EXHIBIT 10.1


                     EXCHANGE AND RECAPITALIZATION AGREEMENT

         THIS EXCHANGE AND RECAPITALIZATION AGREEMENT ("Agreement"), dated as of
June 30, 2004,  and signed at 8:00 p.m.,  Seattle,  Washington  time on June 30,
2004 between Redhook Ale Brewery,  Incorporated, a Washington corporation having
an office at 14300 NE 145th Street,  Woodinville,  Washington 98072 ("Redhook"),
and Anheuser-Busch, Incorporated, a Missouri corporation having an office at One
Busch Place, St. Louis, Missouri 63118 ("ABI").

                              W I T N E S S E T H:

         WHEREAS, ABI or its designee currently holds 1,289,872 shares of Series
B Preferred  Stock,  par value $0.005 per share, of Redhook ("Series B Preferred
Stock") and  953,470  shares of Common  Stock,  par value  $0.005 per share,  of
Redhook ("Common Stock").

         WHEREAS,  ABI and Redhook  desire that,  upon the terms and  conditions
hereinafter provided,  ABI shall transfer all shares of Series B Preferred Stock
to  Redhook  in  exchange  for  Redhook's  issuance  and  delivery  to ABI of an
additional  1,808,243  shares of Common  Stock and a payment  by Redhook to ABI,
such  transfer,  exchange and payment to qualify as a tax-free  recapitalization
under IRC Section 368(a)(1)(E).

         NOW,  THEREFORE,  in  consideration  of the premises and the  covenants
hereinafter  contained and intending to be legally bound hereby, it is agreed as
follows:

I.       DEFINITIONS

         "ABI  Competitor"  shall  mean  any  person  that,  together  with  the
Affiliates of such Person,  has annual alcohol beverage sales of $100,000,000 or
more in North  America  (such number to be adjusted  annually in  proportion  to
changes in the Consumer Price Index from the date hereof).

         "Affiliate"  shall mean,  with  respect to any Person,  (i) each Person
that, directly or indirectly,  owns or controls,  whether beneficially,  or as a
trustee,  guardian or other  fiduciary,  5% or more of the Stock having ordinary
voting power in the  election of  directors of such Person,  or (ii) each Person
that  controls,  is controlled by or is under common control with such Person or
any Affiliate of such Person. For the purpose of this definition, "control" of a
Person shall mean the possession, directly or indirectly, of the power to direct
or cause the  direction  of its  management  or  policies,  whether  through the
ownership of voting securities,  by contract or otherwise. The term "Affiliated"
shall have meanings correlative to the foregoing.

         "A-BC"   shall  mean   Anheuser-Busch   Companies,   Inc.,  a  Delaware
corporation and the parent corporation of ABI.

         "Business  Day"  shall  mean a day of the year on which  banks  are not
required  or  authorized  to  close  in the  States  of  Missouri,  New York and
Washington.

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         "CBA" shall mean Craft Brands Alliance LLC.

         "CBA Distribution Agreement shall mean the Master Distributor Agreement
between Craft Brands  Alliance LLC and ABI dated July 1, 2004, as such agreement
may be  amended,  supplemented  or  otherwise  modified  from  time  to  time in
accordance with the terms thereof.

         "Charges"  shall mean all  federal,  state,  county,  city,  municipal,
local,  foreign or other  governmental  (including,  without  limitation,  PBGC)
taxes,  levies,  assessments,  charges,  liens,  claims or encumbrances  upon or
relating to (i) Redhook's or any of its Subsidiaries' employees, payroll, income
or gross receipts,  (ii) Redhook's or any of its Subsidiaries'  ownership or use
of any of its  assets,  or (iii) any other  aspect  of  Redhook's  or any of the
Subsidiaries' business.

         "Closing" shall have the meaning set forth in Section 2.2.

         "Closing Date" shall have the meaning set forth in Section 2.2.

         "Common Stock" shall initially mean the common stock,  par value $0.005
per  share,  of  Redhook  and shall  thereafter  mean any shares of any class or
classes   of   capital   stock   resulting   from   any    reclassification   or
reclassifications  thereof or otherwise  issued and which have no  preference in
respect  of  dividends  or of  amounts  payable  in the  event of  voluntary  or
involuntary liquidation,  dissolution or winding up of Redhook and which are not
subject to redemption by Redhook.

         "Confidential  Information" shall have the meaning set forth in Section
8.10.

         "Distribution  Agreement" shall mean the Master  Distributor  Agreement
between Redhook and ABI, dated as of the Closing Date and  substantially  in the
form  attached   hereto  as  Exhibit  A,  as  such  agreement  may  be  amended,
supplemented  or otherwise  modified  from time to time in  accordance  with the
terms thereof.

         "Environmental  Laws"  shall mean all  federal,  state and local  laws,
statutes,  ordinances and regulations,  now or hereafter in effect,  and in each
case as  amended  or  supplemented  from  time to  time,  and  any  judicial  or
administrative  interpretation  thereof,  including any  applicable  judicial or
administrative  order,  consent  decree or judgment,  relative to the applicable
property, relating to the regulation and protection of human health, safety, the
environment and natural resources (including,  without limitation,  ambient air,
surface  water,  groundwater,  wetlands,  land  surface  or  subsurface  strata,
wildlife,  aquatic species and vegetation).  Environmental  Laws include but are
not  limited to the  Comprehensive  Environmental  Response,  Compensation,  and
Liability Act of 1980, as amended (42 U.S.C.  ss.9601 ET SEQ.)  ("CERCLA");  the
Hazardous Material  Transportation Act, as amended (49 U.S.C.  ss.1801 ET SEQ.);
the Federal  Insecticide,  Fungicide,  and Rodenticide Act, as amended (7 U.S.C.
ss.136 ET SEQ.);  the Resource  Conservation  and  Recovery  Act, as amended (42
U.S.C.  ss.6901 ET SEQ.) ("RCRA");  the Toxic Substance  Control Act, as amended
(15 U.S.C.  ss.2601 ET SEQ.); the Clean Air Act, as amended (42 U.S.C. ss.740 ET
SEQ.); the Federal Water Pollution Control Act, as amended (33 U.S.C. ss.1251 ET
SEQ.); the Occupational  Safety and Health Act, as amended (29 U.S.C.  ss.651 ET
SEQ.) ("OSHA");  and the Safe Drinking Water Act, as amended (42 U.S.C.  ss.300f
ET SEQ.), and all analogous state and local  counterparts or equivalents and any
transfer of ownership notification or approval statutes.

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<PAGE>


         "ERISA" shall mean the Employee  Retirement Income Security Act of 1974
(or any  successor  legislation  thereto),  as amended from time to time and any
regulations promulgated thereunder.

         "ERISA  Affiliate"  shall mean,  with respect to Redhook,  any trade or
business  (whether or not  incorporated)  under common  control with Redhook and
which,  together  with  Redhook,  are  treated as a single  employer  within the
meaning of Section 414 (b), (c), (m) or (o) of the IRC.

         "Facility" shall have the meaning set forth in Section 4.10.

         "Fiscal Year" shall mean the calendar year.  Subsequent  changes of the
fiscal year of Redhook  shall not change the meaning of the term "Fiscal  Year,"
unless ABI shall consent in writing to such changes.

         "Fully Diluted Basis" shall mean that, for purposes of calculating  any
Person's   percentage   ownership  of  the  Common  Stock,  all  convertible  or
exchangeable  securities  shall be deemed to have been  converted  and exchanged
into the shares of Common Stock into which they are convertible and exchangeable
and all employee  stock  options with an exercise  price of not more than $2.165
per share shall be assumed to be exercised  into the shares of Common Stock into
which they,  pursuant to their terms, may then or thereafter upon the passage of
time be exercised.

         "GAAP"  shall mean  generally  accepted  accounting  principles  in the
United States of America as in effect from time to time.

         "Governmental Authority" shall mean any nation or government, any state
or other  political  subdivision  thereof,  and any agency,  department or other
entity exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.

         "Group"  shall  mean any Group as  defined  by  Sections  13(d)(3)  and
14(d)(2) of the Securities Exchange Act.

         "Hazardous  Material"  shall mean any  substance,  chemical,  compound,
product,  solid,  gas,  liquid,  waste,  byproduct,  pollutant,  contaminant  or
material  which is hazardous or toxic,  and includes,  without  limitation,  (a)
asbestos,  polychlorinated  biphenyls and petroleum  (including crude oil or any
fraction  thereof)  and  (b)  any  such  material  classified  or  regulated  as
"hazardous,"  "dangerous" or "toxic" or like terms pursuant to the Comprehensive
Environmental  Response,  Compensation  and Liability Act of 1980, as amended by
the Superfund  Amendments and Reauthorization Act of 1986, 42 U.S.C.  ss.ss.9601
ET SEQ.,  Solid Waste Disposal Act, as amended by the Resource  Conservation and
Recovery Act of 1976 and Hazardous and Solid Waste Amendments of 1984, 42 U.S.C.
ss.ss.6901 ET SEQ., Federal Water Pollution Control Act, as amended by the Clean
Water  Act of 1977,  33 U.S.C.  ss.ss.1251  ET SEQ.,  Clean Air Act of 1966,  as
amended, 42 U.S.C.  ss.ss.7401 ET SEQ., Toxic Substances Control Act of 1976, 15
U.S.C. ss.ss.2601 ET SEQ., or Hazardous Materials  Transportation Act, 49 U.S.C.
App.  ss.ss.1801  ET SEQ.  and all  analogous  state and local  counterparts  or
equivalents.

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<PAGE>


         "Independent  Directors"  shall  mean  those  members  of the  Board of
Directors  of Redhook  that are deemed to be  independent  of Redhook  under the
rules promulgated by NASDAQ Stock Market, Inc.

         "Initial  Registration  Rights  Agreement"  shall mean the Registration
Rights  Agreement  dated as of October 18, 1994 between Redhook and ABI, as such
agreement has been amended and supplemented to the date hereof.

         "Investment  Agreement" shall mean the Investment Agreement dated as of
October 18, 1994 between Redhook and ABI, as such agreement has been amended and
supplemented to the date hereof.

         "Involuntary  Acquisition"  shall mean, with respect to any Person, the
purchase or  acquisition of Stock by such Person as a result of any stock split,
dividend, distribution, rights offering by Redhook or any Subsidiary of Redhook,
recapitalization  of Redhook,  reclassification  or other change in the terms of
the Stock,  or conversion or exchange of, or adjustment in the  conversation  or
exchange ratio of any exercisable,  convertible or exchangeable security held by
such Person or any other Person.

         "IRC" shall mean the Internal Revenue Code of 1986, as amended, and any
successor thereto.

         "IRS"  shall  mean  the  Internal  Revenue  Service,  or any  successor
thereto.

         "Lien" shall mean any mortgage or deed of trust, pledge, hypothecation,
assignment,   deposit  arrangement,  lien,  charge,  claim,  security  interest,
easement or encumbrance, or preference,  priority or other security agreement or
preferential  arrangement of any kind or nature whatsoever  (including,  without
limitation,  any lease or title retention agreement,  any financing lease having
substantially  the same economic effect as any of the foregoing,  and the filing
of, or agreement to give, any financing statement perfecting a security interest
under the Uniform Commercial Code or comparable law of any jurisdiction).

         "Material  Adverse Effect" shall mean a material  adverse effect on the
business, assets, operations, affairs or financial or other condition of Redhook
and its Subsidiaries taken as a whole.

         "Material  Contracts"  shall  mean  (i)  all  of  Redhook's  contracts,
agreements,  leases or other instruments to which Redhook is a party or by which
Redhook or its properties are bound, which involves payments by or to Redhook of
more than $500,000, (ii) all of Redhook's loan agreements,  bank lines of credit
agreements,   indentures,   mortgages,  deeds  of  trust,  pledge  and  security
agreements, factoring agreements, conditional sales contracts, letters of credit
or other debt  instruments,  (iii) all operating or capital leases for equipment
to which Redhook is a party which involves  aggregate  payments by or to Redhook
of more than $500,000,  (iv) all  noncompetition and similar agreements to which
Redhook  is a party,  (v) all  guarantees  by  Redhook,  (v) all  contracts  and
agreements  between  Redhook  and the  wholesalers  of its  products,  (vi)  all
contracts relating to the license of trademarks or other intellectual  property,
other than  non-exclusive  licenses of which Redhook is the licensee,  and (vii)
all contracts  relating to the brewing or distribution of malt beverage products
and (viii) all other contracts,  oral or written,  that Redhook  considers to be
material to the business,  assets,  operations,  prospects or financial or other
condition of Redhook and its Subsidiaries taken as a whole.

