The Class A Common Stock has no voting rights, except (1) as required by law, (2) for the election of Class A Directors, and (3) that the approval of the holders of the Class A Common Stock is required for (a) certain future authorizations or issuances of additional securities which have rights senior to Class A Common Stock, (b) certain alterations of rights or terms of the Class A or Class B Common Stock as set forth in the Articles of Organization of the Company, (c) other amendments of the Articles of Organization of the Company, (d) certain mergers or consolidations with, or acquisitions of, other entities, and (e) sales or dispositions of any significant portion of the Company’s assets.

The Class B Common Stock has full voting rights, including the right to (1) elect a majority of the members of the Company’s Board of Directors and (2) approve all (a) amendments to the Company’s Articles of Organization, (b) mergers or consolidations with, or acquisitions of, other entities, (c) sales or dispositions of any significant portion of the Company’s assets, and (d) equity-based and other executive compensation and other significant corporate matters. The Company’s Class B Common Stock is not listed for trading. Each share of Class B Common Stock is freely convertible into one share of Class A Common Stock, upon request of any Class B holder, and participates equally in earnings.

All distributions with respect to the Company’s capital stock are restricted by the Company’s credit agreement, with the exception of distributions of capital stock from subsidiaries to The Boston Beer Company, Inc. and Boston Beer Corporation, repurchase from former employees of non-vested investment shares of Class A Common Stock issued under the Company’s equity incentive plan, redemption of certain shares of Class A Common Stock as approved by the Board of Directors and payment of cash dividends to its holders of common stock.

The Company’s Employee Equity Incentive Plan (the “Equity Plan”) currently provides for the grant of discretionary options, restricted stock awards and restricted stock units to employees, and provides for shares to be sold to employees of the Company at a discounted purchase price under its investment share program. The Equity Plan is administered by the Board of Directors of the Company, based on recommendations received from the Compensation Committee of the Board of Directors. The Compensation Committee consists of three independent directors. In determining the quantities and types of awards for grant, the Compensation Committee periodically reviews the objectives of the Company’s compensation system and takes into account the position and responsibilities of the employee being considered, the nature and value to the Company of his or her service and accomplishments, his or her present and potential contributions to the success of the Company, the value of the type of awards to the employee and such other factors as the Compensation Committee deems relevant.

Stock options and related vesting requirements and terms are granted at the Board of Directors’ discretion, but generally vest ratably over three to five-year periods and, with respect to certain options granted to members of senior management, based on the Company’s performance. Generally, the maximum contractual term of stock options is ten years, although the Board of Directors may grant options that exceed the ten-year term. During fiscal years 2021, 2020, and 2019, the Company granted options to purchase 18,998 shares, 21,992 shares, 26,507 shares, respectively, of its Class A Common Stock to employees at market value on the grant dates. Of the total 2021 stock option grants, 10,935 are service-based and vest ratably over a service period of 3 years and 8,063 are performance-based.

During fiscal years 2021, 2020, and 2019, the Company granted 12,867 shares, 33,403 shares, and 22,509 shares, respectively, of restricted stock units to certain senior managers and key employees. All of the 2021 restricted stock unit grants are service-based and vest ratably over service periods of three to five years.

The Equity Plan also has an investment share program which permits employees who have been with the Company for at least one year to purchase shares of Class A Common Stock at a discount from current market value of 0% to 40%, based on the employee’s tenure with the Company. Investment shares vest ratably over service periods of five years. Participants may pay for these shares either up front or through payroll deductions over an eleven-month period during the year of purchase. During fiscal years 2021, 2020, and 2019, employees elected to purchase an aggregate of 4,954 investment shares, 9,127 investment shares, and 7,901 investment shares, respectively.

The Company has reserved 6.7 million shares of Class A Common Stock for issuance pursuant to the Equity Plan, of which 1.0 million shares were available for grant as of December 25, 2021. Shares reserved for issuance under cancelled employee stock options and forfeited restricted stock are returned to the reserve under the Equity Plan for future grants or purchases. The Company also purchases unvested investment shares from employees who have left the Company at the lesser of (i) the price paid for the shares when the employee acquired the shares or (ii) the fair market value of the shares as of the date next preceding the date on which the shares are called for redemption by the Company. These shares are also returned to the reserve under the Equity Plan for future grants or purchases.

The Company has a stock option plan for non-employee directors of the Company (the “Non-Employee Director Plan”), pursuant to which each non-employee director of the Company is granted an option to purchase shares of the Company’s Class A Common Stock upon election or re-election to the Board of Directors. Stock options issued to non-employee directors vest upon grant and have a maximum contractual term of ten years. During fiscal years 2021, 2020, and 2019 the Company granted options to purchase an aggregate of 1,422 shares, 4,410 shares, and 4,779 shares of the Company’s Class A Common Stock to non-employee directors, respectively.

The Company has reserved 0.6 million shares of Class A Common Stock for issuance pursuant to the Non-Employee Director Plan, of which 0.1 million shares were available for grant as of December 25, 2021. Shares under any cancelled non-employee directors’ stock options or options that expire unexercised are returned to the reserve under the Non-Employee Director Plan for future grants.

Information related to stock options under the Equity Plan and the Non-Employee Director Plan is summarized as follows:


	Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term in Years		Aggregate Intrinsic Value (in thousands)
Outstanding at December 26, 2020		241,847		$	228.58
Granted		20,420			1,031.01
Exercised		(40,913	)		186.52
Outstanding at December 25, 2021		221,354		$	310.38		5.53	$	54,048
Exercisable at December 25, 2021		98,390		$	228.66		4.78	$	28,199
Vested and expected to vest at December 25, 2021		205,369		$	305.29		5.48	$	50,688

Of the total options outstanding at December 25, 2021, 8,057 shares were performance-based options for which the performance criteria had yet to be achieved and 21,992 shares were performance-based options for which the performance criteria had been met but yet to be approved for vesting by the Board of Directors.

