Transaction                                                       

         Because CAS Nominees Ltd., the trustee of Golden Eagle, has the ability
to act in favor of Dr. Vijay Mallya, the Company's Chairman of the Board and    
Chief Executive Officer, Dr. Mallya may have beneficial ownership of Golden     
Eagle, which would therefore cause him to have a material financial interest in 
Golden Eagle. Golden Eagle is the sole (100%) owner of Inversiones, which in    
turn owns UBI.                                                                  

       Golden Eagle also holds a controlling interest in United Breweries of
America Inc., a Delaware corporation ("UBA"), through a subsidiary. UBA is the  
Company's principal shareholder, with direct ownership of 3,087,818 shares, or  
55.3%, of the Company's currently outstanding voting Common Stock. UBA also has 
an agreement with certain of the Company's original founders which grants to UBA
a right of first refusal to purchase an additional 882,547 shares. Dr. Mallya is
the Chairman of the Board and Chief Executive Officer of UBA. Through           
Inversiones and UBA, therefore, Golden Eagle owns or controls a majority of the 
voting stock of both of the principal parties to the Agreement. In addition, Dr.
Mallya is a member of the board of directors of UBSN.                           

         Mr. R.H.B. Neame, a current member of the Company's Board of Directors,
has served as the Chairman and Chief Executive Officer of Shepherd Neame Ltd.   
for over twenty-five years. Shepherd Neame Ltd. is the brewer of Kingfisher     
Lager Beer under an agreement with UBSN.                                        

         Because the Acquisition would be a related-party transaction, a Special
Committee of the Board Directors was created to review and approve the proposed 
Acquisition. The members of the Special Committee are Kent D. Price (Chairman), 
Sury Palamand and Michael Laybourn. The Special Committee also retained the law 
firm of Baker & McKenzie to act as its independent counsel and to advise it with
respect to the terms and conditions of the Share Purchase Agreement. The Company
also obtained, from Sage Capital, L.L.C., an independent opinion as to the      
fairness of the proposed Acquisition, from a financial point of view, to the    
Company's shareholders (including shareholders other than UBA). A copy of that  
fairness opinion is attached to this Proxy Statement as Supplement B. For a     
brief description of the fairness opinion, please also see "PROPOSAL NO. 1 -    
Fairness Opinion," below.                                                       

      At present, the U.S. distribution agent for Kingfisher Lager beer in
the United States is American United Breweries Int'l., Inc. ("AUBI"), a company 
which is affiliated with Inversiones and Golden Eagle, although there is no     
formal distribution agreement between UBI and AUBI for this purpose. After the  
Acquisition is consummated, UBI will terminate this relationship (as it relates 
to the distribution of Kingfisher beer) and enter into a separate distribution  
agreement with the Company. AUBI will, however, continue to distribute other    
beers in the United States which compete with the Kingfisher brand (in the same 
market niche), notably the Flying Horse and Taj Mahal brands.                   

The Company's Principal Reasons for the Acquisition                             

        The Special Committee has unanimously determined that the terms of the
proposed Acquisition are fair to, and in the best interest of, the Company and  
its shareholders. On the basis of the recommendation of the Special Committee,  
the Company's full Board of Directors has also approved the proposed Acquisition
(Mr. Mallya and Mr. Neame, being interested parties to the transaction,         
abstained from that vote).                                                      

 These decisions were based on several potential benefits of the
transaction that the Special Committee and Board believe will contribute to the 
success of the Company, including: (a) adding cash flow and financial strength  
to the company; (b) providing impetus to the Company's long-term goal of meeting
the conditions necessary to satisfy the requirements to be listed on the NASDAQ 
SmallCap Market instead of on the Pacific Exchange; (c) increasing the          
attractiveness of the Company to outside                                        

15

DEF 14A
21st Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 21st
investors by combining the business of UBSN with the Company; (d) adding brand  
strength due to Kingfisher's reputation as an established international brand;  
(e) enabling the Company's stock to become a more viable "currency" for         
additional brand acquisitions; (f) providing additional activity to the         
Company's current manufacturing facilities through Kingfisher's proven domestic 
sales volumes; and (g) utilizing the distribution strength of UBSN to market the
Company's specialty ales in Europe and elsewhere.                               

      The Special Committee reviewed a number of factors in evaluating the
Acquisition, including, but not limited to, the following: (a) historical       
information concerning the Company's and UBSN's respective business focus,      
financial performance and condition, operations, technology, and management; (b)
management's view of the financial condition, results of operations, and        
businesses of the Company and UBSN before and after giving effect to the        
Acquisition and the Board's determination of the Acquisition's potential effect 
on stockholder values; (c) current financial market conditions and historical   
stock market prices, volatility and trading information; (d) the consideration  
the Company will exchange in the transactions in light of comparable            
transactions; (e) the belief that the terms of the Agreement are reasonable and 
fair, from a financial point of view, to all of the Company's shareholders; (f) 
the impact of the transactions on customers and employees; (g) results of the   
due diligence investigation of UBI and UBSN conducted by the Company's          
management, accountants and counsel; (h) the expectation that the transactions  
will be accounted for as an "as-if pooling"; and (i) review of the valuations of
comparable companies.                                                           

  The Special Committee also identified and considered a number of
potentially negative factors in its deliberations concerning the Acquisition,   
including among others the risk that the potential benefits of the transactions 
may not be realized and the possibility that the Acquisition may not be         
consummated.                                                                    

         On balance, however, the Special Committee concluded that the potential
benefits of the Acquisition to the Company and its shareholders outweighed the  
associated risks. The discussion of the information and factors considered by   
the Special Committee is not intended to be exhaustive. In view of the variety  
of factors considered in connection with its evaluation of the transactions, the
Special Committee did not find it practicable to quantify or otherwise assign   
relative weight to, the specific factors considered in reaching its             
determination.                                                                  

Inversiones' Principal Reasons for the Acquisition                              

   The Board of Directors of Inversiones has also concluded that the
Acquisition would be fair to and in the best interests of Inversiones and its   
shareholders.                                                                   

   The decision by Inversiones' Board of Directors to enter into the
Agreement was based on several potential benefits of the Acquisition to         
Inversiones, including the belief that the businesses of UBI and UBSN complement
the operations, business, and financial condition of the Company. In addition,  
the acquisition of UBI by the Company may help accelerate UBSN's growth rate,   
especially with respect to its United States markets.                           

         Inversiones' decision to proceed with the Acquisition resulted from its
consideration of a number of alternatives, including its long-range plans to    
continue operating as an entity independent of the Company. Among the factors on
which Inversiones based its decision were the following: (a) finding and        
securing the strategic alternative that would provide the greatest value to     
Inversiones' shareholder; (b) the current and potential market value of the     
Company's Common Stock; (c) the likelihood of completing and effecting the      
Acquisition; (d) the risks to UBI and UBSN if the Acquisition is not effected;  
(e) the results of reviews conducted by Inversiones' management and advisors    
investigating the Company's business, operations, technology, competitive       
position, and possible expansion opportunities for UBI and/or UBSN;             

16

DEF 14A
22nd Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 22nd
and (f) review of the current and prospective future business environment in    
which UBI and UBSN operate.                                                     

    Inversiones' Board of Directors believes that the Acquisition will
provide UBI and UBSN the opportunity to increase their business relationships in
the United States through their connection with the Company, and that through   
closer relationships with the Company and potential relationships with other    
companies with which the Company does business, UBI and UBSN may be able to     
significantly increase their volumes and accelerate and enhance their product   
offerings. This would presumably enhance the value of the current investments of
Inversiones and its parent, Golden Eagle Trust, in the Company.                 

       The Board of Directors of Inversiones considered a number of negative
factors in its review of the potential benefits and drawbacks of the            
transactions, including among others: (a) the risk that the Acquisition might   
not be completed; (b) the possibility of disruption of management in connection 
with effecting the Acquisition and integrating the operations of the companies; 
(c) the Company's current lack of profitability; (d) the possibility that key   
personnel might leave UBI and UBSN after the Acquisition is completed; and (e)  
the risk that the benefits anticipated in connection with the Acquisition will  
not be realized.                                                                

        Inversiones' Board of Directors concluded, however, that the potential
benefits to Inversiones and its shareholder of the Acquisition outweighed the   
risks associated with the Acquisition.                                          

History of the Acquisition                                                      

        During its March 18, 1998 Meeting, the Board discussed the possibility
of acquiring certain brands and companies in the microbrewery industry. The     
Board decided to pursue some specific opportunities, including among others the 
acquisition of UBI.                                                             

      At the Board Meeting held on May 11, 1998, the Board again discussed
the feasibility of a transaction with UBI, in this case, the acquisition of its 
wholly-owned subsidiary, UBSN.                                                  

  The Board again discussed the feasibility of various acquisition
opportunities at its October 6, 1998 Meeting. During that Meeting, the Board    
focused on the acquisition of UBSN and the U.S. distribution capabilities of    
AUBI. At this Meeting, the Board formally appointed a Special Committee of      
disinterested Directors, consisting of Kent D. Price (Chairman), Sury Rao       
Palamand, and Michael Laybourn, to consider various aspects of a few of the     
proposed transactions, including the proposed acquisition of UBSN and AUBI. The 
Special Committee was also authorized to select an independent investment banker
to review any potential transaction and provide the Company with a fairness     
opinion regarding it and to advise the Board on how the Company might obtain    
funding for any proposed transaction, if necessary.                             

        After reviewing proposals from several financial advisors, the Special
Committee selected Black & Co. as its financial advisor and engaged Baker &     
McKenzie as independent Counsel to the Committee. On January 5, 1999, at the    
invitation of the Special Committee, Black & Co. made a presentation to the     
Board with respect to issues related to a proposed acquisition of UBI. Dr. Vijay
Mallya and Mr. R.H.B. Neame, being interested Directors, did not take part in   
the Board's discussions at this Meeting, except to express their views on the   
valuation of the proposed transaction. The individuals with whom the Company was
working at Black & Co., subsequently formed Sage Capital, LLC, and the Company  
has since engaged Sage Capital, LLC to act as its financial advisor with respect
to the Acquisition.                                                             

        At the May 1, 1999 Company Board Meeting, Mr. Price informed the Board
that in view of the Company's revised budget, changes taking place at Black &   
Co., and the need for further analysis, the                                     

17

DEF 14A
23rd Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 23rd
proposed transaction with Inversiones would be delayed. He stated that the      
financial advisory principals of Black & Co. left the Company in April, 1999,   
and formed Sage Capital, LLC and that Black & Co. on April 9, 1999, had agreed  
to having Sage Capital satisfy its commitments and undertakings with respect to 
the above transaction as they were most familiar with it. Mr. Price stated that 
as soon as Sage Capital, LLC completed its evaluation of UBSN and AUBI, a formal
offer to acquire UBSN would be made to UBSN's Board of Directors. The offer was 
expected to be made before June 15, 1999.                                       

       On May 25, 1999, the Special Committee made an offer to purchase UBSN
and UBI in exchange for 5,000,000 shares of Company Common Stock. The offer for 
UBSN included the distribution rights for Kingfisher Beer in the U.S. outside of
the current U.S. Indian restaurant distribution. In its offer, the Special      
Committee stated that it would not make an offer on AUBI.                       

         At the Meeting of the Board held on August 30, 1999, Mr. Price reported
that the Company was still waiting for a response to its offer to acquire UBI   
from Inversiones.                                                               

         On October 1, 1999, Mr. Price, on behalf of the Board, sent a letter to
the Board of Directors of Inversiones, offering to acquire UBI and UBSN in      
exchange for 5,000,000 shares of the Company's Common Stock, subject to normal  
due diligence processes. The Board of Directors of Inversiones accepted this    
offer and the offer letter was signed and returned to the Company by the        
President of Inversiones on October 10, 1999.                                   

       At the Board Meeting held on December 2, 1999, Mr. Price informed the
Board that the Company had received the acceptance of the proposed form of      
transaction to acquire UBSN from its parent, Inversiones. The Board decided that
the proposed transaction should be consummated by the end of March, 2000.       

     On January 25, 2000 the Special Committee met with its Counsel John
McKenzie of Baker & McKenzie. At this meeting the Special Committee discussed   
structural details of the acquisition of UBI and UBSN. The possibility of       
acquiring the exclusive U.S. distribution rights to Kingfisher Lager, and the   
economics of entering into an agreement to brew Kingfisher Lager at the Saratoga
Brewing Facility, were discussed. In addition, the Special Committee discussed  
the intent of listing the Company's Common Stock on the Nasdaq Small Cap market.

         On March 29, 2000, the Company announced that it intended to enter into
two concurrent related party transactions -- the acquisition of UBSN and the    
U.S. distribution rights for Kingfisher Lager.                                  

         On April 15, 2000 the Special Committee had a conference call with Sage
Capital, LLC ("Sage") during which the final transaction between the Company and
UBI was discussed. It was recommended by Sage that the current transaction      
involving the acquisition of UBSN and the U.S. distribution rights to Kingfisher
Lager, structured as two concurrent related party transactions, should be       
consolidated into a single transaction. In order to consolidate these two       
transactions, it was agreed to ask the controlling shareholders of UBI to merge 
the exclusive U.S. distribution rights to Kingfisher Lager into UBI, prior to   
the transaction.                                                                

        On April 27, 2000, the parties agreed to increase the number of shares
of the Company's Common Stock to be issued to Inversiones as the purchase price 
for UBI, because, prior to the proposed transaction, UBI would be acquiring the 
exclusive right to distribute and brew Kingfisher brand beer in the United      
States. The Company agreed to increase the compensation to be paid to           
Inversiones by 500,000 shares, bringing the total purchase price up to 5,500,000
shares of the Company's Common Stock.                                           

18

DEF 14A
24th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 24th
        On May 17, 2000, the Directors of UBI confirmed that the merger of the
exclusive U.S. distribution rights to Kingfisher Lager into UBI, the parent of  
UBSN, was complete. As a result of this merger, a single transaction including  
the acquisition of UBSN, by acquiring its parent UBI which also includes the    
exclusive U.S. distribution rights to Kingfisher Lager, could now take place.   

        On June 2, 2000, the Company made an offer to Inversiones to amend the
original offer dated October 1, 1999 and accepted October 10, 1999, to reflect  
the completed merger of the exclusive U.S. distribution rights to Kingfisher    
Lager into UBI. The Company offered an additional 500,000 shares for the U.S.   
distribution business, bringing the total purchase price up to 5,500,000 shares 
of the Company.                                                                 

         On June 10, 2000 Inversiones accepted the amended offer, confirming the
total compensation of 5,500,000 shares of the Company to Inversiones for all of 
the issued and outstanding shares of UBI, the parent company of UBSN.           

        On October 2, 2000 the Special Committee made its final recommendation
to the Board as to the advisability and potential structure of the proposed     
Acquisition. At that Meeting, the Board voted unanimously (Messrs. Mallya and   
Neame abstaining) to accept the report and recommendations of the Special       
Committee and to pursue the Acquisition on the terms described elsewhere in this
Proxy Statement.                                                                

       All of the parties to the Agreement formally executed it effective as
of November 3, 2000. Subsequently, the Company filed with the SEC a Current     
Report on Form 8-K, also dated as of November 3, 2000, publicly announcing the  
execution and proposed consummation of the Acquisition.                         

        In December of 2000, the Company entered into discussions with the SEC
regarding, among other matters, the Company's need for more comprehensive       
financial statements provided by UBI on a consolidated basis. After             
conversations with the Company regarding the financial disclosures that must be 
made in this Proxy Statement, and that would be required of UBI and UBSN in the 
future if the Acquisition is approved, UBI and UBSN requested that their primary
auditor then commence preparation of the consolidated audited financial         
statements of the two companies according to the Generally Accepted Accounting  
Standards used in the US, in order to better comply with the form of financial  
disclosure required in the US by the SEC.                                       

     On April 11, 2001, as a result of the above mentioned conversations
with the SEC, the Company amended its Current Report on Form 8-K to incorporate 
the more comprehensive consolidated financial statements provided by UBI, and to
correct certain other information related to UBI. These changes to the Current  
Report did not, however, require any related changes to the Agreement.          

         On April 23, 2001, Sage Capital, LLC formally issued a Fairness Opinion
in connection with the Acquisition.                                             

Comparison of Shareholder Rights                                                

      The proposed transaction will not change the rights of the Company's
existing shareholders, although they will experience substantial immediate      
dilution as a result of it. The Company believes that the Acquisition should be 
considered an accretive transaction because after the consummation of the       
Acquisition the value of the Company's Stock will also include the value of UBI.
In looking at the two companies' financial results for the years ended December 
31, 1999 and 2000, UBI showed a profit for both years, while the Company        
suffered losses in both years. If the Acquisition had taken place in 1999 or    
2000, it would have decreased the net amount of the Company's losses, thereby   
increasing the value of the shares to the Company's shareholders.               

19

DEF 14A
25th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 25th
Consequences of Failure to Approve the Acquisition                              

        If the shareholders of the Company fail to approve the purchase of UBI
from Inversiones, the Acquisition will not take place as it is currently        
envisioned and the Company will, for the present, continue its business as a    
separate entity. It will not have purchased UBI and its wholly-owned subsidiary 
UBSN, and will not have the exclusive rights to market and distribute the       
Kingfisher brand in the United States and Canada, and must continue to rely on  
its existing brands for revenues. As described in the Company's Annual Report on
Form 10-KSB for the year ended December 31, 2000, which is being distributed    
(but without Exhibits) along with this Proxy Statement, the Company operated at 
a loss during both 1999 and 2000, and can offer no assurance that it will turn a
profit in the future. It is possible that management of the Company will        
continue to seek out candidates for combination with the Company, but the       
Company can offer no assurance that management will successfully locate a       
suitable candidate or that it will be able to consummate any such transaction.  

Fairness Opinion of the Company's Financial Advisor                             

  The Company has retained Sage Capital LLC ("Sage") to act as its
financial advisor in connection with the evaluation of certain elements of the  
Company's acquisition strategy. Pursuant to this engagement, Sage was asked to  
render an opinion to the Company's Board of Directors as to whether the equity  
consideration to be paid for UBI pursuant to the Agreement is fair to the       
shareholders of the Company from a financial point of view. Sage was not        
requested to, and did not, make any recommendation to the Company's Board of    
Directors as to the number of shares or the amount of cash consideration from   
the Company to be issued to and received by Inversiones' pursuant to the        
Agreement, which numbers were determined through arm's-length negotiations      
between the Company and Inversiones.                                            

         As of April 23, 2001, Sage delivered its written opinion to the Company
Board that, as of such date and based upon and subject to certain assumptions   
and other matters described in its written opinion, the total consideration to  
be paid by the Company pursuant to the Agreement in exchange for all of the     
equity of UBI is fair to the shareholders of the Company from a financial point 
of view. Sage's opinion is addressed to the Board of Directors of the Company,  
is directed only to the financial terms of the Agreement, and does not address  
the underlying business decision of the Company and Inversiones to engage in the
Acquisition and does not constitute a recommendation to any shareholder of the  
Company as to how such shareholder should vote at the Annual Meeting.           

       The complete text of the April 23, 2001 opinion (the "Sage Opinion"),
which sets forth the assumptions made, matters considered, and limitations on   
and scope of the review undertaken by Sage, is attached to this Proxy Statement 
as Supplement B, and the summary of the Sage Opinion set forth in this Proxy    
Statement is qualified in its entirety by reference to the Sage Opinion. The    
Company's shareholders are urged to read the Sage Opinion carefully and in its  
entirety for a description of the procedures followed, the factors considered,  
and the assumptions made by Sage.                                               

        In arriving at its Opinion, Sage, among other things, (i) reviewed the
Agreement; (ii) reviewed certain other documents relating to the Agreement;     
(iii) reviewed certain publicly available information concerning the Company;   
(iv) held discussions with members of senior management of the Company          
concerning the business prospects of the Company, including such management's   
views as to the organization of and strategies with respect to the Acquisition; 
(v) reviewed certain operating and financial information prepared by the        
managements of the Company and UBI; (vi) reviewed the recent reported prices and
trading activity for the common stock of certain other companies engaged in     
businesses Sage considered comparable to that of the Company and compared       
certain publicly available financial data for those comparable companies to     
similar data for the Company; (vii) reviewed the financial terms of certain     

20

DEF 14A
26th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 26th
other merger and acquisition transactions that Sage deemed generally relevant;  
and (viii) performed and considered such other studies, analyses, inquiries, and
investigations as Sage deemed appropriate. Sage was not, to the best of its     
knowledge, denied access by the Company or UBI to any requested information and 
no restrictions were placed on Sage with respect to the procedures followed by  
Sage in rendering its opinion.                                                  

     Sage assumed and relied upon, without independent verification, the
accuracy and completeness of the information it reviewed for the purposes of its
opinion. With respect to the financial information of the Company and UBI, Sage 
assumed that such information was complete and accurate in all material respects
and had been reasonably prepared on bases reflecting the best currently         
available estimates and judgments of management of such companies, at the time  
of preparation, of the operating and financial performance of the Company and   
UBI. Sage also assumed that there were no material changes in the Company's or  
UBI's assets, financial condition, results of operations, business, or prospects
since the date of their last financial statements made available to Sage and    
that all material liabilities (contingent or other, known or unknown) of the    
Company and UBI are as set forth in the financial statements. Sage did not      
prepare or obtain any independent evaluation or appraisal of the assets or      
liabilities of the Company and UBI, nor did Sage conduct a physical inspection  
of the properties and facilities of the Company and UBI in connection with its  
opinion. The Sage Opinion states that it was based on economic, financial and   
other conditions existing as of the date of such opinion. Sage does not have any
obligation to update, revise or reaffirm its opinion. Furthermore, Sage         
expressed no opinion as to what the value of the Company's Common Stock will be 
when issued pursuant to the Agreement or the prices at which the Company's      
Common Stock will trade at any time.                                            

    Based upon this information, Sage performed a variety of financial
analyses of the Acquisition. The following paragraphs briefly summarize the     
principal financial analyses performed by Sage in arriving at its opinion       
delivered to the Company's Board of Directors. Such analyses are based on a     
number of assumptions, including among other things, the projected performance  
of the Company and UBI and the comparable public companies.                     

        Contribution Analysis. Sage reviewed the pro forma contribution of the
Company and UBI to estimated combined financial results for the twelve months   
ending December 31, 1999, the twelve months ending December 31, 2000, and the   
twelve months ending December 31, 2001. Sage reviewed, among other things, pro  
forma contributions to total revenues, earnings before interest, taxes,         
depreciation and amortization ("EBITDA") and earnings before interest and taxes 
("EBIT"). Based on this analysis, for the twelve months ended December 31, 2000,
the Company would have contributed 41.8% of pro forma combined total revenues   
and 41.3% of pro forma combined EBITDA. As of December 31, 2000, the Company    
would have contributed 78.4% of total assets and 91.0% of shareholders' equity. 
For the twelve months ending December 31, 2001, the Company would have          
contributed 46.9% of pro forma combined total revenues, 51.9% of combined       
EBITDA, and 39.6% of pro forma EBIT.                                            

    Comparable Company Analysis. Sage compared selected historical and
projected operating and stock market data and operating and financial ratios for
the Company to the corresponding data and ratios of certain publicly traded     
companies which it deemed generally comparable to the Company. Such data and    
ratios included market value to historical and projected revenue, market value  
to historical and projected earnings before taxes ("EBT"), market value to      
historical and projected net income and market value to historical book value.  
Companies deemed to be generally comparable to the Company included Boston Beer,
Minnesota Brewing, Pyramid Brewing and Redhook Ale Brewery.                     

     For the comparable companies, the multiples of market value to last
twelve months ("LTM") book values ranged from 0.24 to 2.0 with a mean of 1.37;  
market value to LTM net income ranged from 13.2 to14.6 with a mean of 13.9,     
excluding Pyramid and Redhook; and market value to LTM sales ranged             

21

DEF 14A
27th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 27th
from 0.28 to 0.78 with a mean of 0.55. These ratios compared with the following 
ratios for the Company, calculated on the $0.90 per share price of the Company's
Common Stock at its most recent closing price prior to April 23, 2001: market   
value to book value of 0.54, market value to LTM net income is not meaningful   
due to the Company's loss for the period, and market value to LTM sales of 0.51.

        Comparable Transaction Analysis. Sage also analyzed publicly available
financial information for 73 selected U.S. and international mergers and        
acquisitions with aggregate transaction values up to $3.5 billion (the          
"Comparable Public Company Transactions") of companies in the malt beverage     
industry since 1998. For these transactions, the mean value of market           
capitalization to sales was 1.6, the mean value of market capitalization to     
EBITDA was 5.7, and the mean value of market capitalization to LTM earnings was 
16.9 times.                                                                     

       No company or transaction used in any comparable transaction analysis
as a comparison is identical to the Company or UBI. Accordingly, these analyses 
are not simply mathematical; rather, they involve complex considerations and    
judgments concerning differences in the financial and operating characteristics 
of the comparable companies and other factors that could affect the public      
trading value of the comparable companies and the transactions to which they are
being compared.                                                                 

       The preparation of a fairness opinion involves various determinations
as to the most appropriate and relevant quantitative and qualitative methods of 
financial analysis and the application of those methods to the particular       
circumstances and, therefore, such an opinion is not readily susceptible to     
summary description. Accordingly, Sage believes that its analyses must be       
considered as a whole and that considering any portions of such analyses and of 
the factors considered, without considering all analyses and factors, could     
create a misleading or incomplete view of the evaluation process underlying its 
opinion. In performing its analyses, Sage made numerous assumptions with respect
to industry performance, general business and economic conditions and other     
matters, many of which are beyond the control of the Company or UBI. Any        
estimates contained in these analyses are not necessarily indicative of actual  
values or predictive of future results or values, which may be significantly    
more or less favorable than as set forth therein. Additionally, analyses        
relating to the values of businesses or assets do not purport to be appraisals  
or necessarily reflect the prices at which businesses or assets may actually be 
sold.                                                                           

       Sage is a regional investment banking firm based in Portland, Oregon.
As part of their investment banking services, the principals of Sage are        
regularly engaged in the business of advising the managements and boards of     
directors of corporations regarding the issuance of securities, providing       
advisory services for mergers and acquisitions, issuing fairness opinions and   
providing market valuations. The Company has agreed to pay Sage for its services
in connection with the transaction, including the delivery of its fairness      
opinion, a fee of $75,000, of which the balance of $16,666 is due upon delivery 
of its fairness opinion. The Company has also agreed to reimburse Sage for      
reasonable out-of-pocket expenses and to indemnify Sage against certain         
liabilities relating to or arising out of services performed by Sage as         
financial advisor to the Company.                                               

Accounting Treatment                                                            

       The Acquisition will be accounted for as if it were under the pooling
method of accounting, and accordingly, the operating results of UBI and UBSN    
will be included in the Company's consolidated results of operation from the    
date of the Acquisition. Since Golden Eagle controls both the Company and       
Inversiones (and through Inversiones, UBI) through various subsidiaries, the    
Company is required to treat the acquisition of UBI as if it were a pooling of  
interests. Thus UBI's assets and liabilities will be included at their carryover
basis, and not at their fair market value. Because these assets will be recorded
at their historical values, no goodwill will be recorded as a result of the     
transaction. Representatives of                                                 

22

DEF 14A
28th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 28th
Moss Adams, LLP, the Company's independent auditors, are expected to be present 
at the Annual Meeting, will be invited to make a statement if they so desire,   
and are expected to be available to answer appropriate questions from the       
shareholders.                                                                   

U.S. Federal Income Tax Consequences                                            

     The following discussion summarizes the material federal income tax
consequences relevant to the Company and its stockholders in connection with the
Company's acquisition of all of the outstanding shares of UBI. This discussion  
is based on currently existing provisions of the Internal Revenue Code, existing
and proposed Treasury Regulations thereunder, and current administrative rulings
and court decisions, all of which are subject to change. Any such change, which 
may or may not be retroactive, could alter the tax consequences to the Company  
and its shareholders as described herein. The Company is not requesting and will
not request a ruling from the Internal Revenue Service in connection with this  
acquisition. In addition, the Company has not requested an opinion of counsel   
regarding the tax consequences of this acquisition.                             

       The acquisition of the shares of UBI should be considered a statutory
reorganization under Internal Revenue Code section 368(a)(1)(B), and therefore  
should not create a taxable transaction. As a result, the Company should not    
recognize gain or loss with respect to the transaction, and the assets acquired 
should maintain a carryover basis. There should be no tax consequences to the   
Company's shareholders with respect to this acquisition.                        

Market Information                                                              

     On March 28, 2000, the last full day of trading prior to the public
announcement of the proposed Acquisition, the last reported sale price of the   
Company's Common Stock on the Pacific Exchange was $0.8125 per share.           

         There is no public market for UBI's Common Stock. Inversiones owns 100%
of the issued and outstanding shares of UBI. UBI has never paid a dividend on   
its Common Stock and does not anticipate paying dividends in the near future.   

More Information about the Company                                              

       The following additional material, all of which has been filed by the
Company with the SEC and is publicly available on the SEC's website             
(www.sec.gov), is incorporated herein by reference:                             

    o    The following sections of the Company's Annual Report on Form
              10-KSB for the year ended December 31, 2000, all of which included
          with this Proxy Statement pursuant to Exchange Act Rule 14a-3:
        "Description of Business," "Description of Property," "Legal
           Proceedings," "Market for Common Equity and Related Stockholder
        Matters," "Management's Discussion and Analysis of Financial
             Condition and Results of Operations," and "Financial Statements."

        The information incorporated by reference is deemed to be part of this
Proxy Statement, except for any such information superseded in the Proxy        
Statement.                                                                      

23

DEF 14A
29th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 29th
Information about UBI and UBSN                                                  

Overview                                                      

        UBI's primary function is to serve as a holding company for UBSN. UBSN
sells, markets and distributes alcoholic beverages. Its operation is based at   
Faversham, Kent, in England, close to the brewery of Shepherd Neame Ltd.,       
licensed brewers of Kingfisher Lager in the United Kingdom (the "U.K."). UBSN's 
portfolio of products includes Kingfisher Lager (bottled and draught) and Grover
Wines, which are imported from India to be sold in Indian restaurants.          

      UBSN promotes Kingfisher, a premium Indian style Lager brand, within
the U.K. and Continental Europe. Kingfisher is an international brand and is    
currently distributed in over 30 countries. It is a two time World Champion     
Lager, winning at the World Beer Championships at Stockholm, Sweden. Over the   
last several years, Kingfisher has consistently been ranked in the top ten      
fastest growing beer brands in the United Kingdom. On November 7, 2000, UBSN    
sponsored Kingfisher National Curry Day, for the fourth consecutive year. In the
near future, UBSN hopes to sponsor a new event: the Kingfisher Curry Capital of 
Britain.                                                                        

        UBSN is the sole distributor of Kingfisher Lager in the U.K., Ireland,
and Continental Europe. In the U.K., UBSN's business is reliant on the niche    
Indian restaurant sector ("IR Sector") to the extent that total sales volume is 
derived from sales to the IR Sector. In the U.K., Kingfisher has a share of     
approximately 22% of the IR Sector market through some 6,500 licensed Indian    
restaurants. In addition, recently, UBSN has reached an agreement with the J.D. 
Witherspoons restaurant chain to carry Kingfisher Lager. J.D. Witherspoons      
currently has 434 outlets throughout the U.K., with an additional 100           
anticipated to open in the next twelve months. J.D. Witherspoons has recently   
promoted Indian fare through a successful promotion on Thursday evenings, J.D.'s
Curry Club Night.                                                               

        UBSN also distributes Kingfisher Lager in the U.K. and Ireland through
the Cash & Carry and J. Sainsbury chains of supermarket stores. Kingfisher had  
major national exposure through J. Sainsbury when the store conducted a         
nationwide launch of a promotional campaign in the summer of 2000. The          
advertising campaign was centered around a national celebrity and was featured  
in all 360 J. Sainsbury stores throughout the U.K. The campaign featured end of 
aisle displays featuring recipes and ingredients; Kingfisher Lager was the      
recommended beverage to accompany a recipe.                                     

     A recent increase in popularity of Indian food in the U.K. has also
extended to the take-home market. Supermarkets and off-brand stores have also   
experienced a recent increase in take-home sales. UBSN is pursuing new          
distribution possibilities in other U.K. chain supermarket stores. In addition, 
Kingfisher is exported to 16 European markets and to the U.S. and Canadian      
markets.                                                                        

        UBSN does not physically distribute its products to its ultimate trade
customers, relying instead on specialist restaurant trade distributors in the   
U.K. Shepherd Neame Ltd. acts as UBSN's agent, on a commission basis, in the    
supermarket trade.                                                              

Company Background                                            

   UBI (distributors of Kingfisher Lager) and Shepherd Neame Limited
(licensed brewers of Kingfisher Lager) formed UBSN Limited in August 1989 as a  
50-50 joint venture. Key personnel from both companies provided their services  
to UBSN in order to develop the Kingfisher brand in the U.K. and Europe and to  
distribute the brand to North America. In 1998, UBI purchased all of Shepherd   
Neame's stake in UBSN and in consideration, entered into a ten year brewing     
agreement with Shepherd Neame.                                                  

24

DEF 14A
30th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 30th
Premises                                                      

    UBSN currently has 4 years of a 6 year lease remaining for offices
located in Faversham, Kent, England.                                            

Employees                                                     

    UBSN has no employees. However, there are fourteen individuals who
provide their services to UBSN. All fourteen are employed either by UBI or      
Shepherd Neame Limited and are assigned by their respective employers to provide
services to UBSN. Of the fourteen individuals who provide services to UBSN, nine
are members of the sales force, three serve in administrative positions, and    
individuals also serve in the following roles: Managing Director, Marketing     
Director, and Accountant. The latest sales representative to join UBSN began    
working for UBSN during the year 2000.                                          

Products & Sizes                                              

  UBSN's business presently consists of the selling, marketing and
distribution of three product lines. The first is Kingfisher Lager, the sales of
which accounted for 99% of the Company's total gross sales during 2000, up      
slightly from 98.5% in 1999. The other products, Kalyani Export Special Indian  
Lager and Grover Wines, accounted for 1% of the Company's total gross sales     
during 2000, down from 1.5% during 1999.                                        

        UBSN makes available and distributes its Kingfisher Premium Lager Beer
in bottles and kegs. During 2000, UBSN made the decision to shift its emphasis  
on selling forty-liter kegs, the old industry standard, to fifty-liter kegs, the
new industry standard. UBSN is also the exclusive European distributor of four  
wines from Grover Vineyards Limited. Grover Vineyards is now producing Cabernet 
Sauvignon, Shiraz red, Clairette Blanc de Blanc, and Grenache rose wines. All   
wines are available in cases.                                                   

     Until recently, UBSN also distributed Kalyani Export Special Indian
Lager, which is produced and bottled in India, in 350 ml bottles as well as in  
650 ml bottles. However, UBSN launched sales of a new 660 ml bottle of          
Kingfisher Lager in July of 2000, with the intent of spreading the new size     
throughout the United Kingdom prior to a planned trade and restaurant           
promotional drive in November of 2000. All key distributors stocked the 660 ml  
bottle by the end of the year, and sales of the new bottle helped drive         
Kingfisher volume sales for the year ending December 31, 2000, 11.8% ahead of   
the sales volume for 1999. As a result of the success of the introduction of the
660 ml Kingfisher bottle, it was no longer necessary to import the Kalyani      
product of a similar size. Therefore sales of the 650 ml product have been      
discontinued, and UBSN currently sells the Kalyani Lager in 350 ml bottles only.

United Kingdom Overview                                       

         Economically, the U.K. has remained reasonably steady over the past few
years in terms of growth of economy, interest rates, and inflation. However, the
U.K. Pound Sterling has strengthened against most European currencies, and in   
particular, against the Euro. This has encouraged investment in retail          
businesses in the U.K., in particular the food and drink retail businesses.     
Companies which have historically been involved in beer brewing and distributing
activities in the U.K. have been expanding into other segments, such as food and
drink retail, leisure, and hotel/hospitality.                                   

       At the same time, in recent months and since the entry of superstores
such as Wal-Mart, the U.K. has experienced a price discount war, with suppliers 
under extreme pressure to bear the cost of the cuts in retail prices. An        
all-party parliamentary committee was recently engaged to analyze the effects of
the                                                                             

25

DEF 14A
31st Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 31st
economic climate on the large retail food chains, and determined that the four  
largest retail food chains were not making excessive profits.                   

Results of Operations                                         

       The following tables set forth, as a percentage of net sales, certain
items included in UBI's Profit and Loss Account. See Financial Statements and   
Notes thereto.                                                                  

Profit and Loss Account:                      Year Ended December 31,           
                                  2000        1999
                                  --------    --------
                                   (%)         (%)
Net Sales                                       100.00      100.00              
Costs of Sales                                   65.01       65.48              
                                  ------      ------
Gross Profit                                     34.99       34.52              
                                  ------      ------
Distribution and Selling Expenses                22.20       21.15              
General and Administrative Expenses               7.15        8.87              
                                  ------      ------
Total Operating Expenses                         29.35       30.02              
                                  ------      ------
Profit From Operations                            5.64        4.50              
Costs Related to Litigation                        .14        1.70              
Interest Expense                                   .65        1.02              
                                  ------      ------
Profit before income taxes                        4.86        1.78              
Income taxes on Profit                           (1.60)      (0.86)             
Minority interest in loss                         0.00        0.04              
                                  ------      ------
Profit Before Loss on Discontinued                                              
Operations and Disposal of Soyco, Ltd.            3.26        0.96              

Discontinued Operations and Disposal                                            
of Soyco, Ltd.                                    0.00       23.67              
                                  ------      ------
Net Profit                                        3.26       24.63              
                                  ======      ======

Net Sales                                                     

       UBI and UBSN's consolidated net sales for 2000 increased by 6.4% over
1999 due in part to the Kingfisher brand's growth in the IR Sector. Sales for   
the year ended December 31, 2000 were approximately, $12,644,000 and increased  
about $757,000 over 1999. If the sales had been reported in British Pounds, they
would have increased 13.5% from 1999 to 2000. The fluctuation in sales growth   
percentage is attributable to the exchange rates utilized when converting from  
British Pounds to U.S. Dollars. The increase in sales during 2000 resulted in a 
profit of approximately $412,000 for the year, an increase of approximately     
$178,000, or 76%, over sales during 1999. Net profit for 1999 included          
approximately $2,814,000 of income related to Soyco, Ltd. ("Soyco"), a wholly   
owned subsidiary of UBI which was sold to an unrelated buyer late in the year.  
UBI received approximately $80,000 in cash related                              

26

DEF 14A
32nd Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 32nd
to the sale of Soyco, recognizing a gain on the transaction as a result of the  
buyer's assumption of all Soyco's outstanding liabilities.                      

      Export sales increased by 13% from 1999 to 2000. Sales volume in the
United Kingdom measured in Brewers Barrels increased by 8.7% from 1999 to 2000. 
UBI's export sales volume increased by 9% over the same period. Management      
attributes the increase in sales to UBI's good position in an extremely         
competitive situation in the Indian restaurant market and also the continued    
strength of the British Pound against other European currencies. A portion of   
the sales growth is attributable to a price increase of 2.5% on Kingfisher      
products which was effected on January 1, 2000.                                 

Cost of Goods Sold                                            

       Cost of goods sold as a percentage of UBI and UBSN's consolidated net
sales remained relatively constant, decreasing minimally from 65.48% during 1999
to 65.01% during 2000.                                                          

Gross Profit                                                  

        As a result of the higher net sales as explained above, UBI and UBSN's
consolidated gross profit increased from $4,103,000 in 1999 to $4,424,000 in    
2000, representing an increase of 7.8%. As a percentage of net sales, the gross 
profit during 2000 stayed relatively constant, increasing to 35% from 34.5%     
during 1999.                                                                    

Operating Expenses                                            

       Operating expenses were $3,710,000 in 2000, as compared to $3,568,000
for 1999, representing an minor increase of 4%. Operating expenses consist of   
sales, marketing and distribution, and general and administrative expenses.     

       Operating expenses have been increasing over the years, generally due
to UBSN's growth in the industry, for example, transportation and commission    
costs have risen. This may be attributed generally to the increase in volume of 
business to the U.S. over the past few years. Also, because sales to            
supermarkets have increased, the commissions to agents which serve this market, 
such as Shepherd Neame Ltd., have risen accordingly. In addition, there has been
an increase over the past few years in freight rates and oil prices. There have 
also been increases in government duties, for example, there was a minor        
increase in the rate of excise duty on beer and wine in April, 2000.            

UBSN has also incurred more costs with regard to personnel. An
additional staff member was recruited in 2000 to assist in the sales office, in 
addition to the sales personnel which were added to the London and Midlands     
markets. Also, UBSN implemented an annual raise in compensation for its         
personnel. Travel expenses have risen as the directors have been expanding their
focus to the Continent and overseas.                                            

        There has been a slight increase in advertising and promotion costs in
recent months. The increase arises out of UBSN's promotional costs incurred in  
the launch of the new 660 ml bottle size for Kingfisher Lager.                  

         UBSN has experienced a decrease in some expenses. Although there was in
increase in expenses in 1999 associated with equipping UBSN's new offices, the  
majority of those expenses were initial, non-recurring outlays, therefore those 
expenses have fallen in 2000. Also, until 2000, UBSN maintained a small central 
London office to work on sponsorship, which caused redundancies of many         
expenses, including staffing and personnel costs. Closure of this office has cut
expenditures for sponsorship; the                                               

27

DEF 14A
33rd Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 33rd
sponsorship expenses to date in 2000 have been entirely made up of costs and    
expenses related to UBSN's sponsorship of the Kingfisher National Curry Day on  
November 7, 2000.                                                               

Litigation Expense                                            

The provision for litigation expense for the year 1999 was    
approximately $203,000, due to a dispute with a major distributor, German Lager 
Importers, Ltd. Expenses related to this litigation decreased to $18,000 during 
2000. In October of 2000, UBSN received a settlement for the debt owed by this  
distributor, and will be reimbursed for the full costs incurred in the          
litigation.                                                                     

Interest Expense                                              

         UBI's consolidated interest expense on bank overdrafts and other credit
facilities was $82,000 in 2000, down from $121,000 in 1999.                     

Net Income                                                    

      UBI's consolidated net income before income taxes for the year ended
December 31, 2000 was $614,000, as compared to $211,000 for the prior year      
representing 4.9% of net sales for the year 2000 as compared to 1.8% in 1999.   
Net Income increased from $109,000 in 1999 to $412,000 in 2000, excluding a     
recognized gain of $2,928,000 on the sale of Soyco, which took place during     
December of 1999.                                                               

Liquidity and Capital Resources                               

         Short Term Debt. Nedcor Bank has provided UBSN with a maximum overdraft
facility of approximately $2,015,000 ((pound)1,250,000) at an agreed rate of    
1.5% over LIBOR. This facility is secured by all the assets of UBSN, and is used
to supplement the cash flows from operations to sustain UBSN's operations.      
Approximately $1,486,300 was outstanding as of December 31, 2000, as compared to
approximately $2,009,000 as of December 31, 1999.                               

      Trade Creditors. Shepherd Neame Ltd., UBSN's former 50% shareholder,
has agreed to provide the Company with trade credit of an unspecified amount.   
The terms of the trade credit allow 45 days for payment for purchases of        
Kingfisher brand goods. As of December 31, 2000, UBSN owed approximately        
$2,134,000 to Shepherd Neame Ltd. Under this arrangement, as compared to        
$2,014,000 at December 31, 1999.                                                

        Current Ratio. UBI's ratio of current assets to current liabilities on
December 31, 2000 was 1.01 to 1, as compared to December 31, 1999, when the     
ratio was 0.92 to 1. Its ratio of total assets to total liabilities was 1.21 to 
1 as of December 31, 2000, while the same ratio was 1.11 to 1 at December 31,   
1999.                                                                           

Independent Accountants                                       

        UBI and UBSN used the London offices of J.M Shah and Company and Ernst
and Young, respectively (the "Former Accountants") as their independent         
accountants until January 31, 2001. Effective as of February 1, 2001, however,  
UBI and UBSN changed accountants, although here were no disputes with the Former
Accountants regarding their financial or reporting practices. UBI and UBSN      
believed that in order to properly present their financial statements for the   
purposes of this Proxy Statement, it was necessary to choose one principal      
independent auditor to consolidate the two firms' financial statements in       
compliance with US GAAP. UBI and UBSN engaged Hawsons Chartered Accountants     
("Hawsons") as their principal auditor, because, among other reasons, Hawsons is
affiliated                                                                      

28

DEF 14A
34th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 34th
with Moss Adams LLP, the Company's independent auditor ("Moss Adams"), through  
the international accounting group known as Moores Rowland International.       
Hawsons has worked closely with Moss Adams in the past. If the proposed         
Acquisition is approved, the managements of the Company, UBI, and UBSN believe  
that with Hawsons as the lead auditor of UBI, the coordination and production of
future consolidated financial statements will be greatly facilitated.           

Dissenters' Rights                                                              

         Under California law, the Company is required to offer to purchase each
shareholder's dissenting shares (shares which were not voted in favor of the    
Acquisition) for cash at their fair market value on the day before the date that
the material terms of the Acquisition were announced. On March 28, 2000, the day
before the proposed Acquisition was first announced, the closing sale price for 
the Company's Common Stock on the Pacific Exchange was $0.8125; accordingly,    
that is the price which the Company believes is the fair market value of the    
Common Stock for purposes of these dissenters' rights. If you preserve your     
right to dissent by not voting in favor of Proposal No. 1 and, nonetheless, the 
Acquisition is approved, the Company will mail a notice to you of the approval  
of the Acquisition within ten days of the approval. The notice will state the   
price it deems to be the fair market value of the shares ($0.8125 per share),   
and will detail the procedure to follow if you desire to have the Company       
purchase your dissenting shares for the stated fair market value. You must      
follow the procedure given in the notice by making a written demand that the    
Company purchase your dissenting shares within 30 days of receiving the notice  
of approval of the Acquisition. If a Shareholder disagrees with the Company's   
determination of fair market value, then there is a procedure for an appraiser  
appointed by the court to determine such value.                                 

