Document:

<PAGE>   1
                                                                   EXHIBIT 10.26

          CONFIDENTIAL PORTIONS HAVE BEEN OMITTED BASED UPON A REQUEST
      FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 24B-2 OF THE SECURITIES
    EXCHANGE ACT OF 1934 AND HAVE BEEN SEPARATELY FILED WITH THE COMMISSION

November 7, 2000

William G. Gerber, MD
President & CEO
Epoch Biosciences, Inc.
12277 134th Ct. N.E.
Suite 110
Redmond, WA 98052

      RE: LETTER AGREEMENT BETWEEN EPOCH BIOSCIENCES, INC.
          AND BAY CITY CAPITAL BD LLC

Dear Bill:

         This Letter Agreement (this "Agreement") will confirm the understanding
and agreement between Bay City Capital BD LLC ("BCC") (the "Advisor") and Epoch
Biosciences, Inc. ("Epoch" or the "Company") as follows:

         1. The Company hereby engages the Advisor as the Company's sole and
exclusive advisor for the purposes of:

PHASE I:

            (a) developing a strategic action plan aimed at accessing,
developing and commercializing oligonucleotide research products for end-user
markets ("Reagent Strategy");

PHASE II:

            (b) advising and representing the Company concerning certain
opportunities for the purchase of an interest in, or the assets of, one or more
existing businesses engaged in the manufacture and sale of oligonucleotide
research products (as more particularly defined below, a "Purchase");

            (c) advising and representing the Company concerning certain
opportunities for the acquisition of products or technologies that implement or
accelerate the Reagent Strategy (as more particularly defined below, a "Product
or Technology Acquisition");

            (d) facilitating specific opportunities for alliances between
potential corporate partners and the Company which serve to implement or
accelerate the Reagent Strategy (as more particularly defined below, an
"Alliance");

<PAGE>   2

Letter to William Gerber, MD.                                       CONFIDENTIAL
November 7, 2000
Page 2

            (e) advising the company in the analysis of emerging technologies
and market trends which present opportunities for Epoch to [*];

            (f) advising and representing the Company concerning certain
opportunities for (i) the purchase of an interest in, or the assets of, one or
more existing businesses (a "Purchase") or (ii) the acquisition of certain
products or technologies (a "Product or Technology Acquisition") which serves to
advance or accelerate [*].

         2. The Advisor hereby accepts the engagement described in paragraph 1
and, in that connection, agrees to use its best reasonable commercial efforts to
undertake the efforts described in paragraph 1, and to:

            (a) consult with and advise the Company concerning the Reagent
Strategy; and

            (b) consult with and advise the Company concerning opportunities for
Purchases, Alliances and/or Product or Technology Acquisitions, including but
not limited to those companies listed in Exhibit A; and any other companies or
entities requested by the Company; and

            (c) participate, with the consent of management and the Board of
Directors, on the Company's behalf in negotiations for such Purchases, Alliances
and/or Product or Technology Acquisitions; and

            (d) consult with and advise the Company concerning [*].

         3. For purposes of this Agreement:

            (a) A "Purchase" by the Company shall mean any transaction or series
or combination of transactions, whereby directly or indirectly, a majority of
the voting equity interests in a business entity, or a material amount of any of
the respective assets of a business entity is acquired by the Company for
consideration. A Purchase shall exclude the acquisition of capital equipment
from a seller in the ordinary course of its business.

            (b) A "Product or Technology Acquisition" by the Company shall mean
any transaction, agreement, arrangement, or collaboration, other than a
Purchase, whereby the Company acquires a right to develop, manufacture, market
and/or sell existing and potential research products and technologies.

            (c) An "Alliance" with the Company shall mean any agreement,
arrangement or collaboration, other than a Purchase or Product or Technology
Acquisition by the Company, whereby the Company transfers or commits a material
amount of Company assets (whether in the form of cash, equipment, employee
resources or otherwise) toward a third-party business arrangement, including
without limitation, through a joint venture or strategic partnership, a minority
investment, or any similar transaction. An Alliance shall exclude (i) any bank
credit arrangements for the purpose of capital equipment debt/lease or
receivables financing; (ii) supply, licensing and development agreements with
third parties entered into in the normal course of business where the sole
purpose is

      *CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH COMMISSION.

<PAGE>   3

Letter to William Gerber, MD.                                       CONFIDENTIAL
November 7, 2000
Page 3

to commercialize existing Company technologies and there are no third-party
technologies or products being transferred to or committed to the Company by
such third-party; and (iii) strategic alliances or other partnerships with any
company named on the list of exclusions attached hereto as Exhibit B, unless
mutually agreed to by the Advisor and the Company.