On March 1, 2021, the Company granted its Chief Executive Officer a service-based stock option to purchase 10,935 shares of the Company’s Class A Common stock with a weighted average fair value of $457.25 and exercise price of $1,028.71 per share, which vests through 2026. The Chief Executive Officer was also granted 4,861 restricted stock units with a weighted-average fair value of $1,028.71 per share with service-based vesting through 2026.

The following table provides information regarding stock-based compensation expense included in operating expenses in the accompanying consolidated statements of comprehensive income:


	2021		2020		2019
	(in thousands)
Amounts included in advertising, promotional and selling expenses	$	5,612	$	4,467	$	3,996
Amounts included in general and administrative expenses		13,003		10,815		8,341
Total stock-based compensation expense	$	18,615	$	15,282	$	12,337
Amounts related to performance-based stock awards included in total stock-based compensation expense	$	3,384	$	2,771	$	1,944

As permitted by ASC 718, the Company uses a lattice model, such as the trinomial option-pricing model, to estimate the fair values of stock options. The Company believes that the Black-Scholes option-pricing model is less effective than the trinomial option-pricing model in valuing long-term options, as it assumes that volatility and interest rates are constant over the life of the option. In addition, the Company believes that the trinomial option-pricing model more accurately reflects the fair value of its stock awards, as it takes into account historical employee exercise patterns based on changes in the Company’s stock price and other relevant variables. The weighted-average fair value of stock options granted in fiscal years 2021, 2020, and 2019 was $456.28, $153.31, and $131.91 per share, respectively, as calculated using a trinomial option-pricing model.

Weighted average assumptions used to estimate fair values of stock options on the date of grants are as follows:


	2021			2020			2019
Expected volatility		36.1	%		32.6	%		32.1	%
Risk-free interest rate		1.45	%		1.09	%		2.63	%
Expected dividends		0	%		0	%		0	%
Exercise factor	2.6 times			2.1 times			2.33 times
Discount for post-vesting restrictions		0.0	%		0.0	%		0.0	%

Expected volatility is based on the Company’s historical realized volatility. The risk-free interest rate represents the implied yields available from the U.S. Treasury zero-coupon yield curve over the contractual term of the option when using the trinomial option-pricing model. Expected dividend yield is 0% because the Company has not paid dividends in the past and currently has no known intention to do so in the future. Exercise factor and discount for post-vesting restrictions are based on the Company’s historical experience.

Fair value of restricted stock awards is based on the Company’s traded stock price on the date of the grants. Fair value of investment shares is calculated using the trinomial option-pricing model.

The Company uses the straight-line attribution method in recognizing stock-based compensation expense for awards that vest based on service conditions. For awards that vest subject to performance conditions, compensation expense is recognized ratably for each tranche of the award over the performance period if it is probable that performance conditions will be met.

The Company recognizes compensation expense, less estimated forfeitures of 13.0%. The forfeiture rate is based upon historical experience and the Company periodically reviews this rate to ensure proper projection of future forfeitures.

The total fair value of options vested during fiscal years 2021, 2020, and 2019 was $6.3 million, $4.8 million, and $2.5 million, respectively. The aggregate intrinsic value of stock options exercised during fiscal years 2021, 2020, and 2019 was $28.9 million, $45.9 million, and $20.9 million, respectively.

Based on equity awards outstanding as of December 25, 2021, there is $31.0 million of unrecognized compensation costs, net of estimated forfeitures, related to unvested share-based compensation arrangements that are expected to vest. Such costs are expected to be recognized over a weighted-average period of 2.0 years.

The following table summarizes vesting activities of shares issued under the investment share program and restricted stock awards:


	Number of Shares			Weighted Average Fair Value
Non-vested at December 26, 2020		114,316		$	263.47
Granted		17,821			877.10
Vested		(42,038	)		227.40
Forfeited		(1,251	)		458.28
Non-vested at December 25, 2021		88,848		$	401.70

42,038 shares vested in 2021 with a weighted average fair value of $227.40, 45,860 shares vested in 2020 with a weighted average fair value of $214.23, and 33,205 shares vested in 2019 with a weighted average fair value of $188.63.

In 1998, the Board of Directors authorized management to implement a stock repurchase program. As of December 25, 2021, the Company has repurchased a cumulative total of approximately 13.8 million. There were no stock repurchases during fiscal years 2021, 2020 or 2019.

On May 8, 2019, the Company entered into definitive agreements to acquire through the acquisition of all of the equity interests held by certain private entities in Off-Centered Way LLC, the parent holding company of the Dogfish Head operations (the "Dogfish Head Transaction"). The Dogfish Head Transaction closed on July 3, 2019, for total consideration of $336.0 million consisting of $173.0 million in cash and 429,291 shares of restricted Class A Common Stock that had an aggregate market value as of July 3, 2019 of $163.0 million, after taking into account a post-closing cash related adjustment. As required under the definitive agreements, 127,146 of the 429,291 shares of restricted Class A Stock have been placed in escrow and will be released no later than July 3, 2029. These shares had a market value on July 3, 2019 of $48.3 million. The timing of the release of these escrowed shares is primarily related to the continued employment with the Company of Samuel A. Calagione III, one of the two Dogfish Head founders.