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<PAGE>


         "Multiemployer  Plan" shall mean a  "multiemployer  plan" as defined in
Section 4001 (a)(3) of ERISA,  and to which Redhook,  any of its Subsidiaries or
any ERISA Affiliate is making,  is obligated to make, has made or been obligated
to make, contributions on behalf of participants who are or were employed by any
of them.

         "Original  Distribution  Agreement"  shall mean the Master  Distributor
Agreement  between  Redhook  and ABI dated  October  18,  1994,  as  amended  or
modified.

         "PBGC"  shall mean the  Pension  Benefit  Guaranty  Corporation  or any
successor thereto.

         "Pension Plan" shall mean an employee  pension benefit plan, as defined
in Section (3)(2) of ERISA (other than a  Multiemployer  Plan),  which is not an
individual  account  plan,  as  defined  in  Section  3(34) of ERISA,  and which
Redhook,  any of its  Subsidiaries  or, if a Title IV Plan, any ERISA  Affiliate
maintains,  contributes  to or has an  obligation  to contribute to on behalf of
participants who are or were employed by any of them.

         "Person" shall mean any individual,  sole proprietorship,  partnership,
joint venture, trust,  unincorporated  organization,  association,  corporation,
institution,  public benefit corporation, entity or government (whether federal,
state, county, city, municipal or otherwise,  including, without limitation, any
instrumentality, division, agency, body or department thereof).

         "Plan" shall mean, with respect to Redhook or any ERISA  Affiliate,  at
any time, an employee  benefit plan, as defined in Section 3(3) of ERISA,  which
Redhook  or  any  of  its  Subsidiaries  maintains,  contributes  to or  has  an
obligation to contribute to on behalf of  participants  who are or were employed
by any of them.

         "Purchaser" shall have the meaning assigned to it in Section 5.3 (c).

         "Purchasing  Contract" shall mean that letter agreement between ABI and
Redhook dated November 21, 2002.

         "Qualified  Plan"  shall mean an  employee  pension  benefit  plan,  as
defined in Section 3(2) of ERISA,  which is intended to be  tax-qualified  under
Section 401 (a) of the IRC, and which Redhook,  any of its  Subsidiaries  or any
ERISA Affiliate maintains,  contributes to or has an obligation to contribute to
on behalf of participants who are or were employed by any of them.

         "Qualified  Takeover  Defense Plan" shall mean any  shareholder  rights
plan or provision of the articles of  incorporation  or bylaws of Redhook or any
Subsidiary of Redhook or other  contract,  security or  arrangement in each case
applicable to and intended to deter or delay, or with the



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<PAGE>



reasonably anticipated consequences of deterring or delaying, the acquisition of
a specified percentage of Redhook's voting stock or the merger, consolidation or
share  exchange of Redhook  with or into any other  Person  that,  except in the
event of an  acquisition  or proposed  acquisition by any Person of an aggregate
percentage of the outstanding Common Stock or other securities of Redhook having
ordinary voting power in the election of directors of Redhook  specified therein
or the merger, consolidation or share exchange of Redhook with or into any other
Person,  does not provide  holders of Stock of Redhook with economic,  voting or
other  substantive  rights and that,  except in the event of an  acquisition  or
proposed  acquisition by ABI or its Affiliates of an aggregate percentage of the
outstanding  Common Stock or other  securities of Redhook having ordinary voting
power in the election of directors of Redhook  specified  therein or the merger,
consolidation  or share exchange of Redhook with or into ABI or its  Affiliates,
provides ABI or its Affiliates with the same rights generally  provided to other
holders of Stock.  The terms of a Qualified  Takeover  Defense Plan shall not be
applicable to, and no rights under a Qualified Takeover Defense Plan shall arise
as a result of, (a) the  acquisition  or  purchase by ABI or its  Affiliates  of
Stock if such purchase or  acquisition  does not result in ABI or its Affiliates
holding in excess of 35% in aggregate of the outstanding  Common Stock,  (b) any
Involuntary  Acquisition  by ABI or its  Affiliates,  (c)  any  increase  in the
percentage ownership of ABI or its Affiliates of the Common Stock resulting from
the  cancellation,  retirement or  acquisition  by Redhook or any  Subsidiary of
Redhook of any Stock,  (d) any  purchase or  acquisition  of Stock by ABI or its
Affiliates if the respective  entity disposes of shares of Common Stock equal to
the number of shares so  purchased  or acquired  within 10 Business  Days of the
date of such  purchase  or  acquisition,  or (e) any other  action by ABI or its
Affiliates if ABI or its Affiliates  eliminate the  consequences  of such action
within 10 Business Days of the date that it has occurred.

         "Registration  Rights  Agreement"  shall mean the  Registration  Rights
Agreement  by and  between  Redhook and ABI,  dated as of the  Closing  Date and
substantially in the form attached hereto as Exhibit B, as such agreement may be
amended, supplemented or otherwise modified from time to time in accordance with
the terms thereof.

         "Representatives" shall have the meaning set forth in Section 8.10.

         "Securities Act" shall mean the Securities Act of 1933, as amended.

         "Securities  Exchange  Act" shall mean the  Securities  Exchange Act of
1934, as amended.

         "Stock" shall mean all shares,  options,  warrants,  general or limited
partnership interests,  rights,  participations or other equivalents (regardless
of how  designated)  of or in a corporation,  partnership  or equivalent  entity
whether  voting or  nonvoting,  including,  without  limitation,  common  stock,
preferred stock, or any other "equity security" (as such term is defined in Rule
3a11-1 of the General Rules and  Regulations  promulgated  by the Securities and
Exchange Commission under the Securities Exchange Act).

         "Subsidiary"   shall  mean,  with  respect  to  any  Person,   (a)  any
corporation  of which an  aggregate  of more than 50% of the  outstanding  Stock
having  ordinary  voting  power to elect a majority of the board of directors of
such corporation (irrespective of whether, at the time, Stock of any other class
or classes of such  corporation  shall have or might have voting power by reason
of the happening of any  contingency)  is at the time,  directly or  indirectly,
owned legally or beneficially by such Person and/or one or more  Subsidiaries of
such Person, and (b) any partnership or other entity in which such Person and/or
one or more  Subsidiaries of such Person shall have an interest  (whether in the
form of voting or participation in profits or capital contribution) of more than
50%.


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<PAGE>


         "Termination  Date"  shall mean any date on which (i) the  Distribution
Agreement  is duly  terminated  or expires  pursuant to its terms,  (ii) the CBA
Distribution  Agreement is duly  terminated or expires  pursuant to its terms or
(iii) the products of Redhook are excluded from the CBA  Distribution  Agreement
pursuant to its terms.

         "Title IV Plan" shall mean a Pension Plan,  other than a  Multiemployer
Plan, which is covered by Title IV of ERISA.

         "Transaction  Documents"  shall mean this Agreement,  the  Distribution
Agreement,  the  Registration  Rights  Agreement,  the  Purchasing  Contract and
Redhook's guaranty of CBA's obligations under the CBA Distribution Agreement.

         "Widmer" shall mean Widmer Brothers Brewing Company.

II.      THE EXCHANGE OF EQUITY SECURITIES

         2.1. EXCHANGE OF EQUITY SECURITIES. Subject to the terms and conditions
set forth in this  Agreement,  ABI  agrees to  transfer  and  deliver to Redhook
1,289,872  shares of Series B Preferred Stock and in exchange  therefor  Redhook
agrees  to issue and  deliver  to ABI  1,808,243  shares  of  Common  Stock.  In
addition, Redhook shall pay to ABI $2,000,000 on or before December 1, 2004.

         2.2. CLOSING. The closing of the exchange described in Section 2.1 (the
"Closing")  shall take place at the  offices of Riddell  Williams  PS,  1001 4th
Avenue Plaza,  Suite 4500,  Seattle  Washington  98154 commencing at 10:00 a.m.,
local  time,  on July 1, 2004 or such other date and time as Redhook and ABI may
mutually determine (the "Closing Date").

         On  the  Closing  Date,  ABI  shall  deliver  to  Redhook  certificates
representing  the Series B  Preferred  Stock and  Redhook  shall  deliver to ABI
certificates  representing  the Common  Stock to be  acquired  by ABI  hereunder
registered in such names and in such  denominations  as ABI  requests.  Promptly
upon receipt of the certificates for the Series B Preferred Stock, Redhook shall
cancel all shares of Series B Preferred  Stock and shall not reissue or transfer
any such shares.

         2.3. LEGENDS. Each certificate  representing the shares acquired by ABI
at the Closing shall bear a legend substantially in the following form:

         THE SHARES HAVE NOT BEEN  REGISTERED  UNDER THE  SECURITIES ACT OF 1933
("THE ACT") AND MAY NOT BE SOLD OR OTHERWISE  TRANSFERRED  EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION THEREFROM.



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<PAGE>



         The  legend  described  in  this  Section  2.3 and  any  legend  on any
certificate acquired by ABI prior hereto shall be removed promptly,  and Redhook
shall issue to ABI a new  certificate  without such legend with respect to which
(i) a prospectus meeting the requirements of Section 10 of the Securities Act is
available   or  (ii)  ABI  has  provided  to  Redhook  an  opinion  of  counsel,
satisfactory  in the  reasonable  judgment  of  Redhook,  that the public  sale,
transfer  or  assignment  thereof  may be made  without  registration  under the
Securities Act.

III.     ABI'S REPRESENTATIONS AND WARRANTIES

         ABI makes the following representations and warranties to Redhook, each
and all of which shall survive the execution and delivery of this  Agreement and
the Closing:

         3.1. CORPORATE EXISTENCE. ABI is a corporation duly organized,  validly
existing and in good standing under the laws of the State of Missouri.

         3.2.  CORPORATE  POWER;  AUTHORIZATION;  ENFORCEABLE  OBLIGATIONS.  The
execution,  delivery  and  performance  by  ABI of  this  Agreement,  the  other
Transaction  Documents to which it is a party and all  instruments and documents
to be delivered by ABI  hereunder and  thereunder  and the  consummation  of the
other  transactions  contemplated by any of the foregoing:  (i) are within ABI's
corporate  power;  (ii) have been duly  authorized  by all  necessary  corporate
action on the part of ABI;  (iii) are not in  contravention  of any provision of
ABI's  articles  of  incorporation  or bylaws;  (iv) will not violate any law or
regulation,  or any order or decree of any court or government  instrumentality;
(v) will not conflict with or result in the breach or termination of, constitute
a default  under or  accelerate  any  performance  required  by, any  indenture,
mortgage,  deed of trust, lease, agreement or other instrument to which ABI is a
party or by which ABI or any of its  property is bound;  (vi) will not result in
the  creation or  imposition  of any Lien upon any of the  property of ABI;  and
(vii) do not  require  the  consent  or  approval  of, or any filing  with,  any
Governmental  Authority  or any  other  Person.  This  Agreement  has been  duly
executed  and  delivered  by ABI and  constitutes  a legal,  valid  and  binding
obligation of ABI, enforceable against it in accordance with its terms, subject,
as to the enforceability  thereof,  to the effect of any applicable  bankruptcy,
reorganization,  insolvency,  moratorium  or similar laws  affecting  creditors'
rights  generally  and to the effect of  general  principles  of equity.  At the
Closing Date, the other Transaction  Documents to which ABI is a party will have
been duly executed and  delivered by ABI and each will then  constitute a legal,
valid and binding obligation of ABI,  enforceable  against it in accordance with
its  terms,  subject,  as to the  enforceability  thereof,  to the effect of any
applicable bankruptcy,  reorganization,  insolvency,  moratorium or similar laws
affecting creditors' rights generally and to the effect of general principles of
equity.