       To preserve the right to have the Company purchase dissenting shares,
you must either (1) vote against the transaction (whether in person at the      
Annual Meeting or by proxy), or (2) simply refrain from voting in favor of the  
transaction in any way (again, whether personally or by proxy). So, if you      
attend the Annual Meeting in person and vote in favor of the Acquisition, or    
appoint a proxy holder and that proxy holder votes in favor of the Acquisition, 
you will lose your dissenter's rights. The fair market value of the shares that 
a dissenting Shareholder may receive in cash, through exercise of Dissenters'   
Rights, may be more or less than the value of those shares at the time of the   
Annual Meeting, or at the time the proposed Acquisition takes place (if it      
does). For instance, as of the close of business on April 2, 2001 (the beginning
of the fiscal quarter of the mailing of this Proxy Statement), the closing sale 
price for the Company's Common Stock on the Pacific Exchange was approximately  
$0.875 per share.                                                               

       If dissenters' rights are properly demanded with respect to more than
123,457 shares of the Company's Common Stock (which would require the Company to
pay out more than $100,000 to dissenting shareholders), the Company will have   
the right to call off the proposed Acquisition entirely, and in that case no    
shareholder will have the right to exercise dissenters' rights.                 

  For a detailed discussion of dissenters' rights, please refer to
Chapter 13 of the California Corporations Code, sections 1300 through 1304,     
inclusive, which are attached to this Proxy Statement as Supplement C. If       
Proposal No. 1 is approved by the shareholders, each shareholder who has voted  
against the transaction or refrained from voting for the transaction will       
receive a notice within ten (10) days of the approval, setting forth a statement
of the Company's determination of the fair market value of any dissenting       
shares, a description of the procedure to be followed if the Shareholder desires
to exercise his or her dissenters' rights, and a copy of the relevant sections  
of the Chapter 13 of the California Corporations Code.                          

29

DEF 14A
35th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 35th
VOTE REQUIRED FOR APPROVAL

  Approval of the Acquisition requires the affirmative vote of the
holders of a majority of the shares of Common Stock present and voting at the   
Annual Meeting. For purposes of this vote, abstentions and broker non-votes will
in effect not be counted.                                                       

 THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL NO. 1

PROPOSAL NO. 2:            AMENDMENT OF THE COMPANY'S BYLAWS                    

        The Company's Bylaws currently authorize a number of Directors between
five (5) and seven (7), allowing the Board of Directors to fix the exact number 
within that range. At present, the Board consists of seven (7) Directors, so    
that all the available spaces on the Board are currently filled. At the Annual  
Meeting, the Shareholders are being asked to approve an amendment to Article II,
Section 2.2 of the Bylaws to increase the range of authorized Directors to      
between five (5) and nine (9), with the exact number within that range to be set
by the Board.                                                                   

         The proposed text of the amended Section 2.2 of the Company's Bylaws is
attached to this Proxy Statement as Supplement D, and is hereby incorporated by 
reference into this Proxy Statement. If the proposed amendment is approved by   
the Shareholders, the Board intends to increase the size of the Board to eight  
(8), making one additional place available for a new Director. On the assumption
that both Proposal No. 1 and this Proposal will be approved, the Board has      
nominated David Townshend to fill the place thus created.                       

        The reason for this Proposal is that, under the terms of the Agreement
referred to in Proposal No. 1, above, Inversiones has the right to nominate one 
member of the Company's Board of Directors. The Company has also agreed under   
the terms of the Agreement to incorporate this Proposal to increase the number  
of directors into this Proxy Statement. Thus, if Proposal No. 1 is approved by  
the Shareholders the Company must request that the shareholders vote to increase
the size of the Board to accommodate the new candidate.                         

         Inversiones has designated David Townshend, a current Director of UBSN,
for election to the Company's Board. Mr. Townshend is currently a Director of   
UBSN and has been the General Manager of UBSN since 1990. (For more information 
about Mr. Townshend, please see "PROPOSAL NO. 3 - Election of Directors -       
Nominees for Director," below.) If this Proposal and Proposal No. 1 are approved
by the shareholders, management intends to vote all proxies it receives (other  
than those which are marked "Withhold For All", or on which Mr. Townshend's name
has been stricken out, as described above under "GENERAL INFORMATION - Voting   
Securities of the Company - Election of Directors" and on the Proxy Card        
enclosed herewith) FOR the election of Mr. Townshend to the Board of Directors. 

VOTE REQUIRED FOR APPROVAL

         Approval of the proposed amendment to the Company's Bylaws requires the
affirmative vote of the holders of a majority of the shares of Common Stock     
present and voting at the Annual Meeting. For purposes of this vote, abstentions
and broker non-votes will in effect not be counted.                             

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL NO. 2   

30

DEF 14A
36th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 36th
PROPOSAL NO. 3:            ELECTION OF DIRECTORS                                

         At the Annual Meeting, Shareholders will elect Directors to hold office
until the next Annual Meeting of Shareholders and until their respective        
successors have been elected and qualified or until such Directors' earlier     
resignation or removal. Under the Company's current Bylaws the Company's Board  
may consist of between five and seven members, with the current number set at   
seven, but if Proposals No. 1 and 2 above, are approved by the shareholders at  
the Annual Meeting this range will be increased to between five and nine. Either
seven or eight nominees will be elected at the Annual Meeting to be the         
Directors of the Company, depending on the outcome of the vote on Proposals 1   
and 2, above.                                                                   

    Shares represented by the accompanying proxy will be voted for the
election of the nominees recommended by the Board unless the proxy is marked in 
such a manner as to withhold authority so to vote. If any nominee for any reason
is unable to serve or for good cause will not serve, the proxies may be voted   
for such substitute nominee as the proxy holder may determine. The Company is   
not aware of any nominee who will be unable to or for good cause will not serve 
as a Director.                                                                  

Nominees for Director                                                           

         The Board has nominated its current seven members to serve as Directors
of the Company until the next Annual Meeting. The Board's primary nominees are: 
Dr. Vijay Mallya, H. Michael Laybourn, R.H.B. (Bobby) Neame, Kent D. Price, Sury
Rao Palamand, Jerome G. Merchant, and Yashpal Singh.                            

    In the event Proposals No. 1, and 2, above, are both approved, the
Board has additionally nominated Mr. David Townshend. The Agreement discussed in
Proposal No. 1 provides that Inversiones will have the right to designate Mr.   
Townshend for Director. If either Proposal No. 1 or Proposal No. 2 are not      
approved by the Shareholders, the nomination of Mr. Townshend will be withdrawn 
at the Annual Meeting. As of the date of this Proxy Statement, no other names   
had been placed in nomination for consideration by the Shareholders at the      
Annual Meeting.                                                                 

Directors and Executive Officers of the Company                                 

      The following table sets forth the names, ages as of April 30, 2001,
and certain information regarding each of the Company's current Directors and   
executive officers, and each of the Board's nominees for Director:              

31

DEF 14A
37th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 37th
                                                        [Enlarge/Download Table]

                                                                             Director
Name                        Age  Position                                      Since 
----                        ---  --------                                    --------
                                                                                     
H. Michael Laybourn         62   Director                                       1993 
Narayanan Mahadevan         43   Chief Financial Officer and Secretary          ---- 
Vijay Mallya, Ph.D.         44   Director, Chairman of the Board, and Chief     1997 
                                 Executive Officer                                   
Jerome G. Merchant*+        39   Director                                       1997 
R.H.B. (Bobby) Neame        66   Director                                       1998 
Sury Rao Palamand, Ph.D.*+  69   Director                                       1998 
Kent D. Price*+             56   Director                                       1998 
Yashpal Singh               54   Director and President                         1997 
David R. Townshend++        53   Nominee for Director                           ---- 

--------------                                                                  

*       Member of the Audit/Finance Committee.                                  

+       Member of the Compensation Committee.                                   

++      Assuming that the shareholders approve the proposed Acquisition, more   
 fully described in Proposal No. 1, above, and the proposed Bylaws
        amendment, more fully described in Proposal No. 2, above, increasing the
    size of the Board. If either Proposal No. 1 or Proposal No. 2 is not
approved, the nomination of Mr. Townshend will be withdrawn.    

         H. Michael Laybourn, co-founder of the Company, served as the Company's
President from its inception in 1982 through December, 1999, and as its Chief   
Executive Officer from inception through October 1997. Mr. Laybourn was elected 
a Director in November 1993 when the Company began the process of converting    
from a limited partnership to a corporation and served as Chairman of the Board 
from June 1994 through October 1997. Mr. Laybourn is a former Vice President of 
the California Small Brewers Association and a former Chairman of the Board of  
Directors of the Brewers Association of America. Mr. Laybourn holds a Bachelor  
of Fine Arts degree from Arizona State University.                              

         Narayanan Mahadeven, 43, joined the company in early 2001 as Secretary,
Corporate Controller and Chief Financial Officer. Before joining the Company, he
served the United Breweries Group in India for the prior 17 years in various    
financial and accounting capacities. Mr. Mahadaven was most recently employed as
Senior Manager of Accounting Services of Herbertsons Ltd. for the past six      
years. He holds a Bachelors Degree in Mathematics and is a Chartered Accountant 
in India.                                                                       

       Vijay Mallya, Ph.D., became Chairman of the Board and Chief Executive
Officer of the Company in October 1997. Dr. Mallya has been the Chairman of     
several companies since 1983. Dr. Mallya is Chairman of UBICS, Inc., United     
Breweries Limited, UB Engineering Limited, Mangalore Chemicals and Fertilizers  
Ltd., Herbertsons Limited, McDowell & Co. Ltd., and other affiliated companies  
(collectively the "UB Group"). United Breweries Limited and McDowell & Co., Ltd.
are two of Asia's leading beer and spirits companies. The UB Group has annual   
sales in excess of (US) $1 Billion. He also sits on boards of several foreign   
companies and organizations including companies comprising the UB Group, The    
Institute of Economic Studies (India), and the Federation of the Indian Chamber 
of Commerce and Industries. Dr. Mallya holds a Bachelor of Commerce degree from 
the University of Calcutta in India and an honorary Doctorate in Business       
Administration from the University of California, Irvine.                       

    Jerome G. Merchant became a Director in October 1997 and was Chief
Financial Officer of the Company from November 1997 to October, 1998. Mr.       
Merchant currently serves as the Strategic Planning Consultant to the Chairman's
Office of the Company and has served in such capacity since July                

32

DEF 14A
38th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 38th
1996. Since April 1993, Mr. Merchant has served in various capacities for Cal   
Fed Investments, a wholly owned subsidiary of Cal Fed Bank. He is currently     
responsible for the due diligence and monitoring of all investment products for 
Cal Fed Investments. Mr. Merchant received his Bachelor of Science degree in    
Managerial Economics-Finance from the University of California, Davis.          

       R.H.B. (Bobby) Neame became a Director in January 1998. Mr. Neame has
served as the Chairman and Chief Executive Officer of Shepherd Neame Ltd. for   
more than twenty-five years. Shepherd Neame Ltd. has operated as a brewery in   
England for 300 years, making it England's oldest continuously operating        
brewery.                                                                        

  Sury Rao Palamand, Ph.D., became a Director in January 1998. Dr.
Palamand is the President of Summit Products, Inc., a beverage development firm 
serving the beverage industry; President of the Old 66 Brewery & Restaurant, a  
brewery-restaurant in St. Louis, Missouri; owner of Southbend Brewery &         
Smokehouse, a chain of brewpubs in the States of North and South Carolina; and  
Managing Director of Atlantic Beverages Ltd., a product development firm serving
the United Kingdom. From 1966 to 1989, Dr. Palamand served as Director, Beer and
New Product Development for Anheuser-Busch Companies, Inc. Dr. Palamand holds a 
Master of Science in Chemistry from the University of Bombay, India, and a      
Master of Science and Doctorate in Food and Flavor Technology from Ohio State   
University.                                                                     

      Kent D. Price became a Director in January 1998. He is currently the
President and CEO of Robert Kent and Company, an investment and consulting      
company. Additionally, he is currently the Chairman of Fluid, Inc. and a        
Director of Capital Markets Company. From August 1994 until July 1998, he was   
employed by IBM Banking, Finance and Securities Industries as General Manager of
Securities and Capital Markets. From 1993 through August 1994, he served as     
Chairman and Chief Executive Officer of the Bank of San Francisco. He currently 
serves as a Director of The San Francisco Company, which is the holding company 
for the Bank of San Francisco. He also sits on the board of the American Bridge 
Company. Mr. Price received a Bachelor of Arts in history and politics and a    
Master of Arts in Slavic studies from the University of Montana and attended    
Oxford University as a Rhodes Scholar.                                          

       Yashpal Singh, President of the Company since January, 2000, became a
Director in October 1997 and Chief Operating Officer in November 1997. Mr. Singh
has served as Executive Vice President of the company since May, 1998. Since    
1997, Mr. Singh has served as Executive Vice President - Operations for UBA. In 
this capacity, he is responsible for the U.S. brewing operations of UBA. Between
1992 and 1997, Mr. Singh served as Senior Vice President - Operations for United
Brewers Ltd., where he was responsible for the operations of 12 breweries,      
instituting new projects, and technical and operational evaluation of potential 
acquisition opportunities. Mr. Singh has over 36 years of experience in the     
brewing industry. Mr. Singh holds degrees in Chemistry, Botany, and Zoology from
Punjab University in India, and has graduate training in the fields of Brewing, 
Malting, and Mineral Water Technology. Mr. Singh is an associate member of the  
Institute of Brewing, London; a member of the Master Brewers Association of     
America; and was a former member of the Managing Committee of the All India     
Brewer's Association.                                                           

  David Townshend is currently a Director of UBSN and has been the
General Manager of UBSN since 1990. Mr. Townshend's responsibilities encompass  
all aspects of UBSN's operations. Prior to his promotion to General Manager of  
UBSN, Mr. Townshend served as Transport Manager for Shepherd Neame Limited,     
where his responsibilities included distribution and customer services.         

Board of Directors' Meetings and Committees                                     

        During the fiscal year ended December 31, 1999, the Board of Directors
held four meetings. During 2000, the Board of Directors held two meetings. No   
Director attended fewer than 75% of the                                         

33

DEF 14A
39th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 39th
aggregate of the total number of meetings of the Board and the total number of  
meetings held by all committees of the Board on which he served.                

       Listed below are the committees of the Board of Directors, along with
Directors who served as members of each committee during 1999 and to date in    
2000.                                                                           

     Audit and Finance Committee. The Board has a standing Audit/Finance
Committee and a standing Compensation Committee. The Board does not have a      
nominating committee or a committee performing similar functions.               

         Messrs. Merchant, Price, and Palamand presently serve as the members of
the Audit/Finance Committee. The Audit/Finance Committee met once during 1999,  
and met four times during 2000. The Audit/Finance Committee reviews, acts on,   
and reports to the Board of Directors with respect to various auditing,         
accounting and finance matters, including the selection of the Company's        
auditors, the scope of the annual audits, fees to be paid to the auditors, the  
performance of the Company's auditors, and the accounting practices of the      
Company.                                                                        

         Compensation Committee. Messrs. Merchant, Price, and Palamand presently
serve as the members of the Compensation Committee. Messrs. Laybourn, Mallya,   
and Palamand served as the members of the Compensation Committee until April 30,
1999. The Compensation Committee met four times during 1999 and met once during 
2000. The Compensation Committee considers all matters of compensation with     
respect to the chief executive officer, president, any vice president, and any  
other senior executives, and makes recommendations to the Board regarding the   
compensation of such persons. The Compensation Committee also makes             
determinations with respect to the granting of stock options with respect to    
Directors who are also employees of the Company.                                

        Special Committee. The Special Committee, consisting of Directors Kent
D. Price (as Chairman), Sury Rao Palamand, and Michael Laybourn, was created by 
the Board in 1998 for the purpose of advising the Board concerning certain      
potential transactions by the Company, including among others the Acquisition   
described in Proposal No. 1, above.                                             

        The Special Committee met six times during 1999 and three times during
2000.                                                                           

Report of the Audit Committee                                                   

         The following audit committee report is provided in accordance with the
rules and regulations of the Securities and Exchange Commission (the "SEC").    
Pursuant to such rules and regulations, this report shall not be deemed         
"soliciting materials" filed with the SEC, subject to Regulation 14A or 14C or  
Section 18(a) of the Securities Exchange Act of 1934, as amended.               

       The Board of Directors maintains an Audit/Finance Committee comprised
of three of the Company's outside directors. The Board of Directors and the     
Audit/Finance Committee believe that the Audit/Finance Committee's current      
member composition satisfies the rules of the National Association of Securities
Dealers, Inc. ("NASD") and the Pacific Exchange that govern audit committee     
composition, including the requirement that all audit committee members be      
"independent directors." The Audit/Finance Committee has not adopted a written  
charter.                                                                        

 The Audit/Finance Committee assists the Board of Directors with
fulfilling its oversight responsibility regarding the quality and integrity of  
accounting, auditing, and financial reporting practices of the Company. In      
discharging its oversight responsibilities regarding the audit process, the     
Audit/Finance Committee reviewed and discussed the audited financial statements 
with management;                                                                

34

DEF 14A
40th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 40th
discussed with the independent auditors the material required to be discussed by
statement on auditing standards no. 61; and reviewed the written disclosures and
the letter from the independent auditors required by the Independence Standards 
Board's Standard No. 1, and discussed with the independent auditors any         
relationships that may impact their objectivity and independence.               

      Audit Fees. The aggregate fees billed by Moss Adams for the audit of
the Company's annual consolidated financial statements for the year ended       
December 31, 2000 and the review of the quarterly consolidated financial        
statements included in the Company's Form 10-QSB for 2000 were $50,200.         

         Financial Information System Design and Implementation Fees. There were
no fees billed by Moss Adams to the Company for financial information systems   
design and implementation for the year ended December 31, 2000.                 

        All Other Fees. The aggregate fees billed to the Company for all other
services rendered by Moss Adams for the year ended December 31, 2000 were       
$51,800.                                                                        

       The Audit Committee has determined that the provision of the services
rendered above for (a) financial information systems design and implementation  
and (b) all other fees is compatible with the maintenance of Moss Adams'        
independence.                                                                   

Based on the review and discussions referred to above, the    
Audit/Finance Committee recommended to the Board of Directors that the audited  
financial statements be included in the Company's Annual Report on Form 10-KSB  
for the years ended December 31, 1999 and December 31, 2000, as filed with the  
SEC.                                                                            
                                 Approved by the Members of the Audit Committee:

                                        Jerome G. Merchant
                                       Sury Rao Palamand
                                   Kent D. Price

Director Compensation                                                           

        The Company's policy with respect to compensation of outside Directors
for their services as Directors is as follows: each outside Director receives   
$3,000 per Board meeting he attends and $1,000 per committee meeting he attends.
The outside Directors may opt to receive such compensation in cash, or in shares
of the Company's Common Stock which will be valued at its fair market value as  
of the date of the meeting of the Board of Directors or of the meeting of the   
committee for which the outside Director is being compensated. To date, all of  
the outside Directors have elected to receive such compensation in shares of the
Company's Common Stock. In addition, every year each outside Director is granted
options to purchase a number of shares of Common Stock having a fair market     
value equal to $25,000, as determined on the date of the grant, at an option    
exercise price equal to the closing price of the Company's Common Stock on the  
Pacific Exchange.                                                               

Mr. Merchant receives a monthly fee of $2,700 in exchange for 
consulting services he renders to the Company. This monthly fee is in lieu of   
the normal Directors' fees of $3,000 per Board meeting and $1,000 per committee 
meting. In exchange for his consulting services with regard to the Acquisition  
and related transactions, Mr. Merchant will receive 2.5% of the value of the    
consideration paid by the Company under the Agreement, payable in the Company's 
Common Stock. The Common Stock will be valued at the average trading price of   
the Common Stock over the six months prior to the closing of the Agreement.     

35

DEF 14A
41st Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 41st
         Additionally, in recognition of their past services as Directors of the
Company, on August 30, 1999 the Company's three outside Directors were issued a 
one-time grant of shares of the Company's Common Stock in the following amounts:
Mr. Neame, 18,500 shares; Mr. Price, 31,800 shares; and Mr. Palamand, 23,100    
shares.                                                                         

Significant Employees                                                           

      Don Barkley, 46, joined the Company in 1983 as Master Brewer and has
served in that capacity continuously since then. In 1993 Mr. Barkley was the    
President and representative to the national board of governors of the Master   
Brewers Association of the Americas, Northern California District. Mr. Barkley  
holds a Bachelor of Science degree in fermentation science from the University  
of California, Davis.                                                           

Security Ownership of Certain Beneficial Owners and Management                  

         The following table sets forth certain information known to the Company
regarding the beneficial ownership of the Company's Common Stock and Series A   
Preferred Stock as of April 2, 2001, for (a) each shareholder known by the      
Company to own beneficially 5% or more of the outstanding shares of its Common  
Stock or Series A Preferred Stock; (b) each Director and nominee; and (c) all   
Directors and executive officers of the Company as a group. Except as noted, the
Company believes that the beneficial owners of the Common Stock and Series A    
Preferred Stock listed below, based on information furnished by such owners,    
have sole investment and voting power with respect to such shares, subject to   
community property laws where applicable.                                       

                                                                [Download Table]

                                                     Shares                    
                                                  Beneficially      Approximate
               Name                                 Owned(1)         Percentage
               ----                               ------------      -----------
                                                                               
United Breweries of America Inc.+                 3,087,818(2)       55.3%     

Vijay Mallya, Ph.D.+                              3,087,818(3)       55.3%     

H. Michael Laybourn++                               289,067(4)        5.2%     

R.H.B. (Bobby) Neame                                 70,283(5)        1.3%     
         c/o Shepherd Neame, Ltd.                                              
         17 Court Street.                                                      
         Faversham, Kent ME13 3AX                                              
         United Kingdom                                                        

Kent D. Price                                        90,313(5)        1.6%     
         c/o Robert Kent and Company                                           
         Wood Island #308                                                      
         60 E. Sir Francis Drake Blvd.                                         
         Larkspur, CA 94939                                                    

Sury Rao Palamand, Ph.D.                             80,013(5)        1.4%     
         50 Crestwood Executive Center,                                        
         Suite 207                                                             
         St. Louis, MO 63126                                                   

Jerome G. Merchant+                                  42,222(5)        0.8%     

Yashpal Singh++                                                                

David Townshend                                                                
         c/o UBSN Limited                                                      
         17 Court Street                                                       
         Faversham, Kent ME13 3AX                                              
         United Kingdom                                                        

All Directors and executive officers                                           
   as a group (8 persons)                         3,659,716(6)       64.0%     

SERIES A PREFERRED STOCK:                                                      

H. Michael Laybourn                                       6,100        2.7%    
All Directors and executive officers                                           
   as a group (8 persons)                                 6,100        2.7%    

                                              (Footnotes continued on next page)

36

DEF 14A
42nd Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 42nd
(Footnotes continued from previous page)                                        

--------------                                                                  

+       Three Harbor Drive, Suite 115, Sausalito, CA 94965                    

++      1601 Airport Road, Ukiah, CA 95402                                    

(1)     Applicable percentages of ownership are based on 5,580,498 shares     
  of Common Stock outstanding. Shares of Common Stock subject to a
contract of purchase or options currently exercisable or      
   exercisable within 60 days after the date of this Proxy Statement
  are deemed outstanding for computing the percentage ownership of
    the person obligated to purchase the shares or holding the options
    but are not deemed outstanding for computing the percentage of any
other person.                                                 

(2)      Does not include (i) 1,101,302 shares issuable upon conversion of      
certain convertible notes issued to UBA (see "--Certain       
 Transactions," below), or (ii) 882,547 outstanding shares which
 are held in the aggregate by certain of the Company's founders,
  including Messrs. Laybourn and Barkley, John Scahill, and Norman
Franks, and which, pursuant to a Shareholders' Agreement, are 
  subject to (A) a right of first refusal to purchase, held by the
   Company, which may become exercisable within 60 days, and (B) the
 requirement that the owners of record vote such shares for four
Directors designated by UBA and two additional independent    
Directors who are acceptable to UBA.                          

(3)      Includes all shares held by UBA. Dr. Mallya may be deemed to be a      
   beneficial owner of UBA because UBA is controlled by Golden Eagle
 Trust, which in turn is controlled by trustees who may exercise
       discretion in Dr. Mallya's favor among others. Dr. Mallya is also the
Chairman and Chief Executive Officer of UBA.                  

(4)      Includes 12,500 shares subject to options exercisable or will be       
    exercisable within 60 days. Does not include 3,684,498 outstanding
  shares held by UBA, Messrs. Scahill, Franks, and Barkley, all of
 which are subject to Shareholders' Agreement which requires the
parties thereto to vote for one Director designated by Mr.    
Laybourn.                                                     

(5)      Includes 42,222 shares subject to options which are presently          
exercisable or will be exercisable within 60 days.            

(6)      Does not include 596,680 outstanding shares held by Messrs.            
    Scahill, Franks, and Barkley pursuant to a Shareholders' Agreement
which requires the parties thereto to vote for four Directors 
 designated by UBA, one Director designated by Mr. Laybourn, and
 two additional independent Directors who are acceptable to UBA,
    and which grants UBA a right of first refusal with respect to such
shares. Includes 168,888 shares subject to options which are  
presently exercisable or will be exercisable within 60 days   

37

DEF 14A
43rd Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 43rd
Executive Compensation                                                          

   The following table sets forth the annual compensation, including
salary, bonuses, and certain other compensation, paid by the Company to its     
Chief Executive Officer and most highly-compensated executive officers during   
each of the fiscal years ended December 31, 1998, 1999, and 2000. None of the   
Company's other executive officers received total compensation in excess of     
$100,000 in any of those years.                                                 

SUMMARY COMPENSATION TABLE

                                                        [Enlarge/Download Table]

                                            Annual Compensation                                 Long-Term Compensation             
                                --------------------------------------------- -----------------------------------------------------
                                                                                       Awards                        Payouts       
                                                                              ---------------------------- ------------------------
                                                                                             Securities                            
                                                                               Restricted    Underlying                            
                                                               Other Annual       Stock       Options/       LTIP       All Other  
             Name                         Salary     Bonus     Compensation     Award(s)        SARs        Payouts   Compensation 
    And Principal Position       Year      ($)        ($)          ($)            ($)            (#)          ($)          ($)     
------------------------------- ------- ----------- --------- ---------------  ----------    ----------     -------   -------------
                                                                                                                                   
Vijay Mallya                    2000      $120,000     $0.00      $8,266                                                           
Chief Executive Officer                                                                                                            
                                1999      $120,000     $0.00       $0.00                                                           

                                1998      $120,000     $0.00       $0.00                                                           

H. Michael Laybourn             2000         $0.00     $0.00       $0.00                       20,000                              
Former President                                                                                                                   
                                1999      $120,000     $0.00      $9,027                                                           

                                1998      $120,000     $0.00      $8,386                                                           

Yashpal Singh, President and    2000      $106,267   $30,050      $9,027                                                           
Chief Operating Officer                                                                                                            
                                1999      $100,008   $30,000      $7,916                                                           

                                1998      $ 87,922     $0.00      $5,127                                                           

Stock Option Grants                                                             

       The following table sets forth certain information concerning options
held by the named executive officers at December 31, 2000. No stock options were
granted to or exercised by any of the Company's executive officers during the   
year ended December 31, 2000 or to date during 2001.                            

                                                                [Download Table]

                      Number of    Percent of Total                              
                      Securities     Options/SARs                                
                      Underlying      Granted To                                 
                     Options/SARs    Employees in    Exercise or Base  Expiration
Name                 Granted (#)     Fiscal Year     Price ($/Share)      Date   
----                 ------------  ----------------  ---------------   ----------
                                                                                 
H. Michael Laybourn   12,500                           $8.80            09/18/01 

38

DEF 14A
44th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 44th
Employment Agreement                                                            

    The Company's employment agreement with President Michael Laybourn
which provided for minimum salary of $120,000 expired December 24, 1998. Mr.    
Laybourn remained President of the Company until December, 1999.                

   The Company entered into an employment agreement with its current
President and Chief Operating Officer, Yashpal Singh, effective on April 1,     
1998. Under that agreement, which will expire in 2004 (but may be terminated at 
any time, by either party, upon six months notice), Mr. Singh's base salary was 
initially set at $100,000 per year, however, based on performance reviews, his  
base salary may be increased annually by the Company's Board of Directors. For  
the current year, Mr. Singh's base salary is $115,500. Mr. Singh is also        
entitled to receive an annual bonus, based on an annual performance review, and 
such bonuses may amount to as much as 30% of Mr. Singh's base salary. The       
Company provides Mr. Singh with standard medical and dental benefits and also   
approximately $200,000 in life insurance benefits.                              

Certain Transactions                                                            

      The Board of Directors has proposed that the Company purchase all of
the issued and outstanding capital stock of UBI, which is currently wholly-owned
by Inversiones, in exchange for five million five hundred thousand (5,500,000)  
shares of the Company's Common Stock (see "PROPOSAL NO. 1," above). The         
principal terms of this transaction will be presented by management at the      
Meeting for the approval of the Company's shareholders, and a copy of the       
Agreement among the Company, Inversiones, is attached to this Proxy Statement as
Supplement A. Under California law, shareholder approval must be obtained before
the Agreement can be consummated. Also, under the terms of the Agreement        
Inversiones has the right to nominate one Director, David Townshend, to serve on
the Company's Board. Since the Company's Bylaws currently limit the total number
of Directors to seven, and there are now seven serving Directors, in order to   
increase the size of the Board to accommodate Mr. Townshend, the Board of       
Directors has submitted to the shareholders a Proposal to amend the Bylaws to   
increase the size of the Board (see PROPOSAL NO. 2, above). If the Acquisition  
is approved by the Company's shareholders, UBI would become a wholly-owned      
subsidiary of the Company. For a full description of the proposed Acquisition   
please see PROPOSAL NO. 1, above.                                               

     In recognition of Mr. Laybourn's personal guarantee of an equipment
lease during 1996, the Company granted President Michael Laybourn a 5-year      
option to purchase 12,500 shares of Common Stock of the Company at an exercise  
price of $8.80 per share. Mr. Laybourn's personal guarantee has now terminated  
in accordance with its terms. The option was granted in January 1997 and expires
in September 2001.                                                              

         In 1998, UBA agreed to provide the Company with a credit facility of up
to $2 million for the working capital requirements of the Company at an interest
rate of 1.5% per annum above the prime rate offered by the Bank of America in   
San Francisco, California (the "1998 Facility"). In mid-1999, the 1998 Facility 
was terminated, and a new credit facility (the "1999 Facility") in the maximum  
amount of $800,000 was offered to the Company on substantially the same terms as
the 1998 Facility. On August 31, 1999, the Company and UBA entered into a Master
Line of Credit Agreement setting forth the terms of the 1999 Facility. Pursuant 
to the terms of the Master Line of Credit Agreement, advances on the credit     
facility bear interest at the prime rate of the Bank of America in San Francisco
plus 1.5%, up to a maximum of 10%, and is due and payable quarterly. The        
principal amount of each advance, together with any accrued but unpaid interest 
on such advance, is due 18 months after the date of such advance. Each advance  
made on the line of credit will be evidenced by a convertible note. Each        
convertible note includes a conversion feature whereby UBA could, at its option,
convert the principal and any accrued but                                       

39

DEF 14A
45th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 45th
unpaid interest into unregistered shares of the Company's Common Stock on or    
after the maturity date, at a rate of one share of Common Stock for each $1.50  
of principal and unpaid interest. The arrangement was approved by the           
independent Directors (Robert Neame, Kent D. Price and Sury Rao Palamand) on    
August 30, 1999. The terms of the 1999 Facility were recently amended so that   
the maximum amount available to the Company under the 1999 Facility was         
increased to $1,200,000, and then increased again to $1,600,000. As of April 1, 
2001, the Company had made twelve draws on the credit facility, and the         
aggregate principal amount drawn, together with interest accrued, equaled       
$1,651,954. This amount corresponds to the right of UBA to acquire up to        
1,101,302 shares of Common Stock of the Company at a conversion price of $1.50  
per share.                                                                      

Change in UBA's Beneficial Ownership Interest                                   

    United Breweries of America Ltd., a British Virgin Islands company
("UBA-BVI") owns approximately 97% percent of the total issued and outstanding  
shares of UBA (a Delaware corporation). In November of 1997, UBA owned 2,119,647
shares, representing 47.5%, of the then outstanding shares of Common Stock of   
the Company. UBA then acquired an additional 30,000 shares in a private         
transaction, increasing its percentage of share ownership to 2,149,647 shares,  
or approximately 48.2% of the Company's then outstanding common shares.         

       On August 30, 1999, UBA agreed to convert all outstanding convertible
notes (together with all accrued but unpaid interest) issued to UBA under the   
1998 Facility. By their terms the convertible notes were convertible at $1.50   
per share. However, at the request of the Company's Board, UBA agreed to convert
the notes into Company Common Stock at a price of $1.125, which was the market  
price of the Common Stock on the Pacific Exchange as of the date immediately    
prior to the date of the conversion. The total amount converted was             
approximately $1,055,442, and 938,171 shares of Common Stock were received upon 
the conversion. As a result, UBA became the owner of 55.3% of the Company's     
outstanding shares of Common Stock, with 3,087,818 shares. Further, as a result 
of the conversion, the Company recognized an expense of $248,500 for the induced
conversion. The induced conversion was approved by the Board's independent      
Directors (Robert Neame, Kent D. Price and Sury Rao Palamand).                  

      Upon the termination of the 1998 Facility, UBA agreed to provide the
Company with the 1999 Facility of up to $1,600,000 (as subsequently amended) on 
substantially the same terms as the 1998 Facility. As of April 1, 2001, the     
Company had made 12 draws on the 1999 Facility, and the aggregate amount drawn  
together with interest accrued thereon is equal to $1,651,954.                  

Section 16(a) Beneficial Ownership Reporting Compliance                         

       Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires each of the Company's executive Directors and         
officers, and each person who or which is a beneficial owner of more than 10% of
the Company's Common Stock, to file forms with the Securities and Exchange      
Commission ("SEC") and the Pacific Exchange Inc. reports of ownership and       
changes in ownership of the Company's shares. These persons are required by SEC 
regulation to furnish the Company with copies of all such forms they file. Based
solely upon a review of such Forms furnished to the Company during fiscal 1999  
and 2000, only one person who, at any time during fiscal 1999 and 2000 was a    
Director, officer, or beneficial owner of more than 10 percent of the Company's 
Common Stock failed to file on a timely basis, as disclosed in the above forms, 
reports required by Section 16(a) of the Exchange Act during the most recent    
fiscal year or prior fiscal years. The Annual Statement of Changes in Beneficial
Ownership on Form 5 filed jointly by Dr. Vijay Mallya and United Breweries of   
America Inc. was filed with the Commission one day after the filing deadline,   
because Dr. Mallya was travelling overseas and could not be reached until his   
return.                                                                         

40

DEF 14A
46th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 46th
 VOTE REQUIRED FOR THE ELECTION OF DIRECTORS

     The affirmative vote of the holders of a plurality of the shares of
Common Stock present and voting at the Annual Meeting is required to elect each 
of the nominees for Director. Each share of Common Stock which is represented,  
in person or by proxy, at the Annual Meeting will be accorded one vote on each  
nominee for Director, unless one or more shareholders express an intention to   
exercise the right of cumulative voting, in which case all shares will be       
accorded the cumulative voting rights. For purposes of this vote, abstentions   
and broker non-votes will in effect not be counted. Please see "GENERAL         
INFORMATION -- Voting Securities of the Company - Cumulative Voting," above, for
a brief description of the voting procedures in the event that cumulative voting
is requested at the Annual Meeting in connection with the election of Directors.

  The Board of Directors recommends that shareholders vote FOR the
election of all eight of the nominees named above (including David Townshend).  
In the event that the transaction described in Proposal No. 1, above, or the    
Bylaws amendment described in Proposal No. 2, above, are not approved, the Board
will withdraw the nomination of Mr. Townshend.                                  

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF
THE NOMINEES FOR DIRECTOR DESCRIBED ABOVE.

PROPOSAL NO. 4:   AMENDMENT OF THE COMPANY'S 1994 STOCK OPTION PLAN             

       At the Annual Meeting, the Shareholders are being asked to approve an
amendment to the Company's 1994 Stock Option Plan (the "1994 Plan") to increase 
the number of shares of Common Stock reserved for issuance under the 1994 Plan  
by 800,000 shares, from the current 200,000 shares to an aggregate of 1,000,000 
shares.                                                                         

History of the 1994 Plan                                                        

  The Company's 1994 Plan was adopted by the Board of Directors in
October of 1994. The purpose of the 1994 Plan is to advance the interests of the
Company by giving the Company's employees and consultants incentive, through    
ownership of the Company's stock, to continue in the service of the Company and 
thereby to help the Company compete effectively with other enterprises for the  
services of qualified individuals.                                              

      Between its adoption in 1994 and the end of 2000, all of the options
available for grant under the terms of the1994 Plan were awarded, leaving no    
options available for future grant. In February of 2001, the Board of Directors 
amended the 1994 Plan to increase the number of shares of Common Stock reserved 
for issuance thereunder by 800,000 shares to a total of 1,000,000 shares. That  
amendment is the subject of this Proposal.                                      

Options Now Outstanding Under the 1994 Plan                                     

        As of April 2, 2001, options for 201,388 shares were outstanding under
the 1994 Plan, and no shares had been issued pursuant to the exercise of options
granted under the 1994 Plan. As of April 2, 2001, the aggregate fair market     
value of all shares of Common Stock subject to outstanding options under the    
1994 Plan was approximately $176,215, based on the closing sale price of $0.875 
for the Company's Common Stock as reported on the Pacific Exchange on such date.

41

DEF 14A
47th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 47th
Description of the Proposed Amendment                                           

     The Board of Directors believes that in order to attract and retain
highly qualified employees and consultants to the Company in the future, and to 
provide such employees and consultants with adequate incentives through their   
proprietary interest in the Company, it will be necessary to have a recognized  
means of offering them a potential equity stake in the Company. Until very      
recently, such incentives were given by offering stock options through the 1994 
Plan. Now, however, all of the 200,000 shares which have been reserved for      
issuance in the form of options granted under the 1994 Plan have been used up.  
In order to continue to have this form of incentive compensation available, it  
is therefore necessary to either adopt a new option plan, or some other         
comparable plan, or to amend the 1994 Plan in order to make available more      
shares for future option grants. After considering a number of suggestions, the 
Board of Directors has approved this Proposal to amend the 1994 Plan to reserve 
an additional 800,000 shares of Common Stock for issuance in the form of        
options, thereby increasing the number of options available for grant from the  
current 200,000 to an aggregate of 1,000,000. The proposed amendment will not   
make any other changes to the current terms or conditions of the 1994 Plan, or  
of any options which have been or may be granted under the 1994 Plan. By means  
of this Proposal No. 4 the shareholders are being asked to approve this         
amendment to the 1994 Plan.                                                     

New Plan Benefits                                                               

       Option awards under the 1994 Plan may be granted at the discretion of
the Compensation Committee. Accordingly, it is not possible to determine in     
advance when or whether future option grants may be made under the 1994 Plan, or
to whom such grants may be made. The following table sets forth information     
concerning awards made to certain individuals and groups during 2000 under the  
1994 Plan. This information may not be indicative of awards that will be granted
under the Plan in the future, however.                                          

 OPTION GRANTS DURING 2000

                                                                [Download Table]

                                          Number Of Shares      Market Value of the 
Name And Position                       Subject To Options(1)  Underlying Shares (2)
-----------------                       ---------------------  ---------------------
                                                                                    
Michael Laybourn, Director                     20,000                 $17,500       
Jerome G. Merchant, Director                   20,000                 $17,500       
Robert Neame, Director                         20,000                 $17,500       
Sury Rao Palamand, Director                    20,000                 $17,500       
Kent D. Price, Director                        20,000                 $17,500       

All Executive Officers as a Group                                                   
All Non-Executive Directors as a Group         100,000                $87,500       
All Other Employees as a Group                                                      

--------------------                                                            
(1)   All options (i) were granted with an exercise price equal to the fair     
market value of the Company's Common Stock as of the date of grant, 
   (ii) have a term of 5 years from the date of grant, and are immediately
 exercisable upon the date of the grant, except that the last grant of
options under the 1994 Plan to Michael Laybourn exceeded the total  
reserved number of shares under the 1994 Plan by approximately 1,400
shares, therefore the Company and Mr. Laybourn agreed that none of  
  those options would become exercisable until August, 2001, so that the
Company would have sufficient time to take action to increase the   
number of shares available.                                         
(2)   Based on $0.875, the closing price of a share of the Company's Common     
Stock on April 2, 2001.                                             

42

DEF 14A
48th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 48th
Administration of the 1994 Plan                                                 

     The 1994 Plan may be administered by the Board of Directors or by a
committee of the Board. The 1994 Plan is currently being administered by the    
Board of Directors and the Board's Compensation Committee (the "Administrator").
The Compensation Committee, which is comprised of "outside" (non-employee)      
directors, has the authority to grant stock options and otherwise administer the
1994 Plan. Members of the Board of Directors receive no additional compensation 
for their services in connection with the administration of the 1994 Plan. All  
questions of interpretation of the 1994 Plan are determined by the Board of     
Directors or the Compensation Committee and its decisions are final and binding 
upon all participants.                                                          

Options Available for Grant under the 1994 Plan                                 

      Options granted under the 1994 Plan may be, at the discretion of the
Administrator and as reflected in the terms of the written option agreement,    
either "incentive stock options" ("ISO") within the meaning of Section 422 of   
the Internal Revenue Code of 1986, as amended (the "Code"), or nonstatutory     
stock options ("NSO"). The 1994 Plan is not a qualified deferred compensation   
plan under Section 401(a) of the Code, and is not subject to the provisions of  
the Employee Retirement Income Security Act of 1974, as amended. Shares subject 
to options granted under the 1994 Plan that lapse unexercised will generally    
become available for reissuance under the 1994 Plan at the time of such lapse.  

  Subject to adjustment as described below (see "--Adjustment Upon
Changes in Capitalization"), the Company may grant only that number of options  
as is specified in the 1994 Plan. Once the specified number of options are      
outstanding, the Company may not grant any more options under the 1994 Plan     
unless some of the formerly granted options lapse unexercised. The exercise of a
previously granted option will not increase the number of shares available to be
granted in the future.                                                          

 At the present time, there are no remaining shares reserved for
issuance under the 1994 Plan, unless the 1994 Plan is amended. The Board of     
Directors has, however, approved an amendment to the 1994 Plan which would      
increase the number of options which could be granted under the 1994 Plan from  
200,000 shares to 1,000,000 shares. If this Proposal is approved, the 1994 Plan 
would be so amended and the Company would reserve an additional 800,000 shares  
of its Common Stock for issuance pursuant to the grant and exercise of options  
under the 1994 Plan.                                                            

Eligibility                                                                     

 The 1994 Plan provides that options may be granted to employees
(including officers and directors who are also employees) and consultants of the
Company, its subsidiaries and affiliates. ISOs may be granted only to employees 
of the Company and its subsidiaries. The Administrator selects the optionees and
determines the number of shares subject to the option and the exercise price of 
each option. In making such determination, the Administrator takes into account 
the duties and responsibilities of the optionee, his or her present and         
potential contribution to the success of the Company, and other relevant        
factors. Only employees (including employee-Directors) of the Company may       
receive ISOs under the 1994 Plan. As of April 2, 2001, the Company had          
approximately 64 full-time and 21 part-time employees who may be eligible to    
participate in the 1994 Plan.                                                   

       The 1994 Plan provides limits on the aggregate market value of shares
subject to all ISOs that may be granted to any single optionee, so that the     
aggregate fair market value of the shares covered by all ISOs granted to that   
optionee under the 1994 Plan (together with any other ISO's granted to that     

43

DEF 14A
49th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 49th
individual) which may for the first time become exercisable as ISOs during any  
one calendar year may not exceed $100,000.                                      

Terms of Options                                                                

        The terms of options granted under the 1994 Plan are determined by the
Administrator. Each option is evidenced by a stock option agreement between the 
Company and the optionee and is subject to the following additional terms and   
conditions:                                                                     

      Written Agreement. All grants of options under the 1994 Plan must be
evidenced by a written option agreement containing the terms required by the    
1994 Plan itself as well as all other terms, imposed at the discretion of the   
Administrator, which govern the option so granted.                              

       Exercise of Options. The optionee must earn the right to exercise the
option by continuing to work for the Company. All options granted under the 1994
Plan vest (become exercisable) in cumulative annual increments, of at least 20% 
per year, over a period of five years from the date of grant, but the           
Administrator may in its discretion issue options with faster vesting periods,  
or impose performance based vesting criteria. The Administrator determines when 
options have become exercisable. An option is exercised by giving written notice
of exercise to the Company specifying the number of full shares of Common Stock 
to be purchased, and by tendering payment of the purchase price to the Company. 
The method of payment of the exercise price of the shares purchased upon        
exercise of an option is determined by the Administrator.                       

      Exercise Price. The exercise price of options granted under the 1994
Plan is determined by the Administrator, and must be at least equal to the fair 
market value of the shares on the date of grant in the case of ISOs, and 85% of 
the fair market value of the shares on the date of grant, in the case of NSOs,  
as determined by the Administrator, based upon the closing sales price for the  
Company's Common Stock on the principal trading market or quotation system for  
the Company's Common Stock (currently, the Pacific Exchange) on the date of     
grant. ISOs granted to shareholders owning more than 10% of the Company's       
outstanding stock are subject to the additional restriction that the exercise   
price on such options must be at least 110% of the fair market value on the date
of the grant. NSOs granted to a "covered employee" under Section 162(m) of the  
Code are subject to the additional restriction that the exercise price on such  
options must be at least 100% of the fair market value on the date of grant.    

       Termination Of Employment. If the optionee's employment or consulting
relationship with the Company is terminated for any reason other than death or  
disability, options under the 1994 Plan may be exercised, to the extent the     
option was exercisable on the date of such termination, not later than three    
months (or such other period of time as determined by the Administrator) after  
the date of such termination. In no event, however, may an option be exercised  
by any person after its termination date.                                       

        Disability. If an optionee is unable to continue his or her employment
or consulting relationship with the Company as a result of total and permanent  
disability, options may be exercised, to the extent the option was exercisable  
on the date of such termination, within one year (or such other period of time  
as determined by the Administrator) after the date of termination, but in no    
event may any option be exercised after its termination date.                   

