Exhibit










	
	
	 




EXHIBIT 10.3



June 20, 2016


J. Scott Mennen
Craft Brew Alliance, Inc.
929 North Russell Street
Portland, Oregon  97227


Re:    Employment Agreement
Dear Scott:
This letter amends and supersedes your employment letter dated August 4, 2014, and any prior formal or informal agreement regarding your employment by Craft Brew Alliance, Inc. (the "Company"), with the exception of any confidentiality, noncompetition, and/or nonsolicitation agreement(s) you have entered into with the Company.
This letter constitutes your Employment Agreement (this "Agreement") with the Company, effective July 1, 2016 (the "Effective Date").  You and the Company are collectively referred to in this Agreement as "the Parties" (or individually as a "Party").  This Agreement sets forth the terms and conditions of your continued employment with the Company as its Vice President, Chief Operating Officer as of the Effective Date.  Capitalized terms not otherwise defined in the body of this Agreement have the meanings set forth on Exhibit A.
1.    Term
The term of this Agreement shall be three years, from July 1, 2016, through June 30, 2019 (the "Contract Term"), subject to Section 3 of this Agreement.  In the event that the Company experiences a Change in Control Event, the Contract Term will extend to the later of (a) the first anniversary of the Change in Control Event or (b) the date set forth in the preceding sentence.  In the event of a termination by either Party without Cause or Good Reason on or before the end of the Contract term, the terminating Party shall provide the other Party with at least 60 days' written notice of termination.











2.    Compensation and Benefits
2.1    Base Compensation
As of the Effective Date, your annual base salary rate is $255,000, subject to 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.
2.2    Short-Term Incentive Compensation
You will be eligible for short-term incentive ("STI") compensation under the Company's Annual Cash Incentive Bonus Plan.  For 2016, your total STI target amount is $140,250.  For subsequent years, the performance targets and STI target amounts will be determined annually by the Compensation Committee.  
2.3    Long-Term Incentive Compensation
You will also be eligible to participate in the Company's 2014 Stock Incentive Plan as determined by the Compensation Committee.
2.4    Employee Benefits
You are eligible to participate in employee benefit programs made available to the Company's executive officers.  You will receive paid time off consistent with the policies for executive officers of the Company.
3.    Termination & Severance
3.1    Termination During Contract Term
Except as provided in Section 3.2, in the event that (a) the Company terminates your employment effective on a date prior to or as of the end of the Contract Term for any reason other than "Cause" or (b) you terminate your employment prior to or as of the end of the Contract Term due to "Good Reason," the Company will continue to pay you your then current base salary for 12 months from your termination date (the "Severance Period").  The severance payments under this paragraph shall not exceed two times the lesser of (y) 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) and (z) the applicable dollar limit under Section 401(a)(17) of the Internal Revenue Code of 1986, as amended (the "Code"), for the calendar year in which your employment is terminated.
In addition, if you become entitled to severance pay under the first paragraph of this Section 3.1, the Company will also make a lump sum payment to you within 45 days of your termination of employment in an amount equal to the amount necessary to pay your COBRA premiums for continuation of group health insurance coverage during the Severance Period based on such premiums in effect on the date of your termination.











3.2    Termination in Connection with a Change in Control Event.
In the event that (a) the Company experiences a Change in Control Event and (b) either (i) the Company terminates your employment effective on a date prior to the first anniversary of the Change in Control Event for any reason other than "Cause" or (ii) you terminate your employment prior to the first anniversary of the Change in Control Event due to "Good Reason," and (c) in the case of a Change in Control Event described in Paragraph (c) of the definition of Change in Control Event, you represent and warrant that, as of the termination of your employment, you have not entered into any understanding or arrangement with the acquiring individual or entity regarding future employment, the Company will make a lump sum payment to you within 45 days of the termination of your employment equal to the sum of:  (A) your then current monthly base salary multiplied by 18; (B) an amount equal to the amount necessary to pay your COBRA premiums for continuation of group health insurance coverage for 18 months based on such premiums in effect on the date of your termination; and (C) your full target STI bonus amount for the year in which your termination of employment occurs.  The payments under this Section 3.2 are in lieu of the benefits under Section 3.1, and in no event will you be paid benefits under both Sections 3.1 and 3.2.
Notwithstanding the foregoing, in the event that (A) the Company experiences a Change in Control Event described in Paragraph (c) of the definition of Change in Control Event and (B) prior to the date of payment under this Section 3.2 you accept a position with the acquirer of the Company's assets, which in any other Change in Control Event would not be deemed Good Reason under Section 3.2(b)(ii), all benefits under Sections 3.1 and 3.2 will be forfeited.
The Parties agree and acknowledge that their intent is that none of the benefits payable under this Section 3.2 shall constitute an "excess parachute payment" under Section 280G of the Code that would give rise to an excise tax under Section 4999 of the Code or a loss of deduction under Section 280G of the Code.  To give effect to that intent, and notwithstanding any other provision of this Agreement to the contrary, the Parties specifically agree that the aggregate amount of the benefits payable to you or for your benefit that constitute "parachute payments" within the meaning of Section 280G(b)(2) of the Code, under this Agreement or any other agreement or arrangement between you and the Company, shall not exceed 2.99 multiplied by your "base amount," as defined in Section 280G(b)(3) of the Code (the "Maximum Benefit Amount").  The Company shall make all calculations and determinations under this Section 3.2 (including application and interpretation of the Code and related regulatory, administrative and judicial authorities) in good faith, which calculations and determinations shall be binding on you absent manifest error.  The Company shall provide you with a reasonable opportunity to review and comment on the Company's calculations.  If at any time it is determined that the amount paid to you or for your benefit pursuant to this Agreement or any other agreement or arrangement between you and the Company exceeded the Maximum Benefit Amount, you shall immediately repay the excess to the Company, together with interest from the date of original payment to you at the discount rate applicable under Section 280G(d)(4) of the Code.
3.3    Termination at End of Contract Term
Following the Contract Term, if the Parties have not negotiated a replacement agreement or renewal of this Agreement, this Agreement shall terminate (except with respect to any obligations that expressly extend beyond termination) and employment may continue on an at-will basis with either Party free to end the employment relationship for any reason at any time, with or without Cause, Good Reason or notice, and without severance obligations.