         3.3  ABSENCE OF LIENS ON THE  SERIES B  PREFERRED  STOCK.  ABI has good
title to the  Series B  Preferred  Stock,  free and  clear of all Liens and upon
delivery to Redhook of the  certificates  therefor in accordance  with the terms
hereof, ABI shall no longer own any interest in the Series B Preferred Stock.


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<PAGE>


IV.      REDHOOK'S REPRESENTATIONS AND WARRANTIES

         Redhook makes the following representations and warranties to ABI, each
and all of which shall survive the execution and delivery of this  Agreement and
the Closing:

         4.1. AUTHORIZED AND OUTSTANDING SHARES OF CAPITAL STOCK. The authorized
capital  stock of Redhook  consists of 50,000,000  shares of Common  Stock,  par
value $0.005 per share, of which 6,271,006  shares are issued and outstanding as
of April 30, 2004 and 8,757,143 shares of Preferred Stock,  $0.005 par value per
share,  of which  1,289,872  shares of Series B  Preferred  Stock are issued and
outstanding.  All of the issued and  outstanding  shares of Redhook  are validly
issued, fully paid and non-assessable.  Except as set forth on Schedule 4.1 (b),
(i) there is no existing option, warrant, call, commitment or other agreement to
which Redhook is a party requiring,  and there are no convertible  securities of
Redhook  outstanding  which upon conversion  would require,  the issuance of any
additional  shares of Stock of  Redhook  or other  securities  convertible  into
shares of equity securities of Redhook, other than the Series B Preferred Stock,
and (ii) other than the Transaction Documents,  there are no agreements to which
Redhook is a party or, to the best knowledge of Redhook, to which Redhook is not
a party, in each case, among, between or with any of the stockholders of Redhook
with  respect to the voting or transfer of the Stock of Redhook or with  respect
to any  other  aspect  of  Redhook's  affairs.  Schedule  4.1 (b)  sets  forth a
complete, correct and accurate statement of the option terms, exercise price and
identity of the optionee with respect to each outstanding  stock option or other
stock  incentive  of  Redhook.  Except  pursuant  to the  terms of the  Series B
Preferred Stock, Redhook is not a party to any agreement or instrument requiring
Redhook to repurchase or redeem equity securities.

         4.2. AUTHORIZATION AND ISSUANCE OF EQUITY SECURITIES.  The Common Stock
to be  acquired  by ABI  hereunder  has been duly  authorized  by all  necessary
corporate  action on the part of Redhook.  Upon delivery to ABI of  certificates
therefor in accordance  with the terms hereof,  the Common Stock to be issued to
ABI hereunder will be validly issued and fully paid and nonassessable,  free and
clear of all Liens  and  preemptive  rights.  The  shares of Common  Stock to be
acquired by ABI  hereunder,  together  with the 953,470  shares of Common  Stock
acquired  by ABI prior  hereto,  represent  31.0% of the  outstanding  shares of
Common Stock on the Closing Date, calculated on a Fully Diluted Basis.

         4.3.  SECURITIES  LAWS. The offer,  issuance,  sale and delivery of the
Common Stock as provided in this Agreement are exempt from the  registration and
prospectus delivery  requirements of the Securities Act and all applicable state
securities laws, and are otherwise in compliance with such laws.

         4.4. CORPORATE EXISTENCE: COMPLIANCE WITH LAW.

         (a) Redhook (i) is a corporation  duly organized,  validly existing and
in good  standing  under  the  laws of the  State  of  Washington;  (ii) is duly
qualified as a foreign  corporation  and in good standing under the laws of each
jurisdiction  where its  ownership  or lease of  property  or the conduct of its
business  requires such  qualification  (except for  jurisdictions in which such
failure  to so  qualify  or to be in good  standing  would  not have a  Material
Adverse Effect);  (iii) has the requisite  corporate power and authority and the
legal right to own,  pledge,  mortgage  or  otherwise  encumber  and operate its
properties,  to lease the property it operates  under lease,  and to conduct its
business as now, heretofore and proposed to be conducted;  (iv) has all material
licenses,  permits,  consents or



                                       9
<PAGE>


approvals from or by, and has made all material  filings with, and has given all
material notices to, all Governmental  Authorities having  jurisdiction or other
Persons,  to the extent  required  for such  ownership,  operation  and  conduct
(including  all  alcohol   beverage  control  licenses  issued  by  Governmental
Authorities  to the  extent  required  in  each  state  in  which  Redhook  does
business);  (v) is in compliance with its articles of incorporation  and bylaws;
and (vi) is in compliance with all applicable  provisions of law except failures
to comply that,  singly or in the aggregate,  would not have a Material  Adverse
Effect.

         (b) At the Closing,  CBA (i) will be a limited  liability  company duly
organized,  validly existing and in good standing under the laws of the State of
Oregon;  (ii) will be duly qualified and in good standing under the laws of each
jurisdiction  where its  ownership  or lease of  property  or the conduct of its
business  requires such  qualification  (except for  jurisdictions in which such
failure  to so  qualify  or to be in good  standing  would  not have a  Material
Adverse Effect); (iii) will have the requisite power and authority and the legal
right to own, pledge, mortgage or otherwise encumber and operate its properties,
to lease the property it operates  under  lease,  and to conduct its business as
now,  heretofore  and  proposed  to be  conducted;  (iv) will have all  material
licenses,  permits,  consents or approvals from or by, and has made all material
filings  with,  and  has  given  all  material   notices  to,  all  Governmental
Authorities  having  jurisdiction  or other Persons,  to the extent required for
such ownership,  operation and conduct  (including all alcohol  beverage control
licenses issued by Governmental Authorities to the extent required in each state
in which CBA does business);  (v) will be in compliance with its  organizational
documents and all agreements  between it and Redhook or Widmer,  ; and (vi) will
be in compliance with all applicable provisions of law except failures to comply
that,  singly or in the aggregate,  would not have a material  adverse effect on
the business,  assets,  operations,  affairs or financial or other  condition of
CBA.  The  agreements  between  CBA,  Redhook,  Widmer and ABI  relating  to the
establishment and operation of CBA are legal,  valid and binding  obligations of
CBA,  enforceable  against it in accordance with its terms,  subject,  as to the
enforceability   thereof,   to  the   effect  of  any   applicable   bankruptcy,
reorganization,  insolvency,  moratorium  or similar laws  affecting  creditors'
rights generally and to the effect of general principles of equity.


         4.5.  SUBSIDIARIES.  Except as set forth on Schedule 4.5,  Redhook does
not  control,  directly  or  indirectly,  nor does  Redhook  have any  direct or
indirect equity participation in, any corporation,  partnership,  trust or other
business association.

         4.6.  CORPORATE  POWER;  AUTHORIZATION:  ENFORCEABLE  OBLIGATIONS.  The
execution,  delivery and  performance  by Redhook of this  Agreement,  the other
Transaction  Documents to which it is a party and all  instruments and documents
to be delivered by Redhook  hereunder and thereunder,  the issuance and exchange
of the Common Stock, and the consummation of the other transactions contemplated
by any of the foregoing:  (i) are within Redhook's  corporate  power;  (ii) have
been duly authorized by all necessary or proper  corporate action on the part of
Redhook;  (iii) are not in contravention of any provision of Redhook's  articles
of incorporation or bylaws; (iv) will not violate any law or regulation,  or any
order or  decree  of any  court or  governmental  instrumentality;  (v) will not
conflict with or result in the breach or  termination  of,  constitute a default
under or accelerate any performance required by, any indenture,  mortgage,  deed
of trust, lease, agreement or other instrument to which Redhook is a party or by
which  Redhook  or any of its  property  is bound;  (vi)


                                       10
<PAGE>


will not  result  in the  creation  or  imposition  of any Lien  upon any of the
property  of Redhook;  (vii) do not  require the consent or approval  of, or any
filing with,  any  Governmental  Authority  or any other  Person  (except to the
extent  previously  obtained  or made) and (viii) will not  obligate  Redhook to
issue any Stock to any other  Person or  provide  any  Person  with the right to
acquire  Stock from  Redhook  (including  pursuant  to the terms of the  Redhook
rights agreement).  The consummation of the transactions described herein do not
require  approval by the  stockholders of Redhook.  This Agreement has been duly
executed and delivered by Redhook and constitutes  the legal,  valid and binding
obligation  of Redhook,  enforceable  against it in  accordance  with its terms,
subject,  as to the  enforceability  thereof,  to the  effect of any  applicable
bankruptcy,  reorganization,  insolvency,  moratorium or similar laws  affecting
creditors'  rights generally and to the effect of general  principles of equity.
At the  Closing  Date,  the other  Transaction  Documents  shall  have been duly
executed and delivered by Redhook, and each shall then constitute a legal, valid
and  binding  obligation  of  Redhook  to  the  extent  it is a  party  thereto,
enforceable.  The  Closing  shall  not  impair  or affect  the  validity  of the
Purchasing  Contract and the Purchasing  Contract is a legal,  valid and binding
obligation  of Redhook,  enforceable  against it in  accordance  with its terms,
subject,  as to the  enforceability  thereof,  to the  effect of any  applicable
bankruptcy,  reorganization,  insolvency,  moratorium or similar laws  affecting
creditors'  rights generally and to the effect of general  principles of equity.
There are no  restrictions  on the corporate  power or authority of Redhook that
are not disclosed in the Articles of  Incorporation  or the By-Laws,  Washington
corporate law and the listing  standards of the Nasdaq Stock Market,  Inc. There
are no other facts, documents, or agreements that may or could restrict or limit
the terms or  enforceability of the Transaction  Documents.  Redhook has, and at
the time of the Closing shall have, no setoffs,  counterclaims,  recoupments  or
defenses to the enforcement of any of its obligations thereunder. The agreements
between Redhook,  Widmer and CBA relating to the  establishment and operation of
CBA are legal, valid and binding obligations of Redhook,  enforceable against it
in accordance with its terms, subject, as to the enforceability  thereof, to the
effect of any applicable bankruptcy,  reorganization,  insolvency, moratorium or
similar laws affecting  creditors' rights generally and to the effect of general
principles  of  equity.   Subject  to  the   exceptions  set  forth  in  Supply,
Distribution  and  Licensing  Agreement  between  CBA and  Redhook,  Redhook has
provided  CBA with the  exclusive  right to sell and  market  its malt  beverage
products in the states in which CBA operates.

         4.7. FINANCIAL STATEMENTS.

                  (a) All of the  following  balance  sheets and  statements  of
income,  retained  earnings and cash flows of Redhook have been, except as noted
therein,  prepared in conformity with GAAP consistently  applied  throughout the
periods  involved and present  fairly the financial  position of Redhook in each
case as at the dates  thereof,  and the results of operations and cash flows for
the  periods  then  ended (as to the  unaudited  interim  financial  statements,
subject to normal year-end audit adjustments not material in amount):

                           (i) the  unaudited  balance  sheet of  Redhook  as at
March 31, 2004, and the related statements of income, retained earnings and cash
flows for the three months ending on such date; and



                                       11
<PAGE>

                           (ii) the  audited  balance  sheets of  Redhook  as at
December 31, 2003, as at December 31, 2002 and as at December 31, 2001, and  the
related statements of income, retained earnings and cash flows for the year then
ended, with the opinion thereon of Ernst & Young LLP.

                  (b)  Redhook  has no  obligations,  contingent  or  otherwise,
including,  without  limitation,  liabilities for Charges,  long-term  leases or
unusual forward or long-term  commitments which are not reflected in the balance
sheets of  Redhook,  other  than those that are both  incurred  in the  ordinary
course of business and are immaterial in amount.

         4.8. OWNERSHIP OF PROPERTY.

                  (a) Redhook owns good and  marketable  fee simple title to all
of the real estate owned (subject to only those Liens disclosed on such Schedule
4.8 (a) and those Liens that would not have a material adverse effect on the use
of or sale of the property by Redhook and would not, singly or in the aggregate,
have a Material  Adverse  Effect),  and good and  marketable  title to, or valid
leasehold  interests in, all of its other  properties and assets.  Each lease of
real estate is a valid and binding  agreement  of Redhook,  enforceable  against
Redhook in  accordance  with its terms and, to the  knowledge  of Redhook,  is a
valid and  binding  agreement  of each other  party to such  lease,  enforceable
against  such other  parties  in  accordance  with its terms.  Redhook is not in
default of its obligations under any lease and has not delivered or received any
notice of default under any such lease,  nor has any event occurred which,  with
the giving of notice, the passage of time or both, would constitute a default on
the part of Redhook under any such lease. To Redhook's knowledge, no other party
is in default under any such lease.

