Item 9A. Controls and Procedures
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer, Co-Chief Executive Officer and Chief Financial Officer, have evaluated our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) prior to the filing of this Annual Report on Form 10-K. Based on that evaluation, our Chief Executive Officer, Co-Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this Annual Report on Form 10-K, our disclosure controls and procedures were, in design and operation, effective as of December 31, 2021.
Internal Control Over Financial Reporting
This Annual Report on Form 10-K does not include a report of management’s assessment regarding internal control over financial reporting or an attestation report of our registered public accounting firm due to a transition period established by rules of the SEC for newly public companies.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the quarter ended December 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
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Part III
Item 10. Directors, Executive Officers and Corporate Governance
The following table sets forth certain information concerning the individuals who serve as our executive officers and directors.
Name
Age
Position(s) Held
Evan Hafer
44
Chief Executive Officer, Chairman
Mat Best
35
Chief Branding Officer
Tom Davin
64
Co-Chief Executive Officer, Director
Greg Iverson
46
Chief Financial Officer
Toby Johnson
45
Chief Operations Officer
Andrew McCormick
36
General Counsel and Corporate Secretary
Katy Dickson
56
Director
George Muñoz
70
Director
Roland Smith
67
Director
Steven Taslitz
62
Director
Glenn Welling
51
Director
Evan Hafer founded the Company in 2014 and has been Chief Executive Officer and served as a Chairman of the Board since its inception. He is a director and the Chairman of the Board. Prior to founding the Company, Mr. Hafer had fifteen years of service in the U.S. military and worked as a contractor for the CIA. As a member of the military, he served as a Green Beret with the 19th Special Forces Group and was deployed overseas multiple times. Mr. Hafer attended the University of Idaho and has been roasting coffee since 2006. Mr. Hafer is qualified to serve on our board of directors based on his role as Founder and Chief Executive Officer of the Company.
Mat Best co-founded the Company with Mr. Hafer and has served as the Company’s Chief Branding Officer since the Company’s inception. Prior to co-founding the Company, he founded Article 15 Clothing, and created multiple brands, such as Leadslingers Spirits and the Drinkin’ Bros Podcast. When serving in the U.S. military, Mr. Best deployed five times to Iraq and Afghanistan, serving under the 2nd Ranger Battalion, 75th Ranger Regiment. After his military service, he did contract work for the CIA for five years. Mr. Best holds a B.L.A. from Ashford University.
Tom Davin has served as Co-Chief Executive Officer of the Company since January 2019 and has served as a Director since September 2018. Prior to joining the Company, Mr. Davin was the Chief Executive Officer of 5.11 Tactical from 2011 to 2018 and Chief Executive Officer of Panda Restaurant Group from 2004 to 2009. He was the Chief Operating Officer of Taco Bell from 1997 to 2000. Mr. Davin began his business career in the merger and acquisition groups at Goldman Sachs and PepsiCo. He is presently on the board of directors of Backcountry.com, Pear Sports, LLC, and was previously a member of the boards of Oakley and Zumiez. Mr. Davin served as a U.S. Marine Corps infantry officer and Recon Marine, obtaining the rank of Captain. Mr. Davin graduated from Duke University and earned a MBA from Harvard Business School. Mr. Davin is qualified to serve on our board of directors based on his role as co-Chief Executive Officer of the Company.
Greg Iverson has served as Chief Financial Officer of the Company since April 2020. Prior to that, Mr. Iverson worked as Chief Financial Officer of Overstock.com, Inc. from April 2018 to September 2019. Prior to joining Overstock, he served as the Chief Accounting Officer and Treasurer of Apollo Education Group, Inc. from April 2007 to October 2015 and as Chief Financial Officer from October 2015 to March 2018. He also served as the Director of Financial Reporting at US Airways Group, Inc. (subsequently acquired by American Airlines), and began his career in the audit and advisory practices of Arthur Andersen, LLP and Deloitte & Touche, LLP, in Phoenix, Arizona. Mr. Iverson graduated summa cum laude with a B.S. in accounting from the University of Idaho and is a certified public accountant.
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Toby Johnson has served as Chief Operating Officer of the Company since August 2021 after having served as a director on the Company’s Board from August 2020 to July 2021. Prior to joining the Company, Ms. Johnson served as Senior Vice President of Sales for $4 billion Snacks Division of the Campbell Soup Company from July 2020 to August 2021. She began her business career in 2007 as a manufacturing director at a Frito-Lay plant for PepsiCo. Ms. Johnson spent thirteen years at PepsiCo holding various key leadership positions, culminating as a Region Vice President of Frito-Lay from 2018 to 2020. Ms. Johnson is currently a member of the board of directors of USA of Metropolitan New York, Inc. and of Team Red, White & Blue. She served for seven years as an officer in the U.S. Army, where she was an AH-64D Apache Longbow gunship pilot. She deployed with the 3rd Infantry Division as part of the initial invasion in support of Operation Iraqi Freedom. Ms. Johnson graduated from the U.S. Military Academy at West Point and holds an MBA from Harvard Business School.
Andrew McCormick joined the Company as General Counsel in September 2021. Prior to joining the Company, Mr. McCormick served as General Counsel and Corporate Secretary of Laird Superfood from February 2019 to September 2021. Mr. McCormick previously worked as a Senior Associate at Hogan Lovells US LLP from 2014 to 2019 and as an associate at Latham & Watkins (London), LLP from 2011 to 2013. In 2010, Mr. McCormick completed a civilian clerkship with US Army JAG in Seoul, South Korea. Mr. McCormick graduated from Hendrix College with a B.A. with distinction, and holds a J.D. from Columbia University and an LL.M. from the London School of Economics.
Katy Dickson is a director of our Board. Ms. Dickson served as President of Manitoba Harvest, a global company that manufactures and markets plant-based-protein foods and beverages, from 2019 through 2020. Prior to Manitoba Harvest, Ms. Dickson served as Senior Vice President at Mattel, Inc., and President of its American Girl subsidiary from 2016 through 2018. Prior to American Girl, Ms. Dickson served as Chief Marketing Officer for News America Marketing Inc., a subsidiary of global media and information services company, News Corp, from 2015 to 2016. Ms. Dickson spent the majority of her career, more than 23 years, with General Mills, Inc. serving in marketing leadership and general management roles of increasing responsibility for some of the world’s best-known brands, concluding with her service as Vice President/Business Unit Director for Old El Paso and Betty Crocker Dinners. Ms. Dickson served on the board of directors of Cooper Tire & Rubber Company from October 2018 until July 2021, and is currently on the board of Flexsteel Industries, Inc. where she has been an independent director since July 2021, and serves on their compensation committee. Ms. Dickson has served on the board of directors for Black Rifle Coffee Company since August 2020, and is currently Lead Independent Director. Ms. Dickson earned a Bachelor of Science degree from the United States Air Force Academy, and a Master of Business Administration (MBA) degree from the University of California, Los Angeles. She served as an officer in the U.S. Air Force, where she achieved the rank of Captain. Ms. Dickson brings extensive expertise in driving growth through omnichannel and digital strategies, brand building and product innovation to the Board and she is therefore qualified to serve on our Board.
George Muñoz is a director of our Board. Mr. Muñoz has been a director of the Company since July, 2020. He has over seventeen years of experience in public company corporate governance serving as a member of the board of directors and as a member or chair of the board of audit committees, compensation committees, and corporate ESG committees. Mr. Muñoz currently serves on the audit committees of Marriott International, Laureate Education International, Altria Group, and National Geographic Society. From 1993 to 1997, Mr. Muñoz served as an Assistant Secretary and Chief Financial Officer of the U.S. Treasury Department in Washington, DC., and from 1997 to 2001, he served as President and Chief Executive Officer of the Overseas Private Investment Corporation. Mr. Muñoz has a law degree from Harvard Law School, Masters in Public Policy from Harvard University, a bachelor’s in accounting from the University of Texas at Austin, an LL. M. from DePaul University, and a Master of Arts in Theology from Catholic Distance University. He is a currently licensed attorney and a certified public accountant in several states, and, since 2001, has served as a principal of Muñoz Investment Banking Group, LLC and the law firm Tobin & Muñoz, PLLC. Mr. Muñoz brings years of experience of corporate governance and expertise in investment, and he is therefore qualified to serve on our Board.
