Craft Brew Alliance, Inc. (the \”Company\”), has entered into revised employment agreements (the \”Employment Agreements\”) with three of its named executive officers. The Employment Agreements, which were approved by the Compensation Committee of the Company’s Board of Directors (the “Committee”) and signed on either July 15 or July 16, 2019, have an effective date of July 1, 2019, and replace agreements that expired on June 30, 2019.
During the term of each Employment Agreement, the executives will be entitled to salary, annual cash incentive compensation, health and other employee benefits, and stock-based awards as approved by the Committee under our executive compensation program. The general parameters of the current executive compensation program are described under the heading “Compensation Discussion and Analysis” in our proxy statement for the 2019 annual meeting of shareholders filed with the Securities and Exchange Commission on April 10, 2019.
The Employment Agreement with Derek Hahm, the Company’s Chief Commercial Officer, expires on December 31, 2021, and provides for the payment of a cash signing bonus in July 2019 of $28,193. Mr. Hahm’s Employment Agreement also provides for the payment of cash retention bonuses in installments on March 31 of each of the next three years based on specified percentages of awards made under our Amended and Restated Annual Cash Incentive Plan (the STI Plan”). Each retention bonus payment is conditioned on continued employment with the Company through the applicable payment date. Mr. Hahm also entered into an Employee Noncompetition and Nonsolicitation Agreement which will remain in effect until 12 months following termination of his employment for any reason, including after a change in control.
The Employment Agreement with Kenneth Kunze, the Company’s Chief Marketing Officer, has a term expiring on June 30, 2020, while the Employment Agreement with Edwin Smith, the Company’s Corporate Controller and Principal Accounting Officer, will expire on June 30, 2022.
Each of the Employment Agreements provides for severance compensation following termination of employment (x) by the Company other than for “cause” or (y) by the executive for “good reason.” In the absence of a change in control of the Company, following termination Messrs. Hahm and Kunze would each receive severance compensation in the form of 12 monthly payments equal to his monthly base salary rate then in effect, plus a cash payment equal to the amount of health insurance premiums under COBRA for 12 months, while Mr. Smith would receive such severance compensation for six months. The executive would forfeit any unpaid severance payments if he becomes employed by a brewing or other company that the Company determines, in its reasonable discretion, is a competitor of the Company or the portion of the Company\’s business relating to alcoholic beverages. The payment of severance benefits is also conditioned on execution of a general release of claims against the Company.
Upon termination of employment after a change in control of the Company occurs, each of the Employment Agreements provides for a single cash payment to be made within 45 days following termination in an amount equal to 18 months of base salary for Messrs. Hahm and Kunze and 12 months for Mr. Smith, plus (x) an amount equal to the executive’s target award under the STI Plan for the year in which the termination occurs and (y) an amount equal to the sum of COBRA health insurance premiums for the number of months specified above. These benefits will be forfeited if, before payment, the executive accepts employment with the acquirer of the Company under circumstances that would not justify termination for “good reason.”
The following definitions apply for purposes of the Employment Agreements:
Finally, the Employment Agreements provide for acceleration of vesting of all unvested stock options and restricted stock units granted under one of the Company’s stock incentive plans and held by the executive immediately prior to termination of employment following the occurrence of a change in control. With respect to outstanding performance share awards held by Messrs. Hahm and Kunze, the amount to be paid will be determined by the Committee in its reasonable discretion based on the pro rata portion of the performance period that has elapsed and the extent to which progress towards the applicable performance goals has been achieved, but in no event will the amount that is treated as earned and vested be less than 33% of the target amount of each outstanding award. Performance share awards have been granted annually since 2011 and cover a three-year performance period.
About CRAFT BREW ALLIANCE, INC. (NASDAQ:BREW)
Craft Brew Alliance, Inc. is a craft brewing company that is engaged in brewing, branding and bringing to market American craft beers. The Company operates through two segments: Beer Related operations, which include the brewing operations and related domestic and international beer and cider sales of its Kona, Widmer Brothers, Redhook and Omission beer brands, and Square Mile cider brand, and Pubs operations, which include its approximately five pubs, over four of which are located adjacent to its Beer Related operations, as well as other merchandise sales, and sales of its beers directly to customers. The Company’s portfolio of brands includes the Kona Brewing Company, Widmer Brothers Brewing, Redhook Brewery, Omission Beer and Square Mile Cider Company brand families, along with partner brands Appalachian Mountain Brewery, Cisco Brewers and Resignation Brewery. Its brews its beers using hops, malted barley, wheat, rye and other natural traditional and nontraditional ingredients.