            (d) "Consideration" shall mean the gross value of all cash,
securities and other property (i) paid directly or indirectly by the Company in
connection with a Purchase or Product or Technology Acquisition, (ii) paid
directly by the Company in connection with an Alliance, (iii) contributed by the
Company in the case of an Alliance with the Company involving a joint venture or
strategic partnership. The value of any such securities (whether debt or equity)
or other property shall be determined as follows: (x) the value of securities
for which there is an established public market will be equal to the average of
the closing market price of the security over the ten (10) days trading days
immediately preceding the closing of such Purchase or Acquisition, and (y) the
value of securities that have no established public market, and the value of
consideration that consists of other property, shall be the fair market value
thereof. "Consideration" in an Alliance shall include, without limitation,
up-front equity payments, up-front licensing fees up-front royalties and
milestones (with the exception of those instances where milestone achievement is
directly financed by the Company, in which case only the premium above costs
incurred will be included as consideration), but shall exclude recurring
royalties and similar such payments. "Consideration" also shall be deemed to
include the aggregate principal amount of any indebtedness for money borrowed
and any unfunded pension liabilities and guarantees of the transferor or
Alliance partner, assumed, directly or indirectly, whether contractually or by
operation of law, in connection with such Purchase, Product or Technology
Acquisition, or Alliance. Consideration in an Alliance shall exclude the
internal expenses or expense commitments of the Alliance partner, or amounts
paid to third parties for research work or furtherance of the Alliance products
or programs.

         4. The Company shall:

            (a) furnish to the Advisor the names of all parties for which the
Company desires the Advisor's engagement hereunder concerning a possible
Purchase or Product or Technology Acquisition by the Company or an Alliance with
the Company (a current list of which is on Exhibit A);

            (b) furnish to the Advisor the names of all parties which the
Company has or intends to approach with regard to supply, license or development
agreements concerning existing Company technologies;

            (c) furnish to the Advisor the conclusions of any research to date
regarding emerging technologies or other strategic opportunities for which the
Company desires the Advisor's engagement hereunder concerning possible Product
or Technology Acquisitions by the Company; and

            (d) make available to the Advisor all information concerning the
business, assets, liabilities, operations, financial condition and prospects of
the Company which the Advisor reasonably requests in connection with the
performance of its obligations hereunder. All such information provided by or on
behalf of the Company shall be complete and accurate and not misleading, and the
Advisor shall be entitled to rely upon the accuracy and completeness of all such
information without independent verification. The Company shall continue to
advise the Advisor regarding any material developments or matters relating to
the Company that occur during the term of the Advisor's engagement hereunder.

<PAGE>   4

Letter to William Gerber, MD.                                       CONFIDENTIAL
November 7, 2000
Page 4

         5. In consideration for the services rendered by the Advisor hereunder,
the Company shall pay the Advisor as follows:

            (a) A retainer fee (the "Fee") in the form of a five-year, net
exercisable Warrant to purchase 40,000 shares of the Company's stock at an
exercise price of $10.19, (the average of the closing prices over ten (10)
trading days preceding the date of this letter agreement) (the form of Warrant
is attached as Exhibit C);

            (b) Transaction fees according to the schedule below, payable in
cash or warrants to purchase stock at the sole discretion of the Company. If a
Purchase or Product or Technology Acquisition occurs within six months of
execution of this Agreement, or if a Purchase or Product or Technology
Acquisition involves a party named on Exhibit A and occurs within twelve months
of the execution of this Agreement, then the Company shall compensate the
Advisor in an amount equal to [*] Percent ([*]%) of the Purchase or Product or
Technology Acquisition transaction value, with a minimum of $[*] fee per
transaction. Notwithstanding the foregoing, if the aggregate Consideration in
the transaction is less than Ten Million Dollars, the compensation shall be
equal to [*] Percent ([*]%) of the transaction value, with a minimum of $[*] fee
per transaction. If an Alliance occurs within six months of execution of this
Agreement, or if an Alliance involves a party named in Exhibit A and is
concluded within twelve months of the execution of this Agreement, then the
Company shall compensate the Advisor in the amount of [*] Percent ([*]%) of the
Alliance transaction value, with a minimum of $[*] fee per transaction. A
transaction will be considered to have occurred upon closing and any fee with
respect to Consideration received after closing, shall be payable only after
actual receipt.

            (c) If compensation is made using warrants to purchase stock, the
Company shall issue to the Advisor warrants to purchase shares of the Company's
common stock with the following features:

Number of Shares:  The number of shares issuable on exercise of the warrants
                   shall be calculated so that the Black-Scholes value, on the
                   date of signing a letter of intent or definitive agreement,
                   (the "Transaction Signing Date", which may predate the
                   closing), equals the transaction fee payable to the Advisor
                   set forth in Section 5(b) above, assuming a [*] percent
                   [*] volatility. The number of shares is subject to adjustment
                   as set forth below.

      *CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH COMMISSION.

