Letter of Employment Agreement between the Registrant and Joseph K. Vanderstelt dated April 27, 2015

Joseph Vanderstelt

929 North Russell Street

Portland, OR 97227

Dear Joe:

 

This letter sets forth our understanding about your employment with Craft Brew Alliance, Inc. (the "Company"), as its Chief Financial Officer, effective April 27, 2015 (the "Effective Date").  This letter supersedes and replaces any prior offer letter or other agreement regarding your employment by the Company as of the Effective Date, other than the Employee Confidentiality/ Proprietary Information and Non-Competition Agreement of even date, which will also be binding and effective in accordance with its terms.

 

Your employment is "at-will," which means you or the Company may end the employment relationship at any time.  Our mutual agreement regarding your salary, severance, and other benefits and obligations is set forth below.

 

 

As of the Effective Date, your annual base salary rate is $250,000 (before standard tax withholdings and other payroll deductions).  Your base salary level will be reviewed annually for adjustment by the Compensation Committee of the Company's Board of Directors (the "Board"), with salary adjustments, if any, generally made effective as of January 1.  In addition, you are entitled to participate in all of the Company's employee benefit programs for which you are eligible, including long-term incentive awards approved by the Compensation Committee for executive officers from time to time.

 

You will be eligible for an annual bonus payable following certification of the Company's financial results for the prior fiscal year under the Company's Annual Cash Incentive Plan.  Your target bonus amount for 2015 is 55% of your base salary rate and will be prorated based on the period from the Effective Date through December 31, 2015.  The bonus target amount in future years will be determined by the Compensation Committee.  All or a portion of target bonus amounts may be conditioned upon achieving certain performance targets approved by the Compensation Committee or the Board.  You must remain employed through the payment date to be eligible for a bonus; except that, solely for your 2015 target annual bonus, if you are terminated by the Company, other than for cause, at any time prior to the date of payment of annual bonuses for 2015 to executive officers of the Company, you will receive the portion of your annual bonus that the Compensation Committee determines in good faith to have been earned based on your achievement of such performance targets, prorated based on your days of service during the 2015 calendar year, and payable at such time as the annual bonus is paid to other participants in the Annual Cash Incentive Plan, and in no event later than March 15 of the year after the year of termination.

 

 

You will also be eligible to participate in the Long Term Incentive Program under the terms and conditions of that program.  Your target incentive potential for the awards granted in 2015 is 75% of your base salary rate.

 

You will be paid a relocation reimbursement at the executive level package in the fixed amount of $59,000, payable within 60 days following the Effective Date.  If you voluntarily terminate your employment with the Company before April 27, 2017, for any reason other than a "good reason" (as defined below), you will repay the full amount of relocation reimbursement.  You will provide copies of invoices and other statements showing your actual relocation expenses, up to $59,000, to the Company.

 

You will be paid a signing bonus of $50,000, grossed-up for taxes, in two installments as follows:  $25,000 paid on the first payroll date on or after July 27, 2015, and $25,000 paid on the first payroll date on or after April 27, 2016, provided that you remain employed through each date.

 

You will accrue 25 days of Paid Time Off ("PTO") at a rate of 7.69 hours bi-weekly in addition to the 10 assigned paid holidays observed by the Company.

 

 

In the event that your employment with the Company is terminated by the Company for any reason other than "for cause" or terminated by you due to "good reason," the Company will provide you with severance benefits payable based on your weekly base salary rate in effect at the date of termination for a period of time (the "Severance Period") as follows:  Commencing on the day following termination, two weeks' severance will be payable in accordance with the Company's normal payroll schedule for each full year of service with the Company; provided that in no event shall the Severance Period be less than 6 months or more than 12 months.

 

In addition, the Company will promptly make a cash payment to you in an amount equal to 100% of your unused PTO hours accrued through the date of termination in accordance with the provisions of the Company's PTO Plan then in effect.

