Exhibit 10.7

 

EMPLOYMENT AND SEVERANCE AGREEMENT – AMENDMENT NO. 2

 

THIS EMPLOYMENT AND SEVERANCE AGREEMENT – AMENDMENT NO. 2 (this “Agreement”) is
made and entered into effective October 5, 2009, by and between Granite City
Food and Brewery Ltd. (the “Company”) and Darius H. Gilanfar (“Executive”).

 

RECITALS

 

A.                                   Executive is employed by the Company
pursuant to an employment agreement made and entered into December 2, 2008 and
pursuant to amendments thereto (the “Employment Agreement”).  Pursuant to such
Employment Agreement, Executive is currently employed on an at-will basis and
subject to additional provision of the Employment Agreement.

 

B.                                     The Company proposes to enter into a debt
conversion transaction (the “Transaction”) with DHW Leasing L.L.C. (“DHW”)
pursuant to which DHW will be issued common stock of the Company in exchange for
the conversion of certain indebtedness, and DHW will thereupon become the
majority shareholder of the Company.

 

C.                                     It is contemplated that Executive will
continue in the employ of the Company following the Transaction and the Company
desires to secure the services of Executive following the Transaction.

 

D.                                    It is desirable to amend the Employment
Agreement to provide for the term of Executive’s employment and to confirm
certain severance arrangements in connection therewith.

 

NOW, THEREFORE, in consideration of the premises, the parties hereto agree as
follows:

 

1.             Defined Terms.  All capitalized terms not otherwise defined
herein shall have the meanings ascribed to them in the Employment Agreement.

 

2.             Section 1.01 of the Employment Agreement is hereby amended and
restated to read as follows:

 

1.01         The Company agrees to employ Executive as a full-time employee. 
Executive’s employment pursuant to this Agreement shall continue for a term
ending one year following the closing of the debt conversion transaction (the
“Transaction”) by and between the Company and DHW Leasing L.L.C. (“DHW”)
pursuant to which DHW will be issued common stock of the Company in exchange for
the conversion of certain indebtedness, and DHW will thereupon become the
majority shareholder of the Company (the “Termination Date”).  The term of the
Executive’s employment shall automatically be extended for successive one-year
periods unless the Company or Executive elects not to extend employment by
giving written notice to the other not less than sixy (60) days prior to the
Termination Date or the end of any extension periods.  If Executive’s employment
continues beyond the Termination Date, it shall continue on an at-will basis
under the remaining terms and conditions of this Agreement, as amended hereby,
and as

 

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the same may be amended from time to time with the consent of the Company and
Executive, except that incentive compensation payable to Executive, if any,
shall be only as fixed by the Company’s Compensation Committee (“Committee”). 
Executive’s base compensation under this Agreement shall continue at Executive’s
current monthly base compensation rate for each month worked and prorated for
any partial month during which employment continues.

 

3.             The Employment Agreement is hereby amended to add Section 1.09 as
follows:

 

1.09         Executive agrees that any and all bonuses or equity compensation
awards paid, awarded or vested after September 21, 2009, shall be subject to the
Board of Director’s Policy on the Recoupment of Bonuses and Incentive or Equity
Based Compensation Related to Certain Financial Restatements dated September 21,
2009, and that such policy is hereby deemed to be incorporated by reference into
this Agreement.  Executive further agrees that Company may, to the extent
permitted by applicable law, require the Executive to reimburse the Company for
any and all bonuses or equity compensation awards, severance payments provided
for under Section 3 of this Agreement and base salary payments provided for
under Section 2.04 of this Agreement that are paid, awarded or vested after
September 21, 2009, in the event of a material breach by Executive of his
obligations under Sections 4 or 5 of this Agreement.  In the event Executive
fails to make prompt reimbursement of any such bonuses or equity compensation,
severance payments or base salary payments previously paid, awarded or vested,
the Company may, to the extent permitted by applicable law, deduct the amount
required to be reimbursed from Executive’s compensation otherwise due under this
Agreement.  The obligations contained in this Section 1.09 shall survive the
termination of this Agreement indefinitely.

 

4.             Section 2.04 of the Employment Agreement is hereby amended and
restated as follows:

 

2.04         In the event the employment of Executive is terminated prior to the
Termination Date by the Company without Cause (and other than as outlined in
Sections 2.01 and 2.02) or by the Executive with Good Reason as defined in
Section 3.10, the Company will pay Executive the remainder of Executive’s Base
Salary due through the Termination Date.  Such payments will be made on a
monthly basis commencing with the first month following the Executive’s
termination.  Such payments shall be in addition to any payment which shall be
due Executive pursuant to Section 3.01 as amended; shall not be deemed to be
“cash severance-type benefits” under Section 3.01; and shall not reduce amounts
to which Executive is entitled upon a termination under Section 3 
Notwithstanding the above, if the Executive terminates employment due to
Section 3.10(d), payment shall be delayed for six (6) months and the delayed
payments will be paid in a lump sum without interest the first month following
such six month delay.