<PAGE>   5

Letter to William Gerber, MD.                                       CONFIDENTIAL
November 7, 2000
Page 5

Exercise Price:                Either (i) for warrants issued within six (6)
                               months of the date of this letter agreement,
                               $10.19, the average of the closing prices over
                               the ten (10) trading days preceding the date of
                               this Agreement, or (ii) for warrants issued six
                               (6) months or more after the date of this
                               Agreement, the average of the closing prices over
                               the ten (10) trading days preceding the six (6)
                               month anniversary of the date of this Agreement.
                               The exercise price on issuance will be subject to
                               adjustment as set forth below.

Adjustment to Number of        If, on the date of issuance of the warrants, the
Shares (Stock Price            spread (i.e. the difference between (i) the
Increase):                     aggregate value of the shares underlying the
                               warrant based on the average of the closing
                               prices over the ten (10) trading days preceding
                               the Transaction Signing Date, and (ii) the
                               aggregate exercise price) exceeds two (2) times
                               the transaction fee payable under Section 5(b)
                               above, then the number of shares issuable on
                               exercise of the warrant shall be reduced to limit
                               the spread to two (2) times the transaction fee.
                               In such case the exercise price will not change
                               from that set forth above. An example of this
                               adjustment is set out on Exhibit D.

Adjustment to Number of        If, on the Transaction Signing Date, the exercise
Warrants and Exercise Price    price as calculated above is more than the
(Stock Price                   average of the closing prices over the ten (10)
Decrease):                     trading days preceding the Transaction Signing
                               Date, then the exercise price shall decrease to
                               be the average of the closing prices over the ten
                               (10) trading days preceding the Transaction
                               Signing Date so that the Black-Scholes value of
                               the warrants equals the transaction fee payable
                               to the Advisor set forth in Section 5(b) above,
                               assuming a [*] percent [*] volatility. In such
                               case both the exercise price and the number
                               of shares issuable on exercise of the warrants
                               will change from that set forth above. An example
                               of this adjustment is set out on Exhibit D.

Term:                          Five (5) years.

Exercise Method:               Cash or net exercise based on the closing price
                               of the common stock on the day preceding the date
                               of exercise.

Anti-Dilution:                 After issuance, adjustment of exercise price and
                               number of shares for stock splits, combinations,
                               etc. No other price adjustment for changes in
                               value or dilution.

Merger, Acquisition:           Warrant terminates on acquisition of the Company.

Registration Rights:           Piggyback. A form of warrant is attached to this
                               letter agreement as Exhibit C.

         6. In addition to the above fees, the Company shall reimburse the
Advisor upon request and receipt of appropriate documentation for its reasonable
out of pocket expenses incurred in connection with its engagement hereunder.

      *CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH COMMISSION.
<PAGE>   6

Letter to William Gerber, MD.                                       CONFIDENTIAL
November 7, 2000
Page 6

         7. The Company shall:

            (a) indemnify and hold harmless the Advisor and its directors,
controlling persons, officers, employees, agents, representatives, and
affiliates, and the directors, controlling persons, officers, employees, agents,
representatives, and affiliates of such other party's agents, representatives,
and affiliates (collectively, "Indemnified Persons"), from and against any and
all losses, claims, actions, suits, damages, costs, expenses, fees or
liabilities (including, but not limited to, reasonable attorneys' fees) to which
the Indemnified Persons may become subject or may suffer as a result of claims,
suits, actions or other proceedings by the Company or any other third-parties
arising out of the rendering of services by the Advisor hereunder (including any
services rendered prior to the date hereof), or the rendering of additional
services by the Advisor as requested by the Company that are related to the
services rendered hereunder, provided no such indemnification shall apply to any
loss, or claim arising from (i) the gross negligence or willful misconduct of
the Advisor or any Indemnified Person or (ii) any claim of Company against the
Advisor; and

            (b) reimburse the Advisor and its directors, controlling persons,
officers, employees, agents, representatives, and affiliates, and the directors,
controlling persons, officers, employees, agents, representatives, and
affiliates of such other party's agents, representatives, and affiliates
promptly for any legal or other expenses reasonably incurred by it in connection
with investigating, preparing to defend or defending, or providing evidence in
or preparing to serve or serving as a witness with respect to, any lawsuits,
investigations, claims or other proceedings arising out of the rendering of
services by the Advisor hereunder or the rendering of additional services by the
Advisor as requested by the Company that are related to the services rendered
hereunder (including, without limitation, in connection with the enforcement of
this Agreement and the indemnification obligations set forth herein), provided
no such reimbursement shall apply to any lawsuit, investigation, claim or
proceeding arising from the gross negligence or willful misconduct of the
Advisor or any Indemnified Person. The Company agrees that the indemnification
and reimbursement commitments set forth in this paragraph 7 shall apply whether
or not the Advisor is a formal party to any such lawsuits, investigations,
claims or other proceedings and that such commitments shall extend upon the
terms set forth in this paragraph to any Indemnified Person. The Company further
agrees that, without the Advisor's prior written consent, it will not enter into
any settlement of a lawsuit, claim or other proceeding arising out of the
transactions contemplated by this Agreement (whether or not the Advisor or any
other Indemnified Person is an actual or potential party to such lawsuit, claim
or proceeding) , unless such settlement includes an explicit and unconditional
release from the party bringing such lawsuit, claim or other proceeding of all
Indemnified Persons.

