Document:

Exhibit
10.1

 

FOUNDERS FOOD & FIRKINS LTD.

 

1997 DIRECTOR STOCK OPTION PLAN

AMENDED AND RESTATED EFFECTIVE SEPTEMBER 26,
2001

 

1.             PURPOSE

 

The purpose of
this Founders Food & Firkins Ltd. 1997 Director Stock Option Plan (the “Plan”)
is to attract and retain the best available individuals to serve as directors
of the Company, to provide additional incentive to such persons and to
encourage continued service by such persons on the Board. 

 

The Company
intends that the options granted hereunder shall not constitute incentive stock
options within the meaning of Section 422 of the Code, as amended.

 

2.             DEFINITIONS

 

As used herein, the following definitions shall apply:

 

(a) “ACT” means the Securities Act of 1933,
as amended.

 

(b) “BOARD” means the Board of Directors of
the Company.

 

(c) “CODE” means the Internal Revenue Code of
1986, as amended, and the rules and regulations promulgated thereunder.

 

(d) “COMMITTEE” means the Committee of the
Board appointed by the Board to administer the Plan pursuant to Section 6.

 

(e) “COMMON STOCK” means the Common Stock,
$.01 par value per share, of the Company.

 

(f) “COMPANY” means Founders Food &
Firkins Ltd., a Minnesota corporation.

 

(g) “CONTINUOUS SERVICE AS A DIRECTOR” means
the absence of any interruption or termination of service as a Director.
Continuous Service as a Director shall not be considered interrupted in the
case of sick leave, military leave or any other leave of absence approved by
the Board or Committee.

 

(h) “DIRECTOR” means a member of the Board.

 

(i) “EMPLOYEE” means any person, including
officers and Directors, employed by the Company or any Parent or Subsidiary of
the Company. The payment of fees to a Director shall not be sufficient in and
of itself to constitute “employment” by the Company.

 

(j) “EXCHANGE ACT” means the Securities
Exchange Act of 1934, as amended.

 

(k) “NON-EMPLOYEE DIRECTOR” means a Director
who is not an Employee, including an officer who is not employed on a full-time
basis by the Company.

 

(l) “OPTION” means a stock option granted
pursuant to the Plan.

 

 

(m) “OPTIONED STOCK” means the Common Stock
subject to an Option.

 

(n) “OPTIONEE” means a Non-Employee Director
who receives an option.

 

(o) “PARENT” means a “parent corporation,”
whether now or hereafter existing, as defined in Section 424(e) of the Code.

 

(p) “PLAN” means this 1997 Director Stock
Option Plan, as amended and restated effective September 26, 2001.

 

(q) “SHARE” means a share of Common Stock, as
adjusted in accordance with Section 12 of the Plan.

 

(r) “SUBSIDIARY” means a “subsidiary
corporation,” whether now or hereafter existing, as defined in Section 424(f)
of the Internal Revenue Code of 1986, as amended.

 

3.             SHARES SUBJECT TO
THE PLAN

 

Subject to the
provisions of Section 12 of the Plan, the maximum aggregate number of Shares
which may be optioned and sold under the Plan is 360,000 shares of Common
Stock. The Shares may be authorized, but unissued, or reacquired Common Stock.

 

If an Option expires or becomes unexercisable for any reason without having
been exercised in full, the unexercised Shares which were subject thereto shall,
unless the Plan has been terminated, become available for future grant under
the Plan. If Shares which were acquired upon exercise of an Option are subsequently
repurchased by the Company, such Shares shall not become available for future
grant under the Plan.

 

4.             AUTOMATIC GRANTS OF
OPTIONS

 

All grants of
Options hereunder shall be automatic and non-discretionary and shall be made
strictly in accordance with the following provisions:

 

(a) No person shall have any discretion to
select which Non-Employee Directors shall be granted Options or to determine
the number of Shares to be covered by Options granted to Non-Employee Directors.