Roland Smith is a director of our Board. Mr. Smith is currently Chairman of the Board of Jack’s Family Restaurants, Inc. and Director of Caliber Inc. He previously served as Chairman and Chief Executive Officer of Office Depot, Inc., a leading global provider of products, services, and solutions for every workplace, from November 2013 until February 2017. Prior to joining Office Depot, Mr. Smith served as the President and Chief Executive Officer of Delhaize America, LLC, the U.S. division of Delhaize Group, and Executive Vice President of Delhaize Group, an international food retailer, from October 2012 to September 2013. Mr. Smith was a Special Advisor to The Wendy’s Company, a restaurant owner, operator and franchisor, from September 2011 to December 2011 and served as President and Chief Executive Officer from July 2011 to September 2011. Mr. Smith served as President and Chief Executive Officer of Wendy’s/Arby’s Group, Inc. and Chief Executive Officer of Wendy’s International, Inc. from September 2008 to July 2011. Mr. Smith also served as Chief Executive Officer of Triarc Companies, Inc. from June 2007 to September 2008, and the Chief Executive Officer of Arby’s Restaurant Group, Inc., a restaurant owner, operator and franchisor, from
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April 2006 to July 2011. He previously served as Chairman of the Board of 24 Hour Fitness USA, Inc. and Big Jack Holdings Corp., Director and Chairman of the Board of Office Depot, Director and Chairman of the Board of Carmike Cinemas, Inc., Director of The Wendy’s Company, Director of Wendy’s/Arby’s Group, Inc., and Director of Dunkin’ Brands Group, Inc. Mr. Smith brings extensive chief executive experience to our Board and has served previously on multiple public company boards.
Steven Taslitz is a director of our Board. Mr. Taslitz joined the Company as a Director in 2018. Mr. Taslitz is also currently on the board of directors of Datacubed Health, Stella, Fancy Sprinkles, We Are Giant, and Wengen Alberta. He co-founded Sterling Partners in 1983 and is Chairman of the firm. Mr. Taslitz and his family have supported and served on a number of educational, non-profit boards, including the Illinois Board of Higher Education, the Glencoe Educational Foundation, and the Investment Committee of the Jewish United Fund. He received a BS in Accountancy with Honors from the University of Illinois. Mr. Taslitz is qualified to serve on our board of directors based on his role as co-founder of Sterling Partners, a significant stockholder in the Company, his extensive knowledge about our business, and his extensive experience as a director of a diverse range of companies.
Glenn Welling is a director of our Board. Mr. Welling has been the founder and Chief Investment Officer of Engaged Capital, LLC since its founding in 2012. Prior to founding Engaged Capital, Mr. Welling was a Principal and Managing Director at Relational Investors, LLC, an investment fund, which he joined in July 2008, where he was responsible for managing the fund’s consumer, healthcare and utility investments. From February 2002 to May 2008, Mr. Welling was a Managing Director of Credit Suisse Group AG, an investment bank, where he also served as the Head of the Investment Banking Department’s Advisory Business. Mr. Welling has been a member of the board of directors of The Hain Celestial Group since September 2017. From May 2015 to June 2020, Mr. Welling served as a member of the board of directors of TiVo Corporation, a provider of digital entertainment technology solutions, where he was chairperson of TiVo’s compensation committee and a member of the corporate governance and nominating committee and the strategy committee. Mr. Welling served as a member of the board of directors of Jamba, Inc., a leading restaurant retailer of better-for-you food and beverage offerings, from January 2015 to September 2018, where he also served as the chairperson of its compensation committee and as a member of its finance committee. From 2015 to 2018, Mr. Welling served on the board of directors of Medifast, Inc., a manufacturer of medically based, proprietary healthy living and meal replacement products, where he was a member of the audit, compensation and mergers & acquisitions committees. Mr. Welling serves as Chairman of the Board for the University of Pennsylvania’s tennis program and as a member of the Wharton Executive Education Board. Mr. Welling is well-qualified to serve on our Board due to significant experience in the areas of investments, finance and corporate governance.
Controlled Company Exception
Evan Hafer controls a majority of the voting power of our outstanding Class A Common Stock and Class B Common Stock. As a result, we are deemed a “controlled company” under the NYSE corporate governance standards. As a controlled company, we are free from the obligation to comply with certain corporate governance requirements, including the requirements:
● that a majority of our board of directors consists of “independent directors,” as defined under the rules of the NYSE;
● that we have, to the extent applicable, a nominating and corporate governance committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities;
● that any corporate governance and nominating committee or compensation committee be composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and
● for an annual performance evaluation of the nominating and governance committees and compensation committee.
Because we have availed ourselves of the “controlled company” exception under the rules, we may choose to rely upon these exemptions. These exemptions, however, do not modify the independence requirements for our audit committee and we will comply with the requirements of Rile 10A-3 of the Exchange Act and the rules of the NYSE within the applicable time frame.
Board Composition
The Company’s business is managed under the direction of the Board. The Board consists of seven members, divided into three classes of staggered three-year terms.
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As discussed more fully under the section entitled “ Certain Relationships and Related Transactions—Investor Rights Agreement, ” the Company is party to the Investor Rights Agreement with the Founder, the Sponsor, the Forward Purchase Investors, the Sterling Equityholders and certain Legacyholders (each defined therein). Pursuant to the Investor Rights Agreement, Engaged Capital, on behalf of the Forward Purchase Investors, has the right to nominate two directors to the Board and the Founder has the right to nominate three directors (including himself) to the Board, in each case, for so long as such entities, individuals and their respective affiliates beneficially own certain specified percentages of the economic interests in the Company and Authentic Brands as set forth in the Investor Rights Agreement.
Pursuant to the Investor Rights Agreement, the parties thereto agreed that the initial Board upon the completion of the Business Combination is composed of the following seven individuals: Tom Davin, Katy Dickson, Evan Hafer, George Muñoz, Roland Smith, Steven Taslitz and Glenn Welling.
The Board is divided into three staggered classes of directors. At each annual meeting of the Company’s stockholders, a class of directors will be elected for a three-year term to succeed the same class whose term is then expiring, as follows:
● the Class I directors are Katy Dickson and Roland Smith;
● the Class II directors are Tom Davin and George Muñoz; and
● the Class III directors are Evan Hafer, Steven Taslitz and Glenn Welling.
Subject to the Investor Rights Agreement, the term of all Class I directors shall automatically become one year commencing on the seventh annual meeting of stockholders, the term of all Class II directors shall automatically become one year commencing on the eighth annual meeting of stockholders and the term of all Class III directors shall automatically become one year commencing on the ninth annual meeting of stockholders, with all directors having a term of one year from and after such ninth annual meeting of stockholders. Until the fifth anniversary of the closing of the Business Combination, (i) the holders party to the Investor Rights Agreement will agree to vote all of their respective shares of the Company’s Class A Common Stock and the Company’s Class B Common Stock, as applicable, in favor of the Engaged Directors and the Founder Directors and (ii) the Forward Purchase Investors, the Sponsor and certain other equityholders party to the Investor Rights Agreement will agree to vote all of their voting stock in the Company in the election and removal of directors as directed by the Founder.