                  (b) All real estate and improvements  owned,  leased,  used or
occupied by Redhook have adequate  connections  to all  necessary  utilities and
conform with all applicable zoning, building, subdivision and other requirements
of any Governmental  Authority and all restrictive covenants affecting such real
estate and improvements  except any such failures to conform that,  singly or in
the aggregate, would not have a Material Adverse Affect.

         4.9  MATERIAL  CONTRACTS.  Schedule  4.9  contains a true,  correct and
complete  list  and  description  of all  Material  Contracts,  whether  oral or
written,  and any amendments or supplements thereto or extensions  thereof,  and
Redhook has made available to ABI for its review complete,  current and accurate
copies of each Material Contract including any amendments or supplements thereto
or extensions thereof or has completely,  currently and accurately described the
terms of any oral agreement,  amendment,  supplement or extension. Each Material
Contract is a valid and binding agreement of Redhook enforceable against Redhook
in accordance  with its terms,  and Redhook does not have any knowledge that any
Material Contract is not a valid and binding agreement against the other parties
thereto.  Redhook  has  fulfilled  all  obligations  required  pursuant  to each
Material Contract to have been performed by Redhook on its part.  Redhook is not
in default or breach,  nor to Redhook's  knowledge is any third party in default
or breach,  under or with respect to any Material Contract and Redhook is not in
default or breach of any contract between ABI and Redhook.



                                       12
<PAGE>


         4.10. ENVIRONMENTAL PROTECTION.

                   Except  as would  not,  singly  or in the  aggregate,  have a
Material Adverse Effect,

                           (1) Redhook and all real  property  owned,  leased or
otherwise  operated by Redhook (each, a "Facility")  comply in material respects
with any applicable Environmental Law;

                           (2)  Redhook  has not,  and has no  knowledge  of any
other person who has, caused any release,  threatened release or disposal of any
Hazardous  Material  at any  Facility,  and the  Facilities  are  not  adversely
affected by any release,  threatened release or disposal of a Hazardous Material
originating or emanating from any other property; and

                           (3)  There  are  no   investigations,   judicial   or
administrative  proceedings,  pending  litigation  or, to  Redhook's  knowledge,
threatened  investigations,  proceedings or litigation  affecting or relating to
Redhook or the Facilities relating to Environmental Laws or Hazardous Materials.

         4.11.  LABOR  MATTERS.  There are no  strikes or other  labor  disputes
against Redhook pending or, to Redhook's knowledge,  threatened. Hours worked by
and payments made to employees of Redhook have not been in violation of the Fair
Labor Standards Act or any other  applicable law dealing with such matters.  All
payments  due from Redhook on account of employee  health and welfare  insurance
have been paid or accrued as a liability  on the books of Redhook.  Redhook does
not have any  obligation  under any collective  bargaining  agreement or similar
agreement.  There is no organizing  activity  involving  Redhook  pending or, to
Redhook's knowledge,  threatened by any labor union or group of employees. There
are no representation  proceedings pending or threatened with the National Labor
Relations Board, and no labor  organization or group of employees of Redhook has
made a pending  demand  for  recognition.  There are no  complaints  or  charges
against Redhook pending or, to Redhook's knowledge,  threatened to be filed with
any federal,  state, local or foreign court,  governmental  agency or arbitrator
based on,  arising out of, in  connection  with,  or  otherwise  relating to the
employment or termination of employment by Redhook of any individual.  There are
no  collective  bargaining  agreements  or other labor  agreements  covering any
employees of Redhook.

         4.12. TAXES. All federal, state, local and foreign tax returns, reports
and  statements  required to be filed by Redhook have been timely filed with the
appropriate  Governmental  Authority or Redhook has received extensions for such
filings, and all such returns, reports and statements are complete and accurate.
All Charges and other  impositions shown thereon to be due and payable have been
paid prior to the date on which any fine,  penalty,  interest or late charge may
be added thereto for nonpayment thereof,  or any such fine,  penalty,  interest,
late  charge  or loss has been  paid.  Proper  and  accurate  amounts  have been
withheld by Redhook  from its  employees  for all  periods in full and  complete
compliance with the tax, social security and unemployment withholding provisions
of applicable  federal,  state, local and foreign law and such withholdings have
been timely paid to the respective governmental.

         4.13. NO LITIGATION.  No action, claim or proceeding is now pending or,
to the knowledge of Redhook,  threatened  against Redhook,  at law, in equity or
otherwise, before any court, board, commission, agency or instrumentality of any
federal,  state, or local government or of any agency



                                       13
<PAGE>

or subdivision  thereof,  or before any arbitrator or panel of arbitrators  that
would result in a Material Adverse Effect. To the knowledge of Redhook, no state
of facts exist which is reasonably likely to give rise to any such action, claim
or proceeding that would result in a Material Adverse Event. There is no action,
suit,  proceeding,   inquiry,   arbitration,   hearing,  notice  of  hearing  or
investigation  pending  or, to the  knowledge  of  Redhook,  threatened  against
Redhook or its officers or employees by the federal  Alcohol and Tobacco Tax and
Trade Bureau, by the State of Washington,  any other state in which Redhook does
business or any agency of any such state.

         4.14.  BROKERS. No broker or finder acting on behalf of Redhook brought
about  the  consummation  of the  transactions  contemplated  pursuant  to  this
Agreement,  and  Redhook  has no  obligation  to any  Person,  in respect of any
finder's or brokerage fees in connection with the  transactions  contemplated by
this  Agreement.  Redhook is solely  responsible  for the payment of all fees of
brokers or finders acting on behalf or at the request of Redhook.

         4.15.  EMPLOYMENT  AGREEMENTS.  Except  for  the  agreements  that  are
attached or incorporated by reference into Redhook's  Annual Report on Form 10-K
for the year ended  December 31, 2003,  there are no  employment,  consulting or
management agreements between Redhook and any other Person.

         4.16. PATENTS,  TRADEMARKS,  COPYRIGHTS AND LICENSES.  Redhook owns all
licenses, patents, patent applications,  copyrights,  service marks, trademarks,
trademark  applications,  trade  dress,  trade  secrets,  trade  names and other
intellectual  property  rights  necessary to continue to conduct its business as
heretofore  conducted by it, now conducted by it and proposed to be conducted by
it. Redhook conducts its businesses without infringement,  unfair competition or
dilution  or  claim of  infringement,  unfair  competition  or  dilution  of any
license, patent, copyright, service mark, trademark, trade name, trade secret or
other intellectual  property right of others.  There is no infringement or claim
of infringement by others of any material license,  patent,  copyright,  service
mark,  trademark,  trade name, trade dress,  trade secret or other  intellectual
property right of Redhook.

         4.17. FULL DISCLOSURE.  No information contained in this Agreement, the
filings made by Redhook with the Securities and Exchange Commission or any other
Transaction  Document  or any  written  statement  prepared  by  Redhook  or its
representatives  furnished  by  or  on  behalf  of  Redhook  pursuant  to  or in
connection  with the terms of this Agreement or any other  Transaction  Document
contains  any untrue  statement  of a material  fact or,  when taken as a whole,
omits to state a material fact necessary to make the statements contained herein
or therein not  misleading in light of the  circumstances  under which they were
made.

         4.18. NO MATERIAL ADVERSE EFFECT.  No event has occurred since December
31,  2003 that has had,  or is  reasonably  likely to have,  a Material  Adverse
Effect.


                                       14
<PAGE>

         4.19. ERISA.

                  (a) Redhook has no ERISA Affiliates.

                  (b) Each of the  Qualified  Plans  and the  trusts  maintained
pursuant  thereto are exempt from federal  income  taxation under Section 501 of
the IRC,  and  nothing  has  occurred  with  respect  to the  operation  of such
Qualified Plans which could cause the loss of such qualification or exemption or
the imposition of any liability, penalty or tax under ERISA or the IRC.

                  (c) All  contributions  (including all employer  contributions
and employee salary  reduction  contributions)  required to have been made under
any of the Plans or by law (without  regard to any waivers granted under Section
412 of the IRC), to any funds or trusts established  thereunder or in connection
therewith  have  been  made  by  the  due  date  thereof  (including  any  valid
extension), and all contributions for any period ending on or before the Closing
Date  which are not yet due will have  been paid or  accrued  on or prior to the
Closing Date.

                  (d) There is no material  violation  of ERISA with  respect to
the filing of applicable  reports,  documents and notices regarding the Plans or
any tax-exempt trust related to any of the Plans with the Secretary of Labor and
the  Secretary  of the  Treasury  or the  furnishing  of such  documents  to the
participants or beneficiaries of the Plans.

                  (e) There are no pending  actions,  claims or  lawsuits  which
have been  asserted or  instituted  against the Plans,  the assets of any of the
trusts  under  such  Plans or the plan  sponsor  or the plan  administrator,  or
against any  fiduciary of the Plans with respect to the  operation of such Plans
(other than routine  benefit  claims),  nor does Redhook have knowledge of facts
which could form the basis for any such claim or lawsuit.

                  (f) The Plans have been maintained,  in all material respects,
in  accordance  with  their  terms  and with all  provisions  of ERISA and other
applicable  federal and state laws and regulations,  and neither Redhook nor any
"party in  interest"  or  "disqualified  person"  with  respect to the Plans has
engaged in a "prohibited  transaction" within the meaning of Section 4975 of the
IRC or  Section  406 of ERISA.  No  fiduciary  has any  liability  for breach of
fiduciary  duty or any other  failure  to act or comply in  connection  with the
administration or investment of the assets of any Plan.

                  (g) No Pension Plan has an accumulated  funding  deficiency as
defined  in  Section  412 of the IRC.  Redhook  does not  have any  existing  or
potential  liability for a complete or partial  withdrawal  from a Multiemployer
Plan.

                  (h)      No "reportable  event" as  defined in  ERISA  section
4143 has occurred with respect to any Plan.

                  (i) Redhook does not maintain any retiree medical plan.

4.20     SECURITIES FILINGS.

         (a) Redhook has filed in a timely  matter all the material  required to
be filed by it pursuant to Section 13, 14 or 15 (d) of the  Securities  Exchange
Act. All reports  filed by Redhook  conformed  in all  material  respects to the
requirements  of the  Securities  Exchange  Act,  and  none  of  such  documents
contained an untrue  statement  of material  fact or omitted to state a material
fact required to be stated therein or necessary to make the statements  therein,
in the light of the circumstances under which they were made, not misleading.


                                       15
<PAGE>


         (b)  Redhook  has  adequate  and  effective   disclosure  controls  and
procedures and internal controls over financial reporting,  as each such term is
defined by the Securities Exchange Act.

         (c) Redhook is in full compliance with the Securities  Exchange Act, as
amended by the  Sarbanes-Oxley  Act of 2002, and the  regulations  applicable to
companies  whose  securities  are listed on the Nasdaq  Stock Market and, to its
knowledge,  there  have  been  no  material  violations  of  those  policies  or
regulations by its officers and employees.

         4.21 RELATED PARTY TRANSACTIONS.  No employee, officer,  stockholder or
director  of Redhook or member of his or her  immediate  family is  indebted  to
Redhook,  nor is  Redhook  indebted  (or  committed  to make  loans or extend or
guarantee  credit)  to any of them,  other  than (i) for  payment  of salary for
services rendered, (ii) reimbursement for reasonable expenses incurred on behalf
of  Redhook,  and (iii) for other  standard  employee  benefits  made  generally
available to all employees (including stock option agreements  outstanding under
any stock option plan  approved by the Board of  Directors  of Redhook).  To the
best of  Redhook's  knowledge,  none of such  persons has any direct or indirect
ownership  interest in any Person with which Redhook is affiliated or with which
Redhook has a business  relationship,  or any Person that competes with Redhook,
except that  employees,  stockholders,  officers,  or  directors  of Redhook and
members of their immediate  families may own stock in publicly traded  companies
that may compete with Redhook. To the best of Redhook's  knowledge,  no officer,
director,  or stockholder or any member of their immediate families is, directly
or indirectly, interested in any material contract with Redhook (other than such
contracts as relate to any such  person's  ownership  of capital  stock or other
securities of Redhook).  This representation and warranty shall not apply to any
arrangements between Redhook and A-BC, ABI or any employee or officer of A-BC or
ABI.