 

If you become entitled to severance benefits under this agreement, the Company will also continue to provide you, for the Severance Period, payment in an amount equal to the premiums payable under COBRA for the same or equivalent health benefits as were being provided to you at the time of termination; provided, however, that such payments shall terminate in the event you find new employment.

 

 

For purposes of this letter, "for cause" means that (i) you have engaged in conduct which has substantially and adversely impaired the interests of the Company, or would be likely to do so if you were to remain employed by the Company; (ii) you have engaged in fraud, dishonesty or self-dealing relating to or arising out of your employment with the Company; (iii) you have violated any criminal law relating to your employment or to the Company; (iv) you have engaged in conduct which constitutes a material violation of a significant Company policy or the Company's Code of Ethics, including, without limitation, violation of policies relating to discrimination, harassment, use of drugs and alcohol and workplace violence; or (v) you have repeatedly refused to obey lawful directions of the Board or the Company's Chief Executive Officer.

 

For purposes of this letter, "good reason" means the occurrence of one or more of the following events without your consent: (a) a material reduction in your authority, duties, or responsibilities as the Company's Chief Financial Officer; (b) a material reduction in the authority, duties, or responsibilities of the person or persons to whom you report (including, if applicable, a requirement that you report to a Company officer or employee instead of reporting directly to the Board); or (c) a relocation of your principal office to a location that is more than 100 miles from Portland, Oregon; provided, however, that "good reason" shall only be deemed to have occurred if: (i) within 90 days after the initial existence of the circumstances constituting "good reason," you provide the Company with a written notice describing such circumstances, (ii) the Company fails to cure the circumstances within 30 days after the Company receives your notice, and (iii) you terminate your employment with the Company and all the members of the Company's controlled group within 90 days following the date of your notice.

 

For purposes of this letter, a termination of your employment will be deemed to occur only when or if there has been a "separation from service" as such term is defined in Treasury Regulation Section 1.409A-1(h).

 

If, during the Severance Period, you become employed or associated with a brewing or other company that the Company determines, in its reasonable discretion, is a competitor of the Company or Anheuser-Busch, Inc., your severance payments and benefits under this letter agreement will terminate as of the effective date of such employment or association.

 

The total amount of severance payments and benefits (except benefits designated as "short-term deferral" payments or as described in Treasury Regulation Sections 1.409A-1(a)(5) or 1.409A-1(b)(9)(v)) provided to you pursuant to this letter agreement shall not exceed two times the lesser of (i) the sum of your annualized compensation based upon your annual salary in the year preceding the year in which your employment is terminated (adjusted for any increase during that year that was expected to continue indefinitely if your employment had not terminated) or (ii) the applicable dollar limit under Section 401(a)(17) of the Internal Revenue Code for the calendar year in which your employment is terminated.

 

 

The severance payments and other benefits under this letter are intended to be exempt from the requirements of Section 409A of the Internal Revenue Code by reason of all payments under this letter agreement being either "short-term deferrals" within the meaning of Treasury Regulation Section 1.409A-1(b)(4) or separation pay due to involuntary separation from service under Treasury Regulation Section 1.409A-1(b)(9)(iii).  All provisions of this letter shall be interpreted in a manner consistent with preserving these exemptions.

 

The Company will require you to execute an appropriate general release of claims that you may have relating to your employment at the Company and termination of your employment as a condition to your receipt of any severance payments or other benefits other than those required by law or provided to employees generally.  If such general release of claims is not executed within 30 days following the date your employment with the Company is terminated, all severance payments and other benefits payable after such 30‑day period will be forfeited, and you agree to repay any severance payments, and the value of other benefits, paid to you during such period.

 

 

By your signature below, you agree to comply with the Company's Code of Conduct and Ethics as in effect from time to time, and to be subject to the Company's policies and procedures in effect from time to time for senior executives of the Company.

 

We appreciate your continued efforts on behalf of the Company and look forward to having you as a member of our team for years to come.