Director Independence
The Company’s Class A Common Stock is listed on the NYSE. Under the rules of the NYSE, independent directors must comprise a majority of a listed company’s board of directors. In addition, the rules of the NYSE require that, subject to specified exceptions, each member of a listed company’s audit, compensation and nominating and corporate governance committees be independent. Under the rules of the NYSE, a director will only qualify as an “independent director” if, in the opinion of that company’s board of directors, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Audit committee members must also satisfy the additional independence criteria set forth in Rule 10A-3 under the Exchange Act and the rules of the NYSE. Compensation committee members must also satisfy the additional independence criteria set forth in Rule 10C-1 under the Exchange Act and the rules of the NYSE.
In order to be considered independent for purposes of Rule 10A-3 under the Exchange Act and under the rules of the NYSE, a member of an audit committee of a listed company may not, other than in his or her capacity as a member of the committee, the board of directors, or any other board committee: (1) accept, directly or indirectly, any consulting, advisory, or other compensatory fee from the listed company or any of its subsidiaries; or (2) be an affiliated person of the listed company or any of its subsidiaries.
To be considered independent for purposes of Rule 10C-1 under the Exchange Act and under the rules of the NYSE, the board of directors must affirmatively determine that the member of the compensation committee is independent, including a consideration of all factors specifically relevant to determining whether the director has a relationship to the company which is material to that director’s ability to be independent from management in connection with the duties of a compensation committee member, including, but not limited to: (i) the source of compensation of such director, including any consulting, advisory or other compensatory fee paid by the company to such director; and (ii) whether such director is affiliated with the company, a subsidiary of the company or an affiliate of a subsidiary of the company.
The Board has undertaken a review of the independence of each director and considered whether each director of the Company has a material relationship with the Company that could compromise his or her ability to exercise independent judgment in carrying
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out his or her responsibilities. As a result of this review, the Company has determined that Katy Dickson, George Muñoz, Roland Smith, Steven Taslitz and Glenn Welling are “independent directors” as defined under the listing requirements and rules of the NYSE and the applicable rules of the Exchange Act.
Board Committees
The Board has established an audit committee, compensation committee and nominating and corporate governance committee. The responsibilities of each committee are described below. The composition of each committee has been determined and made in accordance with the NYSE listing standards and the independence standards of Rule 10A-3 of the Exchange Act, as applicable. The Board may also establish from time to time any other committees that it deems necessary or desirable. Members serve on these committees until their resignation or until otherwise determined by the Board.
Audit Committee
Our audit committee consists of George Muñoz, Steven Taslitz and Glenn Welling, with George Muñoz serving as chair. Each of these individuals qualify as independent directors under the NYSE listing standards and the independence standards of Rule 10A-3 of the Exchange Act. Each member of the audit committee is financially literate and our board of directors has determined that George Muñoz qualifies as an “audit committee financial expert” as defined in applicable SEC rules.
Our audit committee is responsible for, among other things:
● selecting and hiring our independent auditors, and approving the audit and non-audit services to be performed by our independent auditors;
● assisting the board of directors in evaluating the qualifications, performance and independence of our independent auditors;
● assisting the board of directors in monitoring the quality and integrity of our financial statements and our accounting and financial reporting;
● assisting the board of directors in monitoring our compliance with legal and regulatory requirements;
● reviewing the adequacy and effectiveness of our internal control over financial reporting processes;
● assisting the board of directors in monitoring the performance of our internal audit function;
● monitoring the performance of our internal audit function;
● reviewing with management and our independent auditors our annual and quarterly financial statements;
● establishing procedures for the receipt, retention and treatment of complaints received by us regarding accounting, internal accounting controls or auditing matters and the confidential, anonymous submission by our employees of concerns regarding questionable accounting or auditing matters; and
● preparing the audit committee report that the rules and regulations of the SEC require to be included in our annual proxy statement.
Compensation Committee
Our compensation committee consists of Katy Dickson, George Muñoz, Roland Smith and Glenn Welling, with Katy Dickson serving as chair. Each of these individuals qualify as independent directors under the NYSE listing standards.
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The compensation committee is responsible for, among other things:
● reviewing and approving corporate goals and objectives relevant to the compensation of our CEO, evaluating our CEO’s performance in light of those goals and objectives, and, either as a committee or together with the other independent directors (as directed by the board of directors), determining and approving our CEO’s compensation level based on such evaluation;
● reviewing and approving, or making recommendations to the board of directors with respect to, the compensation of our other executive officers, including annual base salary, bonus and equity-based incentives and other benefits;
● reviewing and recommending the compensation of our directors;
● reviewing and discussing annually with management our “Compensation Discussion and Analysis” disclosure required by SEC rules;
● preparing the compensation committee report required by the SEC to be included in our annual proxy statement; and
● reviewing and making recommendations with respect to our equity compensation plans.
Nominating and Corporate Governance Committee
Our nominating and corporate governance committee consists of Katy Dickson, Evan Hafer, Roland Smith and Steven Taslitz, with Evan Hafer serving as chair. Ms. Dickson, Mr. Smith and Mr. Taslitz qualify as independent directors under the NYSE listing standards.
The nominating and corporate governance committee is responsible for, among other things:
● assisting our board of directors in identifying prospective director nominees and recommending nominees to the board of directors;
● overseeing the evaluation of the board of directors and management;
● reviewing developments in corporate governance practices and developing and recommending a set of corporate governance guidelines; and
● recommending members for each committee of our board of directors.
Compensation Committee Interlocks and Insider Participation
None of our executive officers currently serve, or have served during the last completed fiscal year as a member of the board of directors or compensation committee (or other committee performing equivalent functions) of any entity that has one or more executive officers serving on our board of directors or compensation committee. We are party to certain transactions with affiliates of our Principal Stockholders described in “ Certain Relationships and Related Transactions. ”
Code of Ethics
We adopted a new Code of Business Conduct and Ethics that applies to all of our officers, directors and employees, including our principal executive officer, principal financial officer, principal accounting officer and controller, or persons performing similar functions, which will be posted on our website. Our Code of Business Conduct and Ethics is a “code of ethics,” as defined in Item 406(b) of Regulation S-K. We will make any legally required disclosures regarding amendments to, or waivers of, provisions of our code of ethics on our website. The information contained on, or accessible from, our website is not part of this Annual Report by reference or otherwise.
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Related Person Policy of the Company
We adopted a formal written policy that effective upon the Business Combination providing that the Company’s officers, directors, nominees for election as directors, beneficial owners of more than 5% of any class of the Company’s voting securities, any member of the immediate family of any of the foregoing persons and any firm, corporation or other entity in which any of the foregoing persons is employed or is a general partner or principal or in a similar position or in which such person has a 5% or greater beneficial ownership interest, are not permitted to enter into a related party transaction with the Company without the approval of the Company’s audit committee, subject to the exceptions described below.
A related person transaction is generally a transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships, in which the Company and any related person are, were or will be participants in which the amount involved exceeds $120,000. Transactions involving compensation for services provided to the Company as an employee or director are not covered by this policy.
Under the policy, the Company shall collect information that the Company deems reasonably necessary from each director, executive officer and, to the extent feasible, significant stockholder, to enable the Company to identify any existing or potential related-person transactions and to effectuate the terms of the policy. In addition, under the Code of Conduct, employees and directors have an affirmative responsibility to disclose any transaction or relationship that reasonably could be expected to give rise to a conflict of interest.
The policy requires that, in determining whether to approve, ratify or reject a related person transaction, the Company’s Audit Committee, or other independent body of the Company Board, must consider, in light of known circumstances, whether the transaction is in. or is not inconsistent with, the Company’s best interests and those of the Company’s stockholders, as the Company’s Audit Committee, or other independent body of the Company Board, determines in the good faith exercise of its discretion.