         4.22 BOOKS AND  RECORDS.  The books of  account,  minute  books,  stock
record  books,  and  other  records  of  Redhook,  all of which  have  been made
available  to ABI,  are  complete  and  correct  and  have  been  maintained  in
accordance  with  sound  business  practices  and the  requirements  of  Section
13(b)(2)  of the  Securities  Exchange  Act,  including  the  maintenance  of an
adequate  system of  internal  controls.  The minute  books of Redhook  contains
accurate and  complete  records of all meetings  held of, and  corporate  action
taken by, the  shareholders,  the Boards of  Directors,  and  committees  of the
Boards of Directors of Redhook,  and no meeting of any such shareholders,  Board
of  Directors,  or  committee  has been  held for  which  minutes  have not been
prepared and are not contained in such minute books.

V.       COVENANTS

         5.1. Redhook covenants and agrees that, unless duly waived by ABI, from
and after the date hereof:

                  (a) PERMITTED ACQUISITIONS OR INVESTMENTS.  Redhook shall not,
and shall not permit any of its  Subsidiaries  to, directly or indirectly in any
transaction or related series of transactions, acquire or invest in, whether for
cash, debt, Stock, or other property or assets or by



                                       16
<PAGE>


guaranty of any obligation, (i) any assets or business related to the production
or distribution of malt beverage products the aggregate  purchase price of which
in any such  transaction  or related series of  transactions  exceeds 50% of the
book value of Redhook's  assets on the date of such  acquisition  or  investment
immediately  before  giving effect  thereto,  or (ii) any assets or business not
related  to the  production  or  distribution  of  malt  beverage  products  the
aggregate  purchase price of which in any such transactions or related series of
transactions  exceeds 10% of the book value of  Redhook's  assets on the date of
such acquisition or investment immediately before giving effect thereto. Redhook
shall not acquire any alcohol or  non-alcohol  malt beverage brand or the assets
or Stock of any producer of alcohol malt  beverages  unless it delivers to ABI a
written plan providing for the exclusive  distribution of such malt beverages by
ABI that is satisfactory to ABI.

                  (b) SALES OF ASSETS.

                           (i)  Redhook  shall  not,  and shall not  permit  any
Subsidiary of Redhook to, sell, lease, transfer,  convey or otherwise dispose of
assets in any transaction or related series of  transactions,  which assets have
an aggregate  book value  exceeding 30% of the aggregate book value of Redhook's
assets on the date of such sale,  lease,  transfer,  conveyance  or  disposition
immediately before giving effect thereto; PROVIDED,  HOWEVER, that the foregoing
shall not prohibit any bona fide sale-leaseback  transaction in which all leases
entered into by Redhook or any  Subsidiary  of Redhook in  connection  with such
transaction are capital leases as determined in accordance with GAAP.

                           (ii)  Redhook  and its  Subsidiaries  shall not sell,
transfer, convey, license, pledge or otherwise dispose of any trademark or trade
name  acquired  or owned by any of them after the date  hereof if 15% or more of
the  revenues of Redhook and its  consolidated  Subsidiaries  for the  preceding
Fiscal Year were attributable to sales of products using such trademark or trade
name.

                           (iii)  Redhook  shall  not  dispose  of  any  of  its
interest in CBA.

                  (c) BOOKS AND  RECORDS.  Redhook  shall,  and shall  cause its
Subsidiaries  to, keep  adequate  records and books of account  with  respect to
their  business  activities,  in which proper  entries,  reflecting all of their
financial transactions, are made in accordance with GAAP consistently applied.

                  (d) FINANCIAL AND BUSINESS INFORMATION.

                           (i)   PROJECTIONS.   Redhook  will  deliver  to  ABI,
together  with  appropriate  supporting  details,  within  30 days  prior to the
beginning  of each Fiscal Year (and  Redhook,  at its option,  may deliver  such
information to its other security holders contemporaneously therewith):

                                    (A) a projected  consolidated  balance sheet
of Redhook and its Subsidiaries, for each month of such Fiscal Year;

                                    (B) projected consolidated and consolidating
cash flow statements of Redhook and its Subsidiaries,  including summary details
of cash disbursements  (including for capital  expenditures),  for each month of
such Fiscal Year; and


                                       17
<PAGE>


                                    (C) projected consolidated and consolidating
income  statements  of Redhook  and its  Subsidiaries  for each  quarter of such
Fiscal Year;

                           (ii) OTHER  INFORMATION.  Redhook will deliver to ABI
such other information with respect to Redhook's  business,  financial condition
or prospects as ABI may, from time to time,  reasonably  request;  provided that
ABI  shall  be  entitled  to no  information  concerning  the  specific  brewing
processes and formulae used by Redhook to brew its malt beverage products.

                  (e) COMMUNICATION WITH ACCOUNTANTS.  Redhook authorizes ABI to
communicate  directly with its independent  certified public accountants and tax
advisors,  authorizes those accountants to disclose to ABI any and all financial
statements  and other  supporting  financial  documents and schedules  including
copies  of  any  management  letter  with  respect  to the  business,  financial
condition  and other  affairs of Redhook and any of its  Subsidiaries  and those
advisors to disclose to ABI any information  requested by ABI concerning the tax
filings or reports made by Redhook and any of its  Subsidiaries.  Redhook  shall
not interfere or attempt to restrain any such  communications or disclosures and
at the  request of ABI from time to time shall  issue  written  instructions  or
authorizations to its accountants or advisors to facilitate such  communications
or disclosures.

                  (f) TAX COMPLIANCE.  Redhook shall pay all transfer, excise or
similar taxes (not including  income or franchise  taxes) in connection with the
issuance,  sale,  delivery or transfer by Redhook to ABI of the Common  Stock or
the  transfer  of  Series  B  Preferred  Stock  by  ABI  to  Redhook  hereunder.
Additionally, Redhook shall indemnify and save ABI from all such taxes.

                   (g) CAPITAL STRUCTURE.

                           (i)  Notwithstanding  any  other  provision  of  this
Section  5.1(g),  Redhook  shall not issue,  sell or transfer or agree to issue,
sell or transfer  any of its  authorized  but not  outstanding  shares of Stock,
except, (A) issuances of Common Stock pursuant to any stock split, reverse stock
split or stock  dividend or pursuant to the exercise of any option or warrant or
the conversion of any  convertible  security either now outstanding or otherwise
permitted  by this  Section,  (B) prior to January 1, 2006  issuances  of Common
Stock not  exceeding  20% of the Common Stock on the date of the Closing and for
each  successive  two year  period  thereafter  issuances  of  Common  Stock not
exceeding 20% of the  outstanding  Common Stock on the first day of such period,
(C) issuances of Common Stock to ABI as required hereby,  (D) issuances of Stock
by Redhook pursuant to any Qualified Takeover Defense Plan, and (E) issuances of
Stock by Redhook to employees or directors for compensatory  purposes,  pursuant
to any employee or director stock option or other stock  incentive plan approved
in accordance with the requirements set forth in Section 5.1(h).

                           (ii)  Redhook  shall  not amend  its  certificate  of
incorporation  or bylaws (other than an amendment the sole effect of which is to
increase its authorized capital stock) without the written approval of ABI.



                                       18
<PAGE>


                           (iii) Redhook shall not issue any Stock to any Person
with more than one vote per share or with a class vote on any matter.

                           (iv)  Redhook  shall  not  issue  or sell or agree to
issue or sell any  Stock to any  Person  engaged  in the  business  of  brewing,
producing or  distributing  malt or any alcoholic  beverages in North America or
South  America or to any Person  known by Redhook to be an Affiliate of any such
Person  other than to (A) to any Person who is a  wholesaler  of the products of
ABI or (B) to ABI.

                           (v)  Without  providing  ABI  with at  least 10 days'
advance written notice thereof, Redhook shall not issue or sell shares of Stock,
the effect of which would be to decrease the aggregate  percentage  ownership of
the Common Stock registered in the name of ABI and its designees to under 20% of
the outstanding Common Stock.

                           (vi) Redhook shall not,  pursuant to any agreement or
the terms of any Stock  issued by  Redhook,  give to any Person or  Persons  the
right to name or  designate  more than one member of the board of  directors  of
Redhook.

                           (viii)   Redhook   shall  not  cause  or  permit  any
Subsidiary  of Redhook to issue any Stock to any Person other than to Redhook or
to any other Subsidiary of Redhook.

                  (h) TRANSACTIONS WITH AFFILIATES.

                           (i)  Redhook  shall  not and  shall  not  permit  any
Subsidiary  of Redhook to enter into or be a party to any  transaction  with any
Affiliate of Redhook or such Subsidiary unless such transaction is (i) upon fair
and reasonable  terms that are fully  disclosed to ABI and are no less favorable
to  Redhook  or  such   Subsidiary  than  would  be  obtained  in  a  comparable
arm's-length  transaction  with a Person  not an  Affiliate  of  Redhook or such
Subsidiary,  and  (ii)  has  been  approved  by a  majority  of the  Independent
Directors  of the Board of  Directors  of Redhook or a committee of the Board of
Directors composed entirely of Independent Directors.

                           (ii) Redhook shall not enter into,  amend,  modify or
waive any  provision of any agreement  with an executive  officer or director of
Redhook (or any  Affiliate  thereof)  without the  approval by a majority of the
Independent  Directors  of the Board of Directors or a committee of the Board of
Directors of Redhook composed entirely of Independent  Directors.  Redhook shall
establish and maintain a committee of the board of directors,  composed entirely
of Independent  Directors,  and such committee shall determine the  compensation
(including  salary,  bonus and stock  incentives) for each executive  officer of
Redhook.  Redhook  shall not amend the terms of any stock  option or other stock
incentive  or create  any  stock  incentive  plan  except  as  approved  by such
committee.

                  (i) MAINTENANCE OF EXISTENCE AND CONDUCT OF BUSINESS.  Redhook
shall and shall cause each of its  Subsidiaries  to: (i) continue to conduct its
business in the brewing of malt beverages  substantially  as now conducted or as
otherwise  permitted  hereunder and shall not engage in any material  respect in
any business other than the producing and  distributing of malt beverages,  and,
consistent  with past  practice,  operation  of the  restaurants  located at its
breweries; (ii) comply in


                                       19
<PAGE>


all material respects with all applicable laws, rules, regulations and orders of
any Governmental Authority; (iii) duly and timely make all filings and take such
other action as may be required by any Governmental Authority in connection with
the transactions  described in the Transaction  Documents;  and (iv) assure that
none of its products are  adulterated  or  misbranded  within the meaning of the
federal Food,  Drug and Cosmetic Act, as amended,  and cause all of its products
to comply with the applicable provisions of the Code of Federal Regulations.

                  (j)  DISTRIBUTION  OF  REDHOOK  PRODUCTS.  Redhook  shall  not
distribute  products in the United  States  other than through ABI, CBA or other
wholesalers  to the  extent  permitted  by  Section  11.05  of the  Distribution
Agreement. If Redhook desires to investigate the production,  sale, distribution
or licensing the production of any malt beverage  product in any country outside
of the United States of America,  Redhook shall notify ABI and shall provide ABI
with  all  information  reasonably  requested  by ABI in  connection  with  such
arrangement.  Redhook  shall  give  ABI a  period  of at least 90 days to make a
proposal to Redhook pursuant to which ABI would serve as a master distributor in
such country, and Redhook shall not conduct negotiations or discussions with any
other  party  during  such 90 day  period.  Upon the end of such 90 day  period,
Redhook  shall be  permitted  to select  any  entity to brew or  distribute  the
products  of Redhook  in any such  country,  except  that  Redhook  shall not be
permitted to select an ABI Competitor or any Affiliate thereof for such purpose.