         8. In the event of a third party claim, the Company shall be entitled
to defend the Indemnified Persons with counsel of its choice. The Indemnified
Persons are entitled to retain separate counsel of their choice (at the
Indemnified Person's expense) in connection with any such third party claim.

         9. The Company and the Advisor agree that if any indemnification or
reimbursement sought pursuant to the preceding paragraph 7 is judicially
determined to be unavailable for a reason other than the gross negligence or
willful misconduct of the Advisor, then, whether or not the Advisor is the
Indemnified Person, the Company and the Advisor shall contribute to the losses,
claims, damages, liabilities and expenses for which such indemnification or
reimbursement is held

<PAGE>   7

Letter to William Gerber, MD.                                       CONFIDENTIAL
November 7, 2000
Page 7

unavailable (i) in such proportion as is appropriate to reflect the relative
benefits to the Company on the one hand, and the Advisor on the other hand, in
connection with the transactions to which such indemnification or reimbursement
relates, or (ii) if the allocation provided by clause (i) above is judicially
determined not to be permitted, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) but also the relative
faults of the Company on the one hand, and the Advisor on the other hand, as
well as any other equitable considerations. The Advisor (together with its
related Indemnified Persons) shall not be under any obligation to contribute an
amount in excess of the fees paid to the Advisor hereunder, unless such
obligation results from the negligence or willful misconduct of the Advisor.

         10. Except as contemplated by the terms hereof or as required by
applicable law or pursuant to an order entered or subpoena issued by a court of
competent jurisdiction, the Advisor shall keep confidential all non-public
information provided to it by the Company, or by a third-party for the benefit
of the Company, and shall not disclose such information to any third party,
other than such of its employees and advisors as the Advisor determines to have
a need to know and who are under an obligation of confidentiality.

         11. Except as required by applicable law, any advice to be provided by
the Advisor under this Agreement shall not be disclosed publicly or made
available to third parties without the prior approval of the Advisor, and
accordingly such advice shall not be relied upon by any person or entity other
than the Company.

         12. The Company agrees that the Advisor has the right following the
closing of a Purchase to place advertisements in financial and other newspapers
and journals at its own expense describing its services to the Company
hereunder, provided that the Advisor submits a copy of any such advertisements
to the Company for its approval, which approval shall not be unreasonably
withheld.

         13. The term of the Advisor's engagement hereunder shall terminate
twelve (12) months from the date of execution of this Agreement unless earlier
terminated as set forth below. Either party may terminate the Advisor's
engagement hereunder at any time in whole or in part by giving the other party
at least ten (10) days prior written notice. Paragraphs 7-12 and 14-17 shall
survive termination or expiration of this Agreement. In addition, the Company's
obligation to pay fees pursuant to paragraph 5 shall survive with respect to (i)
transactions closed prior to such termination or expiration, and (ii)
transactions closed within twelve (12) months following such termination or
expiration which were instituted with the Advisor prior to such termination or
expiration. Within thirty (30) days after the effective date of any such
termination, the Advisor will deliver to the Company (i) copies of Exhibit A and
Exhibit B as then constituted and (ii) a list of any companies with which the
Advisor has instituted transactions as of the termination or expiration.

         14. The Company and the Advisor each represent to the other that there
is no other person or entity that is entitled to a finder's fee or any type of
brokerage commission in connection with the transactions contemplated by this
Agreement as a result of any agreement or understanding with it.

<PAGE>   8

Letter to William Gerber, MD.                                       CONFIDENTIAL
November 7, 2000
Page 8

         15. Nothing in this Agreement, expressed or implied, is intended to
confer or does confer on any person or entity other than the parties hereto or
their respective successors and assigns, and to the extent expressly set forth
herein, the Indemnified Persons, any rights or remedies under or by reason of
this Agreement or as a result of the services to be rendered by the Advisor
hereunder. The Company further agrees that neither the Advisor nor any of its
controlling persons, affiliates, directors, officers, employees or agents shall
have any liability to the Company or any person asserting claims an behalf of or
in right of the Company for any losses, claims, damages, liabilities or expenses
arising out of or relating to this Agreement or the services to be rendered by
the Advisor hereunder, unless it is finally judicially determined that such
losses, claims, damages, liabilities or expenses resulted directly from the
negligence or willful misconduct of the Advisor.