    Death. If an optionee should die while employed or retained by the
Company, his or her currently exercisable options may be exercised within one   
year after the date of death (or such other period of time as determined by the 
Administrator) by his or her estate or by a person who acquired the right to    
exercise the option by bequest or inheritance to the extent the right to        
exercise would have                                                             

44

DEF 14A
50th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 50th
accrued had the optionee continued living and remained employed or retained by  
the Company, but in no event may the option be exercised after its termination  
date.                                                                           

         Term (Length of Time) of Options. In general, options granted under the
1994 Plan may not have a term of more than ten years, although options may be   
granted for shorter terms. Options granted to any person who, at the time of    
grant, owns 10% or more of the combined voting power of the outstanding stock   
(common and preferred) of the Company or any of its subsidiaries may not be for 
a term of more than five years.                                                 

      Nontransferability Of Options. No option granted under the 1994 Plan
may be sold, pledged, assigned, hypothecated, transferred, or disposed of in any
manner other than by will or by the laws of descent and distribution. Options   
granted under the 1994 Plan may be exercised, during the lifetime of the        
optionee, only by the optionee and in the event of the optionee's death, only by
a person who acquires the right to exercise the option by bequest or inheritance
or by reason of the death of the optionee.                                      

       Other Provisions. The option agreements issued in connection with the
grant of any option under the 1994 Plan may contain such other terms, provisions
and conditions, not inconsistent with the terms of the 1994 Plan, as may be     
determined by the Administrator.                                                

Adjustment Upon Changes in Capitalization                                       

       In the event any change is made in the Company's capitalization, such
as a stock split or dividend, that results in an increase or decrease in the    
number of outstanding shares of Common Stock without receipt of consideration by
the Company, appropriate adjustment shall be made in the option price, the      
number of shares subject to each option, the annual limitation on a grant to any
one employee, as well as the number of shares available for issuance under the  
1994 Plan, unless the change in capitalization itself involves the termination  
of all outstanding options.                                                     

     All options then outstanding under the 1994 Plan will automatically
terminate upon consummation of any (i) merger in which the shares of the Company
outstanding immediately before the merger (or in which the shares of the        
surviving entity issued with respect to shares of the Company immediately before
the merger takes place) represent 50% or less of the combined voting power of   
all of the Company's outstanding stock, (ii) sale, transfer, or other           
disposition of all or substantially all of the assets of the Company, or (iii)  
other corporate reorganization or business combination in which the beneficial  
ownership of 50% or more of the combined voting power of all outstanding stock  
is transferred. However, the Company may, in its discretion, at any time within 
30 days before the scheduled consummation of such a transaction, cancel all     
outstanding options and pay to each optionee a sum equal to (a) the estimated   
amount per share that the optionee would otherwise have received at the closing 
of such transaction with respect to any shares he or she would receive upon     
exercise of his or her exercisable options, less (b) the aggregate exercise     
price for such options.                                                         

Amendment and Termination                                                       

    The Board of Directors may at any time or from time to time amend,
suspend, or terminate the 1994 Plan without approval of the shareholders;       
provided, however, that shareholder approval is required for any amendment to   
the 1994 Plan that: (i) increases the number of shares that may be issued under 
the 1994 Plan; (ii) modifies the standards of eligibility; or (iii) modifies the
limitation on grants to employees described in the 1994 Plan or results in other
changes which would require shareholder approval to qualify options granted     
under the 1994 Plan as performance-based compensation under Section 162(m) of   
the Code. However, no action by the Board of Directors or shareholders may alter
or impair any option previously granted under the 1994 Plan without the written 
consent of the optionee; provided that the                                      

45

DEF 14A
51st Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 51st
Board of Directors may, with or without the optionee's consent, amend or modify 
the 1994 Plan and any option agreement entered into thereunder to the extent    
necessary to qualify options so granted for such favorable federal income tax   
treatment as may be afforded to employee stock options under Code Section 422   
and applicable tax regulations.                                                 

       The 1994 Plan will terminate on the earlier to occur of (i) the tenth
anniversary of the date on which it was originally approved by the Company's    
Board of Directors, which will fall in 2004 (but in this case any options then  
outstanding under the 1994 Plan shall remain validly outstanding and exercisable
until they expire by their terms), or (ii) the date on which all shares         
available for issuance under the 1994 Plan shall have been issued.              

Federal Income Tax Aspects of the 1994 Plan                                     

         The following is a brief summary of the federal income tax consequences
of transactions under the 1994 Plan based on federal income tax laws in effect  
on April 1, 2001. This summary is not intended to be exhaustive, and does not   
address all matters which may be relevant to a particular optionee based on his 
or her specific circumstances. The summary addresses only current federal income
tax law and expressly does not discuss the income tax law of any state,         
municipality or non-U.S. taxing jurisdiction or gift, estate or other tax laws  
other than federal income tax law. The Company advises all optionees to consult 
their own tax advisors concerning tax implications of option grants and         
exercises and the disposition of stock acquired upon such exercises under the   
1994 Plan.                                                                      

        There are generally no federal income tax consequences to the optionee
or the Company upon the grant of an option. Generally, there are no federal     
income tax consequences to the optionee or the Company upon the exercise of an  
ISO (except that the alternative minimum tax may apply). Upon exercise of an    
NSO, the optionee normally will recognize taxable ordinary income equal to the  
excess of the fair market value of the stock on the date of exercise over the   
option exercise price. Generally, with respect to employees, the Company is     
required to withhold from regular wages or supplemental wage payments an amount 
based on the ordinary income recognized. Subject to the requirement of          
reasonableness and the provisions of Section 162(m) of the Code, the Company    
will generally be entitled to a business expense deduction equal to the taxable 
ordinary income realized by the optionee. Optionees who are employees generally 
may elect to satisfy the withholding tax obligation by payment of the taxes in  
cash or out of the current earnings paid to the optionee. If an optionee holds  
the stock acquired upon exercise of an ISO for at least two years from the date 
on which the option is granted and at least one year from the date of exercise  
of the option, any gain or loss on a disposition of such stock will be long-term
capital gain or loss. Generally, if the optionee disposes of the stock before   
the expiration of either of these holding periods (a "disqualifying             
disposition"), at the time of disposition, the optionee will realize taxable    
ordinary income equal to the lesser of (i) the excess of the stock's fair market
value on the date of exercise over the exercise price, or (ii) the optionee's   
actual gain, if any, on the purchase and sale. The optionee's additional gain,  
or any loss, upon the disqualifying disposition will be a capital gain or loss, 
which will be long-term or short-term depending on whether the stock was held   
for more than one year. To the extent the optionee recognizes ordinary income by
reason of a disqualifying disposition, the Company will generally be entitled   
(subject to the requirement of reasonableness and the provisions of Section     
162(m) of the Code) to a corresponding business expense deduction in the tax    
year in which the disqualifying disposition occurs. Upon disposition of the     
stock acquired upon exercise of an NSO, the optionee will recognize a capital   
gain or loss equal to the difference between the selling price and the sum of   
the amount paid for such stock plus any amount recognized as ordinary income    
upon exercise of the option. Such gain or loss will generally be long-term or   
short-term, depending on whether the stock was held for more than one year.     

46

DEF 14A
52nd Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 52nd
VOTE REQUIRED FOR APPROVAL

    The affirmative vote of the holders of a majority of the shares of
Common Stock present and voting at the Annual Meeting is required to approve the
proposed amendment of the 1994 Plan, by which the total number of shares        
available for grant in the form of options under the Plan would be increased    
from 200,000 to 1,000,000. Each share of Common Stock which is represented, in  
person or by proxy, at the Annual Meeting will be accorded one vote on this     
Proposal. For purposes of this vote, abstentions and broker non-votes will in   
effect not be counted.                                                          

 THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSED
AMENDMENT OF THE COMPANY'S 1994 STOCK OPTION PLAN 

47

DEF 14A
53rd Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 53rd
PROPOSAL NO. 5:    AMENDMENT OF THE COMPANY'S ARTICLES OF INCORPORATION         

        At the Annual Meeting, the Shareholders are being asked to approve the
adoption of Amended and Restated Articles of Incorporation (the "Amended        
Articles"), to replace and supersede the Company's existing Articles of         
Incorporation. If adopted, the Amended Articles would make the following changes
to the Company's existing Articles of Incorporation: (1) the authorized number  
of shares of Company Common Stock would be increased from 20,000,000 to         
30,000,000 shares; (2) the authorized number of shares of Company Preferred     
Stock would be increased from 2,000,000 to 10,000,000 shares; and (3) the       
Company's Board of Directors would be permitted to create and issue one or more 
series of Preferred Stock which would have voting rights and /or the right to   
share in the Company's assets in the event of any liquidation or dissolution of 
the Company. If adopted, the Amended Articles would not change the rights,      
preferences, or restrictions of the Company's existing Series A Preferred Stock 
in any way.                                                                     

Description of and Reasons for the Proposed Amendments                          

      The following is a description of the terms of the Amended Articles.
This description does not purport to be complete and is qualified in its        
entirety by reference to the proposed Amended and Restated Articles of          
Incorporation attached as Supplement G to this Proxy Statement and incorporated 
herein by reference. All shareholders are urged to read the proposed Amended and
Restated Articles of Incorporation in their entirety.                           

Agent for Service of Process                                  

                 How it is Now. Article 3 of the Company's current Articles of
Incorporation purports to identify the Company's agent for service of process.  
In fact, the individual identified in the current Article 3 was appointed to    
that role when the Company was originally incorporated, but he is no longer the 
Company's agent for service of process, and has not been for some time. As is   
the case with all California corporations, the Company's agent for service of   
process is identified each year in a separate certificate required to be filed  
with the California Secretary of State.                                         

                The Proposed Amendment. The Amended Articles would eliminate
the current Article 3 entirely.                                                 

                Reasons for the Proposed Amendment. Under California law, it
is not appropriate to retain the current Article 3 in the Amended Articles. In  
fact, if the Company were to do so the California Secretary of State would most 
likely refuse to accept the Amended Articles for filing. The proposed amendment 
merely brings the Amended Articles into accordance with California law. It will 
have no effect on the Company, its shareholders, or the Company's actual current
agent for service of process.                                                   

Increase in the Number of Authorized Shares of Common Stock   

                  How it is Now. The Company's current Articles of Incorporation
authorize the issuance of up to 20,000,000 shares of Common Stock.              

                The Proposed Amendment. If the Amended Articles are approved
by the Shareholders, the authorized number of shares of Common Stock would be   
increased from 20,000,000 shares to 30,000,000 shares.                          

                Reasons for the Proposed Amendment. At the present time, the
Company has outstanding 5,580,498 shares of Common Stock, leaving 14,419,502    
shares available for issuance in the future,                                    

48

DEF 14A
54th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 54th
including approximately 200,000 shares which may be issued subject to the       
exercise of options currently outstanding. If Proposal No. 1 (the acquisition of
UBI and UBSN) and Proposal No. 4 (amendment of the Company's 1994 Stock Option  
Plan) are approved by the shareholders, however, the Company will have          
outstanding 11,080,498 shares of Common Stock, and will have reserved another   
1,000,000 shares for issuance in connection with the exercise of options granted
or to be granted under the Option Plan. If the Company's Articles of            
Incorporation are not amended, that would leave only 7,919,502 shares of Common 
Stock available for issuance in the future. As is discussed more fully below,   
the Company's Board of Directors has decided to explore the possibility of      
conducting a private offering of Company stock later in the year. The Board has 
not decided whether to offer Common Stock, Preferred Stock, or some combination 
of the two in the private offering now under consideration, but the Board       
believes that it would be in the Company's best interests to increase the number
of shares of Common Stock which are available for issuance in the future in     
order to provide for that and any future offerings.                             

Increase in the Number of Authorized Shares of Preferred Stock

                  How it is Now. The Company's current Articles of Incorporation
authorize the issuance of up to 2,000,000 shares of Preferred Stock. At the     
present time, there are outstanding 227,600 shares of Preferred Stock, all of   
which are Series A Preferred Shares. Except with respect to the Series A        
Preferred Stock, the terms of which are fixed in the Articles of Incorporation  
(and will not be changed if this Proposal is adopted), the Company's current    
Articles authorize the Board of Directors to issue new shares of Preferred Stock
in one or more series, to fix the number of each new series of Preferred Stock, 
and to determine the rights, preferences, privileges, and restrictions granted  
to and imposed upon any such new series of Preferred Stock.                     

                The Proposed Amendment. If the Amended Articles are approved
by the shareholders, the authorized number of shares of Preferred Stock would be
increased from 2,000,000 shares to 10,000,000 shares.                           

               Reasons for the Proposed Amendment. At present, the Company
has available only 1,772,400 authorized and unissued shares of Preferred Stock  
available for future issuances. As is discussed more fully below, the Company's 
Board of Directors has decided to explore the possibility of conducting a       
private offering of Company stock later in the year. The Board has not decided  
whether to offer Common Stock, Preferred Stock, or some combination of the two  
in the private offering now under consideration, but the Board believes that it 
would be in the Company's best interests to increase the number of shares of    
Preferred Stock which are available for issuance in the future in order to      
provide for that and any future offerings.                                      

         Rights of Any New Series of Preferred Stock in the Event of Liquidation
of the Company                                                                  

                How it is Now. The current Articles of Incorporation provide
that, in the event of a liquidation of the Company, the assets of the           
corporation must be distributed first to holders of the Company's Series A      
Preferred Stock, in an amount equal to $1.00 per share, and second to the       
holders of the Company's Common Stock. There is no provision for any            
distribution to the holders of any series of Preferred Stock which may be issued
in the future, and in fact the current Articles effectively prohibit any new    
series of Preferred Stock from receiving any distribution upon liquidation.     

              The Proposed Amendment. The Amended Articles would provide
that each series of Preferred Stock could share in the proceeds of any          
liquidation of the Company, in the order of their seniority as established by   
the Board of Directors at the time each such series is created. Although the    
Amended Articles do not require that any new series of Preferred Stock be given 
rights upon liquidation senior to those of the Common Stock, it is likely that  
any new investor would require seniority over the                               

49

DEF 14A
55th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 55th
Common Stock in the event of liquidation. The Amended Articles do not affect the
existing seniority rights of the Series A Preferred Stock upon liquidation.     

              Reasons for the Proposed Amendment. The Board of Directors
believes that unless the Company's Articles of Incorporation are amended to     
provide that the holders of any potential new series of Preferred Stock may be  
granted seniority over the holders of the Company's Common Stock, it will be    
extremely difficult for the Company to sell shares of its Preferred Stock in the
future.                                                                         

Voting Rights                                                 

                How it is Now. The Articles of Incorporation provide that no
shares of Company Preferred Stock may have voting rights. This provision is,    
however, subject to the requirements of California law, which requires that the 
holders of preferred stock be given the right to vote on certain matters        
affecting their rights as shareholders. As a result, the Company's Series A     
Preferred Stock does not normally carry with it the right to vote on any matter 
which might come before the shareholders.                                       

             The Proposed Amendment. The Amended Articles do not grant
voting rights to the holders of the Company's existing Series A Preferred Stock.
However, the general prohibition against granting voting rights to any new      
series of Preferred Stock which might be issued in the future would be removed, 
so that the Board could create one or more new series of Preferred Stock that   
did have limited or general voting rights.                                      

              Reasons for the Proposed Amendment. The Board of Directors
believes that unless the Company's Articles of Incorporation are amended to     
provide that the holders of any potential new series of Preferred Stock may be  
granted voting rights, it will be extremely difficult for the Company to sell   
shares of its Preferred Stock in the future.                                    

Dividends.                                  

                 How it is Now. The Articles of Incorporation do not expressly
provide the Board of Directors the authority to fix the dividends and dividend  
preferences of any other series of Preferred Stock other than the Series A.     
However, authority is generally provided through the Board's powers set forth in
Section 4.3, because the Board can fix dividends of previously undesignated     
series of Preferred Stock at the time the Board designates such series. The     
current Articles of Incorporation also provide, in Article 5, Section 5.3 (which
would become Section 4.4 of Article 4 in the Amended Articles) that dividends   
may not be made cumulative (in other words, that the Board may not create a     
series of Preferred Stock which has dividend rights which automatically         
accumulate even when no dividend is specifically authorized or paid out for a   
given period).                                                                  

                  The Proposed Amendment. The Amended Articles do not affect the
seniority of the Series A, or any other rights of the Series A, with regard to  
dividends. However, the inclusion of Section 4.2 clearly sets forth the Board's 
ability to fix the dividends of any series of Preferred Stock other than Series 
A Preferred Stock. The Amended Articles also remove the existing prohibition    
against cumulative dividends (see Article 4, Section 4.4, of the Amended        
Articles).                                                                      

             Rasons for the Proposed Amendment. The Board of Directors
believes that the Articles of Incorporation should explicitly set forth the     
Board's right to fix the dividends and dividend preferences, in order to avoid  
any possible question as to whether the Board has such a right. The Board also  
feels that the Company should have the ability to create a series of Preferred  
Stock carrying the right to receive cumulative dividends. It is the view of the 
Board of Directors that these amendments, while not strictly necessary in order 
to expedite any future offering of Company Preferred Stock, are likely to       
increase the                                                                    

50

DEF 14A
56th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 56th
Company's available options and flexibility in drafting (and, where necessary,  
negotiating) the terms of any future series of Preferred Stock.                 

General Reasons for the Proposed Amendments                                     

  The Board of Directors believes that the proposed amendments are
appropriate because the terms of the Company's current Articles are so          
restrictive as to the rights of any future series of Preferred Stock as to make 
it extremely difficult for the Company to be able to raise capital through the  
issuance and sale of Preferred Stock. Further, in the event that the            
shareholders approve Proposals No. 1 and No. 2, which are described elsewhere in
this Proxy Statement and will also be submitted to the shareholders for their   
approval at the Annual Meting, the Company will have issued or reserved for     
issuance over half of the shares of Common Stock it is authorized to issue under
the current Articles of Incorporation, thus further restricting the Company's   
ability to raise capital in the future through the issuance and sale of its     
shares. As discussed below, the Board has decided to explore the possibility of 
conducting a private offering of Company stock later in the year, although the  
Board has not yet decided a number of important questions relating to the       
proposed offering, including among others when it will take place and whether to
offer Common Stock, Preferred Stock, or some combination of the two. The Board  
believes that in order to make such offering successful it will be necessary to 
increase the number of shares of Common and Preferred Stock it is authorized to 
issue, and to make the other changes to the Company's Articles which are part of
Proposal No. 5. Holders of the Company's Series A Preferred Stock will be asked 
to approve the proposed amendments, although they do not have the right to vote 
on any of the other Proposals described in this Proxy Statement.                

Effect of the Proposed Amendments on the Series A Preferred Stock               

    The Board of Directors believes that the Amended Articles will not
affect in any material way the rights, preferences, or privileges of the Series 
A Preferred Stock. Nothing in the proposed amendments will create, or permit the
creation of, a class or series of stock with any dividend or liquidation rights 
senior to those of the Series A Preferred Stock. Although it is true that the   
Amended Articles would permit the Board to create a new series of Preferred     
Stock having voting rights, that will not affect the Series A Preferred Stock in
any way, since the holders of those shares have never had voting rights with    
respect to them. Similarly, while the Board would, under the Amended Articles,  
be authorized to create a new series of Preferred Stock having cumulative       
dividend rights (which the holders of the Series A Preferred Stock do not have),
that will also not affect the Series A Preferred Stock since Under Article 4,   
Section 4.1 of the Amended Articles (previously Article 5, Section 5.1), no     
dividend may be paid on any other class of stock, whether Common or Preferred,  
until the dividend due to the holders of the Series A Preferred Stock has been  
paid in full.                                                                   

     Since the Board of Directors intends to use the proceeds of any new
private placement of Company Preferred Stock to pay out the stated dividend on  
the Series A Preferred Stock, and thereby to retire all of the outstanding      
shares of Series A Preferred Stock (as is discussed more fully below), the Board
believes that this Proposal, and the adoption of the Amended Articles, is in the
best interest, not only of the Company and the Common Shareholders, but of the  
holders of the Series A Preferred Stock as well.                                

Potential Future Offering of Preferred Shares                                   

    The Board of Directors anticipates that the Company will, upon the
closing of its next round of Preferred Stock financing, use a portion of the    
proceeds of such financing to pay to the current holders of the Company's Series
A Preferred Stock a preferred dividend equal to $1.00 per share of Series A     
Preferred Stock. Since there are currently 227,600 issued and outstanding shares
of the Company's Series                                                         

51

DEF 14A
57th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 57th
A Preferred Stock, the aggregate preferred dividend to be paid by the Company   
would be $227,600. Pursuant to the Company's Articles of Incorporation, upon    
payment of such preferred dividend by the Company, all issued and outstanding   
shares of the Company's Series A Preferred Stock would automatically be         
canceled, and would cease to be outstanding for all purposes, so that the       
227,600 shares of Series A Preferred Stock would, once the dividend is paid,    
resume the status of authorized but unissued and undesignated shares of         
Preferred Stock, and become available for future issuances by the Company.      

    The Board of Directors anticipates that it will utilize its "blank
check" authority in the Company's Articles of Incorporation to proceed with the 
Company's next round of Preferred Stock financing. Both the Company's current   
Articles of Incorporation, and the proposed Amended Articles, provide "blank    
check" authority to the Board of Directors. Blank check authority permits the   
Board of Directors, without the expense and delay of calling a special          
shareholders meeting, to issue preferred stock in series and to fix the         
designation, powers, preferences and rights of shares in each series. By using  
this authority, the Board could, in its discretion, tailor the terms of any new 
series of Preferred Stock to fit the particular needs of the Company at the time
of the stock's issuance.                                                        

VOTE REQUIRED FOR APPROVAL

       The affirmative votes of the holders of a majority of the outstanding
shares of both the Company's Common Stock and its Series A Preferred Stock, in  
each case voting separately as a class, will be required in order to approve the
proposed amendment of the Articles of Incorporation. The votes of the holders of
the Company's Common Stock and Series A Preferred Stock will be recorded and    
counted separately for this purpose. Each share of Common Stock, and each share 
of Series A Preferred Stock, which is represented, in person or by proxy, at the
Annual Meeting will be accorded one vote on this Proposal. For purposes of this 
vote, since the approval of a majority of the outstanding shares of the Common  
Stock and of the Series A Preferred Stock will be required (rather than simply a
majority of the shares or either class which are represented, in person or by   
proxy, at the Annual Meeting), abstentions and broker non-votes will have the   
effect of votes against this Proposal.                                          

 THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSED
 AMENDMENTS TO THE COMPANY'S ARTICLES OF INCORPORATION

PROPOSAL NO. 6:    RATIFICATION OF INDEPENDENT AUDITORS                         

 The Company has appointed Moss Adams, L.L.P. as its independent
auditors to perform the audit of the Company's financial statements for the year
2001, and the shareholders are being asked to ratify such appointment. Moss     
Adams, L.L.P. audited the Company's 2000 financial statements which are included
in the Company's Annual Report on Form 10-KSB for the year ended December 31,   
2000, which is included (without Exhibits) with this Proxy Statement, and also  
audited the Company's 1999 financial statements. Representatives of Moss Adams, 
L.L.P. are expected to be present at the Annual Meeting, will have an           
opportunity to make a statement at the Annual Meeting if they desire to do so,  
and are expected to be available to respond to appropriate questions.           
Ratification of the appointment of Moss Adams, L.L.P. requires the vote of a    
majority of the shares of the Company's Common Stock present in person or       
represented by a proxy at the Annual Meeting and entitled to vote. Abstentions  
have no effect.                                                                 

52

DEF 14A
58th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 58th
 VOTE REQUIRED FOR APPROVAL OF THE APPOINTMENT OF MOSS ADAMS LLP

    The affirmative vote of the holders of a majority of the shares of
Common Stock present and voting at the Annual Meeting is required to approve the
appointment of Moss Adams LLP as the Company's independent auditors for the year
2001. Each share of Common Stock which is represented, in person or by proxy, at
the Annual Meeting will be accorded one vote on this Proposal. For purposes of  
this vote, abstentions and broker non-votes will in effect not be counted.      

          THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF MOSS ADAMS, L.L.P.                                               

 OTHER MATTERS

Shareholder Proposals to be Presented at the Next Annual Meeting                

       Any proposal which a shareholder wishes to have presented at the next
annual meeting and included in the management proxy materials relating to such  
meeting must be received at the main office of the Company no later than January
15, 2002. If such proposal is in compliance with all of the requirements of Rule
14a-8 promulgated under the Securities Exchange Act of 1934, it will be included
in the proxy statement and set forth on the form of proxy issued for the next   
annual meeting of shareholders.                                                 

         If a shareholder of the Company wishes to present a proposal before the
Company's next annual meeting but does not wish to have the proposal considered 
for inclusion in the Company's proxy statement and proxy card, such shareholders
must give written notice to the Secretary of the Company at its main office. The
Company must receive such notice no later than March 30, 2002.                  

       It is urged that any shareholder proposals be sent by certified mail,
return receipt requested.                                                       

Availability of Form 10-KSB                                                     

        Included with this Proxy Statement, and partially incorporated herein,
is a copy of the Company's Annual Report on Form 10-KSB for the year ended      
December 31, 2000. The Exhibits to the Form 10-KSB are not included, however.   
The Company will provide without charge to any shareholder, upon written        
request, an additional copy of this Annual Report on Form 10-KSB. Such written  
requests should be made to the Company at Mendocino Brewing Company, Inc., Attn:
Sarah T. McDaniel, Manager, Shareholder Relations, Post Office Box 400, 13351   
Highway 101 South, Hopland, California 95449, Telephone: (800) 733-3871.        

Other Matters to be Considered at the Annual Meeting                            

     The Board of Directors does not presently intend to present matters
other than the foregoing for action by the shareholders at the Annual Meeting,  
and, so far as is known to the Board of Directors, no matters are to be brought 
before the Annual Meeting except as specified herein. As to any business that   
may properly come before the Annual Meeting, however, it is intended that       
proxies, in the form accompanying this Proxy Statement, will be voted in        
accordance with the judgment of the persons voting such proxies.                

53

DEF 14A
59th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 59th
Supplements and Other Attached Documents                                        

         The Company hereby incorporates the following documents into this Proxy
Statement by reference:                                                         

    o   Portions of the Company's Annual Report on Form 10-KSB for the
            year ended December 31, 2000, as described above in the section of
            this Proxy Statement captioned "PROPOSAL NO. 1", under the heading
         "More Information About the Company". A copy of the Form 10-KSB
     (not including the Exhibits thereto) accompanies this Proxy
Statement for convenient reference.                   

o   Supplement A, the Share Purchase Agreement                

        o   Supplement B, the Fairness Opinion provided to the Company by Sage
Capital LLC                                           

         o   Supplement C, Dissenters' Rights: Sections 1300 through 1304 of the
California Corporations Code                          

      o   Supplement D, Pro Forma and Consolidated Financial Statements of
            Mendocino Brewing Company, Inc. and United Breweries International
(UK) Limited                                          

o   Supplement E, the proposed amendment to Section 2.2 of the
Company's Bylaws                                      

o   Supplement F, the Company's 1994 Stock Option Plan        

        o   Supplement G, the Company's proposed Amended and Restated Articles
of Incorporation, marked to show all proposed changes.

         The information specifically incorporated by reference herein is deemed
to be a part of this Proxy Statement; however the information incorporated      
herein from the Company's Annual Report on Form 10-KSB for the year ended       
December 31, 2000, is only deemed to be a part of this Proxy to the extent that 
any statements or information contained therein which have not been superseded  
or corrected by statements or information provided in this Proxy Statement or   
the attachments and supplements hereto.                                         

54

DEF 14A
60th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 60th
SUPPLEMENT A
(Proposal No. 1)

DATED NOVEMBER 3, 2000

 (1) INVERSIONES MIRABEL, S.A.
 (2) MENDOCINO BREWING COMPANY
(3) GOLDEN EAGLE TRUST

----------------------------

SHARE PURCHASE AGREEMENT

 -----------------------------

Baker & McKenzie
 100 New Bridge Street
 London EC4V 6JA

Telephone: (020) 7919 1000
Fax: (020) 7919 1999
Ref: BPA/SAR

DEF 14A
61st Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 61st
CONTENTS

Clauses                                                                    Pages
-------                                                                    -----

1.         Definitions and Interpretation.....................................3 
2.         Sale of Sale Shares...............................................10 
3.         Consideration.....................................................11 
4.         Conditions........................................................12 
5.         Completion........................................................13 
6.         Restriction of Vendor.............................................17 
7.         Warranties........................................................19 
8.         Covenant in Respect of Tax........................................23 
9.         Pensions..........................................................27 
10.        Restriction on Announcements......................................27 
11.        Pre-Completion Obligations........................................28 
12.        Confidentiality of Information Received by the Vendor.............31 
13.        Guarantee and Indemnity by Guarantor..............................32 
14.        Costs.............................................................34 
15.        General...........................................................34 
16.        Notices...........................................................36 
17.        Governing Law and Submission to Jurisdiction......................38 

SCHEDULE 1                                                                      
          The Vendor........................................................39
SCHEDULE 2                                                                      
          Details of the Company............................................40
SCHEDULE 3                                                                      
          The Subsidiary....................................................42
SCHEDULE 4                                                                      
          The Property......................................................43
SCHEDULE 5                                                                      
          Warranties........................................................44
SCHEDULE 6                                                                      
          [NOT USED]........................................................81
SCHEDULE 7                                                                      
          Software..........................................................82
SCHEDULE 8                                                                      
          Vendor's Protection...............................................83

DEF 14A
62nd Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 62nd
DATE:                  2000                                                     

PARTIES:                                                                        

(1)      INVERSIONES  MIRABEL,  S.A.  a company  incorporated  in  Panama  whose
         registered  office is at Hong Kong Bank  Building,  6th  Floor,  Samuel
         Lewis Avenue, P.O. Box 6-4298, El Dorado, Panama City (the "Vendor") as
set out in Schedule 1.                                        

(2)      MENDOCINO BREWING COMPANY a company incorporated in the State of       
California whose registered office is at 3 Harbor Drive #115, 
Sausalito, CA 94965 (the "Purchaser").                        

(3)      GOLDEN EAGLE TRUST a discretionary trust created on 12 October 1982    
     whose registered office address is c/o CAS Nominess Limited, Celtic
 House, Victoria Street, Douglas, Isle of Man (the "Guarantor").

RECITALS:                                                                       

(A)      The Vendor is the registered holder and beneficial owner of all of the 
     issued shares in the capital of United Breweries International (UK)
    Limited ("the Company"). Particulars of the Company are set out in
Schedule 2.                                                   

(B)      The Vendor wishes to sell and the Purchaser wishes to purchase the said
shares on the terms and conditions set out in this Agreement. 

(C) The Guarantor has agreed to guarantee the performance of the obligations of 
the Vendor hereunder.                                                           

TERMS AGREED:                                                                   

1.       Definitions and Interpretation                                         

1.1      In this Agreement where the context so admits the following words and  
expressions shall have the following meanings:                

 3

DEF 14A
63rd Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 63rd
"Accounting Date"                 31 December 1999;           

         "Accounts"                        the audited  financial  statements of
                                           the Company and of the Subsidiary for
                                           the accounting reference period which
                                           ended on the  Accounting  Date  (each
                                           such financial statement comprising a
                                           balance   sheet,   profit   and  loss
                                           account,  cash flow statement,  notes
                                           and directors' and auditors'  report)
                                           copies  of which are  annexed  to the
                        Disclosure Letter;

         "Beer"                            all    existing    brands   of   beer
                                           distributed by the Company and/or the
                                           Subsidiary as at the Completion Date;

    "CAA"                             the Capital Allowances Act 1990;

         "Company"                         United Breweries  International  (UK)
                                           Limited  details of which are set out
                    in Schedule 2;

        "Companies                        Acts" the Companies Act 1985 and the
                                       Companies Act 1989 and the former
                                          Companies Acts within the meaning of
                                        Section 735(1)(c) of the Companies
               Act 1985;

         "Completion"                      completion  of the sale and  purchase
                                           of the Sale  Shares as  specified  in
               clause 5;

      "Completion                       Date" the fifth business day after
                                        the day upon which the last of the
                                           Conditions is satisfied or waived (or
                                        such later date as the parties may
             agree);

         "Conditions"                      the  conditions  specified  in clause
          4.1;

         "Confidential Information"        know-how,  trade  secrets  and  other
                      information of a

 4

DEF 14A
64th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 64th
                                           confidential nature,  wherever in the
                        world protectable;

         "Consideration Shares"            5,500,000  shares of common  stock in
                                   the capital of the Purchaser;

         "Directors"                       the persons  listed as  directors  of
                                the Company in Schedule 2;

         "Disclosure Letter"               the letter of  today's  date from the
                                           Vendor  to  the   Purchaser   in  the
                     approved terms;

         "Employment Law"                  all  and  any   laws,   common   law,
                                           statutes,                 directives,
                                           recommendations,         regulations,
                                           notices, codes of practice,  guidance
                                           notes, judgements, decrees or orders,
                                           whether of the European  Community or
                                           the United  Kingdom,  relating  to or
                                           connected   with  the  employment  of
                                           employees and their health and safety
              at work;

         "Environment"                     all or any  of the  following  media,
                                           namely, the air, water and  land; and
                                           the medium  of  air includes  the air
                                           within buildings  and the  air within
                                           other natural or man-made  structures
                            above or below ground;

         "Environmental Law"               all  and  any   laws,   common   law,
                                           statutes,  directives,   regulations,
                                           notices,  standards  having  force of
                                           law,  codes  of  practice,   guidance
                                           notes, by-laws,  judgements,  decrees
                                           or  orders  whether  of the  European
                                           Community  or the  United  Kingdom or
                                           any  other   relevant   jurisdiction,
                                           relating   to  (1)   the   pollution,
                                           contamination  or  protection  of the
                                           Environment   or  (2)  the   storage,
                                           labelling,     handling,     release,
                                           treatment,  manufacture,  processing,
                                           deposit,  transportation  or disposal
                                           of  Hazardous  Substances  or (3) the
                                           responsibility  or duty  of care  for
            waste;

 5

DEF 14A
65th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 65th
         "Environmental Licence"           any permit,  licence,  authorisation,
                                           consent or other  approval,  that may
                                           be required by any Environmental Law;

         "Environmental Registration"      any registration that may be required
                               by any Environmental Law;

         "Exchange Act"                    the United States Securities Exchange
                              Act of 1934, as amended;

         "Former Property"                 all land and premises previously used
                                           by the Company or the  Subsidiary  or
                                           under the past ownership,  occupation
                                           or  control  of  the  Company  or the
                                           Subsidiary   and  shall  exclude  the
               Property;

         "Hazardous Substances"            all     substances     of    whatever
                                           description which may cause or have a
                                           harmful effect on the  Environment or
                                           the health of man or any other living
                                           organism      including,      without
                                           limitation,  all  poisonous,   toxic,
                                           noxious,   dangerous   and  offensive
                 substances;

 "IHTA"                            the Inheritance Tax Act 1984;

         "Intellectual Property"           includes  Confidential   Information,
                                           patents,      registered     designs,
                                           copyrights,   rights  in   databases,
                                           design  rights,   topography  rights,
                                           trade    marks,    business    names,
                                           registrations  of and applications to
                                           register any of the aforesaid  items,
                                           rights  in the  nature  of any of the
                                           aforesaid   items  in  any   country,
                                           rights   in  the   nature  of  unfair
                                           competition  rights and rights to sue
                                           for   passing   off,   in  each  case
                                        wherever in the world enforceable;

 6

DEF 14A
66th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 66th
         "Management Accounts"             the financial statements unaudited of
                                           the  Company and the  Subsidiary  for
                                           the  period  ending  on  and as at 30
                                           September  2000 (each such  financial
                                           statement to include a balance sheet,
                                           a profit and loss account,  cash flow
                           statement and notes);

         "participating interest"          the  meaning  defined in section  260
                         Companies Act 1985;

         "Pension Scheme"                  the  United  Breweries  International
                                (UK) Limited Pension Plan;

         "Planning Acts"                   the Town  and  Country  Planning  Act
                                           1990, the Planning (Listed  Buildings
                                           and Conservation Areas) Act 1990, the
                                           Planning  (Hazardous  Substances) Act
                                           1990,  the  Planning   (Consequential
                                           Provisions) Act 1990 and the Planning
                                           and  Compensation  Act  1991  and the
                                           Rules,  Regulations  and Orders  made
                                           under  them or  continued  by them as
                                   they apply from time to time;

         "Property"                        the    leasehold    property    short
                                           particulars  of which  are set out in
                 Schedule 4;

         "Proposed Environmental Laws"     any    proposed    laws,    statutes,
                                           directives,   regulations,   notices,
                                           standards,    codes   of    practice,
                                           guidance notes,  by-laws,  decrees or
                                           orders   whether   of  the   European
                                           Community  or the  United  Kingdom or
                                           any other relevant jurisdiction which
                                           have been  published on or before the
                                           date  hereof and which  relate to (1)
                                           the   pollution,   contamination   or
                                           protection of the  Environment or (2)
                                           the  storage,  labelling,   handling,
                                           release,   treatment,    manufacture,
                                           processing,  deposit,  transportation
                                           or disposal of  Hazardous  Substances
                                           or (3) the  responsibility or duty of
                     care for waste;

 7

DEF 14A
67th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 67th
         "Proxy Statement"                 the   statement   required   by  Rule
                                           14a-3(a)  issued  under the  Exchange
                  Act of 1934;

"Purchaser's Accountants"         Moss Adams LP;              

         "Purchaser's Solicitors"          Baker &  McKenzie  of 100 New  Bridge
                              Street, London EC4V 6JA;

 "Retirement                       Benefits Scheme" a retirement
                                        benefits scheme within the meaning
                                          given to that term in Section 611 of
                    the Taxes Act;

       "Sale                             Shares" the 100,000 ordinary shares
                                        of (pound)1 each in the capital of
                                          the Company, being the entire issued
                                   share capital of the Company;

         "SEC"                             the  United  States   Securities  and
                          Exchange Commission;

         "Subsidiary"                      the  subsidiary  undertaking  of  the
                                           Company  which is listed in  Schedule
        3;

         "subsidiary undertaking"          the  meaning  given  to that  term in
                                     section 258 Companies Act 1985;

         "Tax"                             all forms of taxation,  withholdings,
                                           duties,   imposts,   levies,   social
                                           security   contributions   and  rates
                                           imposed  by  any  local,   municipal,
                                           governmental,   state,   federal,  or
                                           other body in the  United  Kingdom or
                                           elsewhere and any interest,  penalty,
                                           surcharge   or  fine  in   connection
                therewith;

 8

DEF 14A
68th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 68th
         "Taxes Act"                       the Income and Corporation  Taxes Act
           1988;

         "TCGA"                            the Taxation of Chargeable  Gains Act
           1992;

         "Vendor's Solicitors"             Butcher Burns of Beaumont  House,  47
                                      Mount Pleasant, London WC1X 0AE;

       "Warranties"                      the representations, warranties and
                                           undertakings contained or referred to
                                 in clause 7 and Schedule 5.

1.2      Save where the context otherwise requires words and phrases the        
       definitions of which are contained or referred to in Part XXVI of the
     Companies Act 1985 shall be construed as having the meaning thereby
attributed to them.                                           

1.3      Any references, express or implied, to statutes or statutory provisions
     shall be construed as references to those statutes or provisions as
        respectively amended or re-enacted or as their application is modified
         from time to time by other provisions (whether before or after the date
        hereof) and shall include any statutes or provisions of which they are
      re-enactments (whether with or without modification) and any orders,
     regulations, instruments or other subordinate legislation under the
    relevant statute or statutory provision. References to sections of
      consolidating legislation shall wherever necessary or appropriate in
         the context be construed as including references to the sections of the
        previous legislation from which the consolidating legislation has been
prepared.                                                     

1.4      References in this Agreement to clauses and schedules are to clauses in
and schedules to this Agreement (unless the context otherwise 
         requires). The recitals and schedules to this Agreement shall be deemed
to form part of this Agreement.                               

1.5      Headings  are inserted  for  convenience  only and shall not affect the
construction of this Agreement.                               

 9

DEF 14A
69th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 69th
1.6      The expression "the Vendor" and the expression "the Purchaser" includes
 their respective successors and assigns and the expression "the
Guarantor" includes its successors.                           

1.7      References to "persons" shall include bodies corporate, unincorporated 
     associations and partnerships (whether or not having separate legal
personality).                                                 

1.8      References to writing shall include any methods of reproducing words in
a legible and non-transitory form.                            

1.9      The masculine gender shall include the feminine and neuter and the     
singular number shall include the plural and vice versa.      

1.10     All warranties, representations, indemnities, covenants, agreements and
        obligations given or entered into by more than one person are given or
entered into jointly and severally.                           

1.11     A document expressed to be "in the approved terms" means a document the
     terms of which have been approved by or on behalf of the parties to
        this Agreement and a copy of which has been signed for the purposes of
identification by or on behalf of those parties.              

2.       Sale of Sale Shares                                                    

2.1      Subject to the terms of this Agreement, the Vendor shall sell with full
         title guarantee and the Purchaser shall purchase,  free from all liens,
         charges and  encumbrances and together with all rights now or hereafter
         attaching  to them,  including  all  rights  to any  dividend  or other
         distribution  declared,  made or paid after the date of this Agreement,
         the number of Sale Shares set opposite its name in column 2 of Schedule
1.                                                            

2.2      The Vendor hereby waives and agrees to procure the waiver of any       
         restrictions on transfer (including pre-emption rights) which may exist
in relation to the Sale Shares, whether under the articles of 
association of the Company or otherwise.                      

10

DEF 14A
70th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 70th
2.3      The Vendor shall have the right to nominate David Townshend (for the   
       purposes of this clause 2.3, the "Nominee") for election to the board
of directors of the Purchaser and for this purpose:           

2.3.1          the Vendor shall, within 7 days of the date of this Agreement,   
        provide the Purchaser with written notice of the Nominee's
               proposed election to the board of directors of the Purchaser; and

2.3.2          the Purchaser shall, within 7 days of receipt of such notice,    
incorporate into the Proxy Statement proposals to:

2.3.2.1           increase  the number of  directors  permitted  on the board of
directors of the Purchaser by one (1); and  

2.3.2.2           elect the Nominee to the board of directors of the Purchaser. 

The parties hereto acknowledge and agree that a failure by the
         Purchaser to obtain shareholder approval for the proposals under clause
       2.3.2.1 and/or clause 2.3.2.2 above shall not in any way constitute a
        breach or default by the Purchaser of this Agreement or a failure of a
         condition to the respective rights and obligations of the parties under
this Agreement.                                               

3.       Consideration                                                          

        The total consideration payable for the Sale Shares shall be the issue
   and allotment by the Purchaser to the Vendor of the Consideration
Shares credited as fully paid.                                

Vendor hereby acknowledges that the Consideration Shares to be
       delivered to Vendor pursuant to this Agreement will not be registered
 under the United States securities laws, and may not be sold or
     transferred except in accordance with such United States securities
    laws. Each of the certificates evidencing the Consideration Shares
        shall bear a restrictive legend to that effect, and a stop order shall
      be placed against the sale or transfer of such Consideration Shares.

11

DEF 14A
71st Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 71st
4.       Conditions                                                             

4.1      The sale and purchase of the Sale Shares is conditional upon:          

4.1.1          the Warranties  remaining true and accurate and not misleading at
               Completion as if repeated at Completion  and at all times between
the date of this Agreement and Completion;        

4.1.2          the Vendor having complied fully with the  obligations  specified
in clauses 11.1, 11.2, 11.3, 11.4 and 11.5;       

4.1.3          the Purchaser having obtained:                                   

4.1.3.1           approval by the Board of  Directors  of the  Purchaser  of the
        Agreement and the transactions contemplated therein;

4.1.3.2           approval  by the  SEC  of the  Proxy  Statement  filed  by the
                  Purchaser with respect to the transactions contemplated in the
   Agreement, in accordance with the Exchange Act;

4.1.3.3           approval by the shareholders of the Purchaser of the Agreement
                  and  the  transactions   contemplated  in  the  Agreement,  in
                  accordance with  applicable  law, and Purchaser's  articles of
incorporation and by-laws;                  

4.1.3.4           a  "fairness  opinion" in a form  satisfactory  to the Special
                  Committee  of the  Purchaser's  Board of  Directors  from Sage
Capital LLC; and                            

4.1.3.5           notices electing to exercise dissenters rights from the       
             holders of no more than 123,457 shares of the Purchaser's
common stock.                               

4.2      The Purchaser may waive all or any of the conditions in clauses 4.1.1, 
  4.1.2 and 4.1.3 at any time by notice in writing to the Vendor's
Solicitors.                                                   

12

DEF 14A
72nd Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 72nd
4.3      Each party to this agreement shall use its reasonable endeavours to    
  procure the fulfilment of the Conditions for which that party is
    responsible on or before the Completion Date and in particular the
      Purchaser shall use its reasonable endeavours to obtain the approval
     and opinion referred to in clause 4.1.3 above as soon as reasonably
practical after the date hereof.                              

4.4      In the event that any of Conditions shall not have been fulfilled (or  
  waived pursuant to clause 4.2) prior to 31 January 2001 then the
       Purchaser shall not be bound to proceed with the purchase of the Sale
  Shares and this Agreement shall cease to be of any effect except
       clauses 1, 10, 12, 13, 14, 15.1 to 15.5, 16 and 17 which shall remain
      in force and save in respect of claims arising out of any antecedent
breach of this Agreement.                                     