The Company’s Audit Committee has determined that certain transactions will not require the approval of the Audit Committee including certain employment arrangements of officers, director compensation, transactions with another company at which a related party’s only relationship is as a director, non- executive employee or beneficial owner of less than 10% of that company’s outstanding capital stock, transactions where a related party’s interest arises solely from the ownership of the Company’s common stock and all holders of the Company’s common stock received the same benefit on a pro rata basis and transactions available to all employees generally.
Item 11. Executive Compensation
We are currently considered an “emerging growth company” within the meaning of the Securities Act for purposes of the SEC’s executive compensation disclosure rules. Accordingly, we are required to provide a 2021 Summary Compensation Table and an Outstanding Equity Awards at the end of fiscal year 2021, as well as limited narrative disclosures regarding executive compensation for our last completed fiscal year. Further, our reporting obligations extend only to the following “Named Executive Officers” or “NEOs,” which are the individuals who served as principal executive officer and the next two most highly compensated executive officers at the end of the fiscal year 2021.
Name
Principal Position
Evan Hafer
Chief Executive Officer
Tom Davin
Co-Chief Executive Officer
Toby Johnson
Chief Operating Officer
Andrew McCormick
General Counsel and Secretary
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2021 Summary Compensation Table
The following table summarizes the compensation awarded to, earned by or paid to our Named Executive Officers for the fiscal year ended December 31, 2021.
Option
All Other
Salary
Bonus (1)
Awards (2)
Compensation (3)
Total
Name and Principal Position
Year
($)
($)
($)
($)
($)
Evan Hafer, Chief Executive Officer
2021
$
340,000
—
—
$
28,382
$
368,382
2020
$
340,000
$
566,352
—
$
28,382
$
934,734
Tom Davin, Co-Chief Executive Officer
2021
$
315,000
—
—
$
31,342
$
346,342
2020
$
315,000
$
472,500
—
$
31,342
$
818,842
Toby Johnson, Chief Operating Officer (4)
2021
$
140,000
$
212,000
$
2,153,100
$
107,579
$
2,612,679
Andrew McCormick, General Counsel and Secretary (5)
2021
$
75,000
—
$
430,620
$
3,197
$
508,817
(1) Represents discretionary bonuses earned by each individual, based on performance for the applicable year. In 2022, the Company’s compensation committee determined that no annual bonus amounts would be paid with respect to 2021 performance to any of the Company’s named executive officers. As noted in (4), the amount shown with respect to Ms. Johnson reflects a signing bonus received in connection with her commencement of employment.
(2) Amounts reported in the “Option Awards” column reflect the aggregate grant date fair value of the Incentive Units in Authentic Brands granted to Ms. Johnson and Mr. McCormick during 2021, calculated in accordance with FASB ASC 718. The Incentive Units represent membership interests in Authentic Brands that are intended to constitute “profits interests” for federal income tax purposes. Aside from the fact that the Incentive Units do not require the payment of an exercise price, they are similar economically to stock options. Accordingly, they are classified as “options” under the definition provided in Item 402(a)(6)(i) of Regulation S-K as an instrument with an “option-like feature.” The assumptions used in calculating the grant date fair value of the Incentive Unit awards reported in this column are set forth in Note 11 of our consolidated financial statements for the year-ended December 31, 2021 included in Item 8. Financial Statements and Supplementary Data. For more information on the Incentive Units, see the “Outstanding Equity Awards at 2021 Fiscal Year-End” table and “ — Equity Incentives ” below.
(3) For 2021, includes the following amounts:
Relocation
401(k) Match
Benefits (a)
Benefit (b)
Evan Hafer
$
11,600
$
16,782
—
Tom Davin
$
11,600
$
19,742
—
Toby Johnson
—
$
21,470
$
86,019
Andrew McCormick
$
1,868
$
1,329
—
(a) Includes employee benefits for medical insurance and HSA/FSA employer match.
(b) Includes reimbursement of a relocation obligation to her former employer in the amount of $86,109.
(4) Ms. Johnson commenced employment with BRCC in August 2021 and received a signing bonus in the amount of $212,000. Her salary for 2021 was pro-rated accordingly. As described above, the Compensation Committee determined that no annual bonus amounts will be paid with respect to 2021 performance to any of the Company’s named executive officers.
(5) Mr. McCormick commenced employment with BRCC in September 2021, and his 2021 annual base salary was pro-rated accordingly. As described above, the Compensation Committee determined that no annual bonus amounts will be paid with respect to 2021 performance to any of the Company’s named executive officers.
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Narrative Disclosure to Summary Compensation Table
Employment Agreements, Offer Letter or other Compensatory Arrangement
We have entered into an employment agreement or an offer letter with each of our Named Executive Officers other than Mr. Hafer. Evan Hafer, as Black Rifle Coffee’s founder and CEO, has controlled all significant decisions of the Company since its inception.
The employment agreements, offer letters, and Mr. Hafer’s compensation arrangement provide for the following key compensation elements:
Base Salary. Each employment agreement and offer letter provides for an annualized base salary. For 2021, annualized base salary numbers for our Named Executive Officers were as follows: $315,000 for Mr. Davin, $350,000 for Ms. Johnson and $300,000 for Mr. McCormick (pro-rated, in the case of Ms. Johnson and Mr. McCormick to reflect her or his commencement of employment during 2021). Mr. Hafer’s base salary for 2021 was $340,000.
Annual Bonuses. Each employment agreement and offer letter provides for an annual discretionary bonus based on achievement of performance objectives established by the Board of Directors of Authentic Brands or a committee thereof. For Fiscal Year 2021, the annual target bonus amounts, which are assessed and approved annually by the compensation committee of the Board, for each Named Executive Officer were as follows: 100% of annual base salary both for Mr. Davin and Ms. Johnson and 50% of annual base salary for Mr. McCormick (pro-rated, in the case of Ms. Johnson and Mr. McCormick to reflect her or his commencement of employment during 2021). For that same period, bonus targets were established based upon revenue, adjusted EBITDA, and individual performance goals. As described above, the Compensation Committee used its discretionary authority to determine no bonuses would be payable with respect to 2021 performance for any of our named executive officers. See “Summary Compensation Table” above for each Named Executive Officer’s annual bonus earned in 2020, if any.
Incentive Units. Ms. Johnson and Mr. McCormick also received grants of Incentive Units during 2021 pursuant to the terms of their offer letter or employment agreement, respectively. See “ — Equity Incentives ” below for a description of the Incentive Units granted to our Named Executive Officers.
Severance Compensation. Certain of the employment agreements provide for additional compensation upon a qualifying termination of employment. See “ — Potential Payments upon Termination or Change in Control ” for additional details.
Restrictive Covenants. Each employment agreement includes the Company’s customary non-competition, non-solicitation, and confidentiality restrictions.
401(k) Plan
We maintain a tax-qualified retirement plan that provides all full-time employees with an opportunity to save for retirement on a tax-advantaged basis. Under our 401(k) plan, participants may elect to defer a portion of their compensation on a pre-tax basis and have it contributed to the plan subject to applicable annual limits under the Code.
We match 100% of participant deferrals up to 3% of a participant’s compensation plus 50% of participant deferrals in excess of 3% and up to 5% of employee’s compensation for a maximum matching contribution equal to 4% of a participant’s compensation under a safe harbor provision. Participants are immediately vested in their contributions and company safe harbor contributions plus actual earnings thereon. Vesting in the Company’s discretionary contribution portion of their accounts plus actual earnings thereon is based on years of credited service. Participants vest 50% each year until they are 100% vested after two years of service.
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Outstanding Equity Awards at 2021 Fiscal Year-End
The following table reflects information regarding outstanding equity-based awards held by our Named Executive Officers as of December 31, 2021.