                  (k) FINANCIAL AND OTHER INFORMATION.

                           (i) MONTHLY STATEMENTS.  Redhook shall deliver to ABI
as soon as practicable  after the end of each month,  but in any event within 30
days thereafter:  (A) an unaudited consolidated balance sheet of Redhook and its
Subsidiaries as at the end of such month, (B) unaudited consolidated  statements
of income,  retained  earnings and changes in financial  position of Redhook and
its  Subsidiaries  for such month and for the  portion of such year  ending with
such month, and (C) a sales report for such month,  which report will show sales
by product, by distributor and whether by bottle or draft in each state in which
Redhook sells its  products,  in each case for such month and for the portion of
the Fiscal Year ending with such month and showing a comparison  of such year to
date sales results with those of the previous year, including growth figures for
each product on a state by state basis but which need not show sales to CBA.

                           (ii) QUARTERLY INFORMATION.  Redhook shall deliver to
ABI as soon as  practicable  after the end of each of the first three  quarterly
fiscal  periods in each Fiscal Year of Redhook,  but in any event within 45 days
thereafter,  (A) an  unaudited  consolidated  balance  sheet of Redhook  and its
Subsidiaries  as at the end of such  quarter,  and  (B)  unaudited  consolidated
statements  of income,  retained  earnings and changes in financial  position of
Redhook and its Subsidiaries for such quarter and (in the case of the second and
third  quarters)  for the portion of the Fiscal  Year ending with such  quarter.
Such  statements  shall be (1)  prepared in  accordance  with GAAP  consistently
applied,  (2) in reasonable detail and (3) certified by the principal  financial
or accounting  officer of Redhook as presenting fairly the financial  condition,
results  of  operation,   and  cash  flows  of  Redhook  and  its   consolidated
Subsidiaries in accordance  with GAAP  consistently  applied  (subject to normal
year-end audit adjustments not material in amount).


                                       20
<PAGE>



                           (iii) ANNUAL INFORMATION. Redhook will deliver to ABI
as soon as practicable after the end of each fiscal year of Redhook,  but in any
event within 90 days thereafter,  (A) an audited  consolidated  balance sheet of
Redhook  and  its  Subsidiaries  as at the  end of such  year,  and (B)  audited
consolidated  statements of income,  retained  earnings and changes in financial
position of Redhook and its  Subsidiaries  for such year,  setting forth in each
case in  comparative  form the figures for the previous  year.  Such  statements
shall be (1)  prepared in  accordance  with GAAP  consistently  applied,  (2) in
reasonable  detail,  and  (3)  certified  as  presenting  fairly  the  financial
condition,  results of operation and cash flows of Redhook and its  consolidated
Subsidiaries  in  accordance  with GAAP  consistently  applied by Ernest & Young
L.L.P. or such other firm of independent  certified public accountants  selected
by Redhook that is acceptable in the reasonable judgment of ABI.

                           (iv) FILINGS.  Redhook will deliver to ABI,  promptly
upon  their  becoming  available,  one  copy of each  report,  notice  or  proxy
statement sent by Redhook to its stockholders generally,  and of each regular or
periodic report  (pursuant to the Securities  Exchange Act) and any registration
statement,  prospectus  or other  writing  (including,  without  limitation,  by
electronic  means)  pursuant to the Securities Act filed by Redhook with (i) the
Securities  and  Exchange  Commission,  or (ii) any  securities  exchange or the
NASDAQ  Stock  Market on which  shares of Common  Stock of Redhook are listed or
quoted.  Prior to filing or making publicly  available any such report,  notice,
proxy  statement,  registration  statement,  prospectus  or other  writing which
references or makes any disclosure concerning ABI or its business, Redhook shall
provide ABI a  reasonable  opportunity  to review  such  report,  notice,  proxy
statement,  registration  statement,  prospectus  or other writing and shall not
make any such  reference  or  disclosure  to ABI or its  business  to which  ABI
reasonably objects.  Redhook shall timely file all material required to be filed
by it pursuant to Section 13, 14 or 15 (d) of the  Securities  Exchange Act. All
reports  filed  by  Redhook  shall  conform  in  all  material  respects  to the
requirements  of the Securities  Exchange Act, and none of such documents  shall
contain an untrue  statement of material  fact or omit to state a material  fact
required to be stated  therein or necessary to make the statements  therein,  in
the light of the circumstances under which they were made, not misleading.

                           (v)  OWNERSHIP  PERCENTAGE.  From  time to time,  ABI
shall be permitted to request that Redhook determine the percentage ownership of
the outstanding  Common Stock held by ABI or any other Person  specified by ABI,
and Redhook  shall  promptly  (but in any event no later than five Business Days
after  such  request  is  made)  and  accurately  provide  ABI  with  a  written
determination of the percentage ownership of the outstanding Common Stock of ABI
or such other Person, as of the date such request is made with such verification
and detail as reasonably requested by ABI.

                           (vi) NASDAQ  LISTING.  Redhook shall not  voluntarily
delist or  terminate  the listing or quotation of the Common Stock on the NASDAQ
Stock Market.

                  (l)  ACCESS  TO  BOOKS  AND  RECORDS.   Redhook  shall  permit
representatives  of ABI to visit and  inspect,  at no charge to ABI,  any of the
properties of Redhook and its  Subsidiaries,  to examine the corporate books and
make  copies or extracts  therefrom  and to discuss the  affairs,  finances  and
accounts  of  Redhook  and its  Subsidiaries  with  the  principal  officers  or
employees of Redhook,  all at such reasonable  times, upon reasonable notice and
as often as ABI may reasonably


                                       21
<PAGE>


request;  provided that ABI shall be entitled to no  information  concerning the
specific brewing processes or formulae used by Redhook to brew its malt beverage
products.

                  (m)  EXCHANGE  OF STOCK  CERTIFICATES.  Redhook  will,  at its
expense,  promptly upon surrender by ABI of any certificates representing shares
of Common Stock at the corporate offices of Redhook,  execute and deliver to ABI
a new certificate or certificates in any  denominations  specified by ABI for an
aggregate number of shares of Common Stock equal to the number of shares of such
stock represented by the certificates surrendered.

                  (n) LOST, STOLEN,  DESTROYED OR MUTILATED STOCK  CERTIFICATES.
Upon receipt of evidence reasonably  satisfactory to Redhook of the loss, theft,
destruction or mutilation of any  certificate for shares of Common Stock and, in
the case of loss, theft or destruction, upon delivery of an indemnity reasonably
satisfactory to Redhook  (which,  at the option of ABI, may be an undertaking by
ABI to so indemnify Redhook), or, in the case of mutilation,  upon surrender and
cancellation thereof,  Redhook will issue to ABI a new certificate of like tenor
for a number of shares of  Common  Stock  equal to the  number of shares of such
stock represented by the certificate lost, stolen, destroyed or mutilated.

                  (o)  AUDITORS.   Redhook  shall  not  change  its  independent
certified  public  accounting  firm except to an  independent  certified  public
accounting firm acceptable in the reasonable judgment of ABI.

                  (p) COLLECTIVE  BARGAINING  AGREEMENTS.  Redhook  acknowledges
that  Redhook  shall  have  complete  responsibility  and  authority  concerning
recognition of collective  bargaining units within its employees or those of its
Subsidiaries,   the  determination  as  to  whether  to  enter  into  collective
bargaining  agreements  or labor  agreements  with its employees or those of its
Subsidiaries, and the terms of any such agreement.

                  (q) REPRESENTATION OF ABI ON THE BOARD OF DIRECTORS. ABI shall
be entitled to designate two individuals as directors of Redhook,  and except as
provided in this section, Redhook shall cause the number of members on the Board
of Directors not to exceed 7. The Board of Directors of Redhook shall  recommend
to the  shareholders  of  Redhook  the  election  of  such  individuals.  If the
shareholders do not elect such individuals,  within 30 days after the meeting of
the  shareholders  the board of directors  of Redhook  shall amend the Bylaws of
Redhook to increase  the number of members on the Board of Directors to nine and
appoint such individuals to the Board of Directors to fill these vacancies.  ABI
shall be entitled to designate a individual to be a member of each  committee of
the Board of  Directors,  except (i) with  respect to a  committee  on which the
individual  is  not  permitted  to be a  member  under  applicable  law  or  the
requirements  of any exchange or market on which the  securities  of Redhook are
listed  or  quoted  or (ii)  with  respect  to a  committee  formed to review or
determine transactions or proposed transactions between ABI and Redhook.

                  (r) CBA. Redhook shall not enter into any agreements  relating
to the  establishment  or operation of CBA, amend,  waive or fail to enforce any
provision  of any such  agreement  or agree to admit  any new  member  into CBA.
Redhook shall comply with its obligations  under all agreements  relating to the
establishment  or  operation  of CBA and shall not  consent or



                                       22
<PAGE>

cause  the  merger,  consolidation,  termination  or  dissolution  of CBA or the
transfer by CBA of all or  substantially  all of its assets.  Redhook  shall not
permit CBA to acquire  any alcohol or  non-alcohol  malt  beverage  brand or the
assets or Stock of any producer of alcohol malt beverages unless CBA delivers to
ABI a  written  plan  providing  for the  exclusive  distribution  of such  malt
beverages by ABI that is satisfactory to ABI.

                  (s)  DISTRIBUTION  FEES.  Within 30 days  after  the  Closing,
Redhook  shall pay to ABI the  amount by which the  product of (i) the number of
case equivalents of products sold by Redhook  (including  Widmer products brewed
and sold by Redhook), on and after June 1, 2004, but prior to the effective date
of the CBA  Distribution  Agreement,  and (ii) $0.50 exceeds the margin to which
ABI is entitled to retain or receive under the Original  Distribution  Agreement
arising out of sales on and after June 1, 2004,  but prior to the effective date
of the CBA Distribution Agreement.

         5.2.  TERMINATION OF CERTAIN COVENANTS.  The obligations of Redhook and
ABI set forth in Section 5.1(a),  (b)(i), (ii), (c)-(e), (g), (h), (k), (l), (o)
and (q) and  Section  5.3  shall  terminate  on the  date on  which  ABI and its
Affiliates do not hold, in aggregate, 5% or more of the outstanding Common Stock
(unless  caused  by a  breach  or  default  by  Redhook  under  any  Transaction
Document).  The obligations of Redhook and ABI set forth in Section 5.1(j) shall
terminate on the Termination  Date. The obligations of Redhook and ABI set forth
in Section 5.1(i) shall terminate on the later of (i) the Termination  Date, and
(ii) the date on which ABI and its  Affiliates do not hold, in aggregate,  5% or
more on the  outstanding  Common Stock.  Section  5.1(b)(iii) and Section 5.1(r)
shall terminate on the date on which ABI or its Affiliates do not distribute the
products of CBA.

         5.3      TRANSFERS OF SECURITIES.

                  (a) Prior to any sale,  transfer or  conveyance  by ABI of any
shares of Common  Stock,  ABI shall provide  Redhook with written  notice of its
determination to sell, transfer or convey such shares, and Redhook shall, within
five Business Days of receipt of such notice,  give ABI written notice informing
ABI as to whether it desires to negotiate  the purchase of such shares of Common
Stock.  Promptly  upon ABI's  receipt of a written  notice  delivered by Redhook
indicating a desire to negotiate  the purchase and sale of such shares of Common
Stock,  Redhook and ABI shall  negotiate in good faith the terms  governing  the
purchase  and sale of such  shares of Common  Stock.  In the event  that ABI and
Redhook do not,  within 30 days of ABI's  receipt  of the  written  notice  from
Redhook,  agree upon the terms governing the purchase and sale of such shares of
Common Stock or in the event that Redhook does not deliver to ABI written notice
indicating  a desire to  negotiate  the  purchase of such shares of Common Stock
within  such five day period,  ABI may attempt to sell,  transfer or convey such
shares of Common  Stock to any other  Person,  but shall not sell,  transfer  or
convey such shares to any other party for cash,  without giving Redhook a 15 day
right of first refusal concerning the same. In the event that ABI does not sell,
transfer or convey such shares or enter into an agreement  to sell,  transfer or
convey such  shares  within 90 days,  ABI may not sell,  transfer or convey such
shares without  compliance  with the notice and  negotiation  provisions of this
Section 5.3(a).