5.       Completion                                                             

5.1      Subject to the provisions of clause 4, Completion shall take place on  
       the Completion Date at the offices of the Purchaser's Solicitors when
        all (but not some only) of the events described in this clause 5 shall
occur.                                                        

5.2      At Completion, the Vendor shall:                                       

5.2.1          deliver to the Purchaser:                                        

5.2.1.1           duly executed transfers of all of the Sale Shares in favour of
                the Purchaser together with the relevant share certificates;

5.2.1.2           transfers in favour of the Company (or its nominees) of such  
              shares in the Subsidiary as are registered in the names of
     nominee holders, together with the relative share
certificates;                               

5.2.1.3           such  waivers or  consents  as the  Purchaser  may  require to
                  enable the Purchaser to be registered as holders of any of the
Sale Shares;                                

13

DEF 14A
73rd Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 73rd
5.2.1.4           all the statutory and other books (duly written up to date) of
       the Company and the Subsidiary and their respective
             certificates of incorporation, common seals and any other
                papers and documents of the Company or the Subsidiary in its
possession;                                 

5.2.1.5           written  confirmation  that the  Vendor or  Directors  are not
                  aware  of  any  matter  or  thing  which  is a  breach  of  or
inconsistent with any of the Warranties;    

5.2.1.6           certified copies of any powers of attorney under which any of 
               the documents referred to in this clause 5.2 is executed or
                  evidence satisfactory to the Purchaser of the authority of any
person signing on the Vendor's behalf;      

5.2.1.7           the duly  executed  power of  attorney  in respect of the Sale
Shares which is referred to in clause 15.8; 

5.2.1.8           letters of resignation in the approved terms from each of the 
                Directors and the secretary of the Company and the directors
              and secretary of the Subsidiary, such resignations to take
                effect from close of the meeting of the Board referred to in
clause 5.2.4 below;                         

5.2.1.9           a duly executed release under seal, in the approved terms,    
               releasing the Company and the Subsidiary from any liability
                whatsoever (whether actual or contingent) which may be owing
                 to the Vendor by the Company or the Subsidiary at Completion;

5.2.1.10          a certified copy of the resolution of the board of CAS        
                  Nominees Limited as trustees of the Guarantor, authorising the
                  Guarantor to act as guarantor of the obligations of the Vendor
under this Agreement;                       

14

DEF 14A
74th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 74th
5.2.2          pay all monies (if any) then owing by it to the Company or to the
Subsidiary, whether due for payment or not;       

5.2.3          assume  responsibility  for the guarantee given by the Company in
               respect  of the  lease  dated  11  July  1990  between  Benchmark
               Shopfitting  Limited, UB (Soyco) Limited and the Company (for the
               purposes of this clause 5.2.3 and clause 7.13,  the lease and the
               guarantee being referred to as the "Guaranteed  Lease").  For the
               avoidance  of doubt,  by virtue of this  clause  5.2.3 the Vendor
               shall assume full responsibility to defend,  settle and discharge
               any claim or liability,  whether by  litigation,  negotiation  or
               otherwise  arising  by  virtue  of the  Guaranteed  Lease and the
               Purchaser's sole involvement with such claim or liability will be
              to tender the handling of such claim or liability to the Vendor;

5.2.4          cause the Directors to hold a meeting of the Board of the Company
           at which the Directors shall pass resolutions in the approved
terms (inter alia) to:                            

5.2.4.1           approve the  registration  of the  Purchaser as members of the
                  Company  subject  only to the  production  of duly stamped and
      completed transfers in respect of the Sale Shares;

5.2.4.2           appoint  such  persons  as  the   Purchaser  may  nominate  as
directors and secretary of the Company;     

5.2.4.3           revoke all authorities to the bankers of the Company  relating
                  to bank accounts and to give  authority to such persons as the
   Purchaser may nominate to operate the same; and

5.3      At Completion, the Purchaser shall:                                    

5.3.1          allot the Consideration Shares to the Vendor, credited as fully  
               paid, and deliver to the Vendor a duly executed share certificate
               in the name of the Vendor in respect of the Consideration Shares;

15

DEF 14A
75th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 75th
5.3.2          deliver to the Vendor's Solicitors certified copies of any powers
              of attorney under which any of the documents referred to in this
          clause 5.3 is executed or other evidence satisfactory to the
               Vendor's Solicitors of the authority of the person signing on the
Purchaser's behalf; and                           

5.3.3          deliver  to  the  Vendor's  Solicitors  certified  copies  of the
approvals referred to in clause 4.1.3 above.      

5.3.4          deliver to the Vendor a letter  confirming  that the Vendor  will
               not be liable for any claim against, or liability incurred by the
               Company   and/or  the   Subsidiary,   which  arises  from  or  is
               attributable  to  an  act,   omission,   event,   transaction  or
               occurrence that takes place after  Completion.  For the avoidance
               of doubt,  such letter shall also confirm that the Vendor will be
               liable  for  claims  asserted  against  the  Company  and/or  the
               Subsidiary,  and for  liabilities  incurred by the Company and/or
               the  Subsidiary  which  are  attributable  to any  breach  of the
               Warranties,  whether such claims are asserted before or after the
Completion Date.                                  

5.4      Without prejudice to any other remedies available to the Purchaser, if 
        in any respect the provisions of clause 5 are not complied with by the
Vendor on the Completion Date the Purchaser may:              

5.4.1          defer Completion to a date not more than 28 days after the       
            Completion Date (and so that the provisions of this clause 5.4
shall apply to Completion as so deferred); or     

5.4.2          proceed to Completion so far as practicable (without prejudice to
its rights under this Agreement); or              

5.4.3          rescind this Agreement.                                          

16

DEF 14A
76th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 76th
6.       Restriction of Vendor                                                  

6.1            The Vendor undertakes with the Purchaser (for itself and as      
               trustee for the Company) that, except with the consent in writing
           of the Purchaser and subject to the provisions of clause 6.3:

6.1.1             for the  period  of two  years  after  Completion  it will not
                  within any country in which the Company or the  Subsidiary has
                  carried  on  business  during  the year  preceding  Completion
                  either on its own account or in conjunction  with or on behalf
                  of  any  person,  firm  or  company  carry  on or be  engaged,
                  concerned or interested,  directly or  indirectly,  whether as
                  shareholder,  director,  employee, partner, agent or otherwise
                  in carrying on any business  which  competes with the business
                  carried on by the Company or the  Subsidiary at Completion and
                  in  particular  (but  without   limitation)  the  business  of
                  brewing, marketing,  selling and distributing Beer (other than
                  as a holder of shares in a company carrying on such a business
                  where the  shareholding  is for  investment  purposes only and
               does not confer any control over the business in question);

6.1.2             for the  period  of two  years  after  Completion  it will not
                  either on its own account or in conjunction  with or on behalf
                  of any other person, firm or company solicit or entice away or
                  attempt  to  solicit  or entice  away from the  Company or the
                  Subsidiary  the  custom  of  any  person,   firm,  company  or
                  organisation  who shall at any time within the year  preceding
                  Completion  have  been  a  customer,   identified  prospective
                  customer,  representative,  agent,  or  correspondent  of  the
                  Company or the  Subsidiary or in the habit of dealing with the
                  Company or the  Subsidiary or enter into any contract for sale
                  and purchase or accept  business  from any such person,  firm,
                  company  or  organisation  in a  business  area in  which  the
                 Company or the Subsidiary competes as at the Completion Date;

6.1.3             for the period of two years after Completion it will not      
                 either on its own account or in conjunction with or on behalf
                 of any other person, firm or company employ, engage, solicit,
               entice away or attempt to employ, engage, solicit or entice
      away from the Company or the Subsidiary any person

17

DEF 14A
77th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 77th
             employed in a managerial, supervisory, technical or sales
                 capacity by, or engaged as a consultant to the Company or the
                Subsidiary at Completion or at any time during the period of
               six months immediately preceding Completion (whether or not
              such person would commit a breach of contract by reason of
leaving such employment or engagement);     

6.1.4             it will not at any time  hereafter  make use of or disclose or
                  divulge to any person  (other than to officers or employees of
                  the Company or of the Subsidiary  whose province it is to know
                  the  same)  any  Confidential   Information  (other  than  any
                  information  properly  available to the public or disclosed or
                  divulged  pursuant  to  an  order  of  a  court  of  competent
                  jurisdiction)  relating to the Company or the Subsidiary,  the
                  identity  of  its  customers  and  suppliers,   its  products,
                  finance,  contractual  arrangements,  business  or  methods of
                  business  and shall use its best  endeavours  to  prevent  the
                  publication  or  disclosure  of any  such  information  by any
       person, firm or company with which it is connected;

6.1.5             if, in connection  with the business or affairs of the Company
                  or  the  Subsidiary,   it  shall  have  obtained  Confidential
                  Information  belonging  to any third party under an  agreement
                  purporting  to  bind  the  Company  or  the  Subsidiary  which
                  contained  restrictions  on disclosure it will not without the
                  previous  written  consent  of the Board of  Directors  of the
     Purchaser at any time infringe such restrictions;

6.1.6             it will not at any time after the Completion  Date in relation
                  to any trade,  business  or  company  use a name or trade mark
                  including  the  word  "Kingfisher"  or  any  word  confusingly
                  similar  thereto in  connection  with a business of brewing or
                  trading lager beer or a business substantially similar to such
                  brewing or trading  business carried out by the Company and/or
                  the Subsidiary at Completion in such a way as to be capable of
                  or likely to be confused with the name or any trade mark owned
    by or licensed to the Company or the Subsidiary.

18

DEF 14A
78th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 78th
       Except that nothing in this clause 6 shall preclude the Vendor either
       on its own account or in conjunction with or on behalf of any person,
     firm or company from directly or indirectly carrying on business to
      supply, manufacture, package, market and distribute Kingfisher lager
 beer or other Kingfisher products to importers and customers in
      territories outside the European Union, the United States of America
      and Canada and any other territories other than those referred to in
      the distribution agreement dated 9 October 1998 between UBSN Limited
and the Company.                                              

6.2      The Vendor shall procure that all companies and businesses directly or 
        indirectly owned or controlled by it shall be bound by and observe the
      provisions of this clause 6 as if they were parties covenanting with
the Purchaser in the same terms.                              

6.3      While the restrictions contained in this clause 6 are considered by the
     parties to be reasonable in all the circumstances, it is recognised
    that restrictions of the nature in question may fail for technical
         reasons and accordingly it is hereby agreed and declared that if any of
        such restrictions shall be adjudged to be void as going beyond what is
         reasonable in all the circumstances for the protection of the interests
         of the Purchaser but would be valid if part of the wording thereof were
      deleted or the periods thereof reduced or the range of activities or
     area dealt with thereby reduced in scope the said restriction shall
        apply with such modifications as may be necessary to make it valid and
effective.                                                    

7.       Warranties                                                             

7.1      The Vendor represents, warrants and undertakes to and with the         
        Purchaser that each of the statements set out in Schedule 5 is now and
will at Completion be true and accurate.                      

7.2      The Warranties (other than Warranties 4.1 and 4.2 in respect of which  
   no qualification is accepted) are given subject to matters fully,
         fairly and specifically disclosed in the Disclosure Letter but no other
    information relating to the Company or the Subsidiary of which the
       Purchaser has knowledge (actual or constructive) and no investigation
        by or on behalf of the Purchaser shall prejudice any claim made by the
Purchaser under the Warranties or operate to reduce any amount
recoverable, and liability in respect                         

19

DEF 14A
79th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 79th
         thereof shall not be confined to breaches discovered before Completion.
No letter, document or other communication shall be deemed to 
       constitute a disclosure for the purposes of this Agreement unless the
        same is accepted as such by the Purchaser and is expressly referred to
in the Disclosure Letter.                                     

7.3      The Vendor acknowledges that the Purchaser has entered into this       
        Agreement in reliance upon the Warranties and has been induced by them
to enter into this Agreement.                                 

7.4      Without restricting the rights of the Purchaser or otherwise affecting 
  the ability of the Purchaser to claim damages on any other basis
       available to it, in the event that any of the Warranties is broken or
    (as the case may be) proves to be untrue or misleading, the Vendor
        shall, on demand, pay (in a full indemnity basis) to the Purchaser or,
at the Purchaser's direction, the Company or the Subsidiary:  

7.4.1             the amount necessary to put the Company and the Subsidiary    
                into the position which would have existed if the Warranties
                 had not been broken or (as the case may be) had been true and
not misleading; and                         

7.4.2             all costs and expenses incurred by the Purchaser,  the Company
                  and the  Subsidiary  as a result of such  breach and any costs
                  (including  legal costs on a solicitor and own client  basis),
                  expenses  or other  liabilities  which  any of them may  incur
                  either  before  or after  the  commencement  of any  action in
                  connection  with  (i)  any  legal  proceedings  in  which  the
                  Purchaser claims that any of the Warranties has been broken or
                  is untrue or  misleading  and in which  judgement is given for
                  the Purchaser or (ii) the enforcement of any settlement of, or
judgement in respect of, such claim.        

7.5      Each of the Warranties shall be separate and independent and, save as  
       expressly provided to the contrary, shall not be limited by reference
   to or inference from any other Warranty or any other term of this
Agreement.                                                    

7.6      Where any statement in the  Warranties  is qualified by the  expression
         "so  far as the  Vendor  is  aware"  or "to the  best  of the  Vendor's
knowledge and belief" or any similar                          

20

DEF 14A
80th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 80th
     expression, that statement shall be deemed to include an additional
        statement that it has been made after due and careful enquiry of David
    Townshend in respect of Subsidiary and Gul Lodhi in respect of the
Company.                                                      

7.7      The Vendor hereby agrees with the Purchaser (for itself and as trustee 
      for the Company and the Subsidiary) to waive any rights which it may
        have in respect of any misrepresentation or inaccuracy in, or omission
         from, any information or advice supplied or given by the Company or the
      Subsidiary or its officers, employees or advisers in connection with
    the giving of the Warranties and the preparation of the Disclosure
Letter save for any rights of the Vendor in respect of fraud. 

7.8      The Vendor shall procure that (save only as may be necessary to give   
        effect to this Agreement) neither it nor the Company or the Subsidiary
        shall do, allow or procure any act or omission before Completion which
       would constitute a breach of any of the Warranties if they were given
       at Completion or which would make any of the Warranties inaccurate or
misleading if they were so given.                             

7.9      The Vendor hereby agrees to disclose promptly to the Purchaser in      
        writing immediately upon becoming aware of the same, any matter, event
    or circumstance (including any omission to act) which may arise or
become known to it after the date of this Agreement and before
Completion which:                                             

7.9.1             constitutes  a breach  of or is  inconsistent  with any of the
Warranties; or                              

7.9.2             has, or in the reasonable opinion of the Vendor is likely to  
                  have, an adverse effect on the financial position or prospects
of the Company or the Subsidiary.           

7.10     In the event of its becoming apparent on or before Completion that the 
        Vendor is in breach of any of the Warranties or any other term of this
         Agreement the Purchaser may (without any liability on its part) rescind
 this Agreement by notice in writing to the Vendor's Solicitors.

21

DEF 14A
81st Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 81st
7.11     The Vendor shall give to the Purchaser and its solicitors and          
       accountants both before and after Completion all such information and
 documentation relating to the Company and the Subsidiary as the
         Purchaser shall reasonably require to enable it to satisfy itself as to
the accuracy and due of observance of the Warranties.         

7.12     The liabilities of the Vendor under the Warranties:                    

7.12.1            shall save in relation to paragraph 3 of Schedule 5 (the "Tax 
          Warranties") cease after the second anniversary of the
                Completion Date except in respect of matters which have been
                  the subject of a bona fide written claim made before such date
                by the Purchaser or the Purchaser's Solicitors to the Vendor
or the Vendor's Solicitors;                 

7.12.2            shall in relation to the Tax  Warranties and for the avoidance
                  of doubt  clause 8 being the  Covenant in respect of Tax cease
                  after the seventh anniversary of the Completion Date except in
                  respect of matters  which have been the subject of a bona fide
                  written  claim made before such date by the  Purchaser  or the
                  Purchaser's   Solicitors   to  the  Vendor  or  the   Vendor's
Solicitors;                                 

7.13     The Vendor agrees with the Purchaser (for itself and in trust for each 
       member of the Purchaser's group, the Company and the Subsidiary) that
         it will indemnify and keep indemnified the Purchaser for the benefit of
      the Purchaser and in trust for each member of the Purchaser's group,
    the Company and the Subsidiary from and against any claims, costs,
 expenses, damages, losses of whatsoever nature (whether direct,
         indirect, consequential or loss of profit) arising suffered or incurred
         by any of them in relation to the Company's guarantee of the Guaranteed
Lease.                                                        

7.14     If any sum payable by the Vendor under this clause 7 shall be subject  
         to Tax (whether by way of deduction or withholding or direct assessment
         of the person entitled thereto) such payment shall be increased by such
        an amount as shall ensure that after deduction, withholding or payment
         of such Tax the recipient shall have received a net amount equal to the
payment otherwise required hereby to be made.                 

22

DEF 14A
82nd Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 82nd
7.15     The Vendor undertakes to indemnify the Purchaser or, at the Purchasers 
       direction the Company or the Subsidiary, against any loss suffered by
      any or all of them as a result of the failure of the Company and the
 Subsidiary to be registered under the Data Protection Act 1998.

7.16     For the avoidance of doubt the terms of Schedule 8 to this Agreement   
shall limit the liability of the Vendor hereunder.            

8.       Covenant in Respect of Tax                                             

8.1      In this clause unless the context otherwise requires:                  

8.1.1             "event"  includes  (without  limitation) any omission,  event,
                  action  or  transaction  whether  or not  the  Company  or the
                  Subsidiary  is a party  thereto,  the death of any  person,  a
                  change in the  residence of any person for any Tax purpose,  a
                  failure  to make  sufficient  dividend  payments  to  avoid an
                  apportionment  or  deemed   distribution  of  income  and  the
                  entering into and  completion of this Agreement and references
                  to the result of events on or before the Completion Date shall
                  include the combined  result of two or more events one or more
                  of which  shall have taken  place on or before the  Completion
Date;                                       

8.1.2             "relief" includes (without limitation) any relief,  allowance,
                credit, set off, deduction or exemption for any Tax purpose;

8.1.3             reference to income or profits or gains earned, accrued or    
               received shall include income or profits or gains deemed to
             have been or treated as or regarded as earned, accrued or
 received for the purposes of any legislation;

8.1.4             reference to any Tax liability shall include not only any     
                 liability to make actual payments of or in respect of Tax but
shall also include:                         

8.1.4.1                    the loss or reduction  in the amount,  or the setting
                           off against income,  profits or gains, or against any
              Tax liability for which no provision has

23

DEF 14A
83rd Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 83rd
                        been made in preparing the Accounts, of any relief
                           which would (were it not for the said loss, reduction
                           or setting off) have been available to the Company or
                          the Subsidiary and which has been taken into account
                       in computing (and so eliminating or reducing) any
                        provision for deferred Tax which appears (or which
                     but for such relief would have appeared) in the
Accounts;                 

8.1.4.2                    the loss or reduction in the amount of, or the       
                        setting off against any Tax liability for which no
                           provision has been made in preparing the Accounts, of
                           a right to repayment of Tax which has been treated as
                  an asset of the Company or the Subsidiary in
 preparing the Accounts; and

8.1.4.3                    the  loss  or  reduction  in the  amount  of,  or the
                           setting off against income,  profits or gains earned,
                           accrued  or  received  on or  before  Completion,  or
                           against any Tax  liability of any relief which is not
                           available  before  Completion  but  which  arises  in
                           respect of an event  occurring  after  Completion  in
                           circumstances  where, but for such loss, reduction or
                           setting off, the Company or the Subsidiary would have
                           had a Tax liability in respect of which the Purchaser
                           would  have  been  able to make a  claim  under  this
clause 8;                 

                 and in such a case the amount of Tax which could otherwise be
                saved or relieved, by the relief so lost, reduced or set off
                (calculated by reference to the rates of Tax in force at the
                  date of this Agreement) or the amount of repayment which would
                  otherwise have been obtained shall be treated as the amount of
a Tax liability which has arisen;           

8.1.5             reference  to a payment in respect  of Tax  includes  (without
                  limitation)  a payment  for the  surrender  of losses or other
                  amounts by way of group relief  (within the meaning of Section
                  402  of the  Taxes  Act)  or  for  the  surrender  of  advance
                  corporation  tax or for the  transfer of any other  relief,  a
                  repayment  of  any  such  payment  and a  payment  by  way  of
  reimbursement, recharge, indemnity or damages.

24

DEF 14A
84th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 84th
8.2      Subject as hereinafter provided, the Vendor hereby covenants with and  
      undertake to pay to the Purchaser (for itself and as trustee for its
successors in title) a sum equal to the amount of:            

8.2.1             any Tax liability of the Company or the  Subsidiary  resulting
                  from or by  reference  to any income,  profits or gains earned
                  accrued or  received on or before the  Completion  Date or any
                  event on or before the  Completion  Date  whether  alone or in
                  conjunction with other  circumstances  and whether or not such
                  Tax is chargeable against or attributable to any other person;
and                                         

8.2.2             any Tax liability of the Company or the Subsidiary that arises
                  after   Completion  as  a  result  of  an  act,   omission  or
                  transaction  by  a  person  other  than  the  Company  or  the
                  Subsidiary  and which  liability to Tax falls upon the Company
                  or the  Subsidiary  as a result of its having been in the same
                  group  for Tax  purposes  as that  person  at any time  before
Completion; and                             

8.2.3             all costs and expenses which are incurred by the Purchaser or 
                 the Subsidiary in connection with any of the matters referred
                  to in this clause 8 or in taking or defending any action under
                the covenants contained in this clause 8 (including, without
               prejudice to the generality of the foregoing, all legal and
other professional fees and disbursements). 

8.3      The covenants contained in clause 8 do not apply to any liability:     

8.3.1             to the extent that provision or reserve in respect thereof has
              been made in the Accounts or to the extent that payment or
           discharge of such liability has been taken into account
therein;                                    

8.3.2             in respect of which provision or reserve has been made in the 
                 Accounts which is insufficient only by reason of any increase
       in rates of Tax made after the Completion Date with
retrospective effect.                       

25

DEF 14A
85th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 85th
8.4      If the Purchaser shall become aware of any assessment, notice, demand  
         or other document issued or action taken by or on behalf of any person,
 authority or body from which it appears that the Company or the
    Subsidiary has or may have a liability in respect of which a claim
       could be made under this clause, it shall give written notice thereof
       to the Vendor and shall (if the Vendor shall indemnify and secure the
   Purchaser and the Company and the Subsidiary as applicable to the
     Purchaser's reasonable satisfaction against any liabilities, costs,
         damages or expenses which may be incurred thereby) take such action and
       procure that the Company and/or the Subsidiary shall take such action
       as the Vendor may reasonably request to dispute, resist or compromise
         the liability; provided that neither the Company nor the Subsidiary nor
    the Purchaser shall be required to take any such action unless the
   Vendor shall have produced to them the opinion of leading Counsel
       practising in the relevant area of law that such action is reasonable
      and provided also that neither the Company and/or the Subsidiary nor
      the Purchaser shall in any event be required to take any steps which
       would require any admission of guilt or liability relating to matters
       connected with the claim in question or which would affect the future
conduct of the business of the Purchaser or the Company or the
         Subsidiary or any subsidiaries of the Purchaser or affect the rights or
reputations of any of them.                                   

8.5      The due date for the making of payments under this clause 8 shall be:  

8.5.1             where the payment relates to a liability of the Company or the
                 Subsidiary to make an actual payment of or in respect of Tax,
              the date which is seven days before the date on which such
               actual payment is due to be made to the relevant authority;

8.5.2             where the payment  relates to a matter  falling  within clause
                  8.1.4.1  or  8.1.4.3,  the date  falling  seven days after the
                  Vendor has been  notified by the  Purchaser  that the auditors
                  for the  time  being of the  Company  or the  Subsidiary  have
                  certified at the request of the Purchaser,  the Company or the
                  Subsidiary  that the Vendor has a liability for a determinable
amount under clause 8.2; and                

26

DEF 14A
86th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 86th
8.5.3             where the payment relates to a matter falling within clause   
                  8.1.4.2 the date on which the repayment of Tax would otherwise
have been due to be made; and               

8.5.4             in the case of costs and expenses within clause 8.2.4 the date
  on which such costs and expenses are incurred.

8.6      If any payment due to be made by the Vendor under this clause is not   
        made on the due date for payment thereof the same shall carry interest
         from such due date of payment until actual payment at the rate of 4 per
         cent above the Base Rate from time to time of National Westminster Bank
         PLC, compounded on the last days of March, June, September and December
in each year.                                                 

8.7      If any sum payable by the Vendor under this clause 8 (other than       
       interest under clause 8.6) shall be subject to Tax (whether by way of
      deduction or withholding or direct assessment of the person entitled
     thereto) such payment shall be increased by such an amount as shall
     ensure that after deduction, withholding or payment of such Tax the
 recipient shall have received a net amount equal to the payment
otherwise required hereby to be made.                         

8.8      The Vendor shall give all such assistance and provide such information 
     as the Purchaser shall reasonably request from time to time for the
         purpose of enabling the Purchaser or the Subsidiary to make returns and
       provide information as required to any Tax authority and to negotiate
any liability to Tax.                                         

9.       Pensions                                                               

The Company operates the Pension Scheme in respect of the Directors and         
employees of the Company and the Subsidiary.                                    

10.      Restriction on Announcements                                           

Each of the parties to this Agreement undertakes that whether before or after   
Completion it will not (save as required by law or by any securities exchange or
any supervisory or regulatory body to whose rules any party to this Agreement is
subject in which case, if                                                       

27

DEF 14A
87th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 87th
practicable, the announcements will be circulated to the other party prior to   
disclosure) make any announcement in connection with this Agreement unless the  
other parties shall have given their respective consents to such announcement   
(which consents may not be unreasonably withheld or delayed and may be given    
either generally or in a specific case or cases and may be subject to           
conditions).                                                                    

11.      Pre-Completion Obligations                                             

11.1     As from the date of this Agreement, the Vendor shall give and shall    
        procure that the Purchaser and/or any persons authorised by it will be
       given such access to the premises and all books, title deeds, records
     and accounts of the Company and the Subsidiary as the Purchaser may
       reasonably request and be permitted to take copies of any such books,
         deeds, records and accounts and that the Directors and employees of the
     Company and the Subsidiary shall be instructed to give promptly all
       such information and explanations to any such persons as aforesaid as
may be requested by it or them.                               

11.2     The Vendor shall procure that, from the date of this Agreement until   
        Completion, the Company shall not other than in the ordinary course of
business, without the prior written consent of the Purchaser: 

11.2.1            enter into or vary any contract nor assume any liability which
               is outside the ordinary or proper course of its business or
which is long term, unusual or onerous;     

11.2.2            enter into any single  capital  commitment  in a sum in excess
                  of(pound)75,000  (whether  by way  of  purchase,  lease,  hire
purchase or otherwise);                     

11.2.3            make any material change in the nature,  scope or organisation
                  of its business nor dispose of the whole of its undertaking or
property or a substantial part thereof;     

11.2.4            acquire or form any  subsidiary  nor acquire any shares in any
                  company nor acquire the whole or any  substantial  part of the
undertaking  assets or  business            

28

DEF 14A
88th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 88th
                  of any other  company  or any firm or person or enter into any
       joint venture or partnership with any other person;

11.2.5            make any loans or grant any credit (other than credit given in
               the normal course of trading and advances made to employees
     against expenses incurred by them on its behalf);

11.2.6            borrow any money (except borrowings from its bankers not      
           exceeding (pound)75,000) or make any payments out of or
                  drawings on its bank accounts (except payments in the ordinary
course of business);                        

11.2.7            enter into any guarantee, indemnity or surety;                

11.2.8            employ  or  engage,   or  make  any  offer  of  employment  or
                  engagement  to, any senior  employee or consultant on a salary
                  or consultancy fee of (pound)35,000 or more a year or make any
                  changes (whether immediate, conditional or prospective) in the
                  terms of employment  (including,  without  limitation,  in the
                  amount or basis of the  emoluments  or benefits) of any of its
          employees or in any arrangements with its consultants;

11.2.9            enter into any agreement, arrangement or understanding with   
              any trade union, works council, staff association or other
         employee representative body in respect of any of the
employees or directors of the Company;      

11.2.10           acquire or dispose of or grant any option or right of         
               preemption in respect of any material asset or any interest
             nor give nor receive any service otherwise than at market
value;                                      

11.2.11           acquire or dispose of any  freehold or  leasehold  property or
                  grant  any  lease  or third  party  right  in  respect  of the
Property;                                   

11.2.12           negotiate  or agree any review of rent in respect of any lease
of any of the Property;                     

29

DEF 14A
89th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 89th
11.2.13           enter  into  any  leasing,  hire  purchase  agreement  or  any
            agreement or arrangements for payment on deferred terms;

11.2.14           grant or enter into any licence,  franchise or other agreement
                  or arrangement  concerning any part of its name, trading names
or know-how;                                

11.2.15           declare, make or pay any dividend or distribution;            

11.2.16           incur or pay any management charges;                          

11.2.17           permit any of its  insurances  to lapse or do  anything  which
        would make any policy of insurance void or voidable;

11.2.18           make any payments to the Vendor;                              

11.2.19           apply  for,   surrender  or  agree  any   variations   to  any
Environmental Licences;                     

11.2.20           agree, conditionally or otherwise, to do any of the foregoing.

11.3     As soon as reasonably practicable after the date of this Agreement,    
      Purchaser shall prepare and file with the SEC the Proxy Statement in
         accordance with the requirements of the Exchange Act, pursuant to which
       the Purchaser solicits the proxies of the Purchaser's shareholders to
       approve the execution, delivery and performance of this Agreement and
the transactions contemplated herein. Purchaser shall use its 
       reasonable efforts to have the Proxy Statement approved by the SEC as
promptly as possible after the filing thereof, and, as soon as
      reasonably practicable following receipt of such approval, Purchaser
       shall mail a copy of the Proxy Statement to each of its shareholders.
       Purchaser shall also use its reasonable efforts to obtain any and all
     permits and approvals required under applicable United States state
  securities or "blue sky" laws and regulations for the execution,
  delivery and performance of this Agreement, and the transactions
       contemplated herein, as soon as reasonably practicable after the date
of this Agreement.                                            

30

DEF 14A
90th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 90th
11.4     The Vendor undertakes that it will provide and cause the Company to    
         provide, such information and any other assistance as the Purchaser may
      reasonably require in order to prepare and file the Proxy Statement.

11.5     The Vendor undertakes that none of the information supplied, or to be  
 supplied, by the Vendor and/or the Company to the Purchaser for
    purposes of inclusion or incorporation by reference into the Proxy
         Statement, or any amendment or supplement thereto, will (i) at the date
    of filing of the Proxy Statement with the SEC; (ii) at the time of
    mailing of the Proxy Statement to the Purchaser's shareholders; or
         (iii) at the time of any meetings of the Purchaser's shareholders to be
   held to consider the transactions contemplated in this Agreement,
     contain any untrue statement of material fact, or omit to state any
      material fact required to be stated therein or necessary in order to
       make the statements contained therein not misleading, in light of the
circumstances under which such statements were made.          

         If, at any time prior to the Completion Date, any material event should
      occur, or Vendor should discover any material facts, relating to the
 Vendor, the Company, the Subsidiary, or any officer or director
 thereof, which should be set forth in a supplement to the Proxy
      Statement, the Vendor shall provide prompt written notice thereof to
      the Purchaser, and shall provide the Purchaser with (i) all relevant
        information pertaining to such event or facts; and (ii) all assistance
reasonably requested by the Purchaser in connection with the  
   preparation and filing of such supplement to the Proxy Statement.

12.      Confidentiality of Information Received by the Vendor                  

12.1     The Vendor undertakes with the Purchaser that it shall treat as        
         strictly confidential all information received or obtained by it or its
employees, agents or advisers as a result of entering into or 
 performing this Agreement including information relating to the
   provisions of this Agreement, the negotiations leading up to this
     Agreement, the subject matter of this Agreement and the business or
     affairs of the Purchaser or any member of the Purchaser's group and
       subject to the provisions of clause 12.3 that it will not at any time
hereafter make use of or disclose or divulge to any person any

31

DEF 14A
91st Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 91st
         such information and shall use its reasonable endeavours to prevent the
publication or disclosure of any such information.            

12.2     The Purchaser undertakes with the Vendor that it shall treat as        
         strictly confidential all information received or obtained by it or its
      employees, agents or advisers relating to the business or affairs of
the Vendor and the terms of this Agreement and subject to the 
       provisions of clause 12.3 that it will not at any time hereafter make
      use of or disclose or divulge to any person any such information and
        shall use its best endeavours to prevent the publication or disclosure
       of such information and in the event that this Agreement is rescinded
     the Purchaser shall forthwith deliver to the Vendor and procure the
       delivery by its advisors of all documents, records and copies thereof
      containing Confidential Information in respect of the Company and/or
Subsidiary and/or its business.                               

12.3     The restrictions contained in clauses 12.1 and 12.2 shall not apply so 
       as to prevent any party from making any disclosure required by law or
         by any securities exchange or supervisory or regulatory or governmental
      body pursuant to rules to which such party is subject or from making
any disclosure to any professional adviser for the purposes of
         obtaining advice (provided always that the provisions of this clause 12
        shall apply to and the relevant party shall procure that they apply to
and are observed in relation to, the use or disclosure by such
        professional adviser of the information provided to him) nor shall the
       restrictions apply in respect of any information which comes into the
   public domain otherwise than by a breach of this clause 12 by any
party.                                                        

13.      Guarantee and Indemnity by Guarantor                                   

13.1     In consideration of the Purchaser entering into this Agreement the     
    Guarantor hereby unconditionally and irrevocably guarantees to the
         Purchaser the due and punctual performance and observance by the Vendor
      of the Warranties and indemnities and covenants under or pursuant to
  this Agreement and agrees to indemnify the Purchaser against all
losses, damages, costs and expenses (including legal costs and
      expenses) which the Purchaser may suffer through or arising from any
    breach by the Vendor of such obligations, commitments, warranties,
        undertakings, indemnities or covenants. The liability of the Guarantor
as aforesaid shall not be released or diminished by any       

32

DEF 14A
92nd Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 92nd
    arrangements or alterations of terms (whether of this Agreement or
        otherwise) or any forbearance, neglect or delay in seeking performance
    of the obligations hereby imposed or any granting of time for such
performance.                                                  

13.2     If and whenever the Vendor defaults for any reason whatsoever in the   
       performance of any obligation or liability undertaken or expressed to
        be undertaken by it under or pursuant to this Agreement, the Guarantor
 shall forthwith upon demand unconditionally perform (or procure
  performance of) and satisfy (or procure the satisfaction of) the
       obligation or liability in regard to which such default has been made
        in the manner prescribed by this Agreement (as the case may be) and so
         that the same benefits shall be conferred on the Purchaser, the Company
   or the Subsidiary as it would have received if such obligation or
    liability had been duly performed and satisfied by the Vendor. The
     Guarantor hereby waives any rights which it may have to require the
        Purchaser to proceed first against or claim payment from the Vendor to
       the intent that as between the Purchaser and the Guarantor the latter
   shall be liable as principal debtor as if it had entered into all
      undertakings, agreements and other obligations jointly and severally
with the Vendor.                                              

13.3     This guarantee and indemnity is to be a continuing security to the     
        Purchaser for the Warranties, indemnities and covenants on the part of
    the Vendor under or pursuant to this Agreement notwithstanding any
settlement of account or other matter or thing whatsoever.    

13.4     This guarantee and indemnity is in addition to and without prejudice to
        and not in substitution for any rights or security which the Purchaser
         may now or hereafter have or hold for the performance and observance of
        the obligations, commitments, undertakings, covenants, indemnities and
      warranties of the Vendor under or in connection with this Agreement.

13.5     In the event of the Guarantor having taken or taking any security from 
 the Vendor in connection with this guarantee and indemnity, the
         Guarantor hereby undertakes to hold the same in trust for the Purchaser
         pending discharge in full of all the Guarantor's obligations under this
   Agreement. The Guarantor shall not, after any claim has been made
         pursuant to this clause 13, claim from the Vendor any sums which may be

33

DEF 14A
93rd Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 93rd
   owing to it from the Vendor or have the benefit of any set-off or
       counter-claim or proof against or dividend, composition or payment by
    the Vendor until all sums owing to the Purchaser in respect hereof
shall have been paid in full.                                 

13.6     As a separate and independent stipulation, the Guarantor agrees that   
    any obligation expressed to be undertaken by the Vendor under this
      Agreement (including, without limitation, any moneys expressed to be
       payable under this Agreement) which may not be enforceable against or
recoverable from the Vendor by reason of any legal limitation,
disability or incapacity of any of them or any other fact or  
       circumstance shall nevertheless be enforceable against or recoverable
from the Guarantor as though the same had been incurred by the
       Guarantor and the Guarantor were sole or principal obligor in respect
    thereof and shall be performed or paid by the Guarantor on demand.

14.      Costs                                                                  

14.1     Each party to this Agreement shall pay its own costs of and incidental 
       to this Agreement and the sale and purchase hereby agreed to be made.

14.2     The Vendor confirms that no expense of whatever nature relating to the 
   sale of the Sale Shares has been or is to be borne by the Company
and/or the Subsidiary.                                        

15.      General                                                                

15.1     This Agreement shall be binding upon and enure for the benefit of the  
 estates, personal representatives or successors of the parties.

15.2     This Agreement (together with any documents referred to herein or      
   executed contemporaneously by the parties in connection herewith)
constitutes the whole agreement between the parties hereto and
 supersedes any previous agreements or arrangements between them
         relating to the subject matter hereof; it is expressly declared that no
       variations hereof shall be effective unless made in writing signed by
duly authorised representatives of the parties.               

34

DEF 14A
94th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 94th
15.3     All of the provisions of this Agreement shall remain in full force and 
   effect notwithstanding Completion (except insofar as they set out
obligations which have been fully performed at Completion).   

15.4     If any provision or part of a provision of this Agreement shall be, or 
     be found by any authority or court of competent jurisdiction to be,
         invalid or unenforceable, such invalidity or unenforceability shall not
 affect the other provisions or parts of such provisions of this
Agreement, all of which shall remain in full force and effect.

15.5     Any right of rescission conferred upon the Purchaser hereby shall be in
    addition to and without prejudice to all other rights and remedies
  available to it (and, without prejudice to the generality of the
   foregoing, shall not extinguish any right to damages to which the
       Purchaser may be entitled in respect of the breach of this Agreement)
         and no exercise or failure to exercise such a right of rescission shall
         constitute a waiver by the Purchaser of any such other right or remedy.
   The Purchaser shall have no right to rescind this Agreement after
Completion.                                                   

15.6     No failure of the Purchaser to exercise, and no delay or forbearance in
     exercising, any right or remedy in respect of any provision of this
Agreement shall operate as a waiver of such right or remedy.  

15.7     Upon and after Completion the Vendor shall do and execute or procure to
         be done and executed all such further acts, deeds, documents and things
       as may be necessary to give effect to the terms of this Agreement and
        to place control of the Company and the Subsidiary in the hands of the
    Purchaser and pending the doing of such acts, deeds, documents and
         things the Vendor shall as from Completion hold the legal estate in the
Sale Shares in trust for the Purchaser.                       

15.8     At the request of the Purchaser, the Vendor shall execute under seal a 
       power of attorney in favour of the Purchaser or such person as may be
        nominated by the Purchaser generally in respect of the Sale Shares and
       in particular to enable the Purchaser (or its nominees) to attend and
vote at General Meetings of the Company.                      

35

DEF 14A
95th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 95th
15.9     This Agreement may be executed in one or more counterparts, and by the 
         parties on separate counterparts, but shall not be effective until each
       party has executed at least one counterpart and each such counterpart
         shall constitute an original of this Agreement but all the counterparts
shall together constitute one and the same instrument.        

15.10    This Agreement may not be assigned by any party without the prior      
      written consent of the other parties. Notwithstanding the foregoing,
     the Purchaser may, without the consent of the other parties hereto,
     assign any or all of its rights and delegate its obligations to the
      extent that it has obligations, or any part thereof but the assignee
  shall be in no better position than the Purchaser hereunder, to:

15.10.1           a newly formed Delaware Corporation, as part of a liquidation 
        and reincorporation of the Purchaser in Delaware, in
            anticipation of listing of the Purchaser's shares on the
                NASDAQ (National Association of Securities Dealers Automated
   Quotations) small capitalisation market; and/or

15.10.2           any affiliate of the Purchaser, as part of a corporate        
              reorganisation undertaken for bona fide business purposes,
such as tax planning restructuring.         

16.      Notices                                                                

16.1     Save as otherwise provided in this Agreement any notice, demand or     
   other communication to be served under this Agreement shall be in
    writing in the English language and shall be served upon any party
     hereto only by posting by first class post (if to an address in the
        same country) or air mail (if to an address in a different country) or
    delivering the same by hand or by courier, to its address given or
referred to in this clause or sending the same by facsimile   
         transmission to the number given in this clause for the addressee or at
    such other address or number as it may from time to time notify in
writing to the other parties hereto.                          

16.2     A notice, demand or other communication served by first class post     
        shall be deemed duly served on an address in the same country 48 hours
  (disregarding days which are not business days) after posting, a
notice, demand or other communication served by               

36

DEF 14A
96th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 96th
     air mail shall be deemed duly served on an addressee in a different
        country five business days after posting and a notice, demand or other
      communication sent by facsimile transmission shall be deemed to have
        been served at the time of transmission (save that if the transmission
        occurs after 6.00 p.m. the notice, demand or other communication shall
     be deemed to have been served at 8.30 a.m. on the next business day
       following transmission) and in proving service of the same it will be
         sufficient to prove, in the case of a letter, that such letter was left
     at or delivered to the correct address of the party to be served as
   provided in this Agreement or, in the case of properly stamped or
       franked first class post or air mail, addressed to the address of the
        party to be served given in this clause and placed in the post and, in
  the case of facsimile transmission, that such facsimile was duly
   transmitted to the number of the party to be served given in this
clause and an electronic acknowledgement was received.        

16.3     All notices, demands or other communications given under this          
Agreement, shall be given to the following addresses:         

        If to the Vendor:          Mr. Jay Vallabh
                            Director
                                             Inversiones Mirabel, S.A.
                                           Hong Kong Bank Building
                             6th Floor
                                       Samuel Lewis Avenue
                                   P.O. Box 6-4298
                             El Dorado
                               Panama City

                                        Administrative Offices
                                          ----------------------
                                   Mr. Jay Vallabh
                            Director
                                             Inversiones Mirabel, S.A.
                                 C/O CAS. S.A.
                                P.O. Box 567
                                         12-14 Avenue Reverdil
                                             CH-1260 Nyon, Switzerland
           Telephone Number:          011 41 22 994 2880
           Fax Number:                011 41 22 994 2888
     Contact:                   Tanya Tamone

               If to the Purchaser:       Mr. Jerome G. Merchant
                            Director
                                             Mendocino Brewing Company

37

DEF 14A
97th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 97th
                                       3 Harbor Drive #115
                                       Sausalito, CA 94965
                       Telephone Number:          001 415 289 1400 Extension 109
         Fax Number:                001 415 289 1409
          Contact:                   Victoria Shepherd

             If to the Guarantor:       CAS Nominees Limited
                                Celtic House
                                   Victoria Street
                           Douglas
                               Isle of Man

           Telephone Number:          00 41 22 994 28 80
           Fax Number:                00 41 22 994 28 88
   For the attention of:      J. Vallabh

16.4     For the purposes of this clause "business day" means a day (other than 
        a Saturday or a Sunday) on which banks are generally open for business
in London.                                                    

17.      Governing Law and Submission to Jurisdiction                           

This Agreement shall be governed by and construed in accordance with English law
and the parties hereto submit to the non-exclusive jurisdiction of the English  
courts for the purpose of enforcing any claim arising hereunder. The Vendor     
hereby irrevocably appoints the Vendor's Solicitors to be its agent for service 
of process in England.                                                          

38

DEF 14A
98th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 98th
SCHEDULE 1

The Vendor

      (1)                                      (2)
        Name and Address                       Number of Sale Shares
of Vendor                                   

INVERSIONES MIRABEL, S.A.                         100,000   

Hong Kong Bank Building                                   
6th Floor                                   

Samuel Lewis Avenue                                   
P.O. Box 6-4298                                   
El Dorado                                   
Panama City                                   

39

DEF 14A
99th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 99th
SCHEDULE 2

Details of the Company

THE COMPANY                                                                     

UNITED BREWERIES INTERNATIONAL (UK) LIMITED                                     

1.       Registered number:                                                     
1688201                                                       

2.       Address of registered office:                                          
75 Westow Hill                                                
Crystal Palace                                                
London SE19 1TX                                               

3.       Date and place of incorporation:                                       
21 December 1982   -   England and Wales                      

4.       Authorised share capital:                                              
(pound)500,000                                                

5.       Issued share capital:                                                  
100,000 shares of (pound)1 each                               

6.       Directors:                                                             
Villivalam Sampath Kumar                                      
Gul Mohammad Khan Lodhi                                       
Mavila Krishnan Nambiar                                       

7.       Secretary:                                                             
Gul Mohammad Khan Lodhi                                       

8.       Accounting Reference Date:                                             
31 December                                                   

40

DEF 14A
100th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 100th
9.       Auditors:                                                              
J.M. Shah and Company                                         

41

DEF 14A
101st Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 101st
SCHEDULE 3

The Subsidiary

Name of Subsidiary:  UBSN LIMITED                                               

Registered Number:   2367133                                                    

Date and place of Incorporation:   31 March 1989  -  England and Wales          

Address of Registered Office: 75 Westow Hill, Crystal Palace, London SE19 1TX   

Directors:                                                                      

Deepak Anand                                                                    

Brian Keith Colin Dozey                                                         

Kalyan Ganguli                                                                  

Dr. Vijay Mallya                                                                

David Royston Townshend                                                         

Secretary: Gul Mohammad Khan Lodhi                                              

Auditors:   Ernst & Young                                                       

Accounting Reference Date:  31 December                                         

Authorised Share Capital:(pound)250,000 divided into 125,000 `A' ordinary shares
of (pound)1 each and 125,000 `B' ordinary shares of(pound)1 each.               

Issued Share Capital:  250,000  shares divided into 125,000 `A' ordinary  shares
of (pound)1 each and 125,000 `B' ordinary shares of(pound)1 each.               

Registered Shareholders & identity of beneficial owners:                        

United Breweries International (UK) Limited 125,000 `A' ordinary shares and     
125,000 `B' ordinary shares.                                                    

42

DEF 14A
102nd Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 102nd
SCHEDULE 4

The Property

Description                                                                     
of Property:               Lease of ground floor offices at White Horse West    
Street, Faversham Kent

Date and Term                                                                   
of Lease:                  23.11.98, six years from 23.11.98                    

Landlord:                  Shephard Neame Limited                               

Tenant:                    UBSN Limited                                         

Surety:                    None                                                 

Annual Rental:             (pound)7000 p.a                                      

Next Rent Review:          25.6.01                                              

Present Use:               Offices                                              

43

DEF 14A
103rd Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 103rd
SCHEDULE 5

Warranties

In this Schedule unless the context otherwise indicates each of the Warranties  
shall be deemed to be repeated mutatis mutandis in relation to the Subsidiary.  

1.       The Accounts                                                           

1.1      The Accounts have been prepared in accordance with the requirements of 
        all relevant statutes and with good and generally accepted accountancy
       principles and practice and show a true and fair view of the state of
         affairs of the Company and of its results and profits for the financial
period ending on the Accounting Date and:                     

1.1.1             depreciation of the fixed assets of the Company has been made 
                  at a rate sufficient to write down the value of such assets to
             nil not later than the end of their useful working lives;

1.1.2             slow-moving  stock has been  written  down  appropriately  and
                  unrecoverable  work in progress  and  redundant  and  obsolete
                  stock has been wholly written off and the value  attributed to
                  the  remaining  stock did not  exceed the lower of cost or net
                  realisable  value at the  Accounting  Date on a going  concern
basis;                                      

1.1.3             the Company's stock in trade and work in progress has been    
              valued on a basis in all material respects consistent with
                  that adopted for the purpose of the Company's audited accounts
                 in respect of the beginning and end of each of the last three
preceding accounting periods.               