Option Awards (1)
Number of
Number of
Securities
Securities
Underlying
Underlying
Unexercised
Unexercised
Options
Options
Option Exercise
Option
(#)
(#)
Price (7)
Expiration
Name
Exercisable (1)
Unexercisable
($)
Date (7)
Evan Hafer
40,000
—
N/A
N/A
Tom Davin
1,972
157
(2)
N/A
N/A
32,772
12,500
(3)
N/A
N/A
Toby Johnson
75
(4)
—
N/A
N/A
—
10,000
(5)
N/A
N/A
Andrew McCormick
—
2,000
(6)
N/A
N/A
(1) The equity awards disclosed in this table are Incentive Units of Authentic Brands (“Incentive Units”), which are intended to be profits interests for federal income tax purposes. For more information on the Incentive Units, see “ — Equity Incentives ,” below. Aside from the fact that the Incentive Units do not require the payment of an exercise price or have an option expiration date, we believe they are economically similar to stock options and, as such, they are reported in this table as “Option” awards. Awards reflected as “Unexercisable” are Incentive Units that have not yet vested. Awards reflected as “Exercisable” are Incentive Units that have vested, but remain outstanding.
(2) 156 Incentive Units were scheduled to vest at the end of each quarter through February 13, 2022, subject to Mr. Davin’s continued employment. The vesting of these Incentive Units accelerated in connection with the Business Combination and such units were converted to fully-vested Common Units of Authentic Brands. For additional discussion, see “ — Potential Payments upon Termination or Change in Control .”
(3) 3,125 Incentive Units were scheduled to vest at the end of each quarter through January 7, 2023, subject to Mr. Davin’s continued employment. The vesting of these Incentive Units accelerated in full upon the closing of the Business Combination and such units were converted to fully-vested Common Units of Authentic Brands. For additional discussion, see “ — Potential Payments upon Termination or Change in Control. ”
(4) Represents a grant of Incentive Units Ms. Johnson received in connection with her prior service as a member of the Company’s Board of Directors. In connection with her commencement of employment, Ms. Johnson forfeited the remainder of this grant.
(5) 2,000 Incentive Units vested upon the closing of the Business Combination and were converted to fully-vested Common Units of Authentic Brands, and 500 Incentive Units will vest on August 11, 2022 and 625 Incentive Units will vest at the end of each subsequent quarter through August 11, 2025, subject to Ms. Johnson’s continued employment. For additional discussion, see “ — Potential Payments upon Termination or Change in Control. ”
(6) 400 Incentive Units vested upon the closing of the Business Combination and such units were converted to fully-vested Common Units of Authentic Brands, and 100 Incentive Units vest on September 13, 2022 and 125 Incentive Units will vest at the end of each subsequent quarter through September 13, 2025, subject to Mr. McCormick’s continued employment. For additional discussion, see “ — Potential Payments upon Termination or Change in Control.”
(7) These awards are not traditional options, and therefore, there is no exercise price or expiration date associated with them.
Equity Incentives
Authentic Brands maintained an Equity Incentive Plan (the “Incentive Unit Plan”) pursuant to which its Board issued Incentive Units to eligible individuals. The Incentive Units are intended to constitute “profits interests” within the meaning of Revenue
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Procedures 93-27 and 2001-43, and provided an immediate and significant alignment between our Named Executive Officers and our business. As profits interests, the Incentive Units have no value for tax purposes on the date of grant.
Each Named Executive Officer was granted Incentive Units pursuant to the terms and conditions set forth in the Incentive Unit Plan and the Authentic Brands LLC Agreement. The number of Incentive Units granted to each of our Named Executive Officers was not determined pursuant to any formulaic equation or benchmarking to any peer groups; rather, the number of Incentive Units is and was determined by the compensation committee of the Board in its sole discretion.
The unvested Incentive Units held by our Named Executive Officers generally vest over a four-year period — 25% on the first anniversary of grant and then in equal installments at the end of each subsequent quarter over the next three years, in each case, subject to continued employment through such date. In connection with the Business Combination, prior Incentive Units that were vested (including those that vested in connection with the Business Combination) were converted into Common Units of Authentic Brands. Incentive Units that remained unvested will continue to vest in accordance with their terms. However, no additional awards will be granted under the Incentive Unit Plan.
In connection with the Business Combination, our shareholder approved the EIP, pursuant to which we may grant eligible employees equity compensation awards.
The EIP provides that Evan Hafer will be eligible to receive awards with respect to a number of shares of Class A Common Stock equal to up to 4% of the fully-diluted aggregate number of Class A and Class B Common Stock outstanding as of the Business Combination. We expect that Mr. Hafer will receive a grant of this full amount (the “Founder Grant”), which will be in the form of performance-based restricted stock units (“PSUs”). The Founder Grant is intended to provide an immediate and significant alignment between the BRCC Founder and the success of our business. The PSUs to be granted to Mr. Hafer are expected to be earned based upon achievement of specified compound annual growth rate (CAGR) goals over a 5-year period, subject to continued employment.
Potential Payments upon Termination or Change in Control
Severance under Employment Agreements
As described above, Mr. Hafer does not currently have a contractual entitlement to severance.
Mr. Davin’s employment agreement provides that his employment by the Company is at-will and generally does not provide for additional compensation upon termination, beyond a requirement to provide at least 30 days’ written notice of termination of employment.
Ms. Johnson’s employment agreement provides that in the event that Ms. Johnson is terminated without “cause”, subject to her execution of a general release of claims, she will be entitled to receive continued payment of her base salary for a six month period following termination of employment.
Mr. McCormick does not have a contractual entitlement to severance.
Vesting of Incentive Units upon Change in Control
The terms of the Incentive Units held by our Named Executive Officers provided for partial accelerated vesting upon a “change in control” (as defined in the Plan), depending on the amount of time that has elapsed between the date of grant and the date of such “change in control.” The Business Combination resulted in Mr. Davin receiving full vesting of all Incentive Units he held. In addition, Ms. Johnson and Mr. McCormick have received accelerated vesting in 2,000 and 400 Incentive Units, respectively.
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Director Compensation
The following table summarizes the compensation awarded or paid to the members of the Board for the fiscal year ended December 31, 2021.
Fees Earned or
Name
Paid in Cash
Options (1)
Total
Katy Dickson
$
52,000
$
64,593
$
116,593
George Muñoz
$
49,000
$
64,593
$
113,593
Steven Taslitz
$
16,500
$
64,593
$
81,093
Toby Johnson (2)
$
30,000
—
$
30,000
(1) Amounts reported in the “Options” column reflect the aggregate grant date fair value of the Incentive Units in the Authentic Brands granted to Mr. Muñoz and Mses. Dickson and Johnson during 2021, calculated in accordance with FASB ASC 718. The Incentive Units represent membership interests in the Company that are intended to constitute “profits interests” for federal income tax purposes. Aside from the fact that the Incentive Units do not require the payment of an exercise price or have an option expiration date, we believe they are economically similar to stock options. Accordingly, they are classified as “options” under the definition provided in Item 402(a)(6)(i) of Regulation S-K as an instrument with an “option-like feature.” The aggregate number of Incentive Units held by each director as of December 31, 2021 was: 1,705 for Mr. Muñoz, 1,107 for Ms. Dickson, 300 for Mr. Taslitz and 75 for Ms. Johnson (excluding the grant she received in connection with her commencement of service as the Chief Operating Officer, as described above).
(2) As described above, in June of 2021, Ms. Johnson resigned as a director in connection with her appointment as Chief Operating Officer.
Director Compensation . During August 2021, we approved an updated director compensation program that provides for a base annual cash retainer of $50,000 plus the following additional cash retainers: $40,000 for Ms. Dickson ($20,000 in recognition of her service as lead independent director and an additional $10,000 for her service as a member of the compensation committee and the audit committee); $26,000 for Mr. Muñoz ($20,000 in recognition of his service as a member of the audit committee and $6,000 for his service as a member of the compensation committee); and $16,000 for Mr. Taslitz ($10,000 in recognition of his service as a member of the audit committee and $6,000 for his service as a member of the compensation committee). The amounts reflected in the table above were paid based upon the Company’s prior director compensation program for periods prior to August 2021 and amounts under the current compensation program were correspondingly pro-rated to reflect the partial year.
