REDHOOK ALE BREWERY INC
EXHIBIT 10.46
<DOCUMENT>
<TYPE>EX-10.46
<SEQUENCE>4
<FILENAME>v79964ex10-46.txt
<DESCRIPTION>EXHIBIT 10.46
<TEXT>
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                                                                   EXHIBIT 10.46



                              EMPLOYMENT AGREEMENT


         THIS EMPLOYMENT AGREEMENT ("Agreement") is entered into effective the
1st day of August, 2000, between Redhook Ale Brewery, Incorporated ("Employer")
and Gerald C. Prial ("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 General Manager - Portsmouth Brewery.

            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 August
1, 2000 and, subject to the further provisions of this Agreement, ends on July
31, 2005.

         3. Employment. Employer employs Employee as General Manager -
Portsmouth Brewery and Employee agrees to render services for and on behalf of
Employer under the direction and supervision of the Chief Executive Officer
("CEO"). 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 One Hundred Thirty Five Thousand
Dollars ($135,000) 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
compensation, the Compensation Committee is required to take into account the
financial condition of the Company, and its short and long term prospects.


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         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 Chief Executive Officer or 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
         one (1) additional year the salary and benefits then in effect on the
         date that 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



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         within such 1(one) 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 one (1) 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 one (1)
         additional year 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 one (1) year from the date
         that notice 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;



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                  (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 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



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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 one (1) year 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 limit the damages available to the
Employer upon violation by Employee of Sections 7 or 8 of this Agreement.



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         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 six (6) months 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:

                  Gerald Prial

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

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

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

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 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



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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.

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



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            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/  Paul S. Shipman           Date:   August 1, 2000
   -----------------------                -----------------

Its President and Chief Executive Officer
    -------------------------------------


"EMPLOYEE"


By  /s/  Gerard C. Prial            Date:   August 1, 2000
    --------------------                 -----------------
    Gerald C. Prial



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                                   SCHEDULE A


BONUS

         The total bonus target is $45,000.00. Of that, $11,250.00 is based upon
the EBITDA improvement formula, $11,250.00 is based upon the New England
contribution improvement formula, and $22,500.00 is the sum of the discretionary
components set forth below. The discretionary portion is to be paid quarterly as
determined by the CEO.

         [factors that determine discretionary payments]

         The quarterly payments shall be paid on the first payroll of the
subsequent quarter, which generally lies on the 20th.

         The non-discretionary components are based on the target performance;
if the performance exceeds target, the non-discretionary amounts will exceed the
target amounts.



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