1.2      The Accounts disclose and make full provision or reserve for all actual
liabilities.                                                  

1.3      The Accounts disclose and make full provision or reserve for or note   
  all contingent, unquantified or disputed liabilities, capital or
burdensome commitments and deferred Tax.                      

44

DEF 14A
104th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 104th
1.4      Full provision or reserve has been made in the Accounts for all Tax in 
     respect of all accounting periods ended on or before the Accounting
     Date for which the Company was then or might at any time thereafter
  become or have become liable including (without limitation) Tax:

1.4.1             on or in respect of or by reference  to the profits,  gains or
                  income for any period ended on or before the Accounting  Date;
or                                          

1.4.2             in respect of any event before the Accounting Date including  
              distributions made and charges on income on or before such
date.                                       

1.5      The bases and policies of accounting of the Company (including         
         depreciation) adopted for the purpose of preparing the Accounts are the
         same as those adopted for the purpose of preparing the audited accounts
         of the Company for each of the last three preceding accounting periods.

1.6      The profits and losses of the Company shown by the Accounts and for the
  last three preceding accounting periods have not in any material
      respect been affected by any unusual or non-recurring or exceptional
       item or by any other matter which has rendered such profits or losses
unusually high or low.                                        

1.7      None of the amounts shown in the Accounts in respect of non-group      
      debtors is represented by debts which were then or are now more than
         three months overdue for payment and none of the same has been released
       or settled for an amount less than that shown in the Accounts. All of
    the Company's book debts, whether shown in the Accounts or arising
    since the Accounting Date, are valid and have realised the nominal
amount thereof.                                               

1.8      The Company has not factored any of its debts or entered into any      
        financing arrangement of a type which would not require to be shown or
reflected in the Accounts.                                    

1.9      Except as disclosed in the Accounts there are:                         

45

DEF 14A
105th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 105th
1.9.1             no  loans,   guarantees,   material   undertakings,   material
                  commitments on capital account, entered into or incurred by or
on behalf of the Company;                   

1.9.2             no mortgages,  charges, liens or other similar encumbrances on
      the assets of the Company or any part thereof; and

1.9.3             no outstanding loan capital or other loans to the Company.    

2.       Management Accounts                                                    

The Management Accounts have been prepared in accordance with the accounting    
policies of the Company which are set out in the Disclosure Letter and on a     
consistent basis with the monthly management accounts of the Company and show a 
fair view of the assets and liabilities and profits and losses of the Company as
at and to 30 September 2000.                                                    

3.       Tax, Records and Returns                                               

3.1      No event, act, transaction or omission has occurred or shall occur     
       between the Accounting Date and Completion which could give rise to a
claim under the terms of clause 8 of the Agreement.           

3.2      All returns, computations (including, for the avoidance of doubt, those
  tax computations attached to the Disclosure Letter), notices and
        information made or provided or required to be made or provided by the
Company for any Tax purpose have been made or given within the
     requisite periods and on a proper basis and when made were true and
       accurate in all material respects and are up to date and none of them
is or is likely to be the subject of any dispute with any Tax 
authority.                                                    

3.3      The Company has not without the prior consent of H.M. Treasury entered 
        into any of the transactions specified in Section 765 of the Taxes Act
         and the Disclosure Letter contains details of all transactions effected
      by the Company in respect of which any consent or clearance from the
     Inland Revenue or H.M. Treasury or other governmental authority was
required or was sought.                                       

46

DEF 14A
106th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 106th
3.4      The  Company  has paid all Tax which it has become  liable to pay on or
before the date hereof.                                       

3.5      Within the preceding period of seven years the Company has not paid or 
  become liable to pay any fine, penalty, surcharge or interest in
relation to Tax.                                              

3.6      The Company is and has always been resident in the United Kingdom for  
        Tax purposes and has never been resident for Tax purposes in any other
jurisdiction.                                                 

3.7      The Company is not and has never been a close company within the       
meaning of Section 414 of the Taxes Act.                      

3.7.1             No loan or advance within Sections 419 to 422 of the Taxes Act
                  has ever been made by the Company nor has the Company released
                 or written off or agreed to release or write off the whole or
any part of such loan or advance.           

3.7.2             No  distribution  within Section 418 of the Taxes Act has ever
been made by the Company.                   

3.7.3             The Company is a close investment-holding company.            

3.8      The Subsidiary and not the Company carries on activities which are a   
     trade for the purposes of United Kingdom Tax and has not ceased and
 will not as a result of any agreement entered into on or before
Completion cease to carry on such activities.                 

3.9      The Company has never carried on a trade for Tax purposes other than   
the trade which the Company will be carrying on at Completion.

3.10     Other than the group of companies comprising the Vendor, the Company   
         and the Subsidiary, the Company is not and has never been a member of a
group of companies for Tax purposes.                          

47

DEF 14A
107th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 107th
3.11     Full particulars of all elections made by the Company under Section 247
        of the Taxes Act and now in force are set out in the Disclosure Letter
      and the Company has not given and does not intend to give any notice
    under Sub-section (3) of that Section in relation to any dividend.

3.12     Full particulars of all surrenders made or agreed to be made by or to  
        the Company under the provisions of Sections 240 and 402 to 412 of the
      Taxes Act and of all payments made or agreed to be made by or to the
       Company for or in consideration of any such surrenders are set out in
       the Disclosure Letter and no such surrenders or payments will be made
on or prior to Completion.                                    

3.13     The Company has not received any payment in respect of any surrender   
        made or agreed to be made under the provisions of Sections 240 and 402
       to 412 of the Taxes Act which whether or not as a result of the entry
      into or completion of this Agreement may be liable to be refunded in
whole or in part.                                             

3.14     There are no arrangements in existence which whether or not taken      
     together with the entry into and completion of this Agreement would
         result in the provisions of Section 240(11) or Section 410 of the Taxes
Act applying to the Company and any other company.            

3.15     The Company is neither a creditor nor a debtor in respect of a loan    
    which is not a normal commercial loan as defined in paragraph 1 of
Schedule 18 to the Taxes Act.                                 

3.16     No rents, interest, annual payments, emoluments or other sums of an    
      income nature paid or payable by the Company or which the Company is
   under an obligation to pay in the future are or (under the law as
presently in force) may be wholly or partially disallowable as
       deductions or charges in computing profits or against profits for Tax
purposes.                                                     

3.17     Full details of all unrelieved Tax losses, management expenses, charges
        on income, advance corporation tax or excess franked investment income
available to the Company are set out in the Disclosure Letter.

48

DEF 14A
108th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 108th
3.18     During the period of three years ending with the Accounting Date and   
       during the period between the Accounting Date and the Completion Date
        there has been and will be no major change in the nature or conduct of
        a trade or business of the Company within the meaning of Sections 245,
     768 or 768A of the Taxes Act or Schedule 7A to the TCGA nor has the
     scale of the activities in such a trade become small or negligible.

3.19     No debt owed by the Company to which Section 94 of the Taxes Act       
     applied has within the preceding period of six years been released.

3.20     The Company has no assets or liabilities which are qualifying assets or
    qualifying liabilities within Section 153 of the Finance Act 1993.

3.21     The Company has not made and is not entitled to make any claim under   
      Sections 24, 48, 253, 254, 279 or 280 of the TCGA or Sections 584 or
585 of the Taxes Act.                                         

3.22     No act or transaction has been or will, on or before Completion, be    
        effected by the Company, the Vendor or any other person (including the
         sale of the Sale Shares), in consequence of which the Company is or may
        be held liable for Tax primarily chargeable against some other person.

3.23     The Company has made all deductions and withholdings which it is       
        obliged or entitled to make in respect, or on account, of any Tax from
any payments and has duly accounted in full to the appropriate
authority for all amounts so deducted or withheld.            

3.24     [Not used]                                                             

3.25     [Not used]                                                             

3.26     [Not used]                                                             

3.27     The Company is not under any obligation to make any payment of interest
        or any annual payment for which no relief will be received, whether as
a deduction or charge                                         

49

DEF 14A
109th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 109th
       on income by reason of Section 125 of the Taxes Act or otherwise, and
no such payments have been made since the Accounting Date.    

3.28     The Company has not made any distribution (within the meaning of       
    Section 209 of the Taxes Act) other than the payment of dividends,
        there is outstanding no loan to the Company on which any interest paid
         would be such a distribution and the Company is not under an obligation
to make any distribution in the future.                       

3.29     The Company has not at any time made a repayment of capital within the 
      meaning of Section 209 of the Taxes Act nor capitalised or agreed to
        capitalise in the form of shares, debentures or other securities or in
 paying up any amounts unpaid on any shares, debentures or other
   securities any profits or reserves of any class or description or
       passed or agreed to pass any resolution to do so, nor has it provided
        capital to any company on terms that such company has in consideration
      issued shares, loan stock or other securities where the terms of the
    capitalisation were otherwise than by way of a transaction made at
  arm's length or where the shares, loan stock or other securities
         acquired are shown in the Accounts at a value in excess of their market
value at the time of acquisition.                             

3.30     The Company has not been engaged in or been a party to any of the      
         transactions set out in Sections 213 to 218 of the Taxes Act nor has it
made or received a chargeable payment as defined therein.     

3.31     The Company has not entered into or been engaged in or been a party to 
       any transaction or series of transactions or scheme or arrangement of
         which the main purpose or one of the main purposes was the avoidance or
        deferral of Tax or a reduction in the liability to Tax of the Company.

3.32     The Company has not done anything which could give rise to an          
         assessment under Sections 703, 776 or 779 to 786 inclusive of the Taxes
Act.                                                          

3.33     The Company has not within the preceding period of six years done or   
    omitted to do or agreed to do nor permitted to be done any act nor
         suffered any occurrence (other than a sale of an asset at a price equal
to its market value) as a result of which any                 

50

DEF 14A
110th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 110th
       disposal value has been or may be required to be brought into account
under Section 24 of the CAA.                                  

3.34     The Company has not within the preceding period of six years done nor  
        has it omitted to do nor agreed to do nor permitted to be done any act
       nor has it suffered any occurrence as a result of which any balancing
charge has arisen or may arise under Section 4 of the CAA.    

3.35     The Company has not taken a lease nor granted a lease of any assets in 
       respect of which an election has been made under Sections 53 or 55 of
the CAA.                                                      

3.36     The Disclosure Letter with specific reference to this warranty 3.41    
        sets out full details of any lease of any interest in land or plant or
    machinery to which the Company as lessee was or has become a party
         where the rent payable by the Company is or may be liable to adjustment
in the event of changes in legislation relating to Tax.       

3.37     All plant or machinery held by the Company on lease is and has at all  
     times been used for a qualifying purpose in the requisite period in
       accordance with Chapter II Part V of the CAA and was purchased by the
relevant lessor as principal acting for itself and without the
   intervention or agency of the Company or any person acting on its
behalf.                                                       

3.38     The Company has elected or has been treated as having elected that all 
disposals made by it fall outside Section 35(3) of the TCGA.  

3.39     The Company does not own any debt on a security or other debt in       
         respect of which a chargeable gain may arise on a disposal of the debt.

3.40     The Company is not a creditor in relation to any such loan relationship
     as is referred to in Section 92 of the Finance Act 1996 nor is it a
     party to any such loan relationship as is referred to in Section 93
thereof.                                                      

3.41     The Company does not owe any amount in respect of which the provisions 
      of paragraph 2 of Schedule 9 to the Finance Act 1996 may be applied.

51

DEF 14A
111th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 111th
3.42     The Company is not a debtor in relation to any loan relationship which 
    has an "unallowable purpose" within the meaning of paragraph 13 of
Schedule 9 to the Finance Act 1996.                           

3.43     The Company has not acquired or disposed of any asset in  circumstances
where Section 17 of the TCGA applies.                         

3.44     The Company has not  appropriated  any trading stock to fixed assets or
vice versa.                                                   

3.45     On a disposal of all of its assets by the Company for (in the case of  
         each asset owned by the Company at the Accounting Date) a consideration
       equal to the value attributed to that asset in preparing the Accounts
     or (in the case of each asset acquired since the Accounting Date) a
consideration equal to the actual consideration given for the 
        acquisition then (in the case of each asset so owned) the liability to
      Tax (if any) which would be incurred by the Company would not exceed
    the amount (if any) taken into account in respect of that asset in
        computing the liability of the Company to deferred Tax as provided for
in the Accounts and (in the case of assets so acquired) no Tax
      liability would be incurred by the Company in respect of that asset.

3.46     No claim has been made or will before Completion be made under Sections
       152, 153, 154 or 175 of the TCGA in respect of any asset owned by the
Company.                                                      

3.47     The Company has not been a party to or involved in any share for share 
       exchange nor any scheme of reconstruction or amalgamation such as are
mentioned in Sections 135, 136 or 139 of the TCGA.            

3.48     No scheme has been effected and no arrangements have been made whereby 
       the value of any asset of the Company has been materially reduced and
       on a disposal thereof Section 30 of the TCGA may be applicable and no
        loss which might accrue on the disposal of any share in or security of
   any company is liable to be reduced by virtue of any depreciatory
       transaction within the meaning of Sections 176 or 177 of the TCGA nor
        is any expenditure on any share liable to be reduced under Section 125
of the TCGA.                                                  

52

DEF 14A
112th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 112th
3.49     The Company does not have and will not on Completion have any          
        distributable profits which will be chargeable profits as that term is
defined in Section 31 of the TCGA.                            

3.50     The Company has not at any time transferred in exchange for shares     
        and/or loan stock part or all of a trade carried on outside the United
     Kingdom through a branch or agency to a company not resident in the
United Kingdom.                                               

3.51     The Company has never ceased to be a member of a group of companies for
      the purposes of Sections 178 or 179 of the TCGA and the Company will
    not be liable to Tax thereunder by virtue of the entering into and
completion of this Agreement.                                 

3.52     The Company has not at any time within the period of six years ending  
       with the Accounting Date acquired any asset from any company which at
    the time of acquisition was a member of the same group (within the
meaning of Section 170 of the TCGA).                          

3.53     The  Company  is not  liable  to be  assessed  for  corporation  tax on
chargeable gains.                                             

3.54     The Company has not entered into any transaction or arrangement in     
       respect of which the provisions of Section 770 or Section 770A of the
Taxes Act have been or could be applied.                      

3.55     The Company does not hold directly or indirectly any interest in a     
      company which if it were subject to a lower level of taxation in the
         territory in which it is resident would be a controlled foreign company
within Section 747 of the Taxes Act.                          

3.56     No direction affecting the Company has been made under Section 747 of  
    the Taxes Act and no circumstances exist which would permit such a
         direction to be made to apportion any of the profits of another company
to the Company.                                               

3.57     No chargeable gain may be attributed to the Company under Section 13 of
the TCGA.                                                     

53

DEF 14A
113th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 113th
3.58     The Company is not and has not at any time within the preceding period 
    of six years been liable to Tax in any jurisdiction other than the
United Kingdom.                                               

3.59     There is no unsatisfied liability to inheritance tax attached or       
     attributable to the Sale Shares or any asset of the Company nor are
         they or any of them subject to an Inland Revenue charge as mentioned in
         Sections 237 or 238 of IHTA nor is any person liable to inheritance tax
         attributable to the value of any of the Sale Shares or any asset of the
Company.                                                      

3.60     No person has by virtue of Section 212 of IHTA any power of sale,      
        mortgage or charge in respect of any shares in or asset of the Company
    and there are no circumstances in existence whereby any such power
       could be exercised in relation to any of the Sale Shares or any asset
of the Company.                                               

3.61     All documents to which the Company is a party or which form part of the
         Company's title to any asset or in the enforcement of which the Company
         is or may be interested which are subject to stamp or similar duty have
been duly stamped and adjudicated.                            

3.62     The Company has not entered into any agreement whereby it is or may    
become liable to stamp duty reserve tax.                      

3.63     The Company is registered for the purposes of value added tax and has  
 been so registered at all times that it has been required to be
        registered and has at no time within the previous 3 years been treated
       as a member of a group of Companies for the purposes of Section 43 of
VATA.                                                         

3.64     The Company has complied fully with all statutory requirements, orders,
  provisions, directions or conditions relating to value added tax
        including the terms of any agreement reached with the Commissioners of
      Customs & Excise, maintains and has at all times maintained complete
         correct and up-to-date records for the purposes of such legislation and
     has preserved such records in such form and for such periods as are
   required by the relevant legislation relating to value added tax.

54

DEF 14A
114th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 114th
3.65     The  Company is not in arrears  with any payment or returns in relation
to value added tax.                                           

3.66     The Company has not been  required  by the  Commissioners  of Customs &
Excise to give security.                                      

3.67     The Company does not operate any special VAT methods or arrangements.  

3.68     The Company is not a party to any contract in respect of which it is   
       obliged to account for VAT pursuant to the provisions of Section 8 or
Section 10 of VATA.                                           

3.69     The Company has not within the preceding period of six years made      
  exempt supplies of such amount that as a consequence thereof the
    Company has been unable to obtain credit for any input tax paid or
suffered by it.                                               

3.70     The Disclosure Letter contains full particulars of all land in which   
      the Company has an interest and in relation to which an election has
       been made and not revoked by the Company or by any relevant associate
         (as defined by paragraph 3(7) of Schedule 10 to VATA) of the Company to
         waive exemption from value added tax under paragraph 2 of that Schedule
       and of all buildings and civil engineering works owned by the Company
        and completed for the purposes of Group 1 of Schedule 9 to VATA within
the last three years.                                         

3.71     The Disclosure Letter contains full particulars of all notifications   
   received by the Company under paragraph 7 of Schedule 10 to VATA.

3.72     The Company is not a developer as defined in paragraph 5 of Schedule 10
      to VATA in relation to any building or work within paragraph 5(2) of
         that Schedule or any reconstructions, enlargements or extensions within
     paragraph 5(8) of that Schedule either currently being constructed,
reconstructed, enlarged or extended or whose construction,    
    reconstruction, enlargement or extension was completed within five
years prior to the date of this Agreement.                    

55

DEF 14A
115th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 115th
3.73     There are set out in the Disclosure Letter particulars of each asset   
        used by the Company in the course or furtherance of its business being
         assets to which Part XV of the Value Added Tax Regulations 1995 applies
        and in respect of which the period of adjustment will not have expired
  before Completion. Such particulars are sufficient to enable the
Company to comply with its obligations under the said Part XV.

3.74     The Disclosure Letter contains details of all claims made by the       
        Company to a refund of value added tax under Part XVIII or Part XIX of
the Value Added Tax Regulations 1995.                         

3.75     The information given by the Company to HM Customs and Excise and all  
   other authorities (whether of the United Kingdom or otherwise) in
       connection with the import or export of any goods was when given true
 and accurate and the Company has complied with all legislation,
      regulations, orders, directions or conditions (whether of the United
         Kingdom or otherwise) relating to the import and export of goods and to
all customs and excise matters.                               

3.76     The books and records of the Company accurately present and reflect in 
        accordance with generally accepted accounting principles and standards
     within the Company's jurisdiction of incorporation all transactions
entered into by the Company or to which it has been a party.  

3.77     The Company has properly operated the PAYE and National Insurance      
       contribution systems by making such deductions as are required by law
       from all payments made or deemed to be or treated as made by it or on
         its behalf or for which it is otherwise required to account and by duly
       accounting to the Inland Revenue for all sums so deducted and for all
      other amounts for which it is required to account under the PAYE and
National Insurance contribution systems.                      

3.78     The Company has not suffered any PAYE audit by the Inland Revenue      
        within the preceding period of six years nor has it been notified that
any such audit will be or is expected to be made.             

56

DEF 14A
116th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 116th
3.79     The Company does not operate any scheme approved under Section 202 of  
the Taxes Act or Chapter III of Part V of the Taxes Act.      

3.80     The Company has complied in full with all its reporting obligations to 
 the Inland Revenue in connection with benefits provided for any
director or employee.                                         

3.81     No payment  has been made to the  Company to which  Section  601 of the
Taxes Act applies.                                            

4.       Corporate Matters                                                      

4.1      The Company has been duly incorporated and is validly existing and no  
    order has been made or resolution passed for the winding up of the
         Company or for an administration order in respect of the Company and no
    distress, execution or other process has been levied on any of its
         assets. The Company is not insolvent or unable to pay its debts for the
purposes of Section 123 of the Insolvency Act 1986 and no     
      administrative receiver or receiver or receiver and manager has been
       appointed by any person of its business or assets or any part thereof
and no power to make any such appointment has arisen.         

4.2      The Vendor is the beneficial owner of the Sale Shares set opposite its 
     name in column 2 of Schedule 1, free and clear of any lien, charge,
        option, right of pre-emption or other encumbrance or third party right
       whatsoever and the Company has not exercised any lien over any of its
   issued shares and there is no outstanding call on any of the Sale
Shares and all of the Sale Shares are fully paid.             

4.3      The Sale Shares  constitute all the issued shares in the capital of the
Company.                                                      

4.4      The Company has no subsidiary or shares in any company other than the  
       Subsidiary and all of the details shown in Schedule 3 relating to the
     Subsidiary are accurate and complete, the Company has no subsidiary
   undertakings which are not also subsidiaries and no participating
      interest in any undertaking (as defined in Section 259 Companies Act
1985) which is not also a subsidiary of the Company.          

57

DEF 14A
117th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 117th
4.5      The Company does not have and has never had any place of business or   
branch or permanent establishment outside its jurisdiction of 
     incorporation, nor has it carried on any trading activities outside
such jurisdiction.                                            

4.6      The Company has never reduced, repaid, redeemed or purchased any of its
share capital.                                                

4.7      There are no options or other agreements outstanding which call for the
         issue of or accord to any person the right to call for the issue of any
  shares in the capital of the Company or the right to require the
     creation of any mortgage, charge, pledge, lien or other security or
encumbrance over the Sale Shares.                             

4.8      The copies of the Memorandum and Articles of Association of the Company
       which are attached to the Disclosure Letter are accurate and complete
         in all respects and have attached to them copies of all resolutions and
  agreements which are required to be so attached. The Company has
 complied with its Memorandum and Articles of Association in all
        respects and none of the activities, agreements, commitments or rights
of the Company is ultra vires or unauthorised.                

4.9      The Register of Members and all other statutory books of the Company   
  are up to date and contain true full and accurate records of all
   matters required to be dealt with therein and the Company has not
      received any notice of any application or intended application under
        the Companies Acts for rectification of the Company's register and all
 annual or other returns required to be filed with the Companies
        Registry have been properly filed within any applicable time limit and
  all legal requirements relating to the issue of shares and other
securities by the Company have been complied with.            

5.       Trading and General Commercial Matters                                 

5.1      The Company has good and marketable title to all such assets as are    
 necessary to enable it properly to conduct its business as such
        business has been conducted prior to the date hereof and to all stocks
    used in its business. All such assets and stocks are free from any
         liens, mortgages, charges, encumbrances or other third party rights and
         the stock confirms to statutory, regulatory and voluntary standards and
requirements.                                                 

58

DEF 14A
118th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 118th
5.2      The fixed and loose plant, machinery, furniture, fixtures and fittings,
     equipment and vehicles and other tangible assets used in connection
         with the business of the Company and all other fixed assets referred to
     in the Accounts and any additions thereto made since the Accounting
         Date are the sole and absolute property of and held by the Company free
         from any liens, mortgages, charges, encumbrances, hire or hire purchase
 agreements, credit sale agreements or agreements for payment on
         deferred terms or bills of sale and the Company has good and marketable
      title thereto and all such assets are in the possession or under the
control of the Company.                                       

5.3      In the reasonable opinion of the Vendor the Company is not a party to: 

5.3.1             any unusual or onerous contract nor any contract which cannot 
               be terminated without penalty or other compensation on less
than twelve months' notice;                 

5.3.2             any contract  restricting  the Company's  freedom of action in
                  relation to its normal  business  activities or materially and
adversely affecting its business or assets; 

5.3.3             any contract not made in the ordinary course of business;     

5.3.4             any  contract  for  the  purchase  or use by  the  Company  of
                  materials,  supplies  or  equipment  which is in excess of the
                  requirements of the Company for its normal operating purposes;

5.3.5             any agency, distribution,  marketing, purchasing,  franchising
                  or  licensing  agreement,  other than those  described  in the
Disclosure Letter;                          

5.3.6             any joint venture, agency, shareholders' or partnership       
               arrangement or agreement or any agreement which purports to
       regulate, control or otherwise affect the voting or
disposition of its shares;                  

5.3.7             any contract for services (other than normal office services).

59

DEF 14A
119th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 119th
5.4      There are no contracts or obligations, agreements, arrangements or     
     concerted practices to which the Company is a party or by which the
     Company is bound and there are no practices in which the Company is
engaged which are void, illegal, unenforceable, registrable or
      notifiable under or which contravene the Restrictive Trade Practices
         Act 1976, the Fair Trading Act 1973, the Competition Act 1980, Articles
       81 or 82 of the EC Treaty and regulations made thereunder or under EC
        Council Regulation 4064/89 as amended and regulations made thereunder,
        the Competition Act 1998 or any other antitrust or similar legislation
     anywhere in the world (all and any such legislation and regulations
        being referred to as "the antitrust rules" in this paragraph 5.5). The
     Company has not registered any agreements or arrangements under the
    Restrictive Trade Practices Act 1976 or filed any notification for
        exemption or application for negative clearance with the Commission of
    the European Communities. The Company has received no complaint or
       threat to complain under or referring to the antitrust rules from any
      person and has not received any request for information or objection
         from or received notice of an investigation by any person with power to
      enforce the antitrust rules or been the addressee of or party to any
decision, judgement, undertaking or settlement relating to the
         antitrust rules or to any proceedings in which the antitrust rules were
pleaded or relied upon.                                       

5.5      No agreement,  arrangement or practice  carried on by the Company or to
which the Company is a party:                                 

5.5.1             is by virtue of its terms or by virtue of any practice for the
                  time being  carried on in  connection  therewith  a  "consumer
                  trade  practice"  within the meaning of Section 13 of the Fair
                  Trading Act 1973 and  susceptible to or under reference to the
                  Consumer  Protection  Advisory Committee or the subject matter
                  of a report to the Secretary of State or the subject matter of
                  an order by the  Secretary  of State under the  provisions  of
Part II of that Act;                        

5.5.2             infringes any other fair trading or consumer protection law or
           legislation applicable in any jurisdiction in which the
Company operates.                           

5.6      So far as the Vendor is aware with respect to each contract,           
         commitment, arrangement to which the Company is party or by which it is
bound:                                                        

60

DEF 14A
120th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 120th
5.6.1             the Company has duly  performed  and  complied in all material
     respects with each of its obligations thereunder;

5.6.2             there has been no delay, negligence or other default on the   
                 part of the Company and no event has occurred which, with the
                 giving of notice or passage of time, may constitute a default
thereunder;                                 

5.6.3             the Company is under no  obligation  which  cannot  readily be
                  fulfilled,  performed or  discharged by it on time and without
undue or unusual expenditure or effort;     

5.6.4             the Company has the technical and other capabilities and the  
                human and material resources to enable it to fulfil, perform
                 and discharge all its outstanding obligations in the ordinary
                 course of business and without realising a loss on completion
of performance;                             

5.6.5             there are no grounds for rescission, avoidance, repudiation or
                  termination  and the  Company has not  received  any notice of
termination, and                            

5.6.6             having made no enquiry none of the other parties thereto is in
default thereunder.                         

5.7      Except in the ordinary course of business no tender, quotation or offer
      issued by the Company and still outstanding is or will be capable of
         giving rise to a contract merely by an order acceptance or other action
by another party.                                             

5.8      The Disclosure Letter sets out full and accurate details of each bank, 
  building society or other similar institution, account or safety
         deposit box maintained by the Company including the name and address of
        each such bank, building society or other institution and the names of
all persons authorised to draw thereon or have access thereto.

61

DEF 14A
121st Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 121st
5.9      All amounts received by the Company have been deposited with one or    
       other of such banks, building societies or other similar institutions
and appear in the appropriate accounting books.               

5.10     There are no non-group loans, guarantees, pledges, mortgages, charges, 
    liens, debentures or encumbrances given, made or incurred by or on
   behalf of the Company and no person has given any guarantee of or
 security for any overdraft loan or loan facility granted to the
  Company, other than the ones described in the Disclosure Letter.

5.11     The execution, delivery and performance of this Agreement will not     
       result in the breach, cancellation or termination of any of the terms
or conditions of or constitute a default under any agreement, 
      commitment or other instrument to which the Company is a party or by
         which the Company or its property or assets may be bound or affected or
       result in the acceleration of any obligation under any loan agreement
    or violate any law or any rule or regulation of any administrative
         agency or governmental body or any order, writ, injunction or decree of
     any court, administrative agency or governmental body affecting the
Company.                                                      

5.12     There are no agreements concerning the Company which can be terminated,
        or which have been terminated, or under which the rights of any person
    are liable to be materially adversely affected, or under which the
     consent of the other contracting party is required as a result of a
        change in control of the Company or in the composition of the Board of
Directors of the Company.                                     

5.13     The Vendor is not aware of any circumstances whereby, following a      
         change in the control of the Company or in the composition of the Board
   of Directors of the Company, any of the principal customers of or
       suppliers to the Company would cease to remain customers or suppliers
        to the same extent and of the same nature as prior to the date hereof.

5.14     No goods delivered by the Company have been defective or in any way    
failed to comply with the terms of sale thereof or with the   
       requirements of law and no services provided by the Company have been
provided in a negligent manner or in any other                

62

DEF 14A
122nd Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 122nd
    manner which would entitle the recipient of such services to claim
damages against the Company.                                  

5.15     The Company has no liabilities except liabilities arising in the       
   ordinary course of business under contracts for service, purchase
        orders, supply contracts or sale contracts, nor does it have any other
         liabilities direct or indirect, absolute or contingent, not required by
   generally accepted accounting principles to be referred to in the
        Accounts and the Company is not owed any moneys other than trade debts
and cash at bank.                                             

5.16     The Company has received no notice that it is the subject of any       
      official investigation or inquiry and the Vendor is not aware of any
  facts which are likely to give rise to any such investigation or
inquiry.                                                      

5.17     So far as the Vendor is aware neither the Company, nor any of its      
directors, employees or agents in relation to the Company, has
       committed any criminal offence or any tort relating to the Company or
         the carrying on of its business and without prejudice to the generality
     of the foregoing the Company has obtained and at all relevant times
       maintained all registrations, licences and consents necessary for the
       carrying on of its business, and all such registrations, licences and
       consents are valid and subsisting and the Vendor does not know of any
  reason why any of them should be suspended, cancelled or revoked
  (whether as a result of the sale and purchase of the Sale Shares
pursuant to this Agreement or otherwise).                     

5.18     The Company has given no powers of attorney which are still outstanding
        or effective to any person to enter into any contract or commitment to
    do anything on its behalf other than the authority of employees to
enter into contracts in the normal course of their duties.    

5.19     The Company  does not carry on  business  under any name other than its
own.                                                          

5.20     No person is entitled to receive from the Company any finder's fee,    
         brokerage's fee, investment banker's fee or commission with respect to,
or in connection with, the                                    

63

DEF 14A
123rd Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 123rd
         execution,   delivery  and   performance  of  this  Agreement  and  the
transactions contemplated herein.                             

5.21     The Company does not have any of its records, systems, controls, data  
    or information recorded, stored, maintained, operated or otherwise
   wholly or partly dependent on or held by any means (including any
        electronic, mechanical or photographic process whether computerised or
      not) which (including all means of access thereto and therefrom) are
      not under the exclusive ownership and direct control of the Company.

5.22     The Company is duly registered under the Data Protection Act 1998, and 
     all due and requisite fees in respect of the Company's registration
 have been paid. The details contained in such registrations are
     correct, proper and suitable for the purposes for which the Company
holds or uses the personal data which is the subject of such  
registrations.                                                

5.23     The Company has security procedures in place to prevent unauthorised   
        access, amendment or damage to the Company's data or the data of third
       parties held, recorded, stored, maintained or operated by the Company
     or on behalf of the Company by any third party, and no unauthorised
         access, amendment or damage to such data has taken place during the six
year period preceding Completion.                             

5.24     No act or transaction has been effected by or on behalf of the Company 
      involving the making or authorising of any payment, or the giving of
       anything of value, to any government official, political party, party
official or candidate for political office for the purpose of 
       influencing the recipient in his or its official capacity in order to
       obtain business, retain business or direct business to the Company or
any other person or firm.                                     

5.25     The Company has not at any time in the previous six years:             

5.25.1            entered into any transaction at an undervalue (within the     
               meaning of Section 238 or Section 339 or Section 423 of the
  Insolvency Act 1986) with any other person; or

64

DEF 14A
124th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 124th
5.25.2            been given any  preference  (within the meaning of Section 239
                  or  Section  340 of the  Insolvency  Act  1986)  by any  other
person; or                                  

5.25.3            entered into any other transaction which is void or voidable  
               (whether in whole or in part) or received any other benefit
                  which is or may be liable to be returned or repaid (whether in
whole or in part).                          

6.       The Property                                                           

6.1      The Property comprises all the land and premises owned or occupied or  
       otherwise used by the Company and all the estate, interest, right and
      title whatsoever of the Company in, under, over or in respect of any
         land or premises and the descriptions set out in Schedule 4 are correct
and not misleading.                                           

6.2      The Company  possesses good and marketable title to the Property and is
the legal and beneficial owner thereof.                       

6.3      The Property is free and clear of all claims, charges, mortgages,      
     liens, encumbrances, leases, tenancies, licences or other rights of
         occupation, options, rights of pre-emption, rights of first refusal and
       other agreements affecting the same and the Company has exclusive and
unfettered possession of the Property.                        

6.4      The title of the Subsidiary to the Property is properly constituted by 
        and can be deduced from documents of title which are in the possession
and under the control of the Company.                         

6.5      The  Property  is not  subject  to any  outgoings  other  than rent and
service charges.                                              

6.6      There are no covenants, restrictions, burdens, stipulations, wayleaves,
       easements, grants, conditions, terms, overriding interests, rights or
   licences affecting the Property which is of an unusual or onerous
 nature or which adversely affect the use or intended use of the
Property.                                                     

65

DEF 14A
125th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 125th
6.7      So far as the Vendor is aware, all covenants, restrictions,            
      stipulations, conditions and other terms affecting the Property have
        been observed and performed and there are no circumstances which would
        entitle or require any landlord or other person to exercise any powers
      of entry and taking possession or which would otherwise give rise to
         restriction or termination of the continued possession or occupation of
the Property.                                                 

6.8      [Not used]                                                             

6.9      None of the facilities necessary for the enjoyment and use of the      
        Property or any part of them are enjoyed on terms entitling any person
to terminate or curtail the same.                             

6.10     So far as the Vendor is aware, the Company has received no notice of   
       any outstanding disputes, notices or complaints which affect or might
         in the future affect the use of the Property for the purposes for which
they are now used.                                            

6.11     The present use of the Property is the permitted use for the purpose of
the Planning Acts.                                            

6.12     None of the Property are  adversely  affected or likely to be adversely
affected by any planning proposals.                           

6.13     The use of the Property permitted by the Planning Acts is not a        
  temporary or personal user or user subject to onerous or unusual
  conditions giving rise to expenditure or adversely affecting the
Company's use and enjoyment of the Property.                  

6.14     No development has been carried out by the Company or the Subsidiary in
      relation to the Property which would require any consent under or by
        virtue of the Planning Acts or any bye-laws or building regulations or
      other relevant legislation without such consent having been properly
       obtained and any conditions or restrictions imposed thereon have been
 fully observed and performed. No application by the Company for
         planning consent has been refused and no application by the Company for
       planning consent has been submitted or a decision in relation thereto
        appealed against where the decision in relation thereto or the outcome
of the appeal (as appropriate) is still pending.              

66

DEF 14A
126th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 126th
6.15     [Not used]                                                             

6.16     All schedules for policies of insurance relating to the Property       
         (including fixtures, fittings and contents) effected by the Company are
      attached to the Disclosure Bundle and are current and valid, and are
     not subject to any special or unusual terms or restrictions and, in
        respect of policies on the Property held on lease where the Company is
   responsible for maintaining insurance, the policy conforms in all
         respects with the requirements of the lease under which the Property is
held.                                                         

6.17     The Company has inspected any current policies of insurance relating to
        the Property (including fixtures fittings and contents) which have not
       been effected by the Company and they are current and valid cover the
         full reinstatement value thereof (including where the relevant property
      is let, loss of rent cover for a minimum of three years) and are not
   subject to any special or unusual terms or restrictions or to the
         payment of any premium in excess of the normal rate for policies of the
       same kind where the Property is insured by a landlord under the terms
         of a lease the policy conforms in all respects with the requirements of
         the relevant lease and the insurer has waived any rights of subrogation
it may have against the Company.                              

6.18     The Company has not entered into any agreements with any water,        
         sewerage or other utilities authority for the supply of water, sewerage
         or other facilities to or from the Property or mains or other equipment
    laying and has not deposited any monies with any such authority as
security therefor.                                            

6.19     [Not used]                                                             

6.20     [Not used]                                                             

6.21     The Company is not engaged in any negotiation for review of the rent   
  payable under any lease under which it holds the Property and no
         negotiations for such review have been concluded changing the rent from
that set out in Schedule 4 or in the Disclosure Letter.       

67

DEF 14A
127th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 127th
6.22     All rent review notices and counternotices and notices, counternotices 
      and applications to the Court under the Landlord and Tenant Act 1954
    have been served within any requisite time limits and there are no
         disputes outstanding as to the settlement of the relevant level of rent
under the leases of the Property.                             

6.23     The Company has not at any time assigned or otherwise disposed of any  
property, leasehold or otherwise, in respect of which it has a
    continuing liability (contingent or otherwise) for payment of rent
and/or for any other liability.                               

6.24     The Company is not the guarantor of or surety for any other party's    
         liability (contingent or otherwise) for any obligations under any lease
     or tenancy or under any agreement relating to the assignment of any
lease or tenancy.                                             

7.       Environmental Issues                                                   

7.1      The Company has received no notice that it is in breach of the         
         Environmental Laws and has at all times complied with all Environmental
Laws.                                                         

7.2      The Company has not engaged in or permitted any operations or          
    activities upon the Property involving the use, storage, handling,
         release, treatment, manufacture, processing, deposit, transportation or
        disposal of any Hazardous Substance, or any substance regulated by the
Environmental Laws and the Vendor has no knowledge of any such
activities.                                                   

7.3      So far as the Company or the Vendor is aware having made no enquiry of 
       the landlord, the landlord of the Property has not received notice of
 any threatened or pending civil or criminal actions, notices of
   violations, investigations, administrative proceedings or written
      communications from any regulatory authority under any Environmental
       Laws that any of the activities carried out on the Property violates,
  or is inconsistent with, any Environmental Laws, and to the best
      knowledge of the Vendor, the landlord is in full compliance with all
material Environmental Laws.                                  

68

DEF 14A
128th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 128th
8.       Confidential Information and Intellectual Property                     

8.1      The Company does not use any processes and is not engaged in any       
     activities which involve the misuse of any Confidential Information
      belonging to any third party, nor does the Company otherwise have in
         its possession or control any such Confidential Information without the
licence or authority of the relevant owner.                   

8.2      Copies of all written agreements and arrangements under which          
         Confidential Information belonging to any third party is made available
to the Company are attached to the Disclosure Letter. All such
       agreements and arrangements are in full force and effect. The Company
      is not in breach nor has it received notice of any alleged breach of
        any such agreement or arrangement and is not aware of the existence of
  any circumstances under which its right to use such Confidential
Information may be terminated.                                

8.3      The Company is not aware of any actual, alleged or threatened misuse by
        any person of any of its Confidential Information. The Company has not
        disclosed to any person (including, without limitation, employees) any
  of its Confidential Information except where such disclosure was
      properly made in the normal course of the Company's business and was
      made subject to an agreement under which the recipient is obliged to
      maintain the confidentiality of such Confidential Information and is
      restrained from further disclosing it or using it other than for the
        purposes for which it was disclosed by the Company. Copies of all such
       agreements are attached to the Disclosure Letter. There is no current
or threatened breach of any such agreement by any of the other
contracting parties thereto.                                  

8.4      The Company is the beneficial owner of all the Intellectual Property   
   used in and material to its business ("the Company's Intellectual
Property").                                                   

8.5      None of the Company's Intellectual Property has been wrongfully or     
         unlawfully acquired by the Company. To the best knowledge of the Vendor
        after reasonable enquiry, no claim under any warranty contained in any
        documentation under which the Company acquired ownership of any of the
Company's Intellectual Property has                           

69

DEF 14A
129th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 129th
    been made or intimated to the Company nor are there any grounds on
which any such claim could be made.                           

8.6      The material particulars as to registration of (and applications to    
       register) the Company's Intellectual Property, including priority and
renewal dates, are set forth in the Disclosure Letter.        

8.7      Neither the validity or subsistence of the Company's Intellectual      
        Property, nor the Company's right, title and interest in the Company's
  Intellectual Property, is the subject of any current, pending or
       threatened challenge, claim or proceedings, including for opposition,
       cancellation, revocation or rectification. The Company's Intellectual
    Property has not during the preceding period of six years been the
       subject of any such challenge, claim or proceedings, and there are no
        facts or matters which might give rise to any such challenge, claim or
proceedings.                                                  

8.8      Copies of all agreements, arrangements and understandings under which  
         the Company's Intellectual Property is made available to third parties,
        and any legally enforceable option in this regard, are attached to the
         Disclosure Letter. There is no current or threatened breach of any such
         agreement, arrangement or understanding by any of the other contracting
parties thereto.                                              

8.9      To the best knowledge of the Vendor, none of the Company's Intellectual
        Property is currently being infringed or used without authorisation by
         any third party nor has any of the Company's Intellectual Property been
infringed during the preceding period of six years. No such   
infringement or unauthorised use has been threatened.         

8.10     The carrying on of the Company's business or businesses as presently   
        constituted does require licences, or the making of royalty or similar
        payments to a non-group third party. The Company is not engaged in any
      activities which infringe any Intellectual Property belonging to any
third party.                                                  

70

DEF 14A
130th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 130th
9.       Software                                                               

9.1      In this paragraph 9, the expression "the Software" means all of the    
   computer programs identified and briefly described in Schedule 7.

9.2      The Software in connection with the business of the Company as at the  
        date hereof is "off the shelf" software. As far as the Vendor is aware
none of this software is counterfeit.                         

10.      Insurance                                                              

10.1     All assets of the Company of an insurable nature have at all times been
  and are insured in amounts to the full replacement value thereof
       against such risks as are in accordance with good commercial practice
        normally insured against. The Company has at all times been adequately
  covered against accident, third party, public liability, product
         liability and other risks normally covered by insurance and nothing has
      been done or omitted to be done by or on behalf of the Company which
   would make any policy of insurance void or voidable or enable the
        insurers to avoid the same and there is no claim outstanding under any
        such policy and the Vendor is not aware of any circumstances likely to
      give rise to such a claim or result in an increased rate of premium.

10.2     All information furnished in obtaining or renewing the insurance       
      policies of the Company was correct full and accurate when given and
   any change in that information required to be given was correctly
      given. The Company is not in default under any of these policies and
     the copies of the policies delivered with the Disclosure Letter are
    true and complete. None of the Company's insurance policies may be
    cancelled without at least 30 days written notice of cancellation.

10.3     The Company has not suffered any uninsured losses nor waived any rights
      of material or substantial value or allowed any insurances to lapse.

11.      Litigation                                                             

71

DEF 14A
131st Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 131st
11.1     So far as the Vendor is aware, neither the Company nor any person for  
         whose acts or defaults the Company may be vicariously liable is engaged
         whether as claimant or defendant or otherwise in any civil, criminal or
      arbitration proceedings or any proceedings before any tribunal (save
        for debt collection by the Company in the ordinary course of business)
       and there are no proceedings threatened against the Company including
       proceedings in respect whereof the Company is liable to indemnify any
        party concerned therein and in particular but without prejudice to the
   generality of the foregoing the Company is not liable (other than
       contingently) to make any redundancy payment to any person or pay any
         other compensation to any of its employees and there are no facts which
      are likely to give rise to any such litigation or proceedings. There
    are no unfulfilled or unsatisfied judgements or orders against the
Company or any of its assets.                                 

11.2     The Company has neither received any notice (written or oral) nor      
         advice of counsel with respect to any potential claims within the scope
of paragraph 11.1.                                            

12.      Employment and Pension Matters                                         

12.1     There is no existing or threatened or pending industrial or trade      
         dispute involving the Company and any of its employees and there are no
         facts known or which would on reasonable enquiry be known to the Vendor
     which might indicate that there may be any such dispute (including,
       without limitation, the sale of the Sale Shares pursuant to the terms
      of this Agreement). There are no agreements or arrangements (whether
  oral or in writing or existing by reason of custom and practice)
between the Company and any trade union or other employees'   
       representatives or organisation concerning or affecting the Company's
employees and there are no trade unions or other employees'   
representatives whom the Company recognises to any extent for 
        collective bargaining purposes nor, so far as the Vendor is aware, has
         the Company done any act which might be construed as recognition. There
       has been no request for recognition of any trade union and, so far as
the Vendor is aware, no such request is pending.              

12.2     The Company has neither given notice of any redundancies to the        
         Secretary of State nor started consultations with any independent trade
        union or employees' representatives within the preceding period of one
year in relation to any of the                                

72

DEF 14A
132nd Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 132nd
Company's employees. To the best knowledge of the Vendor, no  
   circumstances have arisen under which the Company is likely to be
       required to pay damages for wrongful dismissal or breach of contract,
        to make any contractual or statutory redundancy payment or make or pay
    any compensation in respect of unfair dismissal, to make any other
   payment under any Employment Law or to reinstate or re-engage any
        former employee. No circumstances have arisen or exist under which the
       Company may be required to pay damages or compensation, or suffer any
       penalty or be required to take corrective action or be subject to any
        form of sanction under the Employment Rights Act 1996, the Trade Union
and Labour Relations (Consolidation) Act 1992, the Transfer of
   Undertakings (Protection of Employment) Regulations 1981, the Sex
        Discrimination Act 1975, the Equal Pay Act 1970, the Treaty of Rome or
         any Directive or recommendation made pursuant to it, the Race Relations
        Act 1976, the Disability Discrimination Act 1995, the National Minimum
  Wage Act 1998, the Data Protection Act 1998, the Public Interest
 Disclosure Act 1998, Working Time Regulations 1998 or any other
      Employment Law. So far as the Vendor is aware, there are no current,
     pending or threatened claims of any type against the Company by any
    existing or former employees or directors of the Company or by any
existing or former consultants to the Company.                