 

(b) Each Non-Employee Director, including
persons who are Non-Employee Directors on the date of adoption of the Plan,
shall be automatically granted an option to purchase 15,000 Shares (the “First Option”)
upon the later to occur of (i) the effective date of the Plan, as determined in
accordance with Section 8 hereof, or (ii) the date on which such person first
becomes a Non-Employee Director, whether through election by the shareholders
of the Company or appointment by the Board to fill a vacancy.

 

(c) After the grant of the First Option, each
Non-Employee Director shall thereafter be automatically granted an Option to purchase
15,000 Shares (each a “Subsequent Option”) on the first and each successive
anniversary of the grant of the First Option.

 

(d) In the event that a grant would cause the
number of Shares subject to outstanding Options to Non-Employee Directors plus
Shares previously purchased upon exercise of Options by Non-Employee Directors to
exceed the maximum aggregate number of Shares which may be optioned and sold
under the Plan, then each such automatic grant shall be for that number of
Shares determined by dividing the total number of Shares remaining available
for grant by the number of Non-Employee Directors on the automatic grant date.
Any further grants shall then be deferred until such time, if any,

 

 

as additional Shares become available for grant under the Plan through action
of the Company’s shareholders to increase the number of Shares which may be
issued under the Plan or through cancellation or expiration of Options
previously granted hereunder.

 

(e) SHAREHOLDER APPROVAL OF THE PLAN SHALL
ALSO CONSTITUTE SHAREHOLDER APPROVAL OF THE OPTIONS WHICH HAVE BEEN GRANTED TO NON-EMPLOYEE
DIRECTORS PURSUANT TO SECTION 4 HEREOF FROM NOVEMBER 26, 1999, THE DATE THE
PLAN WAS LAST AMENDED AND RESTATED, THROUGH SEPTEMBER 26, 2001, THE DATE OF THE
MOST RECENT AMENDMENT AND RESTATEMENT.

 

5.             OPTION TERMS AND
CONDITIONS

 

The terms and conditions of an Option granted hereunder shall be as follows:

 

(a) the term of each Option shall be five (5)
years, subject to Sections 12, 13 and 14 hereof.

 

(b) the First Option shall become exercisable
in full beginning on the later of (i) the first anniversary of the grant of the
Option, or (ii) twelve (12) months after the date on which the Plan is first
approved by the shareholders of the Company in accordance with Rule 16b-3
promulgated under the Exchange Act and each subsequent Option shall become
exercisable in full beginning on the first anniversary of the grant of such
Option, provided in each case that the Non-Employee Director shall have
maintained Continuous Service as a Director throughout such 12-month period.

 

(c) the Option shall be exercisable only
while the Non-Employee Director serves as a Non-Employee Director of the
Company, and for a period of twelve (12) months after ceasing to be a Non-Employee
Director pursuant to Section 10(b) hereof.

 

(d) the exercise price per Share shall be
100% of the fair market value per Share on the date of grant of the Option, as determined
in accordance with Section 9(a) hereof.

 

6.             ADMINISTRATION

 

(a) ADMINISTRATION. Except as otherwise
required herein, the Plan shall be administered by the Board or a Committee.

 

(b) POWERS OF THE BOARD OR COMMITTEE. Subject
to the provisions and restrictions of the Plan, the Board or Committee shall have
the authority, in its discretion: (i) to determine, upon review of relevant
information and in accordance with Section 9(a) hereof, the fair market value
of the Common Stock; (ii) to interpret the Plan; (iii) subject to Section 14
hereof, to amend or modify the Plan, or to prescribe, amend and rescind rules
and regulations relating to the Plan; (iv) to authorize any person to execute
on behalf of the Company any instrument required to effectuate the grant of an
Option hereunder; and (v) to make all other determinations deemed necessary or
advisable for the administration of the Plan. On a case by case basis, the
Board or Committee, in its sole discretion, may: (i) accelerate the schedule of
the time or times when an Option granted under the Plan may be exercised; and
(ii) extend the duration of any Option granted under the Plan.

 

(c) EFFECT OF BOARD OR COMMITTEE DECISION.
All decisions, determinations and interpretations of the Board or Committee
shall be final and binding on all Optionees and any other holders of any
Options granted under the Plan.

