EXCHANGE AND RECAPITALIZATION AGREEMENT

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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"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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"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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"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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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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"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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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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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

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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)

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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

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(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.

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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