Effective December 22, 2016, Mendocino Brewing Company, Inc. and Releta Brewing Company LLC as Borrowers and MB Financial Bank, N.A. (“Lender”), successor in interest to Cole Taylor Bank entered into a Seventh Amendment to the Credit and Security Agreement by and between the Borrowers and Cole Taylor Bank dated June 23, 2011, as previously amended on March 29, 2013, January 21, 2015, June 20, 2016, July 22, 2016, September 21, 2016, and October 18, 2016. The Agreement provides the Borrowers a credit facility, secured by the personal property of the Company and RBC, and the Ukiah, California facility, among other items of the Borrowers’ property. Prior to the Seventh Amendment, the credit facility was to mature on December 31, 2016, and consisted of a $1,250,000 revolving facility, a $1,934,000 machinery and equipment term loan, a $2,947,000 real estate term loan and a $1,000,000 capital expenditure line of credit. Borrowers advised the Lender that they were unable to pay the Obligations (as defined in the Agreement) by the current maturity date of December 31, 2016 and requested that the Lender amend the Credit Agreement to extend the current maturity date. The Seventh Amendment extends the maturity date of the Credit Agreement from December 31, 2016 to January 31, 2017. Lender has absolutely no commitment and has made no agreement to extend the maturity date beyond January 31, 2017. In connection with the Seventh Amendment, Borrowers paid a $10,000 amendment fee to the Lender, which was charged to the revolving line of credit provided by Lender under the Agreement. The Seventh Amendment also confirms the continuance of certain events of default under the Agreement. The Borrowers have previously received notices from the Lender regarding the exercise of rights related to events of default on September 18, 2013, April 18, 2014 and August 18, 2014. Pursuant to the Agreement, the Borrowers must maintain certain financial metrics. As stated in the Seventh Amendment, the Borrowers have continued to be in default on the fixed charge coverage ratio as of the period ending October 31, 2016 and the dates set forth in the Second Amendment. The fixed charge coverage ratio is required to be 1.15 to 1.00. As of September 30, 2016, the fixed charge coverage ratio was -1.02 to 1.00. The Seventh Amendment also states that the tangible net worth of the Borrowers has continued to fall short of the required amount as of the period ending October 31, 2016 and the dates set forth in the Second Amendment. The Company calculates the required tangible net worth of the Borrowers to be $6,181,400 as of September 30, 2016 and the actual tangible net worth on such date to be $3,317,200. The Company does not anticipate that the Borrowers will be able to regain compliance with the required fixed charge coverage ratio or the minimum tangible net worth in the near future.