         16. This Agreement may not be amended or modified except in writing
signed by each of the parties and shall be governed by and construed and
enforced in accordance with the laws of the State of California.

         17. Any controversy of claim arising out of or relating to this
Agreement, or the alleged breach of this Agreement, shall be settled by binding
arbitration situated in San Francisco, California and administered under the
American Arbitration Association Rules by that arbitration service, or as the
parties may otherwise mutually agree within 10 days of any request by any party
for submission of a matter to arbitration. Any judgment on the award rendered by
the arbitrator(s) may be entered in any court having jurisdiction. This
agreement to arbitrate is specifically enforceable. The arbitrator(s) may not
award punitive or consequential damages. The parties to this Agreement agree
that, in the event that any party to this Agreement initiates any arbitration
proceedings to obtain any payments, benefits, rights or injunctive or other
relief related to this Agreement, the prevailing party shall be entitled to
recover all reasonable attorneys fees and other related expenses incurred by the
prevailing party to the extent successful in the proceedings.

         18. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.

<PAGE>   9

Letter to William Gerber, MD.                                       CONFIDENTIAL
November 7, 2000
Page 9

         If the foregoing correctly sets forth the understanding and agreement
between the Advisor and the Company, please so indicate in the space provided
for that purpose below, whereupon this letter shall constitute a binding
agreement as of the date noted below.

                                              Bay City Capital BD LLC

                                              By: /s/ ANDREW J. SCHWAB
                                                  ------------------------------
                                                      Andrew J. Schwab
                                                      Vice President

Agreed to and accepted this 7 day of
November, 2000.

Epoch Biosciences, Inc.

By: /s/ WILLIAM G. GERBER
    -----------------------------------
Name: William Gerber, M.D.
      Title: Chief Executive Officer<PAGE>   1
                                                                Exhibit 10.43

                              EMPLOYMENT AGREEMENT

        THIS EMPLOYMENT AGREEMENT ("Agreement") is entered into effective the
1st day of November, 2001, between Redhook Ale Brewery, Incorporated
("Employer") and Paul Shipman ("Employee").

        1. Explanatory Statement

                a. Employer is engaged in the business of brewing, packaging,
marketing, and distributing alcoholic malt beverages and other beverages.

                b. Employee has specialized expertise in the business of
brewing, packaging, marketing, and distributing alcoholic malt beverages, and
other beverages and is the Chairman of the Board, Chief Executive Officer and
President of Employer.

                c. Employee accepts continued employment with Employer and
agrees to render the services for Employer on the terms and conditions set forth
in this Agreement.

        2. Term of Employment. The term of this Agreement commences on November
1, 2001 and, subject to the further provisions of this Agreement, ends on July
31, 2005.

        3. Employment. Employer employs Employee as Chairman of the Board, Chief
Executive Officer and President, and Employee agrees to render services for and
on behalf of Employer under the direction and supervision of the Board of
Directors. Employee shall provide these services professionally and competently
and shall devote substantially all of Employee's business time to his services
hereunder.

        4. Compensation.

                a. Employer will pay Employee as compensation for services
rendered under this Agreement as follows:

                (i) a minimum base salary of Two Hundred Thirty Seven Thousand
Five Hundred Dollars ($237,500) per year in accordance with Employer's normal
payroll policies; and

                (ii) bonuses to be determined and paid as set forth on Schedule
A attached hereto.

                b. Employee's base salary and incentive compensation shall be
reviewed annually by the Compensation Committee. The Company intends to increase
Employee's base salary and target bonus annually, (and will not unreasonably
withhold increases) if the Company is meeting or exceeding targeted performance,
and Employee is meeting or exceeding agreed upon objectives. Employee agrees and
acknowledges that, in determining whether to increase base salary or incentive

<PAGE>   2

compensation, the Compensation Committee is required to take into account the
financial condition of the Company, and its short and long term prospects.

        5. Vacations and Fringe Benefits.

                a. Employer shall provide Employee four (4) weeks vacation,
retirement and other fringe benefits provided other similarly situated executive
employees of Employer.

                b. Employer may furnish Employee an automobile, which may be
used by Employee for personal and business use and shall pay the ordinary and
reasonable expenses associated with operation of the automobile; however,
Employee shall account to Employer for the personal use of the automobile which
in turn shall be reported by Employer as income to Employee in accordance with
the regulations of the Internal Revenue Service. If at any time the rules
regarding personal use of business automobiles are changed by the Internal
Revenue Service, this Agreement shall be modified to assure compliance in a
manner that is as favorable to Employee as permitted by such rules. If Employer
does not provide an automobile for Employee, Employee will receive a reasonable
monthly car allowance in an amount to be determined by the Compensation
Committee.