 

(d) SUSPENSION OR TERMINATION OF OPTION. If
the Board or Committee reasonably believes that an Optionee has committed an
act of misconduct, it may suspend the Optionee’s right to exercise any Option pending
a determination by the Board or Committee (excluding the Non-

 

 

Employee Director accused of such misconduct). If the Board or Committee
(excluding the Non-Employee Director accused of such misconduct) determines
that an Optionee has committed an act of embezzlement, fraud, dishonesty,
nonpayment of an obligation owed to the Company, breach of fiduciary duty or
deliberate disregard of the Company’s rules resulting in loss, damage or injury
to the Company, or if an Optionee makes an unauthorized disclosure of any
Company trade secret or confidential information, engages in any conduct
constituting unfair competition with respect to the Company, or induces any
party to breach a contract with the Company, neither the Optionee nor the Optionee’s
estate shall be entitled to exercise any Option whatsoever. In making such
determination, the Board or Committee (excluding the Non-Employee Director
accused of such misconduct) shall act fairly and shall give the Optionee an
opportunity to appear and present evidence on the Optionee’s behalf at a
hearing before the Board or Committee.

 

(e) DATE OF GRANT OF OPTIONS. The date of
grant of an Option shall, for all purposes, be the date determined in
accordance with Section 4 hereof, notwithstanding the fact that an Optionee may
not have entered into an option agreement with the Company on such date. Notice
of the grant of an Option shall be given to the Optionee within a reasonable
time after the date of such grant.

 

7.             ELIGIBLE
PARTICIPANTS

 

Options may be
granted only to Non-Employee Directors. All options shall be automatically
granted in accordance with the terms set forth in Section 4 hereof. The Plan
shall not confer upon any Optionee any right with respect to continuation of
service as a Director or nomination to serve as a Director, nor shall it
interfere in any way with any rights which a Director or the Company may have
to terminate such Director’s directorship at any time.

 

8.             TERMINATION OF PLAN

 

The effective
date of this Plan is July 29, 1997, the date upon which it was adopted by the
Board. The Plan shall continue in effect for a term of ten (10) years unless
terminated sooner under Section 14 hereof.

 

9.             FAIR MARKET VALUE
AND FORM OF CONSIDERATION

 

(a) FAIR MARKET VALUE. The fair market value
per share shall be determined as of the date of grant of an Option as follows:

 

(i) if the Common Stock of the Company is
listed or admitted to unlisted trading privileges on a national securities
exchange, the fair market value on any given day shall be the closing sale
price for the Common Stock, or if no sale is made on such day, the closing bid
price for such day on such exchange;

 

(ii) if the Common Stock is not listed or
admitted to unlisted trading privileges on a national securities exchange, the
fair market value on any given day shall be the closing sale price for the
Common Stock as reported on the Nasdaq Stock Market on such day, or if no sale
is made on such day, the closing bid price for such day as entered by a market maker
for the Common Stock;

 

(iii) if the Common Stock is not listed on a
national securities exchange, is not admitted to unlisted trading privileges on
any such exchange, and is not eligible for inclusion on the Nasdaq Stock
Market, the fair market value on any given day shall be the average of the
closing representative bid and ask prices as reported by the National Quotation
Bureau, Inc. or, if the Common Stock is not quoted on the National Association
of Securities Dealers Automated Quotations System, then as reported in any
publicly available compilation of the

 

 

bid and asked prices of the Common Stock in any over-the-counter market
on which the Common Stock is traded; or

 

(iv) if there exists no public trading market
for the Common Stock, the fair market value on any given day shall be an amount
determined in good faith by the Board in such manner as it may reasonably
determine in its discretion, provided that such amount shall not be less than
the book value per share as reasonably determined by the Board as of the date
of determination nor less than the par value of the Common Stock.

 

(b) FORM OF CONSIDERATION. The consideration
to be paid for the Shares to be issued upon exercise of an Option shall consist
entirely of cash or such other form of consideration as the Board or Committee may
determine, in its sole discretion, to be appropriate for payment, including but
not limited to other shares of Common Stock having a fair market value on the
date of surrender equal to the aggregate exercise price of the Shares as to
which the Option is exercised, or any combination of such methods of payment.