Item 12. Security Ownership of Certain Beneficial Owner and Management and Related Stockholder Matters
The following table sets forth information regarding the beneficial ownership of our voting shares by:
● each person who is known to be the beneficial owner of more than 5% of our voting shares;
● each of our named executive officers and directors; and
● all of our executive officers and directors as a group.
Beneficial ownership is determined according to the rules of the SEC, which generally provide that a person has beneficial ownership of a security if he, she, or it possesses sole or shared voting or investment power over that security, including options and warrants that are currently exercisable or exercisable within 60 days. Except as described in the footnotes below and subject to applicable community property laws and similar laws, we believe that each person listed above has sole voting and investment power with respect to such shares.
The beneficial ownership of shares of the Company’s voting shares as presented below is based on the following: (i) an aggregate of 44,703,936 shares of Class A Common Stock issued and outstanding and (ii) an aggregate of 149,032,886 shares of Class B Common Stock issued and outstanding; provided, that, the information below excludes (a) the shares of Class A Common Stock reserved for future awards under the EIP and the ESPP, (b) 17,766,641 shares of Class A Common Stock subject to outstanding Warrants of the Company, (c) 694,063 shares of Class C Common Stock issued and outstanding, (d) 9,926,562 shares of Class B Common Stock issuable upon vesting of 9,926,562 Restricted Common Units and (e) certain other unvested restricted units.
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Unless otherwise indicated, the Company believes that all persons named in the table have sole voting and investment power with respect to all shares of common stock of the Company beneficially owned by them. Unless otherwise noted, the business address of each of the following entities or individuals is 1144 S 500 W, Salt Lake City, UT 84101.
Beneficial Ownership Table
Class A
Class B
% of Total
Name and Address of Beneficial Owners
Common Stock
Common Stock
Voting Power
Evan Hafer (1)
16,432,868
109,855,412
65.19
%
Tom Davin (2)
—
8,107,010
4.18
%
Toby Johnson (3)
—
113,366
0.06
%
Andrew McCormick (4)
—
20,724
0.01
%
Katy Dickson (5)
—
107,979
0.06
%
George Munoz (6)
—
185,689
0.10
%
Roland Smith
—
—
—
Steven Taslitz (7)
—
1,576,346
0.81
%
Glenn Welling (8)
16,025,000
—
8.27
%
EKNRH Holdings LLC (9)
—
32,131,666
16.59
%
Mathew Best (10)
—
27,237,096
14.06
%
John Miller (11)
—
13,289,347
6.86
%
Marianne Hellauer (12)
—
24,863,521
12.83
%
Funds and accounts managed by Engaged Capital (8)
16,025,000
—
8.27
%
All directors and officers after the Business Combination as a group (11 persons)
21,457,868
118,529,335
72.26
%
(1) Reflects (i) 32,131,666 shares of Class B Common Stock held through EKNRH Holdings LLC, an entity managed by Mr. Hafer, and (ii)(a) 5,432,868 shares of Class A Common Stock held by the Sponsor, (b) 11,000,000 shares of Class A Common Stock held by the Engaged Capital Investors, (c) 27,237,096 shares of Class B Common Stock held by Mr. Best, (d) 13,289,347 shares of Class B Common Stock that may be deemed to be beneficially owned by Mr. Miller, (e) 24,863,521 shares of Class B Common Stock that may be deemed to be beneficially owned by Ms. Hellauer and (f) 12,333,782 shares of Class B Common Stock held in aggregate by certain other stockholders party to the Investor Rights Agreement, which shares listed under (ii) may be deemed to be beneficially owned by Mr. Hafer, given that, pursuant to the Investor Rights Agreement, Mr. Hafer has a proxy to vote such shares with respect to director elections. Mr. Hafer disclaims any beneficial ownership of the reported shares other than with respect to shares held by EKNRH Holdings LLC and other than to the extent of any pecuniary interest Mr. Hafer may have therein, directly or indirectly.
(2) Reflects (i) 6,882,953 shares of Class B Common Stock directly held by Mr. Davin and (ii) 1,224,057 shares of Class B Common Stock that Mr. Davin may be deemed to beneficially own through his control, together with a partner, of the entity owning such shares. Mr. Davin disclaims any beneficial ownership of the reported shares held by such entity other than to the extent of any pecuniary interest Mr. Davin may have therein, directly or indirectly. Does not reflect up to 555,062 shares of Class B Common Stock that Mr. Davin may be deemed to beneficially own in the event of the occurrence of a Second Tier Vesting Event with respect to the 555,062 Restricted Common Units that may be deemed to be beneficially owned by Mr. Davin at Closing.
(3) Does not reflect (i) up to 20,750 shares of Class B Common Stock issuable to Ms. Johnson in the event of the occurrence of a Second Tier Vesting Event with respect to the 20,750 Restricted Common Units held by Ms. Johnson at Closing and (ii) certain unvested restricted units.
(4) Does not reflect (i) up to 4,000 shares of Class B Common Stock issuable to Mr. McCormick in the event of the occurrence of a Second Tier Vesting Event with respect to the 4,000 Restricted Common Units held by Mr. McCormick at Closing and (ii) certain unvested restricted units.
(5) Does not reflect (i) up to 8,670 shares of Class B Common Stock issuable to Ms. Dickson in the event of the occurrence of a Second Tier Vesting Event with respect to the 8,670 Restricted Common Units held by Ms. Dickson at Closing and (ii) certain unvested restricted units.
(6) Does not reflect (i) up to 14,650 shares of Class B Common Stock issuable to Mr. Muñoz in the event of the occurrence of a Second Tier Vesting Event with respect to the 14,650 Restricted Common Units held by Mr. Muñoz at Closing and (ii) certain unvested restricted units.
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(7) Reflects (i) 3,109 shares of Class B Common Stock directly held by Mr. Taslitz and (ii) 1,573,237 shares of Class B Common Stock held by a trust for which Mr. Taslitz is acting as a trustee and which shares may therefore be deemed to be beneficially owned by Mr. Taslitz. Mr. Taslitz disclaims any beneficial ownership of the reported shares held by such trust other than to the extent of any pecuniary interest Mr. Taslitz may have therein, directly or indirectly. Does not reflect (i) up to 104,780 shares of Class B Common Stock that Mr. Taslitz may be deemed to beneficially own in the event of the occurrence of a Second Tier Vesting Event with respect to the 104,780 Restricted Common Units that may be deemed to be beneficially owned by Mr. Taslitz at Closing and (ii) certain unvested restricted units.
(8) Engaged Capital, as the general partner and investment adviser of the investment funds and accounts purchasing the Forward Purchase Shares (as defined below) pursuant to the Forward Purchase Investment (as defined below) and the PIPE Shares (as defined below) pursuant to the PIPE Investment (as defined below), may be deemed to beneficially own the 16,025,000 shares owned in the aggregate by the Forward Purchase Investors (as defined below) and such PIPE Investors (as defined below) following the Business Combination. Engaged Capital Holdings, LLC, as the managing member of Engaged Capital, may be deemed to beneficially own the 16,025,000 shares owned in the aggregate by the Forward Purchase Investors and such PIPE Investors following the Business Combination. Glenn Welling, as the Founder and Chief Investment Officer of Engaged Capital and the sole member of Engaged Capital Holdings, LLC, may be deemed to beneficially own the 16,025,000 shares owned in the aggregate by the Forward Purchase Investors and such PIPE Investors following the Business Combination. Mr. Welling disclaims any beneficial ownership of the reported shares other than to the extent of any pecuniary interest Mr. Welling may have therein, directly or indirectly. The principal business address of Glenn Welling is c/o Engaged Capital, LLC, 610 Newport Center Drive, Suite 250, Newport Beach, CA 92660.