12.3     There are no existing service or other agreements or contracts between 
       the Company and any of its directors or executives or employees which
   cannot be lawfully terminated by appropriate advance notice and a
         statutory redundancy payment, and the Company has complied with all its
       obligations under all legislation, regulations and other requirements
       having the force of law (including, without limitation, codes, orders
         and awards) in connection with its employees, directors and consultants
  and any trade unions and employees' representatives and with all
       collective agreements with respect to trade unions or to employees of
the Company.                                                  

12.5     The Disclosure Letter contains:                                        

                  (i)      the  names and  dates of birth  and  commencement  of
                           employment  or  engagement of all persons who will at
       the Completion  Date be employees

73

DEF 14A
133rd Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 133rd
                           or  directors  of the Company or  consultants  to the
Company;                  

                  (ii)     details of all  remuneration  and emoluments  payable
                           (including any bonus or commission  entitlements) and
                           any other benefits  (including,  for the avoidance of
                           doubt,  permanent health insurance) provided or which
                           the  Company is bound to provide  (whether  now or in
                           the  future) to all such  persons  together  with the
                           terms  on  which  such  remuneration  emoluments  and
benefits are payable; and 

                  (iii)    details of any other material terms and conditions of
               employment or engagement of such persons,

all of which information is true and complete.      

12.6     The Company is not involved in negotiations (whether with employees or 
        any trade union or other employees' representatives) to vary the terms
     and conditions of employment or engagement of any of its employees,
directors or consultants and has not made any representations,
     promises, offers or proposals to any of its employees, directors or
       consultants or to any trade union or other employees' representatives
   concerning or affecting the terms and conditions of employment or
engagement of any of its employees, directors or consultants. 

12.7     The Company has discharged its obligations in full in relation to      
      salary, wages, fees, commission, bonuses, overtime pay, holiday pay,
sick pay and all other benefits and emoluments relating to its
       employees, consultants and directors in respect of all prior periods.

12.8     Other than the Pension Scheme there are no pension  obligations for any
         employees or  directors of the Company,  and the Vendor and the Company
have no obligation                                            

74

DEF 14A
134th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 134th
       (whether legally binding or established by custom) to pay any pension
     or make any other payment after retirement or death or otherwise to
      provide "relevant benefits" within the meaning of section 612 of the
    Taxes Act or to make any payment for the purpose of providing such
      "relevant benefits" to or in respect of any person who is now or has
      been an officer or employee of the Company and is not a party to any
        scheme or arrangement having as its purpose or one of its purposes the
making of such payments or the provision of such benefits.    

12.9     The Pension Scheme complies with and has at all times complied with the
    provisions of the relevant legislation and the requirements of the
       Pension Schemes Office and the Contributions Agency affecting schemes
    approved under Chapter I of Part XIV of the Taxes Act. The Pension
Scheme has been funded to the extent recommended by the scheme
         actuaries. The Company and the trustees of the Pension Scheme have duly
      complied with their respective obligations under the trust deeds and
the rules thereof and under the aforementioned legislation and
 requirements. All amounts due to the trustees thereof or to any
  insurance company in connection therewith have been paid and all
         reports, actuarial or otherwise, relating to any such scheme which have
     been received by the Company or the trustees within the three years
        immediately preceding the date hereof have been complied with in full.

12.10    Neither the Company nor the trustees of the Pension Scheme is engaged  
in any litigation or arbitration proceedings in respect of any
  Retirement Benefits Scheme or any benefit provided thereunder in
        relation to the employees or former employees of the Company and there
         are no current submissions or referrals to the Pensions Ombudsman or to
         the Occupational Pensions Advisory Service in respect of the Company or
  any pension scheme and that there are no outstanding payments or
      penalties payable by the Company or the Pension Scheme in respect of
    any litigation or arbitration proceedings or determinations of the
       Pensions Ombudsman or the Occupational Pensions Regulatory Authority.

12.11    No Retirement Benefits Scheme in which employees or former employees of
    the Company participate or have participated has been or is in the
        process of being (or is proposed to be) wound up (in whole or in part)
or closed to new entrants (in whole or in part).              

75

DEF 14A
135th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 135th
12.12    No power to increase or augment benefits under any Retirement Benefits 
Scheme in which employees or former employees of the Company  
       participate or have participated has been exercised since 6 September
1983.                                                         

13.      Arrangements with connected persons etc.                               

13.1     All amounts outstanding and appearing in the books of the Company as   
       loan accounts or as due to directors or shareholders wholly represent
       money or money's worth paid or transferred to the Company as the case
       may be or remuneration accrued due and payable for services rendered.
All amounts outstanding between the Vendor and the Company are
specifically disclosed in the Accounts.                       

13.2     There is not outstanding any contract or arrangement to which the      
       Company is a party and in which the Vendor is or has been interested,
 whether directly or indirectly, other than arm's length service
      contracts and the Company is not a party to, nor have its profits or
         financial position at any time been adversely affected by, any contract
         or arrangement which is not of an entirely arm's-length nature; save as
       aforesaid, there are no agreements or understandings (whether legally
 enforceable or not) between the Company and any person who is a
       shareholder or the beneficial owner of any interest in the Company or
 any other company controlled by any such person relating to the
        management of the Company's business or the appointment or the removal
   of its directors or the ownership or transfer of ownership or the
  letting of any of its assets or the provision of finance, goods,
services or other facilities to or by the Company or otherwise
howsoever relating to the Company or its affairs.             

13.3     All costs incurred by the Company have been charged to the Company and 
not borne by any other member of the Vendor's group.          

14.      Matters since the Accounting Date                                      

Since the Accounting Date:                                                      

76

DEF 14A
136th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 136th
14.1     there has been no interruption or alteration in the nature, scope or   
     manner of the Company's business which business has been carried on
    lawfully and in the ordinary and usual course of business so as to
maintain it as a going concern;                               

14.2     as at 30 September 2000 there has been no material adverse change in   
 the customer relations of the said business or in the financial
       condition or the position, assets or liabilities of the said business
        or the Company as compared with the position disclosed by the Accounts
   and there has been no damage, destruction or loss (whether or not
  covered by insurance) affecting the said business or its assets;

14.3     no substantial customer or supplier being a customer or supplier       
   accounting for contribution to gross trading profits of more than
      (pound)10,000 of the Company for the accounting period ending on the
Accounting Date has:                                          

14.3.1            given  notice  that it is  likely  to or  threatened  to cease
trading with or supply to the Company;      

14.3.2            given  notice  that it is  likely to or  threatened  to reduce
              substantially its trading with or supplies to the Company;

14.4     the Company has continued to pay its creditors in the ordinary course  
        of business and no unusual trade discounts have been incorporated into
any contract entered into by the Company;                     

14.5     the Company has not repaid any loan capital in whole or in part (other 
        than indebtedness to its bankers) nor has it become bound or liable to
  be called upon to repay prematurely any loan capital or borrowed
monies;                                                       

14.6     the  Company  has not,  except  in the  ordinary  course  of  business,
         acquired,  sold,  transferred  or  otherwise  disposed of any assets of
whatsoever nature;                                            

14.7     the Company has not cancelled,  waived,  released or  discontinued  any
rights, debts or claims;                                      

77

DEF 14A
137th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 137th
14.8     the Company has not incurred any capital expenditure on any single item
   or made any capital commitment on any single item of an amount in
       excess of (pound)30,000 or disposed of any fixed asset having a value
of more than (pound)30,000 in aggregate;                      

14.9     the Company has not hired or dismissed any senior  employee  earning an
         annual  rate of  remuneration,  including  fringe  benefits,  in excess
of(pound)35,000;                                              

14.10    no sum or benefit has been paid, applied or voted to any executive,    
    director or employee of the Company by way of remuneration, bonus,
        incentive or otherwise in excess of the amounts paid or distributed to
    them by the Company at the Accounting Date so as to increase their
    total remuneration and no new service agreements have been made or
       entered into by the Company since the Accounting Date and the Company
    is under no contractual or other obligation to change the terms of
         service of any director, executive or employee and the Company will not
    change the terms of service of any executive, director or employee
prior to Completion;                                          

14.11    no dividends,  bonuses or other distributions have been declared,  paid
or made in respect of any of the Sale Shares;                 

14.12    no share or loan capital of the Company has been issued or agreed to be
issued or any option or right thereover granted;              

14.13    the Company has not undergone any capital  reorganisation  or change in
its capital structure;                                        

14.14    no resolutions have been passed by the Company and nothing has been    
       done in the conduct or management of the affairs of the Company which
 would be likely materially to reduce the net asset value of the
Company;                                                      

14.15    the Company has not made any purchase or sale or introduced any method 
       of management or operation in respect of the business, undertaking or
 assets of the Company except in a manner consistent with proper
practice;                                                     

78

DEF 14A
138th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 138th
14.16    the Company has not incurred or become subject to any liability or     
    obligation (absolute or contingent) except current liabilities and
        obligations, in each case incurred under contracts entered into in the
        ordinary course of business and consistent with past practice which do
not materially increase the nature or amount of liabilities or
obligations disclosed in the Accounts;                        

14.17    as at 30 September 2000 no material changes have occurred in the assets
      and liabilities (actual or contingent) shown in the Accounts and the
        Company has not discharged or satisfied any lien or encumbrance or any
   other obligation or liability (absolute or contingent) other than
     liabilities disclosed in the Accounts as at the Accounting Date and
        current liabilities incurred since the Accounting Date in the ordinary
course of business;                                           

14.18    the Company has not carried out or entered into any transaction and no 
    other event has occurred in consequence of which (whether alone or
       together with any one or more transactions or events occurring before
      on or after the date hereof) any liability to Tax of the Company has
     arisen or will or may arise (or would have arisen or would or might
       arise but for the availability of any relief, allowance, deduction or
         credit) other than corporation tax on actual income (and not chargeable
  gains or deemed income) of the Company arising from transactions
entered into in the ordinary course of business; and          

14.19    no payment has been made by the Company which will not be deductible   
     for corporation tax purposes either in computing the profits of the
        Company or in computing the corporation tax chargeable on the Company.

15.      Accuracy of Information Provided                                       

15.1     All information contained in the Recitals to this Agreement and in the 
      Schedules to this Agreement is true and accurate in all respects and
not misleading in any respect.                                

15.2     All written  information  given to the Purchaser  and its  professional
         advisers by the Vendor, the officers and employees of the Company,  the
Vendor's  professional                                        

79

DEF 14A
139th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 139th
      advisers and the Company's advisers during the negotiations prior to
  this Agreement was when given and is at the date hereof true and
accurate.                                                     

15.3     All information contained in the Disclosure Letter is true and accurate
     in all respects and fairly presented and there is no fact or matter
         which has not been disclosed in the Disclosure Letter which renders any
      such information untrue or misleading and there is no fact or matter
      concerning the Company and its business and affairs which has not on
     the basis of the utmost good faith been disclosed in the Disclosure
        Letter which would reasonably be expected to influence the decision of
    a purchaser to proceed with the purchase of the Sale Shares on the
terms of this Agreement.                                      

80

DEF 14A
140th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 140th
SCHEDULE 6

[NOT USED]

81

DEF 14A
141st Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 141st
SCHEDULE 7

Software

The Company has no proprietary software and off the shelf licenced software only
is used by the Company

82

DEF 14A
142nd Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 142nd
SCHEDULE 8

 Vendor's Protection

1.       General                                                                

1.1      The provisions in this Schedule shall operate to establish certain     
        terms of and procedures for dealings with claims under this Agreement.

1.2      Claims  shall mean a claim  under  this  Agreement  and Claim  shall be
construed accordingly.                                        

2.       Amount of Claim                                                        

2.1      The Vendor shall have no liability whatsoever in respect of any        
        individual Claim unless the amount that would otherwise be recoverable
from the Vendor in respect of that Claim exceeds the sum of   
         (pound)20,000 exclusive of costs and interest and thereafter the Vendor
         shall be liable for the whole amount claimed and not merely the excess.

2.2      The aggregate liability of the Vendor under this Agreement to include  
     but not limited to a claim under the Warranties, clause 8 or clause
         5.2.3 shall not exceed a sum equal to $7,000,000 exclusive of costs and
interest.                                                     

2.3      If any payment is made by the Vendor under the Warranties it shall be  
         treated as a reduction in the Consideration payable to the Vendor under
this Agreement.                                               

3.       Notice and Conduct of Claims                                           

3.1      If any Claim other than one under clause 8 is made or any matter which 
         comes to the notice of the Purchaser, the Subsidiary or the Company for
  which or as a result of which the Vendor may be liable under the
   Warranties the Purchaser, the Subsidiary or the Company shall, as
appropriate:                                                  

3.1.1             not make any admission of liability,  agreement, settlement or
                  compromise and otherwise take any action which may be material
in relation  thereto without                

83

DEF 14A
143rd Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 143rd
                  the prior written approval of the Vendor (such approval not to
be unreasonably withheld or delayed); and   

3.1.2             at all  times  take  such  action  as may from time to time be
                  reasonably  required by the Vendor to avoid,  resist,  appeal,
                  compromise,  defend, mitigate or otherwise deal with the Claim
                  or the liability thereof, subject always to the Purchaser, the
                  Subsidiary  or the  Company  being  provided  with  reasonable
                  security  for any costs and expenses  which it may  reasonably
                  thereby  incur and  subject  always to such  action  not being
                  prejudicial to the  businesses of the  Purchaser,  the Company
and the Subsidiary.                         

4.       Third Party Recovery (Rights)                                          

4.1      Where under the provisions of the Tax statutes or otherwise the        
      Purchaser, the Subsidiary or the Company is entitled to recover from
     some other person any sum in respect of any matter giving rise to a
         claim under this Agreement the Purchaser, the Subsidiary or the Company
 so entitled shall promptly notify the Vendor in writing of such
 entitlement and shall at the request and expense of the Vendor:

4.1.1             take all reasonable steps to enforce such recovery;           

4.1.2             as soon as reasonably practicable supply all information which
               relates to such recovery to the Vendor including reasonable
                  details of any steps taken to enforce such recovery and copies
                of all relevant correspondence and documents relating to the
same.                                       

5.       Third Party Recovery (Receipts)                                        

5.1      If payment is made by the Vendor in respect of a Claim and the         
   Purchaser, the Subsidiary or the Company subsequently recovers an
   indemnifiable loss from a third party in respect of the matter in
      respect of which the Claim was made the indemnity obligations of the
         Vendor with respect to that Claim only will be reduced to the extent of
such recovery provided that:                                  

84

DEF 14A
144th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 144th
5.1.1             such recovery shall not reduce the aggregate  liability of the
Vendor under clause 2.3; and                

5.1.2             the indemnity obligations of the Vendor will only be reduced  
               to the extent of such recovery if the Vendor has discharged
the Claim in full.                          

6.       Changes in the Law                                                     

6.1      The Vendor shall have no liability whatsoever in respect of any Claim  
        to the extent that the Claim would not have arisen but for the passing
      of or any change in any law, rule, regulation, interpretation of the
law or administrative practice of any government, governmental
   department, agency or regulatory body, after the Completion Date.

6.2      No Claim may be made and the Vendor shall not be liable under this     
    Agreement to the extent that the Claim arises or is increased as a
       result of any of the following occurring after the Completion Date: a
 retrospective change(s) in tax rates or in any legislation or a
 retrospective change or withdrawal of any published practice or
   published concession of any revenue, customs, fiscal, government,
   state, community, municipal or regional authority, body or person
competent to impose or collect Tax.                           

7.       Mitigation                                                             

         Nothing in this Schedule shall in any way restrict or limit the general
       obligations at law of the Purchaser, the Subsidiary or the Company to
       mitigate any loss or damage which it may suffer in consequence of any
event giving rise to any Claim.                               

8.       Conduct of Claims                                                      

8.1      If the Purchaser becomes aware of any matter which might give rise to a
  Claim (other than a Claim under clause 8 of this Agreement), the
following provisions shall apply:                             

85

DEF 14A
145th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 145th
8.1.1             the Purchaser shall promptly give notice to the Vendor of the 
            matter and in any event not later than 90 days after the
               Purchaser became aware of the matter shall consult with the
Vendor in respect of the matter;            

8.1.2             the  Purchaser  shall provide to the Vendor and to the Vendor'
                  professional  advisers on reasonable  notice reasonable access
                  to premises and personnel of the Company and/or the Subsidiary
                  and to any relevant assets, documents and records within their
                  power,  possession or control for the purpose of investigating
                  the matter and  enabling  the Vendor to take such action as is
referred to in paragraph 8.1.3 below;       

8.1.3             the Vendor (at its own expense) shall be entitled to take     
        copies of any documents or records (except where the
                Purchaser, the Company or the Subsidiary has confidentiality
                  obligations in respect thereof) and photograph any premises or
   assets as referred to in paragraph 8.1.2 above;

8.1.4             the Vendor shall be kept reasonably informed of all matters   
                pertaining to a Claim and shall be entitled to see copies of
            all correspondence and notes or other written records of
telephone conversations or meetings; and    

8.1.5             all written communications pertaining to the Claim which are  
                to be transmitted to any statutory or governmental authority
     or body whatsoever shall be copied to the Vendor.

8.2      the Vendor shall, and shall procure that all of its agents (if any)    
      shall, keep confidential all information which it receives about the
         Company and/or the Purchaser or their affairs or businesses as a result
of this clause 8.                                             

8.3      For the avoidance of doubt, the Vendor will remain liable in accordance
    with the terms of this Agreement irrespective of any breach of the
provisions of this clause 8 by the Purchaser.                 

86

DEF 14A
146th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 146th
9.       General                                                                

       The Purchaser undertakes to retain or to procure the retention by the
  Company and the Subsidiary of all such books, records, accounts,
      correspondence and other papers of the Company and the Subsidiary as
         are likely to be material in the context of the liability of the Vendor
     under the Warranties during the subsistence of the liability of the
Vendor hereunder.                                             

87

DEF 14A
147th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 147th
IN WITNESS WHEREOF the parties hereto have executed this document as a deed on  
the date appearing at the head hereof.                                          

Executed by Claire Rollo                             )        /s/ Claire Rollo  
as Attorney                                          )                          
for and on behalf of                                                            
Inversiones Mirabel, S.A.                                                       

Executed by                                          )        /s/ P.A. Murali   
for and on behalf of                                 )        (P.A. Murali)     
Mendocino Brewing Company                                                       

Executed by Claire Rollo                             )        /s/ Claire Rollo  
as Attorney                                          )                          
for and on behalf of                                                            
Golden Eagle Trust                                                              

88

DEF 14A
148th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 148th
SUPPLEMENT B

(Proposal No. 1)

FAIRNESS OPINION

April 23, 2001                                                                  

The Subcommittee of the Board of Directors                                      
Mendocino Brewing Company                                                       
13351 Highway 101 South                                                         
Hopland, CA  95449                                                              

Gentlemen:                                                                      

    Mendocino Brewing Company, Inc. ("Mendocino") entered into a Share
Purchase Agreement by and among Mendocino; Inversiones Mirabel, SA, a Panamanian
corporation ("Inversiones"), which owns all of the stock of United Breweries    
International (UK) Ltd., a company organized under the laws of the United       
Kingdom ("UBI"); and Golden Eagle Trust, a trust formed under the laws of the   
Isle of Man (part of the United Kingdom) ("Golden Eagle"), which owns all of the
stock of Inversiones, dated as of November 3, 2000 (the "Agreement"), and UBI   
shall be merged with and into Mendocino, and Mendocino shall continue as the    
surviving corporation. Shareholders of Inversiones will receive 5,500,000 (5.5  
million) newly issued shares of Mendocino common stock in exchange for all of   
the equity of UBI, the parent company of UBSN Ltd., a wholly-owned subsidiary of
UBI (the "Acquisition"). The terms and conditions of the Acquisition are set    
forth more fully in the Agreement.                                              

      At present, UBSN is the only business operation of UBI. Prior to the
Acquisition contemplated in the Agreement, UBI will have acquired, in addition  
to its presently constituted assets, the following rights and licenses, all of  
which will be freely transferable to Mendocino at the closing of the            
Acquisition:                                                                    

       o   the exclusive distribution rights to Kingfisher Lager beer in the
US, Canada, the European Union, UK and Japan;         

       o   an option to brew Kingfisher Lager beer in the United States; and

        o   a license from Kingfisher of America, Inc. to use the "Kingfisher"
        trademark in connection with UBI's distribution and/or sale of
Kingfisher Lager beer.                                

   These rights and licenses will have 10-year terms, with automatic
10-year renewals, unless terminated for cause.                                  

      Mendocino has retained Sage Capital LLC ("Sage") to act as financial
advisor to Mendocino in connection with Mendocino's consideration of various    
strategic alternatives. Sage was asked to render an opinion to the Subcommittee 
of the Board of Directors of Mendocino as to whether the equity consideration to
be paid by Mendocino pursuant to the Agreement is fair to the shareholders of   
Mendocino from a financial point of view.                                       

 B-1

DEF 14A
149th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 149th
    As part of its advisory services, Sage is regularly engaged in the
business of advising the management and boards of directors of corporations     
regarding the issuance of securities, providing advisory services for mergers   
and acquisitions, issuing fairness opinions and providing market valuations.    
Pursuant to the terms of the engagement letters dated November 16, 1998 and     
February 1, 1999 and the assignment agreement of March 25, 1999, Mendocino has  
agreed to pay Sage a fee of $75,000 for services rendered in connection with the
rendering of this opinion. Mendocino has also agreed to reimburse Sage for      
reasonable out-of-pocket expenses and to indemnify Sage against certain         
liabilities relating to or arising out of services performed by Sage as         
financial advisor to Mendocino. In arriving at the opinion set forth below,     
Sage, among other things, (i) reviewed the Agreement; (ii) reviewed certain     
publicly available information concerning Mendocino; (iii) held discussions with
members of senior management of Mendocino concerning the business prospects of  
Mendocino, UBI and the US distribution business for Kingfisher beer including   
such managements' views as to the organization of and strategies with respect to
the Acquisition; (iv) reviewed certain operating and financial reports prepared 
by the managements of Mendocino and UBI; (v) reviewed the recent reported prices
and trading activity for the common stock of certain other companies engaged in 
businesses Sage considered comparable to those of Mendocino and compared certain
publicly available financial data for those comparable companies to similar data
for Mendocino; (vi) reviewed the financial terms of certain other merger and    
acquisition transactions that Sage deemed generally relevant; and (vii)         
performed and considered such other studies, analyses, inquiries and            
investigations as Sage deemed appropriate.                                      

        In connection with Sage's review and for purposes of its opinion, Sage
did not independently verify any of the foregoing information and assumed (i)   
all such information is complete and accurate in all material respects, (ii)    
there have been no material changes in the assets, financial condition, results 
of operations, business or prospects of Mendocino and UBI since the respective  
dates of the last financial statements made available to Sage and all material  
liabilities (contingent or otherwise, known or unknown) of Mendocino and UBI are
as set forth in the respective financial statements, and (iii) no adjustments   
will be made to the material terms of the Agreement from those set forth in the 
copies of the Agreement delivered to Sage prior to Sage's rendering of the final
version of this opinion. With respect to the financial information of Mendocino 
and UBI provided to Sage by the managements of Mendocino and UBI, Sage has      
assumed for purposes of the opinion that such information has been reasonably   
prepared on bases reflecting the best currently available estimates and         
judgments of such management, at the time of preparation, of the operating and  
financial performance of Mendocino and UBI. Sage did not prepare or obtain any  
independent evaluation or appraisal of any of the assets or liabilities of      
Mendocino or UBI, nor did Sage conduct a physical inspection of the properties  
and facilities of Mendocino and UBI in connection with its opinion. Sage's      
opinion is necessarily based upon market, economic, financial and other         
conditions as of the date of the opinion and any subsequent change in such      
conditions would require a reevaluation of this opinion. In rendering its       
opinion, Sage does not express any opinion or make any determination as to what 
specific consideration should be paid by Mendocino in connection with the       
Acquisition. The opinion rendered by Sage is limited to the evaluation and      
determination of whether the equity consideration to be paid by Mendocino       
according to the Agreement is fair, from a financial point of view, to the      
shareholders of Mendocino and does not address the underlying business decision 
of Mendocino and UBI to engage in the Acquisition. Sage is not expressing any   
opinion as to what the value of Mendocino's common stock will be when issued    
pursuant to the Agreement or the price at which Mendocino's common stock will   
trade at any time. Sage's opinion does not constitute a recommendation to any   
shareholder as to how such shareholder should vote on the proposed Agreement.   

 B-2

DEF 14A
150th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 150th
  This letter and the opinion expressed herein are provided at the
request and for the information of the Subcommittee of the Board of Directors of
Mendocino and may not be quoted or referred to or used for any other purpose    
without Sage's prior written consent, except that this letter may be disclosed  
in connection with any registration statement on Form S-4 or proxy statement    
used in connection with the Agreement so long as this letter is quoted in full  
in such registration statement on Form S-4 or proxy statement.                  

        Based upon and subject to the foregoing, it is Sage's opinion that, as
of the date hereof, the equity consideration to be paid by Mendocino according  
to the Agreement is fair to the shareholders of Mendocino from a financial point
of view.                                                                        

Best regards,                                                                   
SAGE CAPITAL LLC                                                                

/S/ BRUCE J. ALEXANDER                      /S/ LAURA  A. BLACK                 
--------------------------                  -------------------------           
Bruce J. Alexander                          Laura A. Black                      
Managing Partner..                          Managing Partner                    

 B-3

DEF 14A
151st Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 151st
SUPPLEMENT C

(Proposal No. 1)

Dissenters' Rights: Sections 1300 Through 1304 of the California
Corporations Code 

CHAPTER 13.  DISSENTERS' RIGHTS                                                 

Section 1300. Reorganization or short-form merger; dissenting shares; corporate 
purchase at fair market value; definitions                                      

   (a)  If the approval of the outstanding shares (Section 152) of a
corporation is required for a reorganization under subdivisions (a) and (b) or  
subdivision (e) or (f) of Section 1201, each shareholder of the corporation     
entitled to vote on the transaction and each shareholder of a subsidiary        
corporation in a short-form merger may, by complying with this chapter, require 
the corporation in which the shareholder holds shares to purchase for cash at   
their fair market value the shares owned by the shareholder which are dissenting
shares as defined in subdivision (b).  The fair market value shall be determined
as of the day before the first announcement of the terms of the proposed        
reorganization or short-form merger, excluding any appreciation or depreciation 
in consequence of the proposed action, but adjusted for any stock split, reverse
stock split, or share dividend which becomes effective thereafter.              

      (b)  As used in this chapter, "dissenting shares" means shares which
come within all of the following descriptions:                                  

(1)  Which were not immediately prior to the reorganization or
short-form merger either (A) listed on any national securities exchange         
certified by the Commissioner of Corporations under subdivision (o) of Section  
25100 or (B) listed on the National Market System of the NASDAQ Stock Market,   
and the notice of meeting of shareholders to act upon the reorganization        
summarizes this section and Sections 1301, 1302, 1303 and 1304; provided,       
however, that this provision does not apply to any shares with respect to which 
there exists any restriction on transfer imposed by the corporation or by any   
law or regulation; and provided, further, that this provision does not apply to 
any class of shares described in subparagraph (A) or (B) if demands for payment 
are filed with respect to 5 percent or more of the outstanding shares of that   
class.                                                                          

  (2)  Which were outstanding on the date for the determination of
shareholders entitled to vote on the reorganization and (A) were not voted in   
favor of the reorganization or, (B) if described in subparagraph (A) or (B) of  
paragraph (1) (without regard to the provisos in that paragraph), were voted    
against the reorganization, or which were held of record on the effective date  
of a short-form merger; provided, however, that subparagraph (A) rather than    
subparagraph (B) of this paragraph applies in any case where the approval       
required by Section 1201 is sought by written consent rather than at a meeting. 

         (3)  Which the dissenting shareholder has demanded that the corporation
purchase at their fair market value, in accordance with Section 1301.           

         (4)  Which the dissenting shareholder has submitted for endorsement, in
accordance with Section 1302.                                                   

         (c)  As used in this chapter, "dissenting shareholder" means the record
holder of dissenting shares and includes a transferee of record.                

 C-1

DEF 14A
152nd Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 152nd
Section 1301.  Notice to holders of dissenting shares in reorganizations; demand
for purchase; time; contents                                                    

 (a)  If, in the case of a reorganization, any shareholders of a
corporation have a right under Section 1300, subject to compliance with         
paragraphs (3) and (4) of subdivision (b) thereof, to require the corporation to
purchase their shares for cash, such corporation shall mail to each such        
shareholder a notice of the approval of the reorganization by its outstanding   
shares (Section 152) within 10 days after the date of such approval, accompanied
by a copy of Sections 1300, 1302, 1303, 1304 and this section, a statement of   
the price determined by the corporation to represent the fair market value of   
the dissenting shares, and a brief description of the procedure to be followed  
if the shareholder desires to exercise the shareholder's right under such       
sections. The statement of price constitutes an offer by the corporation to     
purchase at the price stated any dissenting shares as defined in subdivision (b)
of Section 1300, unless they lose their status as dissenting shares under       
Section 1309.                                                                   

    (b)  Any shareholder who has a right to require the corporation to
purchase the shareholder's shares for cash under Section 1300, subject to       
compliance with paragraphs (3) and (4) of subdivision (b) thereof, and who      
desires the corporation to purchase such shares shall make written demand upon  
the corporation for the purchase of such shares and payment to the shareholder  
in cash of their fair market value. The demand is not effective for any purpose 
unless it is received by the corporation or any transfer agent thereof (1) in   
the case of shares described in clause (i) or (ii) of paragraph (1) of          
subdivision (b) of Section 1300 (without regard to the provisos in that         
paragraph), not later than the date of the shareholders' meeting to vote upon   
the reorganization, or (2) in any other case within 30 days after the date on   
which the notice of the approval by the outstanding shares pursuant to          
subdivision (a) or the notice pursuant to subdivision (i) of Section 1110 was   
mailed to the shareholder.                                                      

        (c)  The demand shall state the number and class of the shares held of
record by the shareholder which the shareholder demands that the corporation    
purchase and shall contain a statement of what such shareholder claims to be the
fair market value of those shares as of the day before the announcement of the  
proposed reorganization or short-form merger. The statement of fair market value
constitutes an offer by the shareholder to sell the shares at such price.       

Section 1302.  Submission of share certificates for endorsement; uncertificated 
securities                                                                      

      Within 30 days after the date on which notice of the approval by the
outstanding shares or the notice pursuant to subdivision (i) of Section 1110 was
mailed to the shareholder, the shareholder shall submit to the corporation at   
its principal office or at the office of any transfer agent thereof, (a) if the 
shares are certificated securities, the shareholder's certificates representing 
any shares which the shareholder demands that the corporation purchase, to be   
stamped or endorsed with a statement that the shares are dissenting shares or to
be exchanged for certificates of appropriate denomination so stamped or endorsed
or (b) if the shares are uncertificated securities, written notice of the number
of shares which the shareholder demands that the corporation purchase. Upon     
subsequent transfers of the dissenting shares on the books of the corporation,  
the new certificates, initial transaction statement, and other written          
statements issued therefor shall bear a like statement, together with the name  
of the original dissenting holder of the shares.                                

Section 1303.  Payment of agreed price with interest; agreement fixing fair     
market value; filing; time of payment                                           

       (a)  If the corporation and the shareholder agree that the shares are
dissenting shares and agree upon the price of the shares, the dissenting        
shareholder is entitled to the agreed price with interest thereon at the legal  
rate on judgments from the date of the agreement. Any agreements fixing the fair

 C-2

DEF 14A
153rd Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 153rd
market value of any dissenting shares as between the corporation and the holders
thereof shall be filed with the secretary of the corporation.                   

     (b)  Subject to the provisions of Section 1306, payment of the fair
market value of dissenting shares shall be made within 30 days after the amount 
thereof has been agreed or within 30 days after any statutory or contractual    
conditions to the reorganization are satisfied, whichever is later, and in the  
case of certificated securities, subject to surrender of the certificates       
therefor, unless provided otherwise by agreement.                               

Section 1304.  Action to determine whether shares are dissenting shares or fair 
market value; limitation; joinder; consolidation; determination of issues;      
appointment of appraisers                                                       

       (a)  If the corporation denies that the shares are dissenting shares,
or the corporation and the shareholder fail to agree upon the fair market value 
of the shares, then the shareholder demanding purchase of such shares as        
dissenting shares or any interested corporation, within six months after the    
date on which notice of the approval by the outstanding shares (Section 152) or 
notice pursuant to subdivision (i) of Section 1110 was mailed to the            
shareholder, but not thereafter, may file a complaint in the superior court of  
the proper county praying the court to determine whether the shares are         
dissenting shares or the fair market value of the dissenting shares or both or  
may intervene in any action pending on such a complaint.                        

    (b)  Two or more dissenting shareholders may join as plaintiffs or
be joined as defendants in any such action and two or more such actions may be  
consolidated.                                                                   

        (c)  On the trial of the action, the court shall determine the issues.
If the status of the shares as dissenting shares is in issue, the court shall   
first determine that issue. If the fair market value of the dissenting shares is
in issue, the court shall determine, or shall appoint one or more impartial     
appraisers to determine, the fair market value of the shares.                   

 C-3

DEF 14A
154th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 154th
SUPPLEMENT D

(Proposal No. 1)

PRO FORMA AND CONSOLIDATED FINANCIAL STATEMENTS OF
MENDOCINO BREWING COMPANY, INC. AND UNITED BREWERIES INTERNATIONAL (UK) LIMITED 

 Mendocino Brewing Company, Inc. and United Breweries International (UK) Limited

Pro Forma Balance Sheet and Income Statement
 For the Years Ended December 31, 1999 and 2000.

The Pro Forma Condensed Consolidated Financial Statements of Registrant as of   
December 31, 2000 and 1999 were prepared using U.S. Generally Accepted          
Accounting Principles (U.S. GAAP) and reflects the financial position of        
Registrant after giving effect to the acquisition of the stock of United        
Breweries International, Ltd. discussed above and assumes the acquisition took  
place on January 1, 1999. Such pro forma financial statements also reflect the  
sale of 5,500,000 shares of common stock referred above for the purchase of the 
common stock of United Breweries International, Ltd. at a purchase price of     
$.8125 per share (the last reported sale price of common stock on November 2,   
2000, the day the agreement was finalized.) The purchase is being recorded as if
it were a pooling transaction due to the related party nature of the            
transaction.                                                                    

The unaudited pro forma condensed consolidated financial statements have been   
prepared by Registrant based upon assumptions deemed proper by it. The unaudited
pro forma condensed consolidated financial statements presented herein are shown
for illustrative purposes only and are not necessarily indicative of the future 
financial position or future results of operations of Registrant, or of the     
financial position or results of operations of Registrant that would have       
actually occurred had the transaction been in effect as of the date or for the  
periods presented. In addition, it should be noted that Registrant's financial  
statements will reflect the purchase only from the closing date, should it      
occur.                                                                          

The unaudited pro forma condensed consolidated financial statements should be   
read in conjunction with the historical financial statements and related notes  
of Registrant.                                                                  

D-1 

DEF 14A
155th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 155th
                                                        [Enlarge/Download Table]

                                                                                  Pro forma Adjustment                           
                                                                           ----------------------------------                    
                                                             Mendocino      United Breweries                         Pro forma   
                                                          Brewing Co, Inc. International, Ltd.                      Consolidated 
ASSETS                                                       12/31/00        12/31/2000 (a)       Adjustments         12/31/00   
                                                          --------------   -------------------    -----------      --------------
                                                                                                                                 
CURRENT ASSETS                                                                                                                   
       Cash                                                $          -          $   208,300        $       -       $  $ 208,300 
       Accounts receivable                                    1,173,000            4,242,900                -          5,415,900 
       Inventories                                            1,203,300              103,300                -          1,306,600 
       Prepaid expenses                                         116,600                    -                             116,600 
       Deferred income taxes                                     48,100                    -                -             48,100 
                                                          --------------     ---------------      -----------      ------------- 
          Total current assets                                2,541,000            4,554,500                -          7,095,500 
                                                          --------------     ---------------      -----------      ------------- 

PROPERTY AND EQUIPMENT                                       13,997,400              864,900                -         14,862,300 
                                                          --------------     ---------------      -----------      ------------- 
OTHER ASSETS                                                                                                                     
       Intangibles, net of amortization                          53,900               33,500                -             87,400 
       Other assets                                             410,500                    -         (340,700)(b)         69,800 
       Deferred taxes                                         2,768,000                    -                -          2,768,000 
                                                          --------------     ---------------      -----------      ------------- 
                                                              3,232,400               33,500         (340,700)         2,925,000 
                                                          --------------     ---------------      -----------      ------------- 
          Total assets                                     $ 19,770,800          $ 5,452,900        $(340,700)      $ 24,883,000 
                                                          ==============     ===============      ===========      ============= 

LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                             
CURRENT LIABILITIES                                                                                                              
       Disbursements in excess of deposits                 $    $ 1,700          $         -        $       -        $     1,700 
       Line of credit                                                 -            1,486,300                           1,486,300 
       Accounts payable                                       1,942,200            2,134,300                           4,076,500 
       Accrued liabilities                                      358,100              666,100                -          1,024,200 
       Accrued income taxes                                       1,000              202,600                             203,600 
       Current maturities of debt and leases                    759,900                    -                -            759,900 
                                                          --------------     ---------------      -----------      ------------- 
              Total current liabilities                       3,062,900            4,489,300                -          7,552,200 
LONG-TERM DEBT AND CAPITAL LEASES,                                                                                               
        less current maturities                               5,655,100                    -                -          5,655,100 
LINE OF CREDIT                                                1,281,600                    -                -          1,281,600 
                                                          --------------     ---------------      -----------      ------------- 
               Total liabilities                              9,999,600            4,489,300                -         14,488,900 
                                                          --------------     ---------------      -----------      ------------- 

STOCKHOLDERS' EQUITY                                                                                                             
       Preferred stock                                          227,600                    -                -            227,600 
       Common stock                                          13,875,900              149,600                -         14,025,500 
       Accumulated deficit                                   (4,332,300)             814,000         (340,700)        (3,859,000)
                                                          --------------     ---------------      -----------      ------------- 
               Total stockholders' equity                      9,771,200             963,600         (340,700)        10,394,100 
                                                          --------------     ---------------      -----------      ------------- 
              Total liabilities and stockholders' equity   $ 19,770,800          $ 5,452,900        $(340,700)      $ 24,883,000 
                                                          ==============     ===============      ===========      ============= 

(a)  To include the assets and liabilities of United Breweries International,   
Ltd., as of December 31, 2000.                                        

(b)  To expense capitalized acquisition costs.                                  

D-2 

DEF 14A
156th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 156th
                                                        [Enlarge/Download Table]

                                                                 Pro forma Adjustment                           
                                                          ----------------------------------                    
                                           Mendocino       United Breweries                          Pro forma  
                                        Brewing Co, Inc.  International, Ltd.                      Consolidated 
                                           12/31/00         12/31/2000 (a)       Adjustments         12/31/00   
                                        ----------------  -------------------   -------------     --------------
                                                                                                                
NET SALES                                 $ 9,255,900        $ 12,643,600        $          -      $ 21,899,500 
COST OF GOODS SOLD                          5,823,300           8,220,000                   -        14,043,300 
                                         -------------    ---------------       -------------      ------------ 
GROSS PROFIT                                3,432,600           4,423,600                   -         7,856,200 
OPERATING EXPENSES                                                                                              
       Selling and marketing                2,041,900           2,806,400                   -         4,848,300 
       General and administrative           1,441,500             903,500                             2,345,000 
                                         -------------    ---------------       -------------      ------------ 
                                            3,483,400           3,709,900                   -         7,193,300 
                                         -------------    ---------------       -------------      ------------ 
INCOME (LOSS) FROM OPERATIONS                 (50,800)            713,700                   -           662,900 
OTHER INCOME (EXPENSE)                                                                                          
       Interest expense                      (895,800)            (82,000)                  -          (977,800)
       Other income (expense)                  90,000             (17,600)           (340,700)(b)      (268,300)
                                         -------------    ---------------       -------------      ------------ 
                                             (805,800)            (99,600)           (340,700)       (1,246,100)
                                         -------------    ---------------       -------------      ------------ 
INCOME (LOSS) BEFORE INCOME TAXES            (856,600)            614,100            (340,700)         (583,200)
PROVISION (BENEFIT) FROM  INCOME TAXES       (329,400)            202,200                   -          (127,200)
                                         -------------    ---------------       -------------      ------------ 
NET INCOME (LOSS)                          $ (527,200)          $ 411,900        $   (340,700)       $ (456,000)
                                         =============    ===============       =============      ============ 
BASIC INCOME (LOSS) PER COMMON SHARE          $ (0.10)                                                  $ (0.04)
                                         =============                                             ============ 

WEIGHTED AVERAGE COMMON SHARES                                                                                  
       OUTSTANDING                          5,538,514                               5,500,000        11,038,514 
                                         =============                          =============      ============ 

(a)  To include the profits and losses of United Breweries International, Ltd.  

(b)  To expense capitalized acquisition costs.                                  

D-3 

DEF 14A
157th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 157th
                                                        [Enlarge/Download Table]

                                                                                    Pro forma Adjustment                       
                                                                             ----------------------------------                
                                                              Mendocino       United Breweries                     Pro forma   
                                                           Brewing Co, Inc.  International, Ltd.                  Consolidated 
ASSETS                                                        12/31/99         12/31/1999 (a)       Adjustments     12/31/99   
                                                           ----------------  -------------------    -----------  --------------
                                                                                                                               
CURRENT ASSETS                                                                                                                 
       Cash                                                $          -        $      54,700         $       -    $     54,700 
       Accounts receivable                                    1,040,300            4,396,400                 -       5,436,700 
       Inventories                                            1,168,700              101,900                 -       1,270,600 
       Prepaid expenses                                          57,200                    -                            57,200 
       Deferred income taxes                                     43,100                    -                 -          43,100 
                                                           -------------       -------------         ----------   ------------ 
          Total current assets                                2,309,300            4,553,000                 -       6,862,300 
                                                           -------------       -------------         ----------   ------------ 

PROPERTY AND EQUIPMENT                                       14,727,200              957,900                 -      15,685,100 
                                                           -------------       -------------         ----------   ------------ 
OTHER ASSETS                                                                                                                   
       Intangibles, net of amortization                          61,000               41,300                 -         102,300 
       Other assets                                              92,100                                                 92,100 
       Deferred taxes                                         2,440,300                    -                 -       2,440,300 
                                                           -------------       -------------         ----------   ------------ 
                                                              2,593,400               41,300                 -       2,634,700 
                                                           -------------       -------------         ----------   ------------ 
          Total assets                                     $ 19,629,900        $   5,552,200         $       -    $ 25,182,100 
                                                           =============       =============         ==========   ============ 

LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                           
CURRENT LIABILITIES                                                                                                            
       Disbursements in excess of deposits                 $      9,600        $           -         $       -    $      9,600 
       Line of credit                                         1,159,800            2,009,000                         3,168,800 
       Accounts payable                                       1,708,700            2,284,300                         3,993,000 
       Accrued liabilities                                      334,900              545,700                 -         880,600 
       Accrued income taxes                                           -              111,600                           111,600 
       Current maturities of debt and leases                    596,700                    -                 -         596,700 
                                                           -------------       -------------         ----------   ------------ 
              Total current liabilities                       3,809,700            4,950,600                 -       8,760,300 
LONG-TERM DEBT AND CAPITAL LEASES,                                                                                             
        less current maturities                               5,562,800                    -                 -       5,562,800 
                                                           -------------       -------------         ----------   ------------ 
              Total liabilities                               9,372,500            4,950,600                 -      14,323,100 
                                                           -------------       -------------         ----------   ------------ 

STOCKHOLDERS' EQUITY                                                                                                           
       Preferred stock                                          227,600                    -                 -         227,600 
       Common stock                                          13,834,900              161,500                 -      13,996,400 
       Accumulated deficit                                   (3,805,100)             440,100                 -      (3,365,000)
                                                           -------------       -------------         ----------   ------------ 
               Total stockholders' equity                     10,257,400             601,600                 -      10,859,000 
                                                           -------------      --------------         ----------   ------------ 
               Total liabilities and stockholders' equity  $  19,629,900       $   5,552,200         $       -    $ 25,182,100 
                                                           =============       =============         ==========   ============ 

(a)  To include the assets and liabilities of United Breweries International,   
Ltd., as of December 31, 1999.                                        

D-4 

DEF 14A
158th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 158th
                                                        [Enlarge/Download Table]

                                                               Pro forma Adjustment                           
                                                        ----------------------------------                    
                                          Mendocino      United Breweries                         Pro forma   
                                       Brewing Co, Inc. International, Ltd.                     Consolidated  
                                           12/31/99        12/31/1999 (a)      Adjustments         12/31/99   
                                       --------------   -------------------   -----------      -------------- 
                                                                                                              
NET SALES                               $  8,698,600      $   11,886,600      $         -      $   20,585,200 
COST OF GOODS SOLD                         5,767,900           7,783,600                -          13,551,500 
                                        ------------      --------------      -----------      -------------- 
GROSS PROFIT                               2,930,700           4,103,000                -           7,033,700 
OPERATING EXPENSES                                                                                            
       Selling and marketing               2,108,600           2,513,900                -           4,622,500 
       General and administrative          1,652,200           1,054,500                            2,706,700 
                                        ------------      --------------      -----------      -------------- 
                                           3,760,800           3,568,400                -           7,329,200 
                                        ------------      --------------      -----------      -------------- 
INCOME (LOSS) FROM OPERATIONS               (830,100)            534,600                -            (295,500)
OTHER INCOME (EXPENSE)                                                                                        
       Interest expense                     (846,800)           (116,100)               -            (962,900)
       Other income (expense)               (358,900)           (202,700)               -            (561,600)
                                        ------------      --------------      -----------      -------------- 
                                          (1,205,700)           (318,800)               -          (1,524,500)
                                        ------------      --------------      -----------      -------------- 
INCOME (LOSS) BEFORE INCOME TAXES         (2,035,800)            215,800                -          (1,820,000)
PROVISION (BENEFIT) FROM INCOME TAXES       (729,500)            102,000                -            (627,500)
                                        ------------      --------------      -----------      -------------- 
NET INCOME (LOSS) BEFORE DISCONTINUED                                                                         
       OPERATIONS                         (1,306,300)            113,800                -          (1,192,500)
LOSS FROM OPERATIONS OF SOYCO, LTD.                -            (242,500)         242,500 (b)               - 
GAIN ON THE DISPOSAL OF SOYCO, LTD.                -           3,056,300       (3,056,300)(b)               - 
                                        ------------      --------------      -----------      -------------- 
NET INCOME (LOSS)                       $ (1,306,300)     $    2,927,600      $(2,813,800)     $   (1,192,500)
                                        ============      ==============      ===========      ============== 
BASIC INCOME (LOSS) PER COMMON SHARE    $      (0.27)                                          $        (0.12)
                                        ============                                           ============== 

WEIGHTED AVERAGE COMMON SHARES                                                                                
       OUTSTANDING                         4,838,151                            5,500,000 (c)      10,338,151 
                                        ============                          ===========      ============== 

(a)  To include the profits and losses of United Breweries International, Ltd.  