                  (b) The  provisions  of Section  5.3(a) shall not apply to any
sale,  transfer  or  conveyance  of  shares  by ABI (i) in a  registered  public
offering  pursuant to the terms of the Registration  Rights  Agreement,  (ii) in
connection  with a tender or  exchange  offer made by any Person or Group  other
than ABI or its Affiliates,  (iii) as a result of any merger,  consolidation  or
share exchange of Redhook with or into any other Person or (iv) to any Affiliate
of ABI.


                                       23
<PAGE>


                  (c) In the event of a Termination  Date, ABI shall be entitled
to solicit and negotiate offers from any Person ("Purchaser") to purchase all or
substantially all of the assets of Redhook or all of the outstanding  securities
of Redhook or to merge or  consolidate  into or with  Redhook or to have Redhook
merge or  consolidate  into it. At the request of ABI,  Redhook shall provide to
the Purchaser any  information  reasonably  requested by Purchaser in connection
with its determination whether or not to extend an offer to purchase such assets
or securities or to enter into such merger or consolidation transaction, subject
only  to  agreement  by  Purchaser  to  preserve  the  confidentiality  of  such
information in a form satisfactory in the reasonable judgment of Redhook. At the
direction  of ABI,  the board of  directors  shall  create a committee  composed
entirely of Independent  Directors and direct such committee to review any offer
made by the  Purchaser  to purchase  all or  substantially  all of the assets of
Redhook  or all of the  outstanding  securities  of Redhook or to enter into any
merger or  consolidation  transaction  with Redhook and to make  recommendations
with respect to such offer to the Board of  Directors.  The  committee  shall be
authorized to engage an investment  banking firm and other advisors to assist it
in such review and such  recommendation  and to incur any other expenses  deemed
advisable by it in connection with such review and recommendation. At the option
of ABI, ABI may  publicize  and disclose any offer made by a Purchaser.  Nothing
herein  shall  require the members of the Board of  Directors to take any action
that would violate their fiduciary duties to Redhook or its shareholders.

         5.4  EFFECT  ON OTHER  AGREEMENTS.  The  parties  agree  that  upon the
consummation of the transactions described herein, the rights and obligations of
the parties under the Investment Agreement,  the Original Distribution Agreement
and the Initial  Registration  Rights Agreement,  as supplemented and amended to
the date hereof,  shall be terminated  and of no further  force and effect,  but
that any  liabilities of Redhook accrued  thereunder  prior to the Closing shall
survive  the  Closing.  The  parties  agree  that upon the  consummation  of the
transactions  described  herein the shares of Series B Preferred  Stock shall be
cancelled  and of no further  force and effect.  The parties also agree that the
Purchase  Contract  shall survive the Closing and that, in addition to the other
provisions therein providing for the termination thereof, ABI shall be permitted
to terminate the Purchase Contract in the event of a Termination Event.

         5.5 PAYMENTS WITH RESPECT TO SYSTEMS COSTS.  ABI is engaged in revising
the systems and procedures by which the wholesalers of ABI generate and transmit
orders to  Redhook,  Widmer and CBA and by which  Redhook  and  Widmer  schedule
production of products.  ABI expects to incur out of pocket costs and also costs
internally  allocated  to it by the  management  systems  group of ABC.  Redhook
agrees to pay one-half of such costs,  but not to exceed  $260,000.  During each
calendar  quarter,  ABI shall invoice Redhook for one-half of the costs incurred
by ABI therefor during the preceding  calendar  quarter and within 30 days after
receipt of such invoice Redhook shall pay to ABI such amount.

VI.      CONDITIONS PRECEDENT

         6.1.     The obligation of ABI to consummate the transactions described
in Section 2.1 hereof is subject to the following:


                                       24
<PAGE>


                  (a) ABI shall  have  received a  favorable  opinion of Riddell
Williams P.S. in a form satisfactory to ABI in its reasonable judgment.

                  (b) ABI  shall  have  received  resolutions  of the  board  of
directors  of Redhook,  certified by the  Secretary  or  Assistant  Secretary of
Redhook, as of the Closing Date, to be duly adopted and in full force and effect
on such  date,  authorizing  (i) the  consummation  of each of the  transactions
contemplated by this Agreement and (ii) specific officers to execute and deliver
this Agreement and each other Transaction Document to which it is a party.

                  (c)  ABI  shall  have  received  copies  of  the  Distribution
Agreement and the Registration Rights Agreement duly executed by Redhook.

                  (d) ABI shall have received  certificates  of the Secretary or
an Assistant Secretary of Redhook,  dated the Closing Date, as to the incumbency
of the officers of Redhook  executing this  Agreement and the other  Transaction
Documents.

                  (e)  All of the  representations  and  warranties  of  Redhook
contained herein or in the other  Transaction  Documents shall be correct on and
as of the date made and as of the  Closing  Date as though made on and as of the
Closing Date, Redhook shall have complied with all of its obligations  hereunder
or  thereunder  to be satisfied on or prior to the Closing  Date,  and ABI shall
have  received  a  certificate  dated  as of the  Closing  Date  executed  by an
executive officer of Redhook to that effect.

                  (f) All licenses,  permits,  consents or approvals from or by,
and all filings  with and all notices to, all  Governmental  Authorities  having
jurisdiction,  to the extent  required  for ABI and  Redhook to  consummate  the
transaction  described  herein and the other  transactions  contemplated  by the
Transaction Documents, shall have been received or made.

                  (g) There  shall have been no material  adverse  change in the
business,  assets,  operations,  prospects or  financial  or other  condition of
Redhook since the date hereof.

                  (h) No United States or state governmental  authority or other
agency or commission thereof or any court of the United States or state court of
competent  jurisdiction  shall have enacted,  issued,  promulgated,  enforced or
entered,  and there shall not be  threatened,  instituted or pending  before any
United  States or state  governmental  authority or other  agency or  commission
thereof  or any  court  of  the  United  States  or  state  court  of  competent
jurisdiction, any statute, rule, regulation,  litigation, proceeding, injunction
or other order (whether  temporary,  preliminary or permanent) that has or would
have the effect of making the consummation of the transactions  described herein
illegal,  prohibiting  consummation  of such  transactions,  seeking  damages in
connection  with such  transactions,  or  otherwise  seeking to  challenge  such
transaction or impose limitations on the ability of ABI to hold the Common Stock
to be  acquired  hereunder  or to  exercise  its  rights  under any  Transaction
Document.



                                       25
<PAGE>

                  (i) Redhook,  Widmer  Brothers  Brewing  Company and ABI shall
have  entered  into  agreements  establishing  CBA  with  terms  and  conditions
satisfactory to ABI and all governmental consents and licenses necessary for the
operations of CBA shall have been obtained.

                   (j) ABI shall have received such  additional  information and
materials concerning Redhook as ABI may reasonably request.

         6.2. CONDITIONS OF REDHOOK WITH RESPECT TO THE CLOSING.  The obligation
of Redhook to issue and deliver the Common Stock  pursuant to Section 2.1 hereof
is subject to the following conditions:

                  (a) Redhook  shall have  received  copies of the  Distribution
Agreement and the Registration Rights Agreement duly executed by ABI.

                  (b) All of the representations and warranties of ABI contained
herein and in the other Transaction  Documents shall be correct on and as of the
date made and as of the  Closing  Date as though  made on and as of the  Closing
Date,  ABI  shall  have  complied  with  all of  its  obligations  hereunder  or
thereunder  to be satisfied on or prior to the Closing  Date,  and Redhook shall
have received a certificate  dated as of the Closing Date executed by an officer
of ABI to that effect.

                  (c) Redhook shall have received  certificates of the Secretary
or an Assistant  Secretary of ABI,  dated the Closing Date, as to the incumbency
of the officers of ABI executing this Agreement, the Distribution Agreement, and
any certificate or other document to be delivered pursuant hereto or thereto.

                  (d) All licenses,  permits,  consents or approvals from or by,
and all filings  with and all notices to, all  Governmental  Authorities  having
jurisdiction,  to the extent  required  for ABI and  Redhook to  consummate  the
transaction  describe  herein  and the other  transactions  contemplated  by the
Transaction Documents, shall have been received or made.

                  (e) No United States or state governmental  authority or other
agency or commission thereof or any court of the United States or state court of
competent  jurisdiction  shall have enacted,  issued,  promulgated,  enforced or
entered,  and there shall not be  threatened,  instituted or pending  before any
United  States or state  governmental  authority or other  agency or  commission
thereof  or any  court  of  the  United  States  or  state  court  of  competent
jurisdiction, any statute, rule, regulation,  litigation, proceeding, injunction
or other order (whether  temporary,  preliminary or permanent) that has or would
have the effect of making the consummation of the transactions  described herein
illegal,  prohibiting  consummation  of such  transactions,  seeking  damages in
connection with such transactions, prohibiting consummation of such transactions
or otherwise seeking to challenge such transaction or impose  limitations on the
ability of Redhook to exercise its rights under any Transaction Document.

         6.3. TERMINATION.

                  (a)  Subject  to  Section  6.3(b),   the  parties  hereto  may
terminate this Agreement as provided below:


                                       26
<PAGE>

                           (i) ABI and Redhook may terminate  this  Agreement by
mutual written consent at any time prior to the Closing.

                           (ii)  ABI may  terminate  this  Agreement  by  giving
written notice to Redhook at any time prior to the Closing (A) in the event that
Redhook has breached any covenant,  representation or warranty contained in this
Agreement, or (B) if the Closing shall not have occurred on or before August 31,
2004 by reason of the  failure of any  condition  precedent  under  Section  6.1
hereof  (unless the failure  results  primarily  from ABI itself  breaching  any
representation, warranty or covenant contained in this Agreement or in any other
Transaction Document).

                           (iii) Redhook may terminate  this Agreement by giving
written notice to ABI at any time prior to the Closing (A) in the event that ABI
has  breached  any  covenant,  representation  or  warranty  contained  in  this
Agreement or (B) if the Closing  shall not have occurred on or before August 31,
2004 by reason of the  failure of any  condition  precedent  under  Section  6.2
hereof (unless the failure results  primarily from Redhook itself  breaching any
representation, warranty or covenant contained in this Agreement or in any other
Transaction Document).

                  (b) In  the  event  of a  termination  of  this  Agreement  as
described in this Article VI, all rights and obligation of each party  hereunder
shall  terminate  without any  liability of either party to the other except for
any  liability  of either  party  arising  out of any breach of this  Agreement;
provided  however,  that Article VII and Section 8.1,  8.2,  8.4, 8.5, 8.6, 8.7,
8.8, 8.9, 8.10, 8.12, 8.13, 8.14, 8.15 and 8.17 shall survive termination.

VII.     INDEMNIFICATION

                  (a) Redhook  agrees to indemnify  and hold  harmless  ABI, its
corporate  Affiliates and its and their  officers,  directors and employees from
and against any liabilities,  obligations,  losses, damages, penalties, actions,
judgments,  suits, claims, costs, attorneys' fees, expenses and disbursements of
any kind which may be imposed upon,  incurred by or asserted  against them, such
officers,  directors and  employees in any manner  relating to or arising out of
(i) any untrue  representation,  breach of  warranty  or failure to perform  any
covenants by Redhook  contained herein or in any other  Transaction  Document to
which Redhook is a party or in any  certificate or document  delivered  pursuant
hereto or thereto,  (ii) any Environmental Law applicable to Redhook,  (iii) any
liability of Redhook or its Subsidiaries  that is not explicitly  assumed by the
indemnified  party  hereunder  or in any other  Transaction  Document,  (iv) any
liability to or claim of any former, present or future shareholder of Redhook or
other third party made on behalf of Redhook or on their own behalf,  arising out
of  the  consummation  or  disclosure  of  the  transactions  described  in  the
Transaction Documents,  and (v) the status of any employee or designee of ABI as
a director of Redhook.