(9) Does not reflect up to 2,106,631 shares of Class B Common Stock issuable to EKNRH Holdings LLC in the event of the occurrence of a Second Tier Vesting Event with respect to the 2,106,631 Restricted Common Units held by EKNRH Holdings LLC at Closing. EKNRH Holdings LLC is an entity managed by Evan Hafer and, as such, Evan Hafer is the beneficial owner of the shares held by EKNRH Holdings LLC.
(10) Does not reflect up to 1,787,793 shares of Class B Common Stock issuable to Mr. Best in the event of the occurrence of a Second Tier Vesting Event with respect to the 1,787,793 Restricted Common Units held by Mr. Best at Closing.
(11) Represents shares of Class B Common Stock held by entities managed by Mr. Miller and by a trust for which Mr. Miller is serving as a trustee, which shares may in each case be deemed to be beneficially owned by Mr. Miller. Does not reflect up to 880,027 shares of Class B Common Stock that Mr. Miller may be deemed to beneficially own in the event of the occurrence of a Second Tier Vesting Event with respect to the 880,027 Restricted Common Units that may be deemed to be beneficially owned by Mr. Miller at Closing. Mr. Miller disclaims any beneficial ownership of the reported shares other than to the extent of any pecuniary interest Mr. Miller may have therein, directly or indirectly.
(12) Represents 12,431,760 shares of Class B Common Stock held by trusts and 12,431,761 shares of Class B Common Stock held by GI Decaf Trust UAD 2/3/2016, in each case for which Ms. Hellauer is serving as a trustee, and which shares may be deemed to be beneficially owned by Ms. Hellauer. Does not reflect up to 1,646,468 shares of Class B Common Stock that Ms. Hellauer may be deemed to beneficially own in the event of the occurrence of a Second Tier Vesting Event with respect to the 1,646,468 Restricted Common Units that may be deemed to be beneficially owned by Ms. Hellauer at Closing. Ms. Hellauer disclaims any beneficial ownership of the reported shares other than to the extent of any pecuniary interest Ms. Hellauer may have therein, directly or indirectly.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Other Transactions
On January 10, 2020, we entered into a purchase and sale agreement with Flag Holdings LLC for the purchase of real property located in Salt Lake City, Utah for a purchase price of approximately $3.6 million. Flag Holdings LLC was 50% owned by Evan Hafer, our Chief Executive Officer, at the time of closing. In payment of the purchase price, we assumed a mortgage on the property, transferred cash to the other principal owner of Flag Holdings, and entered into a promissory note in favor of Evan Hafer in a principal amount of approximately $530,000. The promissory note accrued interest at a rate of 9% per annum compounded monthly, resulting in a final payment from us of approximately $580,000 at the time of repayment. Following the entry into the promissory note, Evan
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Hafer assigned $200,000 in principal amount and accrued interest under the note to Mat Best, our Chief Branding Officer. No amounts remain outstanding on the promissory note.
On August 18, 2021, we entered into an agreement with Sterling Fund Management, LLC pursuant to which we agreed to cover certain expenses incurred by Sterling Fund Management, LLC and certain of its affiliates in connection with the evaluation of potential Black Rifle store locations in the State of Arizona in an aggregate amount of $1.0 million. Steven Taslitz, a member of our Board of Directors, is the co-Founder and Chairman of Sterling Fund Management, LLC. As of the date of this Annual Report, no amount was due under this agreement.
LLC Agreement
On February 9, 2022, in connection with the consummation of the Business Combination, the Company and the other holders of Company Units entered into the LLC Agreement. The operations of Authentic Brands, and the rights and obligations of the holders of the Company Units, are set forth in the LLC Agreement.
Under the LLC Agreement, Authentic Brands is managed by the Company. Except as otherwise specifically required under the LLC Agreement, the Company has full and complete control of all affairs of Authentic Brands. The Company manages and control all business activities and operations of Authentic Brands and control the day-to-day management of the business of Authentic Brands and its subsidiaries. In addition, the LLC Agreement provides, among other things, that the holders of the Common Units (other than the Company and its subsidiaries) have the right to require Authentic Brands to redeem all or a portion of such Common Units, together with the cancellation of an equal number of shares of Class B Common Stock, for an equal number of shares of Class A Common Stock, or a corresponding amount of cash, in each case contributed to Authentic Brands by the Company, provided that the Company may elect to effect a direct exchange of such cash or the Class A Common Stock for such Common Units in lieu of any such redemption, all in accordance with the terms and subject to certain restrictions set forth in the LLC Agreement.
Investor Rights Agreement
On February 9, 2022, in connection with the consummation of the Business Combination, the Company, the Sponsor, Engaged Capital and certain of its affiliates (collectively, “Engaged”), BRCC Founder and certain other equityholders of the Company entered into an Investor Rights Agreement (the “Investor Rights Agreement”), pursuant to which, among other things, so long as the BRCC Founder and Engaged continue to own a specified percentage of Class A Common Stock and/or Common Units, then such holder will have the right to designate for nomination by the board of directors the number of candidates for election to the board of directors specified in the Investor Rights Agreement. In addition, for a period of five years following the consummation of the Business Combination, certain equityholders party to the Investor Rights Agreement agree to vote as directed by the BRCC Founder as a proxy on the election and removal of directors. The Investor Rights Agreement also provides that certain specific action as set forth therein shall be approved by a vote of two thirds of the directors then in office. In addition, under the Investor Rights Agreement, the Company agreed to register for resale, certain shares of Class A Common Stock and other equity securities of the Company that are held by the parties thereto from time to time. The Investor Rights Agreement provides for underwritten offerings and piggyback registration rights, in each case subject to certain limitations set forth therein.
Tax Receivable Agreement
On February 9, 2022, in connection with the consummation of the Business Combination, the Company entered into a Tax Receivable Agreement with Authentic Brands and Sterling New Investment Holdings LLC, as agent (the “Tax Receivable Agreement”).
Pursuant to the Tax Receivable Agreement, the Company will be required to pay to the Continuing Unitholders 85% of the tax savings that the Company realizes as a result of increases in tax basis in Authentic Brands’ assets resulting from the redemption of former preferred units of Authentic Brands (other than those held by Blocker) and a portion of the Common Units for the consideration paid pursuant to the Business Combination Agreement, the future exchange of Common Units for shares of Class A Common Stock (or cash) pursuant to the LLC Agreement and certain pre-existing tax attributes of the Blocker, as well as certain other tax benefits related to entering into the Tax Receivable Agreement, including tax benefits attributable to payments under the Tax Receivable Agreement. The term of the Tax Receivable Agreement will continue until all such tax benefits have been utilized or expired unless the Company exercises its right (with the consent of a majority of its disinterested directors and of the Agent under the
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Tax Receivable Agreement) to terminate the Tax Receivable Agreement for an amount representing the present value of all forecasted future payments that would have otherwise been made under the Tax Receivable Agreement or certain other acceleration events occur.
Statement of Policy Regarding Transactions with Related Persons
In connection with the consummation of the Business Combination, the Company adopted a formal written policy providing that the Company’s officers, directors, nominees for election as directors, beneficial owners of more than 5% of any class of the Company’s capital stock, any member of the immediate family of any of the foregoing persons and any firm, corporation or other entity in which any of the foregoing persons is employed or is a general partner or principal or in a similar position or in which such person has a 5% or greater beneficial ownership interest, are not permitted to enter into a related party transaction with the Company without the approval of the Company’s audit committee, subject to certain exceptions.