(b)  To carve out the operations of Soyco, Ltd., a subsidiary that will not be  
    purchased as part of the the proposed transaction. Soyco, Ltd. was sold in
December 1999.                                                        

(c)  To reflect the shares issued for the purchase of the stock of United       
Breweries International, Ltd.                                         

 D-5

DEF 14A
159th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 159th
 United Breweries International (UK) Limited
 December 31, 2000 Consolidated Financial Statements
Conversion Table

United Breweries International, Ltd. (UBI)
Consolidated Balance Sheet
December 31, 2000 

                                                        [Enlarge/Download Table]

                                               (GBP(pound))    Exchange       (US$)     
                                                    UBI          Rate          UBI      
                                            ----------------  ----------  ------------- 
                                                                                        
Cash                                          (pound)139,274      1.4955    $   208,284 
Accounts receivable                                2,812,179      1.4955      4,205,614 
Inventory                                             69,053      1.4955        103,269 
Prepaids                                              24,932      1.4955         37,286 
                                            ----------------              ------------- 
     Current assets                                3,045,438                  4,554,453 
                                            ----------------              ------------- 

Property, plant and equipment                        578,356      1.4955        864,931 
                                            ----------------              ------------- 

Intangible assets, net of amortization                22,401      1.4955         33,501 
                                            ----------------              ------------- 

Total assets                                (pound)3,646,195                $ 5,452,885 
                                            ================              ============= 

Current liabilities                                                                     
     Bank overdraft                           (pound)993,870      1.4955    $ 1,486,333 
     Accounts payable                              1,427,112      1.4955      2,134,246 
     Income tax payable                              135,464      1.4955        202,586 
     Accruals                                        445,427      1.4955        666,136 
                                            ----------------              ------------- 
Total liabilities                                  3,001,873                  4,489,301 
                                            ----------------              ------------- 

Stockholder's Equity                                                                    
     Common stock                                    100,000      1.4955        149,550 
     Currency translation                                  -                     (5,464)
     Retained earnings                               544,322                    819,498 
                                            ----------------              ------------- 
                                                     644,322                    963,584 
                                            ----------------              ------------- 

Total stockholder's equity and liabilities  (pound)3,646,195                $ 5,452,885 
                                            ================              ============= 

D-6 

DEF 14A
160th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 160th
United Breweries International, Ltd. (UBI)
Consolidated Statement of Income and
Stockholder's Equity December 31, 2000

                                                                [Download Table]

                                         (GBP(pound))     Exchange      (US$)     
                                              UBI           Rate         UBI      
                                      ----------------   ----------  ------------ 
                                                                                  

Sales                                 (pound)8,342,315     1.5156    $ 12,643,613 
Cost of goods sold                           5,423,592     1.5156       8,219,996 
                                      ----------------               ------------ 

Gross profit                                 2,918,723                  4,423,617 

Selling and distribution                     1,851,646     1.5156       2,806,355 
General and administrative                     596,108     1.5156         903,461 
                                      ----------------               ------------ 

Net income from operations                     470,969                    713,801 
Other income (expense)                                                            
     Provision for litigation                  (11,584)    1.5156         (17,557)
     Interest expense                          (54,116)    1.5156         (82,018)
                                      ----------------               ------------ 

Net income before taxes                        405,269                    614,226 

     Provision for income tax                 (133,426)    1.5156        (202,220)
                                      ----------------               ------------ 

Net income                              (pound)271,843               $    412,005 

Retained earnings, beginning of year           272,479     1.4955         407,492 
                                      ----------------               ------------ 

Retained earnings, end of year          (pound)544,322               $    819,498 
                                      ================               ============ 


D-7 

DEF 14A
161st Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 161st
United Breweries International, Ltd. (UBI)
Consolidated Statement of Cash Flows
December 31, 2000 

                                                        [Enlarge/Download Table]

                                                 (GBP(pound))     Exchange      (US$)    
                                                      UBI           Rate         UBI     
                                                --------------   ----------  ----------- 
                                                                                         
Cash flows from operating activities                                                     
Net income                                      (pound)271,843     1.5156    $   412,005 
Adjustments to reconcile net income                                                      
to net cash from operating activities                                                    
     Depreciation                                      238,587     1.5156        361,602 
     Gain on sale of assets                             (2,185)    1.5156         (3,312)
Changes in:                                                                              
     Accounts receivable                              (114,876)    1.5156       (174,106)
     Inventory                                          (5,979)    1.5156         (9,062)
     Accounts payable and accruals                     186,562     1.5156        282,753 
                                                --------------               ----------- 
Net cash from operating activities                     573,952                   869,882 
                                                --------------               ----------- 

Cash flows from investing activities                                                     
     Purchase of property, plant and equipment        (221,700)    1.5156       (336,009)
     Cash received from sale of assets                   3,250     1.5156          4,926 
     Cash received from sale of investments                  -     1.5156              - 
                                                --------------               ----------- 
                                                      (218,450)                 (331,083)
                                                --------------               ----------- 
Cash flows from financing activities                                                     
     Increase in bank overdraft                       (250,073)    1.5156       (379,011)
                                                --------------               ----------- 

Translation adjustment                                       -                    (2,119)
                                                --------------               ----------- 

Net increase in cash                                   105,429                   157,669 

Cash beginning of year                                  33,845     1.4955         50,615 
                                                --------------               ----------- 

Cash end of year                                (pound)139,274               $   208,284 
                                                ==============               =========== 

D-8 

DEF 14A
162nd Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 162nd
United Breweries International, Ltd. (UBI)
Consolidated Balance Sheet
December 31, 1999 

                                                        [Enlarge/Download Table]

                                              (GBP(pound))     Exchange      (US$)     
                                                  UBI            Rate         UBI      
                                            ----------------  ----------  ------------ 
                                                                                       
Cash                                           (pound)33,845    1.6150    $     54,660 
Accounts receivable                                2,700,298    1.6150       4,360,981 
Inventory                                             63,074    1.6150         101,865 
Prepaids                                              21,937    1.6150          35,428 
                                            ----------------              ------------ 
     Current assets                                2,819,154                 4,552,934 
                                            ----------------              ------------ 

Property, plant and equipment                        593,108    1.6150         957,869 
                                            ----------------              ------------ 

Intangibles                                           25,601    1.6150          41,346 
                                            ----------------              ------------ 

Total assets                                (pound)3,437,863              $  5,552,149 
                                            ================              ============ 

Current liabilities                                                                    
     Bank overdraft                         (pound)1,243,943    1.6150    $  2,008,968 
     Accounts payable                              1,414,454    1.6150       2,284,343 
     Income tax payable                               69,094    1.6150         111,587 
     Accruals                                        337,893    1.6150         545,697 
                                            ----------------              ------------ 
Total liabilities                                  3,065,384                 4,950,595 
                                            ----------------              ------------ 

Stockholder's Equity                                                                   
     Common stock                                    100,000    1.6150         161,500 
     Currency translation                                  -                    (3,982)
     Retained earnings                               272,479                   444,036 
                                            ----------------              ------------ 
                                                     372,479                   601,554 
                                            ----------------              ------------ 

Total stockholder's equity and liabilities  (pound)3,437,863              $  5,552,149 
                                            ================              ============ 

D-9 

DEF 14A
163rd Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 163rd
United Breweries International, Ltd. (UBI)
Consolidated Statement of Income and
Stockholder's Equity December 31, 1999

                                                                [Download Table]

                                         (GBP(pound))     Exchange       (US$)     
                                              UBI           Rate          UBI      
                                      ----------------   ----------  ------------- 
                                                                                   
Sales                                 (pound)7,350,109     1.6172    $  11,886,596 
Cost of goods sold                           4,813,017     1.6172        7,783,611 
                                      ----------------               ------------- 

Gross profit                                 2,537,092                   4,102,985 

Selling and distribution                     1,554,503     1.6172        2,513,942 
General and administrative                     652,055     1.6172        1,054,503 
                                      ----------------               ------------- 

Net income from operations                     330,534                     534,540 
Other income (expense)                                                             
     Costs relating to litigation             (125,303)    1.6172         (202,640)
     Disposal of fixed assets                        -     1.6172                - 
     Other income                                    -     1.6172                - 
     Interest expense                          (74,837)    1.6172         (121,026)
                                      ----------------               ------------- 

Net income before taxes                        130,394                     210,873 

     Provision for income tax                  (63,072)    1.6172         (102,000)
                                      ----------------               ------------- 

Net income before discontinued                  67,322                     108,873 
     operations                                                                    

Minority interest in discontinued                                                  
     operations                                  3,023     1.6172            4,889 
Discountinued operations                                                           
     Loss from operations of                                                       
     discontinued Soyco, Ltd,                 (149,967)    1.6172         (242,527)
     Gain on disposal of Soyco, Ltd          1,889,877     1.6172        3,056,309 
                                      ----------------               ------------- 

Net income                            (pound)1,810,255               $   2,927,544 

Retained earnings, beginning of year        (1,537,776)    1.6150       (2,483,508)
                                      ----------------               ------------- 

Retained earnings, end of year          (pound)272,479               $     444,036 
                                      ================               ============= 

D-10

DEF 14A
164th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 164th
United Breweries International, Ltd. (UBI)
Consolidated Statement of Cash Flows
December 31, 1999 

                                                        [Enlarge/Download Table]

                                                   (GBP(pound))     Exchange     (US$)     
                                                        UBI           Rate        UBI      
                                                ----------------   ----------  ----------- 
                                                                                           
Cash flows from operating activities                                                       
Net income                                      (pound)1,810,255     1.6172    $ 2,927,544 
Adjustments to reconcile net income                                                        
to net cash from operating activities                                                      
     Depreciation                                        238,515     1.6172        385,726 
     Gain on sale of assets                               (4,241)    1.6172         (6,859)
     Gain on sale of Soyco, Ltd.                      (1,739,310)    1.6172     (2,812,812)
Changes in:                                                                                
     Accounts receivable                                (253,078)    1.6172       (409,278)
     Inventory                                            48,346     1.6172         78,185 
     Accounts payable and accruals                      (244,886)    1.6172       (396,030)
                                                ----------------               ----------- 
Net cash from operating activities                      (144,399)                 (233,522)
                                                ----------------               ----------- 

Cash flows from investing activities                                                       
     Purchase of property, plant and equipment          (238,809)    1.6172       (386,202)
     Cash received from sale of assets                    22,065     1.6172         35,684 
     Cash received from sale of investments               50,000     1.6172         80,860 
                                                ----------------               ----------- 
                                                        (166,744)                 (269,658)
                                                ----------------               ----------- 
Cash flows from financing activities                                                       
     Increase in bank overdraft                          190,607     1.6172        308,250 
                                                ----------------               ----------- 

Translation adjustment                                         -                       266 
                                                ----------------               ----------- 

Net decrease in cash                                    (120,536)                 (194,665)

Cash beginning of year                                   154,381     1.6150        249,325 
                                                ----------------               ----------- 

Cash end of year                                   (pound)33,845               $    54,660 
                                                ================               =========== 

D-11

DEF 14A
165th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 165th
 United Breweries International (UK) Limited

Balance Sheet, Statement of Income and Stockholder's
 Equity, and Statement of Cash Flows for the years ended
 December 31, 1999 and 2000.

UNITED BREWERIES INTERNATIONAL (UK) LIMITED                                     

REPORT OF THE DIRECTORS                                                         

The directors submit their report and the financial statements of the Group for 
the year ended 31st December 2000.                                              

PRINCIPAL ACTIVITIES AND BUSINESS REVIEW                                        

The principal activities of the Group during the year continued to be that of   
marketing and distribution of beer and wines and commission agents for the sale 
of beverages.                                                                   

The results for the year and the financial position at the year end were        
considered to be satisfactory by the directors who expect continued growth in   
the forseeable future.                                                          

RESULTS AND DIVIDENDS                                                           

The results for the year are set out on page D-15.                              

The directors do not recommend the payment of a dividend.                       

FIXED ASSETS                                                                    

Details relating to fixed assets are shown in the notes to the financial        
statements.                                                                     

DIRECTORS AND INTERESTS IN SHARES                                               

The directors who served during the year and their beneficial interests in the  
shares of the company were as stated below:                                     

                           Ordinary shares of(pound)1 each
                            2000              1999
M. K. Nambiar                                 -                 -               
V. S. Kumar                                   -                 -               
G. M. K. Lodhi                                -                 -               

AUDITORS                                                                        

The auditors, Hawsons Chartered Accountants, were newly appointed during the    
year. They have indicated that they are willing to be reappointed at the        
forthcoming Annual General Meeting.                                             

On behalf of the Board.                                                         

G. M. K. Lodhi                                                                  
Director / Secretary                                        Date: 9th March 2001

Registered Office:                                                              
75 Westow Hill,                                                                 
Crystal Palace,                                                                 
London,                                                                         
SE19 1TX                                                                        

D-12

DEF 14A
166th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 166th
UNITED BREWERIES INTERNATIONAL (UK) LIMITED                                     

STATEMENT OF DIRECTORS' RESPONSIBILITIES                                        

Company law requires the directors to prepare financial statements for each     
financial year which give a true and fair view of the state of affairs of the   
company and the group and of the profit or loss for that period. In preparing   
those financial statements, the directors are required to:-                     

(1)      Select suitable accounting policies and then apply them consistently.  

(2)      Make judgements and estimates that are reasonable and prudent.         

(3)      State whether applicable accounting standards have been followed,      
   subject to any material departures disclosed and explained in the
financial statements.                                         

(4)      Prepare the financial statements on the going concern basis unless it  
       is inappropriate to presume that the group will continue in business.

The directors are responsible for keeping proper accounting records which       
disclose with reasonable accuracy at any time the financial position of the     
group and to enable them to ensure that the financial statements comply with the
Companies Act 1985. They are also responsible for safeguarding the assets of the
group and hence for taking reasonable steps for the prevention and detection of 
fraud and other irregularities.                                                 

  D-13

DEF 14A
167th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 167th
UNITED BREWERIES INTERNATIONAL (UK) LIMITED                                     

INDEPENDENT AUDITOR'S REPORT                                                    

To the Board of Directors                                                       
United Breweries International (UK) Limited                                     

We have audited the consolidated financial statements on pages D-15 - D-29 which
have been prepared under the historical cost convention and the accounting      
policies set out on page .                                                      

Respective responsibilities of directors and auditors                           

As described on page D-13 the group's directors are responsible for the         
preparation of the financial statements. It is our responsibility to form an    
independent opinion, based on our audit, on those financial statements and to   
report our opinion to you. We did not audit the financial statements of United  
Breweries International (UK) Limited or its subsidiaries as individual entities 
for the year ended 31st December 1999. Those statements were audited by other   
auditors whose report has been furnished to us and our opinion, in so far as it 
relates to the amounts included for the year ended 31st December 1999, is based 
solely on the other auditors' reports.                                          

Basis of opinion                                                                

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. An audit includes examination, on a test basis,
of evidence relevant to the amounts and disclosures in the financial statements.
It also includes an assessment of the significant estimates and judgements made 
by the directors in the preparation of the financial statements, and of whether 
the accounting policies are appropriate to the group's circumstances,           
consistently applied and adequately disclosed.                                  

We planned and performed our audit so as to obtain all information and          
explanations which we consider necessary in order to provide us with sufficient 
evidence to give reasonable assurance that the financial statements are free    
from material misstatement, whether caused by fraud, other irregularity or      
error. In forming our opinion we also evaluated the overall adequacy of the     
presentation of the information in the financial statements. We believe that our
audits and the report of other auditors provide a reasonable basis for our      
opinion.                                                                        

Opinion                                                                         

In our opinion, based on our audits and the report of other auditors, the       
consolidated financial statements give a true and fair view of the state of     
affairs of United Breweries International (UK) Limited and the group as at 31st 
December 2000 and 31st December 1999 and of the profits of the group for the    
years then ended and have been properly prepared in accordance with accounting  
principles generally accepted in the United Kingdom.                            

Hawsons Chartered Accountants                                                   
And Registered Auditors                                                         

Jubilee House                                                                   
Billing Brook Road                                                              
Weston Favell                                                                   
Northampton                                                                     
NN3 8NW                                                                         

Dated: 9th March 2001                                                           

D-14

DEF 14A
168th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 168th
UNITED BREWERIES INTERNATIONAL (UK) LIMITED                                     

CONSOLIDATED PROFIT AND LOSS ACCOUNT - YEAR ENDED 31ST DECEMBER 2000            

                                                        [Enlarge/Download Table]

                                                            2000       2000       1999       1999
                                               Notes     (pound)    (pound)    (pound)    (pound)
                                                                                                 
Turnover:                                                                                        
        Continuing                               2     8,342,315             7,350,109           
        Discontinued operations                  3             -               846,597           
                                                       ---------             ---------           
                                                                  8,342,315             8,196,706

Cost of sales                                                     5,423,592             5,471,122
                                                                  ---------             ---------

Gross Profit                                                      2,918,723             2,725,584

Distribution and selling costs                         1,851,646             1,554,503           
Administrative expenses                                  596,108               990,514           
                                                      ---------              ---------           
                                                                  2,447,754             2,545,017
Operating profit/(loss)                                                                          
        Continuing operations                            470,969               330,534           
        Discontinued operations                  3             -             (149,967)           
                                                      ----------             ---------           
                                                                  ---------             ---------
Operating profit total                           4                  470,969               180,567

Exceptional items:                                                                               
Profit on sale of subsidiary undertaking         5             -             1,889,877           
Costs relating to litigation                     6      (11,584)             (125,303)           
                                                        --------              --------           
                                                                   (11,584)             1,764,574
                                                                  ---------             ---------
Profit on ordinary activities before interest                       459,385             1,945,141

Interest receivable                                                       -                    21
Interest payable                                 7                 (54,116)              (74,858)
                                                                  ---------             ---------
Profit on ordinary activities before taxation                       405,269             1,870,304

Tax on profit on ordinary activities             8                (133,426)              (63,072)
                                                                  ---------             ---------

Profit on ordinary activities after taxation                        271,843             1,807,232
                                                                  ---------             ---------

Equity minority interests                                                 -                 3,023
                                                                  ---------              --------

Retained profit transferred to reserves          19                 271,843             1,810,255
                                                                   ========              ========

The group has no recognised gains and losses other than those included in the   
profits above, and therefore no separate statement of total recognised gains and
losses has been presented.                                                      

  The notes on pages D-19 to D-29 form part of these financial statements.

D-15

DEF 14A
169th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 169th
UNITED BREWERIES INTERNATIONAL (UK) LIMITED                                     

CONSOLIDATED BALANCE SHEET - 31ST DECEMBER 2000                                 

                                                        [Enlarge/Download Table]

                                                              2000     2000        1999        1999
                                                 Note      (pound)  (pound)     (pound)     (pound)
                                                 ----                                              
                                                                                                   
Fixed assets                                                                                       
Intangible Fixed Assets                           10                 22,401                  25,601
Tangible Fixed Assets                             11                578,356                 593,108
                                                                    -------                 -------
                                                                    600,757                 618,709
Current assets                                                                                     
Stocks                                            13        69,053                63,074           
Debtors                                           14     2,837,111             2,722,235           
Cash at bank and in hand                                   139,274                33,845           
                                                       -----------            ----------           
                                                         3,045,438             2,819,154           

Creditors - amounts falling due within one year   15   (3,001,873)           (3,065,384)           
                                                       -----------           -----------           
Net current assets/(liabilities)                                     43,565               (246,230)
                                                                    -------               ---------
Total assets less current liabilities                               644,322                 372,479
                                                                    =======                 =======
Capital and Reserves                                                                               
Called up share capital                           18                100,000                 100,000
Profit and loss account                           19                544,322                 272,479
                                                                    -------                 -------
Equity Shareholders' funds                        20                644,322                 372,479
                                                                    =======                 =======

The financial statements were approved by the board of directors on 9th March,  
2001 and were signed on its behalf by:                                          

M. K. Nambiar                                                 Director          

G. M. K. Lodhi                                                Director          

The notes on pages D-19 to D-29 form part of these financial statements.

D-16

DEF 14A
170th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 170th
UNITED BREWERIES INTERNATIONAL (UK) LIMITED                                     

BALANCE SHEET - 31ST DECEMBER 2000                                              

                                                        [Enlarge/Download Table]

                                                           2000      2000        1999      1999 
                                                Note    (pound)   (pound)     (pound)   (pound) 

                                                                                                
Fixed Assets                                                                                    
Investments                                      12               299,119               299,119 

Current Assets                                                                                  
Debtors                                          14       9,933                14,787           
Cash at bank and in hand                                 31,436                 7,681           
                                                      ---------             ---------           
                                                         41,369                22,468           
Creditors: amounts falling due within one year   15   (209,081)             (189,496)           
                                                      ---------             ---------           
Net Current Liabilities                                          (167,712)             (167,028)
                                                                 --------              -------- 

Total assets less current liabilities                             131,407               132,091 
                                                                 ========              ======== 
Capital and Reserves                                                                            
Called up share capital                          18               100,000               100,000 
Profit and loss account                                            31,407                32,091 
                                                                 --------              -------- 

Equity Shareholders' funds                                        131,407               132,091 
                                                                 ========              ======== 

The financial statements were approved by the board of directors on 9th March,  
2001 and were signed on its behalf by:                                          

M. K. Nambiar                                                 Director          

G. M. K. Lodhi                                                Director          

The notes on pages D-19 to D-29 form part of these financial statements.

D-17

DEF 14A
171st Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 171st
UNITED BREWERIES INTERNATIONAL LIMITED                                          

CONSOLIDATED CASH FLOW STATEMENT                                                

FOR THE YEAR ENDED 31ST DECEMBER 2000                                           

                                                        [Enlarge/Download Table]

                                                                             2000        1999
                                                                          (pound)     (pound)
                                                                                             
Net cash inflow/(outflow) from operating activities (Note 27a)           695,123     (10,113)

Returns on investments and servicing of finance                                              
Interest paid                                                           (54,116)     (73,649)
                                                                        --------     --------
Net cash outflow from returns on investments and servicing of finance   (54,116)     (73,649)

Taxation                                                                (67,055)     (51,360)

Capital expenditure and financial investment                                                 
Payments to acquire tangible assets                                    (221,700)    (238,809)
Sale of tangible fixed assets                                              3,250       22,065
                                                                       ---------    ---------
Net cash outflow for capital expenditure                               (218,450)    (216,744)

Acquisitions and disposals (note 27d)                                                        
Sale of subsidiary undertaking                                                 -      50,000 
Cash at bank and in hand disposed of with subsidiary                           -    (24,150) 
                                                                        --------   --------- 
Net cash inflow from disposals                                                 -      25,850 

                                                                        --------   --------- 
Net increase/(decrease) in cash in the year                              355,502   (326,016) 
                                                                        ========   ========= 

The notes on pages D-19 to D-29 form part of these financial statements.

D-18

DEF 14A
172nd Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 172nd
UNITED BREWERIES INTERNATIONAL (UK) LIMITED                                     

NOTES TO THE FINANCIAL STATEMENTS                                               

1.       ACCOUNTING POLICIES                                                    

Basis of accounting:                                          
 The financial statements are prepared under the historical cost
 convention and in accordance with Generally Accepted Accounting
Principles (GAAP) applicable in the United Kingdom (UK).      

     Reconciliation to US accounting principles - summary of differences
       between UK and US GAAP: No reconciliation between US GAAP and UK GAAP
   has been presented. In the opinion of the directors, there are no
     significant differences in the group's net income and net equity on
       preparing the 2000 and 1999 financial statements under either UK GAAP
or US GAAP.                                                   

Basis of consolidation:                                       
The consolidated accounts comprise the accounts of the parent 
     undertaking and its subsidiary undertakings for the year ended 31st
December 2000.                                                

Goodwill and intangible fixed assets:                         
   Goodwill represents purchased goodwill on the acquisition of UBSN
         Limited, a wholly owned subsidiary. It is valued at the amount by which
        the cost of UBSN Limited as a whole exceeded the aggregate fair values
        of its identifiable assets and liabilities at the date of acquisition.
   The goodwill is being amortised on a straight-line basis over ten
     years. This is the period over which UBSN Limited holds its brewing
licence to carry out its principal activity.                  

Depreciation of tangible fixed assets:                        
     Depreciation is provided on all fixed assets at rates calculated to
        write off the costs of each asset evenly over its expected useful life
as follows:-                                                  

   - Plant and equipment              6 to 7 years
   - Motor vehicles                   2 to 5 years

Foreign currency:                                             
      Transactions denominated in foreign currencies are translated at the
        exchange rate on the transaction date. Balances denominated in foreign
     currencies are translated at the exchange rate on the balance sheet
date.                                                         

Turnover:                                                     
         Turnover represents the amounts receivable by the group for goods sold,
         services supplied and commissions receivable and is stated net of value
added tax.                                                    

Stocks:                                                       
       Stocks are valued on a first-in, first-out basis at the lower of cost
and net realisable value.                                     

Taxation:                                                     
  Corporation tax is provided on taxable profits at current rates.
  Deferred taxation is provided at appropriate rates on all timing
        differences using the liability method only to the extent that, in the
    opinion of the directors, there is a reasonable probability that a
liability or asset will crystallise in the forseeable future. 

Pensions:                                                     
     The pension costs charged in the financial statements represent the
contributions payable by the group during the year.           

D-19

DEF 14A
173rd Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 173rd
UNITED BREWERIES INTERNATIONAL (UK) LIMITED                                     

NOTES TO THE FINANCIAL STATEMENTS continued                                     

2.       TURNOVER                                                               

    The total turnover comprises sales and commissions excluding value
added tax.                                                                      

The geographic analysis of turnover is as follows:            

                                                2000              1999
                                             (pound)           (pound)

     United Kingdom                        7,197,991         7,185,099
     Export                                1,144,324         1,011,607
                                           ---------         ---------
                                           8,342,315         8,196,706
                                           =========         =========

3.       ANALYSIS OF PROFIT AND LOSS ACCOUNT BETWEEN CONTINUING AND DISCONTINUED
OPERATIONS                                                    

                                                                [Download Table]

                                Continuing  Acquisitions  Discontinued      Total
                                      2000          2000          2000       2000
                                   (pound)       (pound)       (pound)    (pound)
                                                                                 
Turnover                         8,342,315             -             -  8,342,315
Cost of sales                    5,423,592             -             -  5,423,592
                                 ---------      --------      --------  ---------
Gross profit                     2,918,723             -             -  2,918,723

Distribution and selling costs   1,851,646             -             -  1,851,646
Administrative expenses            596,108             -             -    596,108
                                 ---------      --------      --------  ---------
Operating profit                   470,969             -             -    470,969
                                 =========      ========      ========  =========

                                Continuing  Acquisitions  Discontinued      Total
                                      1999          1999          1999       1999
                                   (pound)       (pound)       (pound)    (pound)

Turnover                         7,350,109             -       846,597  8,196,706
Cost of sales                    4,813,017             -       658,105  5,471,122
                                 ---------      --------      --------  ---------

Gross profit                     2,537,092             -       188,492  2,725,584

Distribution and selling costs   1,554,503             -             -  1,554,503
Administrative expenses            652,055             -       338,459    990,514
                                  --------      --------      --------   --------
Operating profit/(loss)            330,534             -     (149,967)    180,567
                                   =======       =======       =======    =======

D-20

DEF 14A
174th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 174th
UNITED BREWERIES INTERNATIONAL (UK) LIMITED                                     

NOTES TO THE FINANCIAL STATEMENTS continued                                     

4.       OPERATING PROFIT                                                       

                                                        [Enlarge/Download Table]

                                                                        2000     1999
                                                                     (pound)  (pound)
Operating profit  has been arrived at after charging/(crediting):-                   
                                                                                     
Amortisation of intangible fixed assets                                3,200    3,200
Depreciation of tangible fixed assets                                235,387  272,232
Auditors' remuneration - as auditors                                  15,250   24,294
                       - for non audit services                       25,830   12,857
(Profit)/Loss on disposal of tangible fixed assets                   (2,185)   13,563
Exchange differences                                                (44,382)  (4,652)
                                                                     =======  =======

       As permitted by Section 230 of the Companies Act 1985, the profit and
    loss account of the parent undertaking is not presented as part of
       these financial statements. The consolidated profit for the financial
   year includes a deficit of (pound)684, which is dealt with in the
financial statements of the parent undertaking.               

5.       PROFIT ON SALE OF SUBSIDIARY UNDERTAKING                               

                                                                [Download Table]

                                                     2000       1999
                                                  (pound)    (pound)
                                                                    
Gain on disposal of subsidiary net liabilities          -  2,163,205
Goodwill previously eliminated against reserves         -  (273,328)
                                                 --------  ---------
Profit on sale of subsidiary                            -  1,889,877
                                                 ========  =========

    On 9th December 1999, the group sold its entire shareholding in UB
     (Soyco) Limited, a 98% owned subsidiary, for (pound)50,000 in cash.

6.       COSTS RELATING TO LITIGATION                                           

      All remaining matters in issue between the parties have been finally
resolved to their satisfaction.                                                 

7.       INTEREST PAYABLE                                                       

                                                                [Download Table]

                    2000     1999
                 (pound)  (pound)
                                 
Bank overdrafts   54,116   74,858
                  ======   ======

8.       TAX ON PROFIT ON ORDINARY ACTIVITIES                                   

                                                                [Download Table]

                                                           2000     1999
                                                        (pound)  (pound)
                                                                        
Corporation Tax on profit for year at 30% (1999 - 30%)  133,000   63,072
Prior year adjustment                                       426        -
                                                        -------   ------
                                                        133,426   63,072
                                                        =======   ======

D-21

DEF 14A
175th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 175th
UNITED BREWERIES INTERNATIONAL (UK) LIMITED                                     

NOTES TO THE FINANCIAL STATEMENTS continued                                     

9.       DIRECTORS AND EMPLOYEES                                                

Staff costs during the year were as follows:                  

                                                                [Download Table]

                        2000     1999
                     (pound)  (pound)
                                     
Wages and salaries   325,017  348,902
Other pension costs   14,410   14,315
                     -------  -------
                     339,427  363,217
                     =======  =======

      The average monthly number of employees, including directors, during
the year was as follows:                                                        

                                                                [Download Table]

                       2000    1999
                     Number  Number
                                   
Sales and marketing      13      26
                       ====    ====

10.      INTANGIBLE FIXED ASSETS - Group                                        

                                                                [Download Table]

                                               Goodwill
                                                (pound)
                                                       
Cost                                                   
At 1st January 2000 and at 31st December 2000    32,001
                                                 ======
Aggregate amortisation                                 
At 1st January 2000                               6,400
Charge for the year                               3,200
                                                 ------
At 31st December 2000                             9,600
                                                 ======
Net Book Value                                         
At 31st December 2000                            22,401
                                                 ======
At 31st December 1999                            25,601
                                                 ======

D-22

DEF 14A
176th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 176th
UNITED BREWERIES INTERNATIONAL (UK) LIMITED                                     

NOTES TO THE FINANCIAL STATEMENTS continued                                     

11.      TANGIBLE FIXED ASSETS - Group                                          

                                                                [Download Table]

                           Plant                     
                             and     Motor           
                       Equipment  Vehicles      Total
                         (pound)   (pound)    (pound)
                                                     
Cost                                                 
At 1st January 2000    1,291,990   104,445  1,396,435
Additions                181,823    39,877    221,700
Disposals                      -  (12,003)   (12,003)
                       ---------  --------  ---------
At 31st December 2000                                
                       1,473,813   132,319  1,606,132
Depreciation           =========   =======  =========

At 1st January 2000      767,385    35,942    803,327
Charge for year          209,259    26,128    235,387
Disposals                      -  (10,938)   (10,938)
                       ---------  --------  ---------

At 31st December 2000    976,644    51,132  1,027,776
                       =========   =======  =========
Net Book Value                                       
At 31st December 2000    497,169    81,187    578,356
                       =========   =======  =========

At 31st December 1999    524,605    68,503    593,108
                       =========   =======  =========

12.      FIXED ASSET INVESTMENTS - Company                                      

                                                                [Download Table]

                                               Shares in
                                                   group
                                            undertakings
                                                     and
                                           participating
                                               interests
Cost and Net Book Value at                       (pound)
                                                        
1st  January 2000 and 31st  December 2000       299,119 
                                                ======= 


The subsidiary undertakings are as follows:-                  

                                                                   Percentage of
                                                                     equity held
         UBSN Limited            Registered in England                      100%

                                                        [Enlarge/Download Table]

13. STOCKS                                         Group                 Company     
                                             2000         1999     2000          1999
                                          (pound)      (pound)  (pound)       (pound)
                                                                                     
     Finished goods and goods for resale   69,053       63,074        -             -
                                           ======       ======   ======        ======

D-23

DEF 14A
177th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 177th
UNITED BREWERIES INTERNATIONAL (UK) LIMITED                                     

NOTES TO THE FINANCIAL STATEMENTS continued                                     

                                                        [Enlarge/Download Table]

14. DEBTORS                                                     Group                  Company       
                                                           2000          1999      2000          1999
                                                        (pound)       (pound)   (pound)       (pound)
                                                                                                     
     Trade debtors:                                                                                  
        Amounts owed by Shepherd Neame Limited         485,068       583,469         -             - 
        Other                                        2,244,259     2,047,626         -             - 
     Prepayments                                        24,932        21,937     9,933        14,787 
     Prepayments and accrued income in respect of                                                    
     related parties:                                                                                
        Amounts owed by Shepherd Neame Limited          82,852        69,203         -             - 
                                                     ---------     ---------     -----        ------ 
                                                     2,837,111     2,722,235     9,933        14,787 
                                                     =========     =========     =====        ====== 

15. CREDITORS - amounts falling due within one year                                                  

                                                                 Group                 Company       
                                                          2000          1999      2000          1999 
                                                       (pound)       (pound)   (pound)       (pound) 

     Bank overdraft (secured - see note 21)            993,870     1,243,943         -             - 
     Trade creditors:                                                                                
          Amounts owed to Shepherd Neame Limited     1,427,112     1,246,978         -             - 
          UB Global Corporation Limited                      -        64,023    19,975             - 
          Others                                       107,827       103,453         -             - 
     Corporation tax                                   135,464        69,094         -            72 
     Other taxation and social security                 76,518        35,395    13,163        11,764 
     Accruals:                                                                                       
          Amounts owed to Shepherd Neame Limited       135,466       159,212         -             - 
          American United Breweries Inc                 41,292        38,386         -             - 
          Other                                         70,906        88,865     6,400         5,500 
     Other creditors                                    13,418        16,035    13,418        16,035 
     Loan from subsidiary undertaking UBSN Ltd               -             -   156,125       156,125 
                                                     ---------     ---------   -------       ------- 
                                                     3,001,873     3,065,384   209,081       189,496 
                                                     =========     =========   =======       ======= 

16.      PENSION COSTS                                                          

         The group operates a defined contribution pension scheme. The assets of
the scheme are held separately from those of the company in an
     independently administered fund. The pension cost charge represents
  contributions payable by the company to the fund and amounted to
(pound)14,410 (1999 - (pound)14,315).                         

17.      DEFERRED TAXATION                                                      

The full potential liability for 2000 is (pound)4,000 (1999 - 
       (pound)12,000) in respect of capital allowances carried forward which
has not been provided for in the accounts.                    

D-24

DEF 14A
178th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 178th
UNITED BREWERIES INTERNATIONAL (UK) LIMITED                                     

NOTES TO THE FINANCIAL STATEMENTS continued                                     

                                                        [Enlarge/Download Table]

18. CALLED UP SHARE CAPITAL - Company and Group                                               
                                                        Authorised        Allotted, called up 
                                                        and Issued          and partly paid   
                                                    2000          1999     2000          1999 
                                                     No.           No.      No.           No. 
                                                                                              
     100,000 Ordinary shares of (pound)1 each    500,000       500,000  100,000       100,000 
                                                 -------       -------  -------       ------- 
                                                 500,000       500,000  100,000       100,000 
                                                 =======       =======  =======       ======= 

19. PROFIT AND LOSS ACCOUNT - Group                                                           
                                                                                       (pound)

    At 1st January 2000                                                               272,479 
    Retained profit for year                                                          271,843 
                                                                                      ------- 
    At 31st December 2000                                                             544,322 
                                                                                      ======= 

20.      RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS - Group             

                                                                [Download Table]

                                                2000         1999 
                                              (pound)      (pound)
                                                                  
Profit after taxation for the financial year  271,843   1,810,255 
                                              -------   --------- 

Net addition to shareholders' funds           271,843   1,810,255 
Opening shareholders' funds                   372,479  (1,437,776)
                                              -------   --------- 
Closing shareholders' funds                   644,322     372,479 
                                              =======     ======= 

21.      CONTINGENT LIABILITIES                                                 

         The company acts as a surety for the obligations on a lease of premises
      acquired by UB (Soyco) Limited (a former subsidiary undertaking) for
     the term of twenty years from 24th June 1999 at an annual rental of
(pound)61,500.                                                

22.      BANK OVERDRAFT                                                         

       The bank overdraft is secured by a fixed and floating charge over the
        assets of UBSN Limited. The maximum facility available to the group is
       (pound)1,250,000. This facility is available on an on-going basis and
         is repayable on demand. Interest is calculated on a daily basis at 1.5%
above the bank's base rate.                                   

D-25

DEF 14A
179th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 179th
UNITED BREWERIES INTERNATIONAL (UK) LIMITED                                     

NOTES TO THE FINANCIAL STATEMENTS continued                                     

23.      OPERATING LEASE COMMITMENTS                                            

   Financial commitments under non-cancellable operating leases will
    result in the following payments falling due in the next financial
year:                                                         

                                                          2000          1999
                                                      Land and      Land and
                                                     buildings     buildings
                                                       (pound)       (pound)

Expiring:                                                 
         Within two to five years                        7,000         7,000
                                                         =====         =====

24.      ULTIMATE PARENT UNDERTAKING AND CONTROL                                

        The directors consider the company's ultimate parent undertaking to be
Inversion Mirabele S.A., a company incorporated in Panama.    

        Prior to the balance sheet date, a conditional sale/purchase agreement
         had been entered into by the ultimate parent company. As at the balance
sheet date this transfer of shareholding had not occurred.    

D-26

DEF 14A
180th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 180th
UNITED BREWERIES INTERNATIONAL (UK) LIMITED                                     

NOTES TO THE FINANCIAL STATEMENTS continued                                     

26.      RELATED PARTY TRANSACTIONS                                             

   During the year the group had the following transactions with its
related parties:                                                                

                                                        [Enlarge/Download Table]

                                                 Nature of                  2000        1999 
                                              relationship               (pound)     (pound) 
                                                                                             
Shepherd Neame Limited                        Common trade                                   
(Company registered in the UK)                                                               
Sales                                                                    990,220     699,493 
Freight cost                                                             312,241     240,590 
Commission payable                                                        94,229      63,227 
Purchases                                                              5,276,064   4,625,586 

Galaxy International Limited             Common commercial                                   
(Company registered in the UK)                   interests                                   
Management charge payable                                                 17,000     103,547 

UB Global Corporation Limited                 Mutuality of                                   
(Subsidiary of United Breweries                   interest                                   
Limited of India registered in India)                                                        
Purchases                                                                 70,278      96,009 

American United Breweries Inc                 Mutuality of                                   
(Company registered in the USA)                   interest                                   
Commission/advertising payable                                           166,762     125,492 

United Breweries Limited                     Licence owner                                   
(Company registered in India)                                                                
Royalty payable                                                            5,960       5,227 


As a result of the trading and other activities with related parties,                        
the following balances remained outstanding as at 31st December 2000.                        

                                                                                             
                                                                            2000         1999
                                                                         (pound)      (pound)
Amounts owed by Shepherd Neame Limited                                    485,068     652,672
Amounts owed to Shepherd Neame Limited                                  1,427,112   1,246,978
Amounts owed to UB Global Corporation Ltd                                       -      64,023
Amounts owed to Galaxy International Limited                               19,975           -
Amounts owed to United Breweries Limited                                    5,960       5,227
Accruals - Shepherd Neame Limited                                         135,466     159,212
                - American United Brewers Inc                              41,292      38,386


D-27

DEF 14A
181st Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 181st
UNITED BREWERIES INTERNATIONAL (UK) LIMITED                                     

NOTES TO THE FINANCIAL STATEMENTS continued                                     

27.      CASH FLOW STATEMENT                                                    

a.       RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW/(OUTFLOW)        
FROM OPERATING ACTIVITIES                           

                                                        [Enlarge/Download Table]

                                                                                            2000       1999  
                                                                                         (pound)    (pound)  
                                                                                                             
       Operating profit                                                                  470,969    180,567  
       Depreciation charges                                                              235,387    235,315  
       Amortisation charges                                                                3,200      3,200  
       (Profit)/loss on disposal of tangible assets                                      (2,185)    (4,241)  
       (Increase)/decrease in stocks                                                     (5,979)     48,346  
       (Increase) in debtors                                                           (110,894)  (253,078)  
       Increase/(decrease) in creditors                                                  116,209  (244,886)  
       Costs relating to litigation                                                     (11,584)  (125,303)  
       Operating loss in respect of discontinued activities                                    -    149,967  
                                                                                        --------   --------  
       Net cash inflow/(outflow) from continuing operating activities                    695,123   (10,113)  
                                                                                         =======    =======  


b. ANALYSIS OF CHANGES IN NET DEBT                                                                           

                                                             At 1st January       Cash     At 31st December  
                                                                       2000      Flows                 2000  
                                                                    (pound)    (pound)              (pound)  
                                                                                                             
            Net cash:                                                                                        
            Cash  at bank and in hand                                33,845    105,429              139,274  
            Bank overdrafts                                     (1,243,943)    250,073            (993,870)  
                                                                -----------    -------            ---------  
                                                                (1,210,098)    355,502            (854,596)  
                                                                ===========    =======            =========  


c. RECONCILIATION OF NET CASH FLOW MOVEMENT TO MOVEMENT IN NET DEBT                                          

                                                                                    2000                 1999
                                                                                 (pound)              (pound)
                                                                                                             
     Increase/(Decrease)  in  cash  in  the                                                                  
     period and change in net debt                                              355,502            (326,016) 

     Opening net debt                                                        (1,210,098)            (884,082)
                                                                             -----------          -----------
     Closing net debt                                                          (854,596)          (1,210,098)
                                                                               =========          ===========

d.       CASH FLOWS IN RESPECT OF DISPOSAL OF SUBSIDIARY UNDERTAKING IN 1999    

       On 9th December 1999, a 98% owned subsidiary, UB (Soyco) Limited, was
         disposed of through the transfer of the groups entire shareholding, for
   the consideration of (pound)50,000 in cash. The fair values of UB
      (Soyco) Limited's identifiable assets and liabilities at the date of
disposal were as follows:                                     
                                                             (pound)

     Fixed assets                                            404,700
     Stocks                                                  117,861
     Debtors                                                 191,583
     Cash at bank and in hand                                 24,150
     Trade creditors                                       (113,634)
     Other creditors                                     (2,350,932)
                                                         -----------
                                                         (1,726,272)
     Minority interests                                       34,525
                                                         -----------
                                                         (1,691,747)
                                                         ===========

D-28

DEF 14A
182nd Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 182nd
UNITED BREWERIES INTERNATIONAL (UK) LIMITED                                     

DETAILED CONSOLIDATED PROFIT AND LOSS ACCOUNT                                   
Year ended 31 December 2000                                                     

                                                                [Download Table]

                                                      2000         1999
                                                   (pound)      (pound)
                                                                       
GROSS PROFIT                                                           
Sales and commissions                            8,342,315    8,196,706
Cost of sales                                  (5,423,592)  (5,471,122)
                                                 ---------  -----------

Gross profit                                     2,918,723    2,725,584
                                                 ---------  -----------

DISTRIBUTION AND SELLING EXPENSES                                      
Freight                                            446,690      329,185
Advertising and promotional expenses               569,930      497,093
Sales commission                                   205,405      141,228
Dispense equipment repairs                         178,012      152,073
Operational expenses                               273,205      207,385
Sponsorship                                         58,062      127,049
Other distribution and selling                     120,342      100,490
                                                 ---------  -----------
                                                 1,851,646    1,554,503
                                                 ---------  -----------

GENERAL AND ADMINISTRATIVE EXPENSES                                    
Management fees                                     17,000      103,547
Audit and taxation fees                             41,080       37,151
Postage and stationery                               5,552        5,660
Bad debt provision                                  25,000       50,687
Depreciation/profit on asset disposal              233,202      285,701
Amortisation                                         3,200        3,200
Exchange rate differences                         (44,382)      (4,652)
Operational expenses                               251,255      429,517
Royalties payable/receivable                         5,960        1,846
Miscellaneous                                       58,241       77,857
                                                 ---------  -----------

                                                   596,108      990,514
                                                 ---------  -----------
FINANCE COSTS                                                          
Bank interest received                                   -         (21)
Bank interest paid and charges                      54,116       74,858
                                                 ---------  -----------

                                                    54,116       74,837
                                                 ---------  -----------

EXCEPTIONAL ITEMS                                                      
Sale of subsidiary undertaking                           -  (1,889,877)
Litigation costs                                    11,584      125,303
                                                 ---------  -----------

                                                    11,584    1,764,574
                                                 ---------  -----------

Profit on ordinary activities before taxation      405,269    1,870,304
                                                 =========  ===========

D-29

DEF 14A
183rd Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 183rd
SUPPLEMENT E

(Proposal No. 2)

BYLAW AMENDMENT 

Following is the entire text of Article II, Section 2.2 of the Company's ByLaws,
as it now exists and as the Board of Directors proposes to amend it. Material   
which would be changed by the proposed amendment is indicated by strikethrough, 
like this: seven (7) while material to be added is contained within brackets and
printed in bold type, like this: [nine (9)]. Except as shown below, no changes  
would be made to the text of this Bylaw if Proposal No. 2 is adopted by the     
Shareholders.                                                                   

2.2     Number.                                                 

                The number of the corporation's directors shall not be less than
five (5) and not more than seven (7) [nine (9)]. The number of directors shall  
be fixed, within the foregoing limits, by resolution of the board of directors  
or the shareholders. After the issuance of shares, no amendment to this Section 
2.2 reducing the number of directors to a number below five (5) shall be enacted
if the votes cast against its adoption at a meeting, or the shares not          
consenting in the case of action by written consent, are equal to more than     
sixteen and two-thirds percent (16-2/3%) of the outstanding shares entitled to  
vote.                                                                           

E-1 

DEF 14A
184th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 184th
SUPPLEMENT F

(Proposal No. 4)

       Following is the entire text of the Company's 1994 Stock Option Plan,
as it now exists and as the Board of Directors proposes to amend it. Material   
which would be changed by the proposed amendment is indicated by strikethrough, 
like this: 200,000 shares while material to be added is contained within        
brackets and printed in bold type, like this: [1,000,000 shares]. Except as     
shown below, no changes would be made to the text of this Stock Option Plan if  
Proposal No. 4 is adopted by the Shareholders.                                  