        6. Termination of Employment.

                a. Employer may at its option terminate the employment of
Employee with no further obligation to compensate Employee through written
notice to Employee for any of the following reasons:

                        (1) Employee materially breaches any of the provisions
        of this Agreement and fails to cure the breach within thirty (30) days
        after receiving specific written notice of the breach; or

                        (2) Employee has engaged in conduct which in the event
        he were to remain employed by Employer would substantially and adversely
        impair the interests of Employer; or

                        (3) Employee repeatedly refuses to obey lawful
        directions of Employer's Board of Directors.

                b. Employer may at its option terminate the employment of
Employee through written notice to Employee for any other reason; however, in
the event of such termination:

                        (1) Employer shall pay employee all bonuses calculated
        in accordance with the respective formula set-forth on Schedule A,
        pro-rated up to and including the effective date of termination;

                        (2) Employer shall continue to pay Employee for a
        minimum of two (2) additional years the salary and benefits then in
        effect on the date that

                                       2
<PAGE>   3

        notice of termination is received (such compensation to be paid in
        accordance with standard payroll policies, or in a lump sum within 30
        days of termination, at Employees option), provided, that if Employee
        has not obtained employment within such two (2) year period, Employee
        shall be entitled to the health benefits provided other similarly
        situated executive employees of Employer for an additional three (3)
        months, and at the conclusion of the three month period, Employee shall
        be entitled to the COBRA benefits provided other similarly situated
        executive employees for an additional six (6) months;

                        (3) All outstanding unvested options/shares granted to
        the Employee that are scheduled to vest within two (2) year from the
        date that notice of termination is received under this Section 6.b.,
        will continue to vest according to that schedule and all other unvested
        options/shares will be canceled;

                        (4) If Employee violates Sections 7 or 8 of this
        Agreement, Employer's obligation to continue to pay Employee's
        compensation, as described in this Section 6.b., shall immediately
        terminate, and the Employer will have no further obligation to Employee
        pursuant to this Agreement, provided that the cessation of the
        Employee's compensation under this Section 6.b.(4) shall not limit
        Employer's rights to pursue other remedies at law or in equity.

                c. Employee may at his option terminate his employment with
Employer under this Agreement through written notice to Employer for the
following reasons:

                        (1) Employer materially breaches any of the provisions
        of this Agreement and fails to cure the breach within thirty (30) days
        after receiving specific written notice of the breach and action
        required to cure the breach;

                        (2) Employer is declared bankrupt or a receiver is
        appointed.

                        (3) Employer liquidates or otherwise ceases business
        operations;

                d. In the event that Employee elects to terminate his employment
under Section 6.c.(1)

                        (1) Employer shall pay Employee all bonuses calculated
        in accordance with the respective formula set-forth on Schedule A,
        pro-rated up to and including the effective date of termination

                        (2) Employer shall continue to pay Employee for two (2)
        additional years the compensation, other than the annual performance
        bonus, then in effect on the date that notice of termination is
        received;

                        (3) All outstanding unvested options/shares granted to
        the Employee that are scheduled to vest within two (2) year from the
        date that notice

                                       3
<PAGE>   4

        of termination is received under this Section 6.d., will continue to
        vest according to that schedule and all other unvested options/shares
        will be canceled;

                        (4) If Employee materially violates Sections 7 or 8 of
        this Agreement, Employer's obligation to continue to pay Employee's
        compensation, as described in this Section 6.d., shall immediately
        terminate, and the Employer will have no further obligation to Employee
        pursuant to this Agreement, provided that the cessation of Employee's
        compensation under this Section 6.d.(4) shall not limit Employer's
        rights to pursue other remedies at law or in equity.

                e. Employee's termination of employment for any other reason
shall constitute a material breach of this Agreement, and shall terminate
Employer's obligations under this Agreement, without limiting Employer's rights
to pursue other remedies at law or in equity; and

                f. Employee shall continue to be subject to the restrictions in
Sections 7 and 8 of this Agreement following termination of employment for any
reason.

        7. Confidential Information and Goodwill.

                a. Employee will acquire knowledge of Employer's confidential
information. Confidential information is information which is of a unique nature
relating to the Employer's business operations, internal structure, financial
affairs, programs, recipes, formulations, brewing methods, systems, procedures,
manuals, confidential reports, lists of customers and prospective customers,
sales and marketing methods, as well as the amount, nature and type of product,
equipment and methods used and preferred by Employer's customers and the prices
paid by Employer's customers or any other information which is confidential or
proprietary or otherwise not available to the general public. Disclosure of
material confidential information could cause substantial loss to the Employer.
Employee agrees that Employee will not for any purpose disclose any confidential
information obtained by Employee during employment with the Employer to any
person or entity.