 

5.             Section 3.01 of the Employment Agreement is hereby amended and
restated to read as follows:

 

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3.01         The Company, its successors or assigns, will pay Executive as
severance pay a lump sum (the “Severance Payment”) amount equal to twelve (12)
months of the Executive’s monthly Base Salary for full-time employment at the
time of Executive’s termination:

 

(a)           if (i) there has been a Change of Control of the Company (as
defined in Section 3.02), and (ii) Executive is an active and full-time employee
at the time of the Change of Control, and (iii) within twelve (12) months
following the date of the Change of Control, Executive’s employment is
involuntarily terminated for any reason (including Good Reason (as definition
Section 3.10)), other than for Cause or death or disability.  If prior to a
Change of Control (a) Executive’s employment is involuntarily terminated by the
Company without Cause or (b) Executive terminates his employment for Good
Reason, and such termination for Good Reason (x) occurred at the request of a
person who indicated an intention, or taken steps reasonably calculated, to
effect a Change of Control or (y) otherwise occurred in connection with, or in
anticipation of, a Change of Control which actually occurs, then the termination
of Executive’s employment shall be deemed to have occurred immediately following
a Change of Control; or

 

(b)           if the employment of Executive is terminated by the Company
without Cause at any time, or the Executive terminates his employment for “Good
Reason” at any time.  For the purposes of this section (3.01(b)) such
termination may occur before, on, or after the Termination Date and “Good
Reason” shall be as defined in Section 3.10, except that no “Change of Control”
need occur; or

 

(c)           if (i) a Change in Control (as defined in Section 3.02) occurred
prior to Executive commencing his employment with the Company, and (ii) at the
time of the Change in Control Executive had accepted employment with the Company
as indicated by his execution of this Agreement and as a result he was no longer
employed by his previous employer, and (iii) the Company decided to not commence
Executive’s employment as a result of the Change in Control.

 

Nothing in this Subsection 3.01 shall limit the authority of the Committee or
Board to terminate Executive’s employment in accordance with Section 2.03. 
Payment of the Severance Payment pursuant to Section 3.01, less customary
withholdings, shall be made in one lump sum within thirty (30) days of the
Executive’s termination or resignation; however, such payments will be delayed
for six (6) months if the Executive terminates employment due to
Section 3.10(d).  In addition, the Severance Payment shall be reduced by the
amount of cash severance-type benefits to which Executive may be entitled
pursuant to any other cash severance plan, agreement, policy or program of the
Company or any of its subsidiaries; including any payment for post-employment
restrictions, provided, however, that if the amount of cash severance benefits
payable under such other severance plan, agreement, policy or program is greater
than the Severance Payment payable pursuant to this Agreement, Executive will be
entitled to receive the amounts payable under such other plan, agreement, policy
or program which exceeds the Severance Payment.  Without limiting other payments
which would not constitute “cash severance-type benefits” hereunder, any cash
settlement of stock options,

 

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accelerated vesting of stock options and retirement, pension and other similar
benefits shall not constitute “cash severance-type benefits” for purposes of
this Section 3.01.

 

6.             The Employment Agreement is hereby amended to add Section 3.09 as
follows:

 

3.09         If the Company is obligated to pay the severance payment provided
in Section 3.01, and if Executive timely elects to continue his group health and
dental insurance coverage pursuant to applicable COBRA/continuation law and the
terms of the respective benefit plans, the Company shall pay on Executive’s
behalf the premiums for such coverage for the lesser of twelve (12) months or
such time as Executive’s COBRA/continuation rights expire; and cause the
immediate vesting of any unvested stock options then held by Executive.

 

7.             The Employment Agreement is hereby amended to add Section 3.10 as
follows:

 

3.10  “Good Reason” will be deemed to have occurred if, after a Change in
Control:

 

(a)           the Company, its successors or assigns, assigns Executive
position, principal duties, responsibilities, or status materially contrary to
that provided in Sections 1.02 or 1.03 above;

 

(b)           the Company, its successors or assigns, relocates Executive to a
location that is more than fifty (50) miles from the Company’s current
headquarters in Minnesota;

 

(c)           the Company, its successors or assigns, materially reduces
Executive’s base salary contrary to the provisions of section 1.05 hereof or
fails to pay Executive any material compensation or fringe benefits to which the
Executive is entitled within ten (10) business days of the due date; or

 

(d)           a successor company fails or refuses to assume the Company’s
obligations under this Agreement;

 

(e)           the Company, its successors or assigns, breaches any of its
material obligations under this Agreement and does not correct any such breach
within thirty (30) days of receiving notice thereof from Executive.

 

If Executive intends to terminate this Agreement for Good Reason:  (i) he must
give the Company written notice of the facts or events giving rise to Good
Reason at least sixty (60) days prior to such termination, and such notice must
be given within ninety (90) days following the facts or event alleged to give
rise to Good Reason; and (ii) such grounds for Good Reason must continue and not
be remedied for a period of thirty (30) days or more following the Company’s
receipt of such notice.  The failure to give such notice shall be deemed a
waiver of the right to terminate this Agreement for Good Reason based on such
fact or event.

 

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8.             Bonus or Incentive Compensation.  Executive acknowledges that he
has waived and is not entitled to any bonus payments or incentive compensation
through the Company’s 2009 fiscal year.

 

9.             Remainder of Employment Agreement to Continue.  Except as
provided herein, the remainder of the Employment Agreement is not affected by
the foregoing amendments and shall continue in full force and effect.

 

IN WITNESS WHEREAS, the parties have executed this Agreement effective the date
first above written.

 

 

GRANITE CITY FOOD AND BREWERY LTD

 

 

 

 

 

 

 

By:

/s/ Steven J. Wagenheim

 

 

 

 

 

EXECUTIVE

 

 

 

 

 

 

 

By:

/s/ Darius H. Gilanfar

 

 

Darius H. Gilanfar

 

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