 MENDOCINO BREWING COMPANY, INC.
1994 STOCK OPTION PLAN

1.       DEFINITIONS.                                                           

     As used in this Plan, the underlined terms set forth below have the
meanings set forth in this Article 1.                                           

    "Administrator" means the Board or any of its Committees appointed
pursuant to Article 10.                                                         

      "Affiliate" means a parent or subsidiary corporation of the Company,
whether now or hereafter existing, as defined in Sections 424(e) and (f) of the 
Code, respectively.                                                             

"Board" means the Board of Directors of the Company.          

"Code" means the Internal Revenue Code of 1986, as amended.   

         "Committee" means the applicable committee appointed by the Board under
Article 10.                                                                     

"Common Stock" means the common stock of the Company.         

"Company" means Mendocino Brewing Company, Inc., a California 
corporation.                                                                    

"Consultant" means                                            

         (a)  any persons, including an advisor, who is engaged by the
              Company or any Affiliate to render services, either on a
                continuous or project-by-project basis, who is compensated
        for such services, but who is not an Employee; and

           (b)  any director who is not an Employee, regardless of whether
    the director is compensated for such services.

         "Control Person" means a person who directly or indirectly controls, is
controlled by or is under common control with the Company.                      

F-1 

DEF 14A
185th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 185th
"Corporate Transaction" means                                 

        (a)  a merger in which the shares of the Company outstanding
              immediately before the merger, or in which shares of the
                   surviving entity issued with respect to shares of the Company
                 outstanding immediately before the merger, represent 50% or
               less of the combined voting power of all of the Company's
outstanding stock;                        

   (b)  the sale, transfer, or other disposition of all or
        substantially all of the assets of the Company; or

              (c)  any other corporate reorganization or business combination in
                   which the beneficial ownership of 50% or more of the combined
               voting power of all of the Company's outstanding stock is
transferred.                              

         "Employee" means any person, including an officer or director, employed
by the Company or any Affiliate. The payment of a director's fee by the Company 
does not by itself constitute employment.                                       

       "Exchange Act" means the Securities Exchange Act of 1934, as amended.

"Fair Market Value" means, as of any date:                    

         (a)  the closing sales price (or the closing bid, if no sales
               were reported), as quoted on a stock exchange or national
            market system (including without limitation the Nasdaq
                   National Market System), for the last market trading day most
                 recently in the Wall Street Journal or such other source as
the Administrator deems reliable; or      

         (b)  if (a) does not apply, the mean between the high and low
             asked prices for the Common Stock regularly quoted by a
                  recognized securities dealer during the previous 30 days; or

          (c)  if (a) and (b) do not apply, the value determined in good
faith by the Administrator.               

        "Incentive Option" means an Option intended to qualify as an incentive
stock option within the meaning of Code Section 422.                            

     "Nonstatutory Option" means an Option not intended to qualify as an
Incentive Option.                                                               

       "Option" means an option to purchase Common Stock granted pursuant to
this Plan.                                                                      

      "Option Agreement" means a written agreement, signed by the Optionee
and a duly authorized representative of the Company, evidencing the grant of an 
Option.                                                                         

    "Optionee" means an Employee or Consultant who receives an Option.

       "Outside Director" means a member of the Board who is not an Employee
or an officer of the Company or any Affiliate.                                  

"Plan" means this 1994 Stock Option Plan.                     

   "Rule 16b-3" means Rule 16b-3 promulgated under Section 16 of the
Securities Exchange Act of 1934, as amended.                                    

F-2 

DEF 14A
186th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 186th
      "Share" means a share of the Common Stock, as adjusted in accordance
with Article 9.                                                                 

         "Tax Date" means the date on which the amount of any tax to be withheld
upon exercise of an Option is to be determined.                                 

      "Termination of Employment" means the interruption or termination of
the employment relationship by the Company or any Affiliate for any reason      
including resignation, discharge, death, or retirement, but does not include a  
termination where there is a simultaneous reemployment of the Optionee by the   
Company or an Affiliate as an Employee or, in the sole discretion of the        
Administrator, as a Consultant. Employment is not considered to be interrupted  
by                                                                              

(a)  sick leave;                                    

(b)  military leave;                                

        (c)  any other leave of absence for 90 days or less approved
                   by the Board, unless reemployment upon the expiration of such
    leave is guaranteed by contract or statute; or

          (d)  transfers between locations of the Company or between the
Company and its Affiliates or successor.  

      For Consultants, "Termination of Employment" means ceasing to render
services on at least a periodic basis. The Administrator, in its absolute       
discretion, shall determine the effect of all matters and questions to          
Termination of Employment.                                                      

2.       PURPOSE.                                                               

        The purpose of this Plan is to advance the interests of the Company by
giving the Company's Employees and Consultants incentive through ownership of   
the Company's stock to continue in the service of the Company and thereby to    
help the Company compete effectively with other enterprises for the services of 
qualified individuals. Options granted under this Plan may be Incentive Options 
or Nonstatutory Options, as determined by the Administrator at the time of grant
of any Option and subject to the applicable provisions of Code Section 422, the 
regulations promulgated thereunder, or another relevant provisions of the Code  
and regulations.                                                                

3.       STOCK SUBJECT TO THIS PLAN.                                            

     Subject to the adjustment as provided in Article 9, the Company may
issue Options to purchase up to 200,000 Shares [1,000,000 Shares]. Options that 
terminate for any reason other than exercise may be issued again in the future  
unless this Plan has been terminated. The Company shall at all times reserve for
issuance pursuant to this Plan a number of its authorized but unissued Shares   
equal to the number of Shares issuable pursuant to this Plan. Exercise of an    
Option shall decrease the number of Shares available, both under this Plan and  
under the Option, by the number of Shares as to which the Option is exercised.  

4.       TERM OF PLAN.                                                          

         This Plan shall become effective upon its adoption by the Board. Within
12 months after the date of such adoption, this Plan shall be approved by the   
shareholders in the Company in the degree and manner required under applicable  
state and federal law. No option shall become exercisable unless and            

F-3 

DEF 14A
187th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 187th
until such shareholder approval has been obtained. Unless sooner terminated     
under Article 9 or 10, this Plan shall terminate upon the earlier of (a) the    
tenth anniversary of its adoption by the Board or (b) the date on which all     
Shares available for issuance under this Plan have been issued. Any Option      
outstanding under this Plan at the time of its termination shall remain in      
effect in accordance with its terms and conditions and those of this Plan.      

5.       ELIGIBILITY.                                                           

The Company may grant Nonstatutory Options to Employees and   
Consultants, except that Outside Directors who serve as Administrator under     
Section 10.1 are eligible to receive Option grants only in accordance with      
Article 8. The Company may grant Incentive Options only to Employees. The       
Company may grant eligible Optionees additional Options.                        

6.       TERMS OF OPTIONS.                                                      

     6.1  Written Agreements. Grants of Options shall be evidenced by an
Option Agreement, which shall contain the provisions that this Plan requires and
may contain additional provisions that do not conflict with this Plan as the    
Administrator deems appropriate. Option Agreements need not have identical      
terms. Each Option Agreement shall be subject to this Plan.                     

    6.2  Term of Option. The term of each Option shall be no more than
10 years from the date of grant. The term of an Option granted to person who, at
the time the Option is granted, owns (as that term is defined in Code Section   
424(d)) stock representing more than 10% of the combined voting power of all    
classes of stock of the Company or any Affiliate shall be no more than 5 years  
from the date of grant.                                                         

     6.3  Exercise Price. The per Share exercise price for the Shares to
be issued pursuant to exercise of an Option shall be determined by the          
Administrator, but in no event shall the per Share exercise price of an         
Incentive Option be less than the Fair Market Value per Share on the date of    
grant, and in no event shall the per Share exercise price of a Nonstatutory     
Option be less than 85% of the Fair Market Value per Share on the date of grant.
In the case of an Option granted to an Employee who, at the time of the grant of
such Option, owns, as that term is defined in Section 424(d) of the Code, stock 
representing more than 10% of the voting power of all classes of stock of the   
Company or any Affiliate, the per Share exercise price shall be no less than    
110% of the Fair Market Value per Share on the date of grant.                   

6.4  Termination of Employment.                               

   6.4.1  General Rule. Unless determined otherwise by the
Administrator pursuant to Section 6.6, to the extent not already expired or     
exercised, and except as provided otherwise by this Section 6.4, every Option   
shall terminate at the earlier of:                                              

             (a)  the expiration date as set forth in the Option
Agreement; or               

                   (b)  3 months after Termination of Employment for reasons
   other than death or disability;

        An Option shall be exercisable after Termination of Employment only to
the extent that it was exercisable on the date of Termination of Employment.    
Upon the expiration of the period of exercisability after Termination of        
Employment or (if earlier) upon the expiration of the Option term, the Option   
shall terminate.                                                                

F-4 

DEF 14A
188th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 188th
              6.4.2  Death or Disability. If Termination of Employment is due to
the Optionee's death or disability (as defined in Code                          
Section 22(e)(3)), unless determined otherwise by the Administrator pursuant to 
Section 6.6, the Option, to the extent not already expired or exercised, shall  
terminate at the earlier of (a) the expiration date as set forth in the Option  
Agreement, or (b) one year after the date of the Optionee's disability or death.
In the event of the death of the Optionee, the Option shall be exercisable by   
the Optionee's estate or any person who acquired the right to exercise the      
Option by bequest or inheritance.                                               

           6.4.3  Special Rule for Incentive Options. For purposes of this
Section 6.4, the limited period of exercisability of Incentive Options following
Termination of Employment shall be measured from the date the Optionee ceased to
be Employee.                                                                    

           6.4.4  Change of Status from Employee to Consultant. Unless the
Administrator determines otherwise in its sole discretion, following termination
of an Optionee's employment with the Company or an Affiliate as an Employee     
where there is a simultaneous reemployment of the Optionee by the Company or an 
Affiliate as a Consultant, any Incentive Options held by the Optionee shall, at 
the time the options would otherwise have terminated pursuant to subsection     
6.4.1, instead convert to Nonstatutory Options.                                 

 6.5  Extension of Exercise Period. The Administrator may at any
time extend the expiration date of an Option following the Optionee's           
Termination of Employment beyond the periods specified in Section 6.4, but not  
beyond the expiration date set forth in the Option Agreement. Unless the        
Optionee agrees to convert an Incentive Option into a Nonstatutory Option or the
Option will continue to meet the requirements of an Incentive Option, the       
Administrator may not:                                                          

            (a)  extend the expiration date of an Incentive Option after the
Company has granted the Option, or        

              (b)  extend the expiration date of an Incentive Option, beyond one
                year after Termination of Employment by reason of death or
                disability or 3 months after Termination of Employment for
other reasons.                            

 6.6  Non-Transferability of Options. An Option may not be sold,
pledged, assigned, hypothecated, transferred, or disposed of in any manner other
than by will or by the laws of descent or distribution. An Option may be        
exercised, during the lifetime of the Optionee, only by the Optionee.           

        6.7  Type of Option. Each Option Agreement shall clearly state whether
or not the Option is intended to qualify as an Incentive Option. If only a      
portion of an Option is intended to so qualify, (a) the Option Agreement shall  
so state, and (b) the Option Agreement shall not require that the number of     
Incentive Options exercised reduces the size the Nonstatutory Option portion, or
vice-versa.                                                                     

       6.8  Limitation on Incentive Options. The aggregate Fair Market Value
of the Shares for which one or more Incentive Options granted to a single       
Employee under this Plan (or any other Incentive Option plan of the Company or  
any Affiliate) may for the first time become exercisable as Incentive Options   
under the Code during any one calendar year shall not exceed $100,000 or such   
other amount as may be permitted under subsequent amendments to Code Section    
422. To the extent that any two or more Incentive Options violate this          
limitation, the excess Options shall be treated as Nonstatutory Options. For    
purposes of this Section 6.9, Incentive Options shall be taken into account in  
the order in which they are granted, and the Fair Market Value of the Shares    
shall be determined as of the time the Options with respect to such Shares are  
granted.                                                                        

F-5 

DEF 14A
189th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 189th
         6.9   Time of Granting Options. The date the Company is deemed to grant
an Option shall, for all purposes, be the date on which the Administrator       
decides to grant the Option, or such other date as the Administrator may        
designate. The Administrator shall notify each Employee or Consultant to whom an
Option is granted within a reasonable time after the date of grant.             

  6.10  No Employment Agreement. No Option Agreement, nor anything
contained in this Plan, shall confer upon any Optionee any right of employment  
or consulting relationship with the Company or interfere in any way with the    
right of the Optionee or the Company to terminate such employment or consulting 
relationship at any time, with or without cause.                                

 6.11  Notice of Disqualifying Disposition of Incentive Options.
Optionees shall give the Company written notice of any disposition of any Share 
acquired pursuant to exercise of an Incentive Option if the disposition occurs  
within (a) two years of the date the Option was granted or (b) one year of the  
date the Optionee purchased the Share, whichever occurs later. A disposition    
includes any sale, exchange, gift, or other transfer or attempted transfer of   
legal title. The notice shall include the Optionee's name, the number of Shares 
disposed of, and the dates and prices the Shares were acquired and disposed of. 
Failure to give such notice may result in the Company's failure to claim income 
tax deductions with respect to the issuance of the Shares.                      

6.12  Adjustments to Option Rights. Subject to the general    
limitations of this Plan, the Administrator may adjust the exercise price, term,
or any other provision of an Option (other than Options granted pursuant to     
Article 8) by canceling and regranting the Option or by amending or substituting
the Option. Options that have been so adjusted may have higher or lower exercise
prices, have longer or shorter terms, or be subject to different rights and     
restrictions than prior Options. The Administrator may also adjust the number of
Options granted to an Optionee by canceling outstanding Options or granting     
additional Options. Except for adjustments necessary to ensure compliance with  
any applicable state or federal law, no such adjustment shall impair an         
Optionee's rights under any Option Agreement without the consent of the         
Optionee.                                                                       

7.       EXERCISE OF OPTIONS.                                                   

     7.1   When Options Become Exercisable. Options shall be exercisable
in cumulative annual increments of at least 20% per year over five years from   
the date the Options are granted, but otherwise at such times and under such    
conditions as the Administrator may determine. Exercisability may also depend   
upon satisfaction of performance criteria by the Company and/or the Optionee.   
Options granted to officers and directors of the Company shall not be           
exercisable in whole or in part until six months after the date of grant. No    
Option shall be exercisable until the Company and the Optionee sign an Option   
Agreement acceptable to the Company.                                            

   7.2   No Fractional Shares.  An Option may not be exercised for a
fraction of a Share.                                                            

  7.3   Exercise Procedure. An Option is exercised when the person
entitled to exercise the Option gives written notice of exercise to the Company 
in accordance with the terms of the Option the Company receives full payment for
the Shares issuable upon such exercise. Full payment may consist of any         
consideration and method of payment allowable under Section 7.4 of this Plan,   
subject to the approval of the Administrator. Notwithstanding the exercise of an
Option, no right to vote or receive dividends or any other rights as a          
shareholder shall exist with respect to such Shares until the Company issues a  
stock certificate evidencing the Shares and the transfer agent makes an         
appropriate entry on the stock record books of the Company. The Company shall   
issue a stock certificate promptly upon valid exercise of an Option.            

F-6 

DEF 14A
190th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 190th
7.4  Payment for Shares. The Administrator shall determine the
consideration to be paid and the method of payment for Shares to be issued upon 
exercise of an Option. Unless the Optionee agrees to convert an Incentive Option
into a Nonstatutory Option or the Option will continue to meet the requirements 
of an Incentive Option, the Administrator shall not change the consideration to 
be paid or the method of payment after the date of grant. Consideration to be   
paid for Shares may consist entirely of                                         

(a)  cash;                                          

(b)  check;                                         

(c)  promissory note;                               

(d)  other Shares which                             

       (i)  in the case of Shares acquired upon exercise
          of an Option either have been owned by the
        Optionee for more than six months on the
       date of surrender or were not acquired,
         directly or indirectly, from the Company,
and                             

            (ii) have a Fair Market Value on the date of surrender
            equal to the aggregate exercise price of the
           Shares as to which the Option is exercised;

              (e)  delivery of a properly executed exercise notice together with
                 irrevocable instructions to a broker to promptly deliver to
                 the Company the amount of sale or loan proceeds required to
pay the exercise price;                   

(f)  any other lawful consideration; or             

     (g)  any combination of the foregoing methods of payment.

Unless the Company becomes a Delaware corporation, the Company shall not extend 
or guarantee credit to any Optionee in connection with an Option exercise in    
excess of the amount equal to the sum of the total aggregate exercise price of  
the Options exercised plus any federal and state income and employment tax      
liability incurred by the Optionee in connection with the Option exercise. If   
the Company becomes a Delaware corporation, the Company shall not extend or     
guarantee credit to the Optionee in connection with an Option exercise in excess
of the amount equal to the sum of that portion of the total aggregate exercise  
price of the Options exercised that exceeds the amount determined to be capital 
under Section 154 of the Delaware General Corporation Law plus any federal and  
state income and employment tax liability incurred by the Optionee in connection
with the Option exercise.                                                       

         7.5  Withholding Tax Obligations. At the time of exercise of an Option,
the Optionee shall pay to the Company by bank cashier's check or other form of  
payment acceptable to the Company, all applicable federal and state withholding 
and employment taxes as determined by the Company in its sole discretion. If    
authorized by the Administrator in its sole discretion, and if the Option has   
been held for six months or more, any Optionee may elect to have the Company    
withhold from the Shares to be issued upon exercise of the Option a number of   
Shares having a Fair Market Value as determined on the Tax Date equal to the    
amount required to be withheld. All such elections shall be in writing in a form
acceptable to the Administrator and shall be subject to the following           
restrictions:                                                                   

     (a)  the Optionee must make the election on or before the
applicable Tax Date;                      

F-7 

DEF 14A
191st Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 191st
       (b)  once made, the election shall be irrevocable as to the
                   particular Shares with respect to which the election is made;

             (c)  all elections shall be subject to the consent or disapproval
of the Administrator; and                 

            (d)  if the Optionee is subject to Rule 16b-3, the election must
                   comply with the applicable provisions of Rule 16b-3 and shall
                 be subject to such additional conditions or restrictions as
           may be required thereunder to qualify for the maximum
                   exemption from Section 16 of the Exchange act with respect to
Plan transactions.                        

8.       DISINTERESTED ADMINISTRATORS.                                          

    Members of the Board who serve as Administrator under Section 10.1
shall not be eligible to receive any additional options under this Plan or any  
other stock plan of the Company or any Affiliate, except as permitted by Rule   
16b-3.                                                                          

9.       ADJUSTMENTS OF AND CHANGES IN STOCK.                                   

       9.1  Adjustments. Subject to any required action by the shareholders,
the number of Shares covered by each outstanding Option, the number of          
additional Shares eligible for issuance under this Plan, and the per Share      
exercise price shall be proportionately adjusted upon any change in the Common  
Stock by reason of any stock split, reverse stock split, stock dividend,        
recapitalization, combination or reclassification of Shares, or other change    
affecting the outstanding Common Stock as a class without receipt of            
consideration, unless the change results in the termination of all outstanding  
Options. The Administrator shall make the adjustments. The Administrator's      
adjustments shall be final, binding, and conclusive. Except as expressly        
provided in this Plan, no issuance of stock of any class, or of securities      
convertible into stock of any class, shall affect the number or exercise price  
of Shares subject to outstanding Options.                                       

         9.2  Dissolution. The Board shall notify the Optionees at least fifteen
(15) days before any proposed dissolution or liquidation of the Company. The    
outstanding unexercised Options shall terminate immediately before the          
dissolution or liquidation of the Company.                                      

   9.3  Corporate Transactions. Upon the consummation of a Corporate
Transaction, all outstanding Options shall terminate to the extent not          
previously exercised or assumed by the successor corporation or its parent.     
Notwithstanding the foregoing, the Company may, in its discretion, at any time  
within 30 days before any scheduled closing of a Corporate Transaction, cancel  
all outstanding Options and pay to each Optionee (a) the estimated amount per   
Share that the Optionee would receive at the closing with respect to any Shares 
the Optionee would receive upon exercise immediately before the closing of all  
Options that would be exercisable on the closing date, minus (b) the aggregate  
exercise price of the exercisable Options. The Company may withhold from such   
amount any taxes that the Company is required to withhold.                      

9.4  Other Changes. Upon any other relevant change in the     
capitalization of the Company, the Administrator may, as it deems appropriate,  
provide for an equitable adjustment in the number of Shares then subject to this
Plan and to any outstanding Options, and to the exercise price of outstanding   
Options.                                                                        

F-8 

DEF 14A
192nd Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 192nd
    9.5   No Fractional Shares. No right to purchase fractional Shares
shall result from any adjustment to outstanding Options pursuant to this        
Article. Upon any such adjustment, the number of Shares subject to outstanding  
Options of each Optionee shall be rounded down to the nearest whole Share. The  
Company shall give notice of any adjustment to each holder of Options that have 
been so adjusted. Such adjustment (whether or not such notice is given) shall be
effective and binding for all purposes of this Plan.                            

10.      ADMINISTRATION OF PLAN.                                                

   10.1  Administration With Respect to Directors and Officers. With
respect to grants of Options to officers or directors of the Company, this Plan 
shall be administered by (a) the Board if the Board may administer this Plan in 
compliance with Rule 16b-3, or (b) a Committee of the Board, which shall be     
constituted in such a manner as to permit this Plan to comply with Rule 16b-3.  
Once appointed, such Committee shall continue to serve in its designated        
capacity until otherwise directed by the Board. From time to time the Board may 
increase the size of such Committee and appoint additional members thereof,     
remove members (with or without cause) and appoint new members, fill vacancies, 
however caused, and remove all members of the Committee and thereafter directly 
administer this Plan, all to the extent permitted by Rule 16b-3.                

       10.2  Administration With Respect to Consultants and Other Employees.
With respect to grants of Options to Employees or Consultants who are neither   
directors nor officers of the Company, this Plan shall be administered by (a)   
the Board or (b) a Committee of the Board, which shall be constituted in such a 
manner as to satisfy the legal requirements relating to the grant of Options and
the administration of Incentive Option plans. Once appointed, such Committee    
shall continue to serve in its designated capacity until otherwise directed by  
the Board. From time to time the Board may increase the size of such Committee  
and appoint additional members thereof, remove members (with or without cause)  
and appoint new members, fill vacancies, however caused, and remove all members 
of the Committee and thereafter directly administer this Plan, all to the extent
permitted by applicable law.                                                    

        10.3  Multiple Administrative Bodies. If permitted by Rule 16b-3, this
Plan may be administered by different bodies with respect to directors,         
non-director officers, and Employees and Consultants who are neither directors  
nor officers.                                                                   

      10.4  Powers of the Administrator. Subject to the provisions of this
Plan and in the case of a Committee, the specific duties delegated by the Board 
to the Committee, the Administrator shall have the authority, in its discretion:

          (a)  to determine the Fair market Value of the Common Stock;

              (b)  to select the Employees and Consultants to whom Options may
     from time to time be granted under this Plan;

(c)  to determine whether Options are granted;    

          (d)  to determine the number of Shares to be covered by each
Option;                                 

          (e)  to approve forms of Option Agreement for use under this
Plan;                                   

               (f)  to determine the terms and conditions, not inconsistent with
                the terms of this Plan, of any Option granted under this
                   Plan (including, but not limited to, the exercise price and
              any restriction or limitation on any Option and/or the
                   Shares relating thereto, based in each case on such factors
                    as the Administrator may determine, in its sole discretion);

F-9 

DEF 14A
193rd Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 193rd
              (g)  to determine whether and under what circumstances an Option
            may be settled in cash instead of Common Stock under
Section 10.5;                           

             (h)  to adopt rules and regulations for implementing this Plan;

(i)  to interpret this Plan; and                  

     (j)  to take such other action as is appropriate to the
administration of this Plan.            

     10.5  Buyout Provisions. The Administrator may at any time offer to
buy out for a payment in cash or Shares, an Option previously granted, based on 
such terms and conditions as the Administrator may establish and communicate to 
the Optionee at the time that the offer is made.                                

10.6  Rule 16b-3. Unless the Board determines otherwise in a  
specific case, Options granted to persons subject to Section 16(b) of the       
Exchange Act shall comply with Rule 16b-3 and shall contain such additional     
conditions or restrictions as may be required to qualify for the maximum        
exemption from Section 16(b) of the Exchange Act with respect to Plan           
transactions. In no event shall the Board take any action that would violate    
Section 10.1 of this Plan.                                                      

10.7  Effect of Administrator's Decision. All decisions,      
determinations, and interpretations of the Administrator shall be final and     
binding on all Optionees and any other persons having an interest in any        
Options.                                                                        

11.      AMENDMENT AND TERMINATION OF THE PLAN.                                 

   11.1  Amendment and Termination. The Board may at any time amend,
suspend, or terminate this Plan. Amendments to this Plan shall be subject to    
shareholder approval to the extent such approval is necessary to enable this    
Plan to comply with Rule 16b-3, Code Section 422, or any other applicable law or
regulation, including the requirements of the NASD or an established stock      
exchange if the Company is then subject to such requirements.                   

      11.2  Effect of Amendment or Termination. Except as provided in this
Plan or in an Option Agreement, no amendment, suspension, or termination of this
Plan shall alter or impair the rights of any Optionee under any Option          
outstanding at the time without the written consent of the Optionee.            

      11.3  Amendments Required by Code. Notwithstanding the provisions of
Section 11.2, the Board hereby reserves the right to amend or modify this Plan  
and any Options outstanding to the extent necessary to qualify Options for such 
favorable federal income tax treatment as may be afforded employee stock options
under Code Section 422 and regulations subsequently promulgated thereunder.     

12.      CONDITIONS UPON ISSUANCE OF SHARES.                                    

The Company shall obtain all approvals and permits required by
regulatory authorities who have jurisdiction over this Plan, the Options, or the
Shares (including, without limitation, any stock exchange or market upon which  
the Shares may then be listed or traded) before implementing this Plan, granting
Options, or issuing Shares. The inability of the Company to obtain any such     
approvals or permits shall relieve the Company of any liability for failing to  
grant Options or issue Shares with respect to which such approval or permit has 
not have been obtained. As a condition to the exercise of an Option, the        

F-10

DEF 14A
194th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 194th
Company may require the person exercising such Option to represent and warrant  
at the time of exercise that the Shares are being purchased only for investment 
and without any present intention to sell or distribute such Shares if, in the  
opinion of counsel for the Company, such a representation is required by any    
applicable exemption from registration or qualification under federal or state  
law.                                                                            

13.      INFORMATION TO OPTIONEES.                                              

      The Company shall provide each Optionee, during the period for which
the Optionee has one or more Options outstanding, copies of all annual reports  
and other information that the Company provides to its shareholders. This       
Article 13 shall not be construed to require the Company to provide such        
information to employees whose duties in connection with the Company assure     
their access to equivalent information.                                         

14.      TAX STATUS.                                                            

       The Company does not hereby, nor by way of any plan, document, Option
Agreement, or otherwise, represent or warrant to any person, including the      
Optionees, that the grant or exercise of an Option or the subsequent disposition
of Shares obtained by the exercise of an Option pursuant to this Plan, or any   
other aspect of this Plan, will have any particular tax effect. Optionees are   
responsible for understanding the tax effects of the Options on them.           

15.      PLAN GOVERNS.                                                          

   If there is any inconsistency between this Plan and any documents
related to this Plan, including any Option Agreement, this Plan shall govern.   
Nothing contained in this Plan shall be construed to constitute, or be evidence 
of, any right in favor of any person to receive Options.                        

16.      APPLICABLE LAW; SEVERABILITY.                                          

         This Plan shall be governed and construed in all respects in accordance
with the laws of the State of California excluding its conflict of laws rules to
the extent such rules would apply the law of another jurisdiction. Incentive    
Options granted under this Plan shall be interpreted and administered in        
accordance with Code Section 422. If any provision is susceptible of more than  
one interpretation, it shall be interpreted in a manner consistent with this    
Plan being an Incentive Option plan. If any provision of this Plan is found by a
court of competent jurisdiction to be invalid or unenforceable, the remaining   
provisions shall continue to be fully effective.                                

F-11

DEF 14A
195th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 195th
SUPPLEMENT G

(Proposal No. 5)

Following is the entire text of the Company's Articles of     
Incorporation, as they now exist and as the Board of Directors proposes to amend
them. Material which would be changed by the proposed amendment is indicated by 
strikethrough, like this: 20,000,000 shares while material to be added is       
contained within brackets and printed in bold type and underlined, like this:   
[30,000,000] shares. Except as shown below, no changes would be made to the text
of these Articles of Incorporation if Proposal No. 5 is adopted by the          
Shareholders.                                                                   

AMENDED AND RESTATED

 ARTICLES OF INCORPORATION

OF

 MENDOCINO BREWING COMPANY, INC.
------------------------------------

 ARTICLE 1
NAME

  The name of the corporation is:  MENDOCINO BREWING COMPANY, INC.

 ARTICLE 2
 PURPOSE

  The purpose of the corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation 
Law of California, other than the banking business, the trust company business, 
or the practice of a profession permitted to be incorporated by the California  
Corporations Code.                                                              

 ARTICLE 3
 INITIAL AGENT FOR SERVICE

      The name and address in the State of the corporation's initial agent
for service of process is:                                                      
 Norman Franks
13351 Hwy. 101 South
 Hopland, CA 95449

 ARTICLE 4

G-1 

DEF 14A
196th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 196th
 ARTICLE 3
 AUTHORIZED SHARES

    Section 4.1 [3.1] Classes of Stock. The corporation is authorized to
issue two classes of shares designated "Common Stock" and "Preferred Stock,"    
respectively. The corporation shall have the authority to issue a total of      
20,000,000 [30,000,000] shares of Common Stock and 2,000,000 [10,000,000] shares
of Preferred Stock. The Common Stock is sometimes referred to as "Common Shares"
and the Preferred Stock is sometimes referred to as "Preferred Shares." Holders 
of Common Shares are sometimes referred to as "Common Shareholders" and holders 
of Preferred Shares are sometimes referred to as "Preferred Shareholders."      

      Section 4.2 [3.2] Authorized Series of Preferred Stock. Of the total
authorized share [shares] of Preferred Stock, 275,000 shares are designated     
Series A Preferred Stock ("Series A Shares"). Holders of the Series A Shares are
sometimes referred to herein as "Series A Shareholders."                        

         Section 4.3 [3.3] Undesignated Series of Preferred Stock. Any remaining
undesignated shares of Preferred Stock may be divided into such number of       
additional Series as the Board of Directors may determine. The Board of         
Directors is authorized to determine and alter the rights, preferences,         
privileges, and restrictions granted to and imposed upon any wholly unissued    
series of Preferred Stock, to fix the number of shares of any series of         
Preferred Stock, and to set the designation of any series of Preferred Stock.   
The Board of Directors, within the limits and restrictions stated in any        
resolution or resolutions of the Board of Directors originally fixing the number
of shares constituting any series, may increase or decrease the number of shares
of any Series after shares of that series have been issued. The Board of        
Directors may not, however, reduce any series below the number of shares of such
series then outstanding.                                                        

 ARTICLE 5 [4]
 DIVIDENDS

      Section 5.1 [4.1 Dividends on Series A] Preferred Share Rates [Stock].
The Series A Shareholders shall receive dividends equal in the aggregate to     
$1.00 per Series A Share before any dividend is paid on the Common Shares or any
other series of Preferred Shares (the "Preferred Dividend"). When the entire    
Preferred Dividend has been paid, the Series A Shares shall automatically be    
cancelled and shall cease to be outstanding for all purposes, and the Series A  
Shares shall resume the status of authorized but unissued and undesignated      
Preferred Shares. Stock.                                                        

     Section 5.2 [ 4.2 Dividends on Other Series of Preferred Stock. The
Board of Directors shall have the authority, consistent with the provisions of  
Section 3.3, above, to fix the dividends and dividend preferences of any series 
of Preferred Stock other than the Series A Preferred Stock; provided that so    
long as any share of Series A Preferred Stock remains outstanding no series of  
Preferred Stock may be granted dividend rights which are senior to those of the 
Series A Preferred Stock.                                                       

  Section 4.3] Dividends on Common Shares. The corporation may pay
dividends with respect to the Common Shares if and only if the corporation has  
paid the entire Preferred Dividend on the Series A Shares and the Series A      
Shares have been cancelled. The corporation may at any time declare and pay a   
dividend with respect to the Common Shares payable solely in Common Shares.     

      Section 5.3 [4.4] Conditions to All Dividends. Dividends are payable
only at the times and to the extent declared by the Board of Directors.         
Dividends may be payable quarterly or otherwise as the Board of Directors may   
determine from time to time. The corporation shall distribute any declared      
dividend to each shareholder entitled to receive the dividend simultaneously.   
Dividends are payable only out of assets legally available for that purpose.    
Dividends shall not cumulate. No right to a dividend shall accrue unless the    
dividend is declared by the Board of Directors. The Board of Directors may      
rescind the declaration of a dividend to the extent that the dividend has not   
been paid if each shareholder is treated ratably in accordance with the         
shareholder's preferences with respect to the dividend.                         

 G-2

DEF 14A
197th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 197th
      Section 5.4 [4.5] Service Shares. "Service Shares" are Common Shares
held by an employee, director, or other person who is providing services to the 
corporation issued pursuant to an agreement that gives the corporation the right
to repurchase the shares upon the occurrence of certain events (such as         
termination of employment). Section 503 of the California Corporations Code does
not apply to any repurchase of Service Shares by the corporation.               

   Section 5.5 [4.6] Restriction on Repurchase of Junior Shares. The
corporation may repurchase shares other than the Series A Shares only if (a) the
Preferred Dividend on the Series A Shares has been paid in full and the Series A
Shares have been cancelled; or (b) the shares to be repurchased are Service     
Shares.                                                                         

 ARTICLE 6 [5]
 LIQUIDATION

       Section 6.1 [5.1] Order of Distribution. Following dissolution of the
corporation, the assets of the corporation shall be distributed first to the    
Series A Shareholders in an amount equal to their aggregate Liquidation         
Preference (as defined below), and second [then, in the order of seniority, to  
any holders of any Series of Preferred Shares which may be junior with respect  
to liquidation rights to the Series A Preferred Stock, and then] to the Common  
Shareholders.                                                                   

       Section 6.2 [5.2] Liquidation Preferences. The Liquidation Preference
of the Series A Shareholders is an amount per share equal to the unpaid         
Preferred Dividend of a Series A Share. Upon dissolution of the corporation, any
declared but unpaid Preferred Dividends on the Series A Shares shall            
automatically be cancelled. When the entire Liquidation Preference of the Series
A Shareholders has been paid, the Series A Shares shall automatically be        
cancelled and shall cease to be authorized or outstanding for all purposes.     

         Section 6.3 [5.3] Insufficient Assets. If assets of the corporation are
not sufficient to distribute the entire Liquidation Preference to the Series A  
Shareholders, the entire assets of the corporation shall be distributed among   
the Series A Shareholders in accordance with their Series A Shares.             

 Section 6.4 [5.4] Service Shares. Section 502 of the California
Corporations Code does not apply to any repurchase of Service Shares by the     
corporation.                                                                    

   Section 6.5 [5.5] Restriction on Repurchase of Junior Shares. The
corporation may repurchase shares other than the Series A Shares only if (a) the
corporation has sufficient net assets to enable it to pay the Series A          
Shareholders the full amount of their Liquidation Preference at the time of the 
repurchase; or (b) the shares to be repurchased are Service Shares.             

ARTICLE 7 VOTING RIGHTS 
[6 PREFERRED STOCK VOTING RIGHTS] 

     Except as otherwise required by law, the Preferred Shares shall not
vote on any matter.                                                             

        [Section 1. Voting Rights of the Series A Preferred Stock. The holders
of Series A Preferred Stock shall have no voting rights, except to the extent   
required by law.                                                                

G-3 

DEF 14A
198th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 198th
        Section 2 Voting Rights of Other Classes of Preferred Stock. The Board
of Directors shall have the authority, consistent with the provisions of Section
3.3, above, to fix the voting rights of any series of Preferred Stock other than
the Series A Preferred Stock.]                                                  

 ARTICLE 8 [7]
LIABILITY OF DIRECTORS

    Section 8.1 [7.1] Limitation of Directors' Liability. The liability of the
directors of the corporation for monetary damages shall be eliminated to the    
fullest extent permissible under California law.                                

        Section 8.2 [7.2] Indemnification of Corporate Agents. The corporation
is authorized to provide indemnification of agents (as defined in Section 317 of
the Corporations Code) through bylaw provisions, agreements with agents, vote of
shareholders or disinterested directors or otherwise, in excess of the          
indemnification otherwise permitted by Section 317 of the California            
Corporations Code, subject only to the applicable limits set forth in Section   
204 of the California Corporations Code with respect to actions for breach of   
duty to the corporation and its shareholders.                                   

        Section 8.3 [7.3] Repeal or Modification. No repeal or modification of
Sections 8.1 [7.1] or 8.2 [7.2] shall adversely affect any right of             
indemnification or limitation of liability of an agent of the corporation       
relating to acts or omissions that occur before such repeal or modification.    

G-4 

DEF 14A
199th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 199th
 THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
 MENDOCINO BREWING COMPANY, INC.

 THIS PROXY IS FOR USE BY HOLDERS OF COMMON STOCK ONLY
IT MAY NOT BE USED TO VOTE ANY SHARES OF PREFERRED STOCK

       The undersigned holder of shares of Common Stock of MENDOCINO BREWING
COMPANY, INC., a California corporation (the "Company") hereby acknowledges     
receipt of the Notice of Annual Meeting of Shareholders and Proxy Statement,    
each dated May 11, 2001, and appoints Dr. Vijay Mallya, Jerome Merchant, and    
Yashpal Singh, and each of them, as proxy of the undersigned with power of      
substitution and revocation, to represent the undersigned at the Annual Meeting 
of the Shareholders of the Company, to be held on June 28, 2001 at 11:00 a.m. at
the Ukiah Valley Conference Center located at 200 South School Street, Ukiah,   
California, and at any adjournment thereof, and to vote all shares of Common    
Stock which the undersigned would be entitled to vote as if the undersigned were
present and voting the shares.                                                  

THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE 
UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR  
PROPOSALS NO. 1, 2, 4, 5, AND 6 AND FOR THE ELECTION OF THE NOMINEES NAMED IN   
PROPOSAL NO. 3 AS DESCRIBED IN THE ACCOMPANYING PROXY STATEMENT. IN THEIR       
DISCRETION, THE PROXY HOLDERS ARE ALSO AUTHORIZED TO VOTE UPON SUCH OTHER       
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.                               

If you wish to vote in accordance with the Board of Directors'
recommendations, just sign on the reverse side. You do not need to mark any     
boxes.                                                                          

/X/    Please mark votes as in this example.                  

 The Board of Directors recommends a vote FOR Proposals 1 through 6.

1.   To approve a Share Purchase Agreement dated November 3, 2000, between the  
Company, Inversiones Mirabel, S.A., and Golden Eagle Trust, and the   
transactions contemplated thereby.                                    

    / / For           / / Against            / / Abstain

2.   To amend the Company's Bylaws to allow for the election of up to nine      
Directors.                                                            

    / / For           / / Against            / / Abstain

DEF 14A
200th Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 200th
3.   Election of Directors:                                                     

    a.   Election of the 7 Directors nominated by the Board (or if any nominee
     is not available for election, such substitute(s) as the Board of
    Directors may designate). (To WITHHOLD authority to vote for any
       individual nominee or nominees strike a line through that nominee's
        name in the list below. To WITHHOLD authority to vote for ALL of the
Board's nominees, check the appropriate box below.)         

          Nominees: Vijay Mallya, Michael Laybourn, Robert Neame, Kent D. Price,
             Sury Rao Palamand, Jerome Merchant, and Yashpal Singh

/ /  FOR ALL                   / /  WITHHOLD FOR ALL        

     b.   If Proposals 1 and 2 are approved, election of nominee David Townshend
        as Director (or if he is not available for election, such substitute
as the Board of Directors may designate).                   

/ /  FOR                       / /  WITHHOLD                

4    To approve an amendment to the Company's 1994 Stock Option Plan, increasing
 the number of shares for which options may be granted under the Plan to
1,000,000 shares.                                                     

/ /  FOR            / /  AGAINST          / /  ABSTAIN                

5    To approve an amendment to the Company's Articles of Incorporation,        
 increasing the authorized number of shares of Company Common Stock from
     20,000,000 to 30,000,000 shares, increasing the authorized number of shares
of Company Preferred Stock from 2,000,000 to 10,000,000 shares, and   
making certain other changes.                                         

/ /  FOR            / /  AGAINST          / /  ABSTAIN                

6.   To ratify the appointment of Moss Adams, L.L.P. as independent auditors of 
the Company for the current fiscal year.                              

/ /  FOR            / /  AGAINST          / /  ABSTAIN                

  MARK HERE      / /                 MARK HERE       / /
FOR ADDRESS                        IF YOU PLAN      
CHANGE AND                         TO ATTEND        
NOTE AT LEFT                       THE MEETING      

      Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or guardian,   
please give full title as such.                                                 

Signature:                                           Date:                      
        ----------------------------------              --------------------
Signature:                                           Date:                      
        ----------------------------------              --------------------

DEF 14A
Last Page of 201
TOC
1st
Previous
Next
↓Bottom
Just 201st
 THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
 MENDOCINO BREWING COMPANY, INC.

 THIS PROXY IS FOR USE BY HOLDERS OF SERIES A PREFERRED STOCK ONLY
 IT MAY NOT BE USED TO VOTE ANY SHARES OF COMMON STOCK

 The undersigned holder of shares of Series A Preferred Stock of
MENDOCINO BREWING COMPANY, INC., a California corporation (the "Company") hereby
acknowledges receipt of the Notice of Annual Meeting of Shareholders and Proxy  
Statement, each dated May 10, 2001, and appoints Dr. Vijay Mallya, Jerome       
Merchant, and Yashpal Singh, and each of them, as proxy of the undersigned with 
power of substitution and revocation, to represent the undersigned at the Annual
Meeting of the Shareholders of the Company, to be held on June 28, 2001 at 11:00
a.m. at the Ukiah Valley Conference Center located at 200 South School Street,  
Ukiah, California, and at any adjournment thereof, and to vote all shares of    
Preferred Stock which the undersigned would be entitled to vote as if the       
undersigned were present and voting the shares.                                 

THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE 
UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR  
PROPOSAL NO. 5, AS DESCRIBED IN THE ACCOMPANYING PROXY STATEMENT. IN THEIR      
DISCRETION, THE PROXY HOLDERS ARE ALSO AUTHORIZED TO VOTE UPON SUCH OTHER       
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.                               

If you wish to vote in accordance with the Board of Directors'
recommendations, just sign below. You do not need to mark any boxes.            

/X/    Please mark votes as in this example.                  

The Board of Directors recommends a vote FOR Proposal No. 5.      

5      To approve an amendment to the Company's Articles of   
            Incorporation, increasing the authorized number of shares of
          Company Common Stock from 20,000,000 to 30,000,000 shares,
     increasing the authorized number of shares of Company
        Preferred Stock from 2,000,000 to 10,000,000 shares, and
making certain other changes.                   

    / / For           / / Against            / / Abstain

  MARK HERE      / /                 MARK HERE       / /
FOR ADDRESS                        IF YOU PLAN      
CHANGE AND                         TO ATTEND        
NOTE AT LEFT                       THE MEETING      

      Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or guardian,   
please give full title as such.                                                 

Signature:                                           Date:                      
        ----------------------------------              --------------------

Signature:                                           Date:                      
        ----------------------------------              --------------------

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘DEF 14A’ Filing		Date		First		Last			Other Filings
		3/30/02		58
		1/15/02		58
		12/31/01		4		26			10KSB
For Period End:		6/28/01		2		201			8-K
Filed as of:		5/11/01		2		199
Filed on:		5/10/01		201
		5/8/01		5		13
		4/30/01		36
		4/23/01		24		148
		4/11/01		24					8-K/A
		4/2/01		34		48
		4/1/01		45		51
		3/31/01		1					10QSB
		2/1/01		33
		1/31/01		33
		12/31/00		24		165			10KSB
		11/9/00		1					PRE 14A
		11/7/00		29		33
		11/3/00		4		199			8-K/A
		11/2/00		154
		10/2/00		24
		6/10/00		24
		6/2/00		24
		5/17/00		24
		4/27/00		23
		4/15/00		23
		3/29/00		23					8-K
		3/28/00		28		34
		1/25/00		23
		1/1/00		32
		12/31/99		24		165			10KSB
		12/2/99		23
		10/10/99		23		24
		10/1/99		23		24
		8/31/99		44
		8/30/99		23		45
		6/15/99		23
		5/25/99		23
		5/1/99		22
		4/30/99		39					DEF 14A
		4/9/99		23
		3/25/99		149
		2/1/99		149
		1/5/99		22
		1/1/99		154
		12/31/98		43					10KSB
		12/24/98		44
		11/16/98		149
		10/6/98		22
		5/11/98		22					DEF 14A
		4/1/98		44
		3/18/98		22
									List all Filings