                b. Employee may have access to records of the Employer. Records
are all contracts, agreements, financial books, instruments and documents,
client lists, memoranda, data, reports, recipes, formulations, brewing records,
tapes, rolodexes, telephone and address books, letters, research, card decks,
listings, programming, and any other instruments, records or documents relating
or pertaining to manufacturing or customer sales by Employer or Employee, the
services rendered by Employee, or the business of the Employer. Records will
remain in Employer's property. When Employee's employment terminates, Employee
will return to Employer all records and will neither make nor retain any copies
of any records after termination of employment.

                c. During the term of this Agreement and thereafter, Employee
shall diligently, legally and freely perform his duties as set forth in this
Agreement and shall take no action that would materially damage the goodwill of
the Employer. During the term of this Agreement and thereafter, Employee agrees
that he will not make any oral

                                       4
<PAGE>   5

or written statement to any third party that is intended to, or does, call into
question the (1) conduct, business practices or business judgment of the
Employer or any of its officers, directors or business partners; or (2) quality
of the Employer's products or services.

        8. Restrictive Covenants.

                a. Employee will perform services which have a unique value to
Employer which if used in competition with Employer could cause serious and
irreparable harm to Employer. Employee will develop goodwill for Employer
through personal contact with customers and others who have business
relationships with Employer. This goodwill, which is a proprietary asset of
Employer, may follow Employee after the employment with Employer terminates.
Employee agrees that for a period of two (2) years following the termination of
this Agreement, Employee will not, unless given prior written consent by
Employer:

                        (1) solicit for employment or employ any other person or
        entity any person who is employed by Employer during the same time as
        Employee. Employee will not persuade or attempt to persuade any
        customer, supplier, distributor, retailer, person or entity which is a
        customer or supplier to Employer during the time of Employee's
        employment with Employer, to discontinue business with Employer and its
        affiliates or modify the terms of business between itself and Employer
        or its affiliates.

                        (2) engage or act, either as a consultant, independent
        contractor, proprietor, partner, employee, officer, or in any other
        capacity, in any business which brews, packages, markets or distributes
        alcoholic malt beverages in any state of the continental United States
        or in any foreign country where Employer brewed, packaged, marketed or
        distributed alcoholic malt beverages during the term of this Agreement,
        provided however that this Subsection 8(a)(2) shall not apply to
        Employee if Employee's employment is terminated pursuant to 6(a), 6(c)
        or 6(e), above.

                b. If any provision or portion of this section of the Agreement
is held unreasonable, unlawful, or unenforceable by a court of competent
jurisdiction, the provision will be deemed to be modified to the extent
necessary for the provision to be legally enforceable to the fullest extent
permitted by applicable law. Any court of competent jurisdiction may enforce any
provision of this section or modify any provision in order that the provision
will be enforced by the court to the fullest extent permitted by applicable law.

                c. Violation by Employee of the provisions of Sections 7 or 8 of
this Agreement could cause irreparable injury to Employer and there is no
adequate remedy at law for violation of those provisions. Employer has, in
addition to other legal or equitable remedies, the right to enjoin Employee in a
court of equity from violating those provisions. The cessation of Employee's
compensation under Section 6 shall in no way

                                       5
<PAGE>   6

limit the damages available to the Employer upon violation by Employee of
Sections 7 or 8 of this Agreement.

        9. Employee's Death or Disability. In the event that Employee dies or
becomes disabled during the period that Employee is employed by Employer under
this Agreement, Employer shall pay for a period of one (1) year the compensation
including all bonuses calculated in accordance with the respective formula
set-forth on Schedule A and pro-rated up to and then in effect on the date of
Employee's death, or date that notice of Employee's disability is received, to
Employee or to Employee's estate or legal guardian. In the event that Employee
dies within one year after Employee's employment has been terminated pursuant to
Section 6.b. or Section 6.c. Employer shall continue to pay Employee's estate
the compensation, other than the annual performance bonus, then in effect on the
date of Employee's death until the first anniversary of the date Employee's
employment terminated, whereupon Employer's obligation to pay compensation under
Section 6 shall cease. In addition, the options/shares granted to the Employee
that are scheduled to vest during the twelve (12) month period under Section
6.b.(3) and Section 6.d.(3) shall vest immediately and be exercisable for a
period of one year from the date of Employee's death. Employee shall continue to
be subject to the restrictions in Sections 7 and 8 of this Agreement following
termination of employment due to disability.

        10. Notices. All notices and other communications required or permitted
to be given by this Agreement must be in writing and must be given and will be
deemed received if and when either hand delivered and a signed receipt is given
or mailed by registered or certified U.S. mail, return receipt requested,
postage prepaid, and if to Employer to:

               Secretary of the Board of Directors
               Redhook Ale Brewery, Incorporated
               3400 Phinney Avenue North
               Seattle, Washington  98103

and if to Employee to:

               Paul S. Shipman

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

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

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

or at any other address as either party notifies the other of in writing.