Indemnification of Directors and Officers
The Bylaws provide that we will indemnify our directors and officers to the fullest extent permitted by the DGCL. In addition, the Charter provides that our directors will not be liable for monetary damages for breach of fiduciary duty to the fullest extent permitted by the DGCL.
There is no pending litigation or proceeding naming any of the Company’s directors or officers to which indemnification is being sought, and we are not aware of any pending or threatened litigation that may result in claims for indemnification by any director or officer.
Item 14. Principal Accounting Fees and Services
The following sets forth fees billed by Ernst & Young LLP for the audit of the annual financial statements and other services rendered (dollars in thousands):
December 31
2021
2020
Audit fees (1)
$
1,250
$
198
Total
$
1,250
$
198
(1) Includes fees for audits of annual financial statements, reviews of quarterly financial statements, and services that are normally provided by the independent accountants in connection with statutory and regulatory filings or engagements, including reviews of documents filed with the SEC.
The Audit Committee is responsible for the oversight of our accounting, reporting and financial practices. The Audit Committee is responsible for, among other things:
selecting and hiring our independent auditors, and approving the audit and non-audit services to be performed by our independent auditors;
● assisting the board of directors in evaluating the qualifications, performance and independence of our independent auditors;
● assisting the board of directors in monitoring the quality and integrity of our financial statements and our accounting and financial reporting;
● assisting the board of directors in monitoring our compliance with legal and regulatory requirements;
● reviewing the adequacy and effectiveness of our internal control over financial reporting processes;
● assisting the board of directors in monitoring the performance of our internal audit function;
● monitoring the performance of our internal audit function;
● reviewing with management and our independent auditors our annual and quarterly financial statements; and
● preparing the audit committee report that the rules and regulations of the SEC require to be included in our annual proxy statement.
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Part IV
Item 15. Exhibits, Financial Statement Schedules
(1) Financial Statements - See Part II, Item 8, Financial Statements and Supplementary Data
(2) Financial Statement Schedules - None
(3) Exhibits
Exhibit
Description
2.1†
Business Combination Agreement, dated as of November 2, 2021, by and among SilverBox, the Company, Merger Sub 1, Merger Sub 2, Authentic Brands and Blocker (incorporated by reference to Exhibit 2.1 to the Company’s Form 8-K filed on February 10, 2022 with the SEC).
2.2
First Amendment to Business Combination Agreement, dated as of January 4, 2022, by and among SilverBox, the Company, Merger Sub 1, Merger Sub 2, Authentic Brands and Blocker (incorporated by reference to Exhibit 2.2 to the Company’s Form 8-K filed on February 10, 2022 with the SEC).
3.1
Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K filed on February 10, 2022 with the SEC).
3.2
Amended and Restated By-Laws of the Company (incorporated by reference to Exhibit 3.2 to the Company’s Form 8-K filed on February 10, 2022 with the SEC).
4.1
Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Company’s Form 8-K filed on February 10, 2022 with the SEC).
4.2
Specimen Warrant Certificate (incorporated by reference to Exhibit 4.1 to the Company’s Form 8-K filed on February 10, 2022 with the SEC).
4.3
Warrant Agreement, dated as of February 25, 2021, between Continental Stock Transfer & Trust Company and SilverBox (incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K filed with the SEC on February 10, 2022).
4.4
Warrant Assumption Agreement, dated as of February 9, 2022, by and among SilverBox, the Company and Continental Stock Transfer & Trust Company (incorporated by reference to Exhibit 4.4 to the Company’s Form 8-K filed on February 10, 2022 with the SEC).
4.5*
Description of the Registrant’s Securities Registered under Section 12 of the Exchange Act.
10.1†
Third Amended and Restated Limited Liability Company Agreement of Authentic Brands, dated as of February 9, 2022, by and among Authentic Brands and each other person who is or at any time becomes a member of Authentic Brands (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on February 10, 2022 with the SEC).
10.2
Tax Receivable Agreement, dated as of February 9, 2022, by and among the Company, Authentic Brands and Sterling New Investment Holdings LLC, as agent (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed on February 10, 2022 with the SEC).
10.3†
Investor Rights Agreement, dated as of February 9, 2022, by and among the Company and the stockholders party thereto (incorporated by reference to Exhibit 10.3 to the Company’s Form 8-K filed on February 10, 2022 with the SEC).
10.4
Form of Indemnification Agreement (incorporated by reference to Exhibit 10.4 to the Company’s Form 8-K filed on February 10, 2022 with the SEC).
10.5
Waiver under the Business Combination Agreement, dated as of February 9, 2022, by and among Authentic Brands and SilverBox (incorporated by reference to Exhibit 10.5 to the Company’s Form 8-K filed on February 10, 2022 with the SEC).
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10.6
Amended and Restated Forward Purchase Agreement, dated as of November 2, 2021, by and among SilverBox Engaged Capital and Authentic Brands (incorporated by reference to Exhibit 10.6 to the Company’s Form 8-K filed on February 10, 2022 with the SEC).
10.7
Form of PIPE Subscription Agreement (incorporated by reference to Exhibit 10.7 to the Company’s Form 8-K filed on February 10, 2022 with the SEC).
10.8#
The Company’s 2022 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.8 to the Company’s Form 8-K filed on February 10, 2022 with the SEC).
10.9#
The Company’s 2022 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.9 to the Company’s Form 8-K filed on February 10, 2022 with the SEC).
10.10#
Form of Stock Option Award Agreement under the Company’s 2022 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.10 to the Company’s Form 8-K filed on February 10, 2022 with the SEC).
10.11#*
Incentive Units Agreement, dated as of September 28, 2018, by and between Authentic Brands LLC and Evan Hafer
10.12#*
Employment Agreement, dated as of January 7, 2019, by and between Black Rifle Coffee Company LLC and Tom Davin.
10.13#*
Restricted Units Agreement, dated as of September 28, 2018, by and between Authentic Brands LLC and Tom Davin.
10.14#*
Employment Agreement, dated as of August 3, 2021, by and between Black Rifle Coffee Company LLC and Toby Johnson.
10.15#*
Restricted Units Agreement, dated as of August 11, 2021, by and between Authentic Brands LLC and Toby Johnson.
10.16#*
Restricted Units Agreement, dated as of September 13, 2021, by and between Authentic Brands LLC and Andrew McCormick.
21.1
List of Subsidiaries of the Company (incorporated by reference to Exhibit 21.1 to the Company’s Form 8-K filed on February 10, 2022 with the SEC).
31.1*
Certification of Co-Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*
Certification of Co-Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.3*
Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*
Certification of Co-Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*
Certification of Co-Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.3*
Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS
Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document.
101.SCH
Inline XBRL Taxonomy Extension Schema Document.
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document.
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101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase.
104
Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101).
* Filed herewith.
#
Indicates a management contract or compensatory plan, contract or arrangement.
†
Schedules and similar attachments to this Exhibit have been omitted pursuant to Item 601(a)(5) of Registration S-K. The Company hereby agrees to furnish a copy of any omitted schedules to the SEC upon request.
Item 16. Form 10-K Summary
None.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
BRC Inc.
By:
/s/ Evan Hafer
Evan Hafer
March 16, 2022
Chief Executive Officer, Chairman
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated as of March 16, 2022.
Signature
Title
/s/ Evan Hafer
Chief Executive Officer
Evan Hafer
(Co-Principal Executive Officer)
/s/ Tom Davin
Co-Cheif Executive Officer
Tom Davin
(Co-Principal Executive Officer)
/s/ Gregory J. Iverson
Chief Financial Officer
Gregory J. Iverson
(Principal Financial Officer and Principal Accounting Officer)
/s/ Katy Dickson
Director
Katy Dickson
/s/ George Munoz
Director
George Munoz
/s/ Roland Smith
Director
Roland Smith
/s/ Steven Taslitz
Director
Steven Taslitz
/s/ Glenn Welling
Director
Glenn Welling
84