                  (b) ABI agrees to indemnify and hold harmless  Redhook and its
officers, directors and employees from and against any liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, claims, costs, attorneys'
fees, expenses and disbursements of any kind which may be imposed upon, incurred
by or asserted against Redhook and such officers, directors and employees in any
matter  relating  to or  arising  out of any  untrue  representation,  breach of


                                       27
<PAGE>


warranty or failure to perform any covenants by ABI  contained  herein or in any
other  Transaction  Document  to which ABI is a party or in any  certificate  or
document delivered pursuant hereto or thereto.

                  (c) The foregoing  indemnification  provisions are in addition
to, and not in derogation of, any statutory, equitable or common law remedy ABI,
Redhook and their  respective  officers,  directors  and  employees may have for
breach or representation, warranty or covenant.

                  (d)  Notwithstanding the foregoing  provisions,  the rights of
indemnity of Redhook,  ABI, the corporate Affiliates of ABI and their respective
officers,  directors,  employees and designees  arising out of the  Distribution
Agreement or any  certificate or document  delivered  pursuant  thereto shall be
governed by the terms of the Distribution Agreement.

VIII.    MISCELLANEOUS

         8.1. NOTICES.  Whenever it is provided herein that any notice,  demand,
request, consent,  approval,  declaration or other communication shall or may be
given to or served upon any of the parties by  another,  or whenever  any of the
parties  desires  to give or serve  upon  another  any such  communication  with
respect to this Agreement, each such notice, demand, request, consent, approval,
declaration  or other  communication  shall be in writing  and  either  shall be
delivered  in person with receipt  acknowledged  or by  registered  or certified
mail, return receipt requested, postage prepaid, or by telecopy and confirmed by
telecopy answer back addressed as follows:

                  If to Redhook at:
                  Redhook Ale Brewery, Incorporated
                  14300 NE 145th Street
                  Woodinville, Washington  98072
                  Attention:  President
                  Telecopy Number: (425) 485-0761

                  with a copy to:
                  Riddell Williams, P.S.
                  1001 Fourth Avenue Plaza, Suite 4500
                  Seattle, Washington  98154
                  Attention:  Douglass A. Raff
                  Telecopy Number:   (206) 389-1708

                  If to ABI at:
                  Anheuser-Busch, Incorporated
                  One Busch Place
                  St. Louis, Missouri 63118
                  Attention:  Vice President- Business and
                  Wholesaler System Development
                  Telecopy Number:  (314) 765-9167


                                       28
<PAGE>

                  with a copy to:
                  Anheuser-Busch Companies, Inc.
                  One Busch Place
                  St. Louis, Missouri 63118
                  Attention:  Vice President and General Counsel
                  Telecopy Number:  (314) 577-0776


         The parties  agree to send such notices to such other address as may be
substituted  by  notice  given as herein  provided.  The  giving  of any  notice
required  hereunder  may be waived in writing by the party  entitled  to receive
such notice. Every notice, demand, request,  consent,  approval,  declaration or
other communication  hereunder shall be deemed to have been duly given or served
on the date on which personally delivered, with receipt acknowledged, telecopied
and  confirmed by telecopy  answerback,  or three  Business  Days after the same
shall have been deposited with the United States mail.

         8.2.  BINDING EFFECT;  BENEFITS.  Except as otherwise  provided herein,
this Agreement  shall be binding upon and inure to the benefit of the parties to
this Agreement and their respective successors and permitted assigns. Nothing in
this  Agreement,  express or implied,  is intended or shall be construed to give
any  person  other  than the  parties  to this  Agreement  or  their  respective
successors or assigns any legal or equitable right,  remedy or claim under or in
respect of any agreement or any provision contained herein.

         8.3.  AMENDMENT.  Any  amendment  or  waiver of any  provision  of this
Agreement  or any other  Transaction  Document or any  consent to any  departure
therefrom shall not be effective  unless the same shall be in writing and signed
by  Redhook  and ABI and  shall  specifically  refer to this  Agreement  or such
Transaction  Document.  Except as provided in the preceding sentence,  no action
taken  pursuant  to  this  Agreement,   including,   without   limitation,   any
investigation  by or on behalf of any  party,  shall be deemed to  constitute  a
waiver by the party taking such action of compliance  with any  representations,
warranties,  covenants or agreements  contained herein.  The waiver by any party
hereto of a breach of any  provision of this  Agreement  shall not operate or be
construed as a waiver of any preceding or succeeding  breach,  and no failure by
either  party to exercise  any right or  privilege  hereunder  shall be deemed a
waiver of such  party's  rights  or  privileges  hereunder  or shall be deemed a
waiver of such  party's  rights to exercise the same at any  subsequent  time or
times hereunder.

         8.4. SUCCESSORS AND ASSIGNS:  ASSIGNABILITY.  Except as provided in the
next  sentence,  neither this  Agreement  nor any right,  remedy,  obligation or
liability  arising  hereunder or by reason  hereof shall be assignable by either
party hereto  without the prior written  consent of the other party hereto.  Any
right or remedy,  arising hereunder or by reason hereof,  shall be assignable by
ABI to any direct or  indirect  subsidiary  of A-BC  without  the prior  written
consent of Redhook,  so long as such Person assumes ABI's obligations  hereunder
and ABI remains liable for ABI's obligations hereunder.  All covenants contained
herein  shall  bind and inure to the  benefit  of the  parties  hereto and their
respective successors and assigns.


                                       29
<PAGE>

         8.5.  REMEDIES.  ABI and  Redhook,  in  addition  to being  entitled to
exercise  all rights  granted by law,  including  recovery of  damages,  will be
entitled to specific  performance of their rights under this Agreement.  Redhook
and ABI agree that monetary  damages would not be adequate  compensation for any
loss  incurred by reason of a breach by them of the  provisions  of Article V of
this  Agreement and hereby agree to waive the defense in any action for specific
performance  that a remedy at law would be adequate.  Each party hereto shall be
paid by the other party hereto for any reasonable costs and expenses incurred by
it (including  reasonable fees and expenses of counsel and whether incurred as a
result of negotiations,  legal  proceedings or otherwise) in connection with the
enforcement  of its rights under the  Transaction  Documents  against such other
party.

         8.6.  APPLICABLE LAW. This Agreement shall be governed by and construed
in accordance  with the law of the State of  Washington,  without  regard to the
principles thereof regarding conflict of laws.

         8.7.  SECTION  AND OTHER  HEADINGS.  The  section  and  other  headings
contained in this Agreement are for reference purposes only and shall not affect
the meaning or interpretation of this Agreement.

         8.8. SEVERABILITY.  In the event that any one or more of the provisions
contained  in this  Agreement  shall be  determined  to be  invalid,  illegal or
unenforceable  in any  respect  for  any  reason,  the  validity,  legality  and
enforceability  of any such  provision or  provisions in every other respect and
the remaining provisions of this Agreement shall not be in any way impaired.

         8.9.  COUNTERPARTS.  This  Agreement  may be  executed in any number of
counterparts,  each of which shall be deemed to be an original  and all of which
together shall be deemed to be one and the same instrument.

         8.10.  NONDISCLOSURE  OF  CONFIDENTIAL  INFORMATION.  Without the prior
written consent of Redhook,  any information relating to Redhook provided to ABI
in  connection  with,  or as a result of, its  acquisition  of the Common  Stock
(including   any  such  received   under  Article  V  hereof)  which  is  either
confidential,  proprietary,  or otherwise not generally  available to the public
(but  excluding  (a)  information  ABI  has  obtained   independently   or  from
third-party  sources  without ABI's  knowledge  that the source has violated any
fiduciary or other duty not to disclose such  information,  (b) information that
otherwise becomes generally available to the public, or (c) information known to
ABI other than as a result of its ownership of the  securities of Redhook or its
designation of directors for Redhook (the "Confidential  Information"))  will be
kept  confidential by ABI, using the same standard of care in  safeguarding  the
Confidential  Information  as ABI  employs  in  protecting  its own  proprietary
information  which  ABI  desires  not to  disseminate  or  publish  and ABI will
instruct its directors,  officers, employees, and representatives (collectively,
"Representatives") to so keep such Confidential  Information  confidential.  ABI
further  represents  that it will not, and it will instruct its  Representatives
not to,  trade in Common  Stock while in  possession  of  material  Confidential
Information. It is understood (i) that such Representatives shall be informed by
ABI of the  confidential  nature of the  Confidential  Information and (ii) that
such Representatives  shall be bound by the provisions of this Section 8.10 as a
condition of receiving the Confidential Information.  ABI shall not use any such
confidential  information  to  produce  a malt  beverage  the  formula  of which
duplicates any formula for a malt beverage produced by Redhook.

                                       30
<PAGE>


         8.11. PUBLICITY.  Neither ABI nor Redhook shall issue any press release
or make any public disclosure regarding the transactions  contemplated hereby or
their consummation without consulting the other party hereto.

         8.12.  ENTIRE  AGREEMENT.  This  Agreement  and the  other  Transaction
Documents constitute the entire agreement among the parties hereto and supersede
any prior understandings,  agreements or representations by or among the parties
hereto,  written  or oral,  to the  extent  they are  related  in any way to the
subject matter hereof.

         8.13. FEES AND EXPENSES.  Each of the parties hereto shall bear its own
costs and expenses  (including  legal fees and expenses)  incurred in connection
with this Agreement and the transactions contemplated hereby.

         8.14. EXHIBITS AND SCHEDULES.  The exhibits and schedules identified in
this Agreement are incorporated herein by reference and made a part hereof.

         8.15.  CONDITIONS TO CLOSING.  Each party hereto shall use commercially
reasonable  efforts to satisfy  the  conditions  described  in Article VI hereof
contemplated to be satisfied by it.

         8.16. SURVIVAL OF REPRESENTATIONS  AND WARRANTIES.  The representations
of ABI and Redhook  hereunder  shall  survive  the Closing and  continue in full
force and  effect  forever  thereafter  (subject  to any  applicable  statute of
limitations).

         8.17.  CONSTRUCTION.  Any  reference  to any federal,  state,  local or
foreign  statute  or law  shall  be  deemed  also  to  refer  to all  rules  and
regulations promulgated thereunder,  unless the context requires otherwise.  The
word "including"  shall mean including without  limitation.  If either party has
breached  any  representation,  warranty  or  covenant  contained  herein in any
respect, the existence of another  representation,  warranty or covenant related
to the same subject matter  (regardless of the relative  levels of  specificity)
that the party has not breached shall not detract from or mitigate the breach of
the former representation, warranty or covenant.

         References  to this  Agreement  shall  mean  this  Exchange  Agreement,
including all  amendments,  modifications  and  supplements  and any exhibits or
schedules to any of the foregoing,  and shall refer to the Agreement as the same
may be in effect at the time such reference becomes operative.

         Any accounting term used in this Agreement shall have, unless otherwise
specifically  provided  herein,  the  meaning  customarily  given  such  term in
accordance  with  GAAP,  and  all  financial  computations  hereunder  shall  be
computed, unless otherwise specifically provided herein, in accordance with GAAP
consistently applied. That certain terms or computations are explicitly modified
by the phrase "in  accordance  with GAAP" shall in no way be  construed to limit
the foregoing.  The words "herein,"  "hereof" and "hereunder" and other words of
similar  import refer to this  Agreement as a whole,  including the exhibits and
schedules  hereto,  as the same may from time to time be  amended,  modified  or
supplemented,  and not to any particular section, subsection or clause contained
in this Agreement.  Wherever from the context it appears appropriate,  each term
stated in either the  singular  or plural  shall  include the  singular  and the
plural,  and pronouns  stated in the masculine,  feminine or neuter gender shall
include the masculine, the feminine and the neuter.


                                       31
<PAGE>


                            (SIGNATURE PAGE FOLLOWS)





                                       32
<PAGE>





         IN WITNESS WHEREOF,  Redhook and ABI have executed this Agreement as of
the day and year first above written.

                               REDHOOK ALE BREWERY, INCORPORATED


                               By:/S/ PAUL SHIPMAN
                               -----------------------------------------------
                               Title: President and Chief Executive Officer

                               ANHEUSER-BUSCH, INCORPORATED


                               By: /S/ JAMES F. HOFFMEISTER
                               -----------------------------------------------
                               Title: Vice President-Administration