        11. Arbitration.

                a. In the event of any dispute between the parties arising out
of or related to the enforcement or interpretation this Agreement or concerning
this Agreement, the subject matter hereof or thereof, the making, performance,
breach or termination of this Agreement or the rights and duties of the parties
in relation hereto or

                                       6
<PAGE>   7

thereto, the parties agree that, in lieu of initiating judicial proceedings, the
dispute shall be submitted to and resolved by binding arbitration before a
single arbitrator under the commercial arbitration rules of the American
Arbitration Association ("AAA") then existing, selected in accordance with AAA
rules, with the exception that, to the extent available, such arbitrator must
have worked in the beverage industry for a period of at least two (2) years. The
place of arbitration shall be agreed to by the parties or in the absence of such
agreement shall be King County, Washington. The parties agree that judgment upon
the award may be entered in any court where the arbitration takes place or any
court having jurisdiction. The arbitrator may order specific performance or
other equitable relief or remedies to the extent they deem it appropriate, in
any situation in which a court could so order. Each party hereby waives personal
service of any process in connection with any such action or proceeding and
agrees that the service thereof may be made by certified or registered mail
directed to such party at the address designated below, and shall be deemed
effective as provided in that paragraph, hereof or in any other manner permitted
by law. The decision of the arbitrator shall be final and binding upon the
parties, their successors and assigns, and they shall comply with such decision
in good faith, and each party hereby submits itself to the jurisdiction of the
courts of the place where the arbitration is held, but only for the entry of
judgment with respect to and to enforce the decision of the arbitrators
hereunder, which judgment may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. This provision shall not
preclude the filing of a lawsuit or other judicial action to enable the
recording of a notice of pending action, or for attachment, receivership,
injunction or other provisional remedies. Judgment on the arbitration award may
be entered in any court having jurisdiction over the subject matter of the
controversy.

                b. By agreeing to arbitration under this paragraph, both
Employee and Employer understand that they are agreeing to have any dispute
relating to Employee's employment decided by a neutral arbitrator, and as to
those disputes decided by the neutral arbitrator, Employee and Employer FULLY
AND FOREVER WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL OF ANY ACTION OR PROCEEDING
ARISING OUT OF THIS AGREEMENT BY JURY. THIS WAIVER MEANS JUDGMENT MAY BE ENTERED
BY A NEUTRAL ARBITRATOR.

        12. Miscellaneous.

                a. This Agreement binds and benefits Employer and its successors
and assigns. This Agreement binds and benefits Employee and Employee's heirs,
personal and legal representatives, and guardians. No portion of this Agreement
or interest in it may be assigned by Employee.

                b. The terms and provisions of this Agreement may not be
modified except by written instrument duly executed by Employer and Employee.

                c. This Agreement will be governed by and enforced and construed
in accordance with the laws of the State of Washington.

                                       7
<PAGE>   8

                d. In any dispute arising out of this Agreement, the prevailing
party shall be entitled to recover its reasonable attorneys' fees and costs.

                e. In the event of a breach of this Agreement, the non-breaching
party may maintain an action for specific performance against the party who is
alleged to have breached any of the terms of the Agreement. This subsection will
not be construed to limit in any manner any other rights or remedies an
aggrieved party may have by virtue of any breach of this Agreement.

                f. Each of the parties has the right to waive compliance with
any obligation of this Agreement, but a waiver by any party of any obligation
will not be deemed a waiver of compliance with any other obligation or of its
right to seek redress for any breach of any obligation on any subsequent
occasion, nor will any waiver be deemed effective unless in writing and signed
by the party so waiving.

        IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first set forth above.

"EMPLOYER"
Redhook Ale Brewery, Incorporated

By  /s/ Walter F. Walker                                 Date: November 3, 2000
   ---------------------------------------------              -----------------
        Its  Chairman, Compensation Committee

"EMPLOYEE"

By  /s/ Paul S. Shipman                                  Date:  November 1, 2000
  ----------------------------------------------              ------------------
   Paul S. Shipman

                                       8
<PAGE>   9

SCHEDULE A

                            MEASUREMENTS BY EXECUTIVE

                                 TARGETED PAYOUT

                         PAUL SHIPMAN -- CEO & PRESIDENT

Targeted bonus is $87,500. Of this amount, 50% is discretionary and paid out
quarterly. $10,937.50 per quarter is targeted

Discretionary to be paid out unless, in the opinion of the Compensation
Committee, there is perceived to be a shortfall in the following:

        1.      General corporate performance as reported in monthly statements,
                quarterly financial reports and the various reports which are
                generated to measure all executive's performance.

        2.      Company financial components reflecting trends consistent with
                predicted EBITDA improvement.

The non-discretionary portion (50%, or $43,750) is based on the following
formula:

        Actual EBITDA improvement divided by projected EBITDA improvement times
        $43,750.

                                       9

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00023-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00023-of-00352.parquet"}]]