3.4    Release of Claims
The Company will require you to execute an appropriate general release of all claims that you may have relating to your employment with the Company and termination of your employment as a condition to your receipt of any severance payments or other benefits under this Agreement 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.
3.5    Competition During Severance Period 
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 the portion of the Company's business relating to alcoholic beverages, your severance payments and benefits under Section 3.1 will terminate as of the effective date of such employment or association.  The foregoing does not supersede or replace any provision of any noncompetition agreement between you and the Company.
4.    Code Section 409A
For purposes of this Agreement, 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).  The severance payments and other benefits under this Agreement are intended to be exempt from the requirements of Section 409A of the Code by reason of all payments under this 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 Agreement shall be interpreted in a manner consistent with preserving these exemptions.
5.    Severability
In the event that a court of competent jurisdiction determines that a provision of this Agreement is unenforceable or not fully enforceable, the Parties agree that this Agreement is severable and should be enforced to the full extent allowed by law to best effectuate the intentions of the Parties.
6.    Code of Conduct
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.
Sincerely,
/s/ Andrew J. Thomas                                     
Andrew J. Thomas
Chief Executive Officer


Acknowledged and Agreed:
/s/ J. Scott Mennen                                            Date: July 5, 2016
J. Scott Mennen


Attachment:  Exhibit A (Definitions)















EXHIBIT A
Definitions
1.    "Cause" shall mean that (a) 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; (b) you have engaged in fraud, dishonesty or self-dealing relating to or arising out of your employment with the Company; (c) you have violated any criminal law relating to your employment or to the Company; (d) you have engaged in conduct which constitutes a material violation of a significant Company policy or the Company's Code of Conduct and Ethics as in effect from time to time, including, without limitation, violation of policies relating to discrimination, harassment, use of drugs and alcohol and workplace violence; or (e) you have repeatedly refused to obey lawful directions of the Board or the Company's Chief Executive Officer.
2.    "Change in Control Event" shall mean the occurrence of any of the following events:
(a)    Any one person or entity, or more than one person or entity acting as a group (as defined in Treasury Regulation Section 1.409A-3), acquires ownership of stock of the Company that, together with stock previously held by the acquirer, constitutes more than 50 percent of the total fair market value or total voting power of the Company's stock.  If any one person or entity, or more than one person or entity acting as a group, is considered to own more than 50 percent of the total fair market value or total voting power of the Company's stock, the acquisition of additional stock by the same person or entity or persons or entities acting as a group does not cause a Change in Control Event.  An increase in the percentage of stock owned by any one person or entity, or persons or entities acting as a group, as a result of a transaction in which the Company acquires its stock in exchange for property, is treated as an acquisition of stock; or
(b)    A majority of the members of the Board is replaced during any 12‐month period by directors whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of appointment or election; or
(c)    Any one person or entity, or more than one person or entity acting as a group, acquires (or has acquired during the 12‐month period ending on the date of the most recent acquisition by that person or entity or persons or entities acting as a group) assets from the Company that have a total gross fair market value equal to at least 75 percent of the total gross fair market value of all the Company's assets immediately prior to the acquisition or acquisitions.  Gross fair market value means the value of the Company's assets, or the value of the assets being disposed of, without regard to any liabilities associated with these assets.
In determining whether a Change in Control Event has occurred, the attribution rules under Section 318 of the Code will apply to determine stock ownership.  The stock underlying a vested option is treated as owned by the individual who holds the vested option, and the stock underlying an unvested option is not treated as owned by the individual who holds the unvested option.
3.    "Good Reason" shall mean the occurrence of one or more of the following events without your consent:  (a) a material reduction in your base compensation; (b) a material reduction in your 











authority, duties, or responsibilities as the Company's Vice President, Chief Operating Officer; (c) 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 (d) 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 within 90 days of the date of your notice.