 

10.           EXERCISE OF OPTIONS

 

(a) PROCEDURE FOR EXERCISE; RIGHTS AS A
SHAREHOLDER. Any Option granted hereunder shall be exercisable at such times as
are set forth in Section 5 hereof. An Option may not be exercised for a fraction
of a Share.

 

An Option shall be deemed to be exercised
when written notice of such exercise has been given to the Company in
accordance with the terms of the Option by the person entitled to exercise the
Option and full payment for the Shares with respect to which the Option may be exercised
has been received by the Company. Full payment may consist of any consideration
and method of payment allowable under Section 9(b) hereof. Until the issuance
(as evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company) of the stock certificate evidencing
such Shares, no right to vote or receive dividends or any other rights as a
shareholder shall exist with respect to the Optioned Stock, notwithstanding the
exercise of the Option. A certificate for the number of Shares so acquired
shall be issued to the Optionee as soon as practicable after exercise of the Option.
No adjustment will be made for a dividend or other right for which the record
date is prior to the date the certificate is issued, except as provided in
Section 12 hereof.

 

Exercise of an Option in any manner shall
result in a decrease in the number of Shares which thereafter may be available,
both for purposes of the Plan and for sale under the Option, by the number of Shares
as to which the Option was exercised.

 

(b) TERMINATION OF STATUS AS A DIRECTOR. If
an Optionee ceases to serve as a Director, the Optionee may, but only within
twelve (12) months after the date the Optionee ceases to be a Non-Employee
Director of the Company, exercise his or her Option to the extent the Optionee was
entitled to exercise it at the date of such termination. To the extent that the
Optionee was not entitled to exercise an Option at the date of such
termination, or if the Optionee does not exercise such Option within the time
specified herein, the Option shall terminate.

 

(c) DEATH OF OPTIONEE. In the event of the
death of an Optionee occurring:

 

(i) during the term of the Option, and provided
that the Optionee was at the time of death a Director of the Company and had
been in Continuous Service as a Director since the date of grant of the Option,
the Option may be exercised, at any time within twelve (12) months following
the date of death, by the Optionee’s estate or by a person who acquired the
right to exercise the Option by bequest or inheritance, but only to the extent
of the right to

 

 

exercise that would have accrued had the Optionee continued living and
remained in Continuous Service a Director for twelve (12) months after the date
of death; or

 

(ii) within thirty (30) days after the
termination of Continuous Service as a Director, the Option may be exercised, at
any time within six (6) months following the date of death, by the Optionee’s
estate or by a person who acquired the right to exercise the Option by bequest
or inheritance, but only to the extent of the right to exercise that had
accrued at the date of termination of Continuous Service as a Director.

 

11.           TRANSFERABILITY OF OPTIONS

 

Except as
provided by rule adopted by the Committee, (i) no Option may be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent and distribution or pursuant to a qualified domestic
relations order and (ii) an Option may be exercised

during the lifetime of the Optionee only by the Optionee.

 

12.           ADJUSTMENTS UPON
CHANGES IN CAPITALIZATION

 

The number of
Shares of Common Stock covered by each outstanding Option, and the number of Shares
of Common Stock which have been authorized for issuance under the Plan but as
to which Options have not yet been granted or which have been returned to the
Plan upon cancellation or expiration of an Option, as well as the price per
Share of Common Stock covered by each such outstanding Option, shall be
proportionately adjusted for any increase or decrease in the number of issued
and outstanding Shares of Common Stock resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification of the Common
Stock, or any other increase or decrease in the number of issued shares of
Common Stock effected without receipt of consideration by the Company;
provided, however, that conversion of any convertible securities of the Company
shall not be deemed to have been “effected without receipt of consideration.”
Such adjustment shall be made by the Board, whose determination in that respect
shall be final, binding and conclusive. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, or options or rights to purchase
shares of stock of any class shall affect, and no adjustment by reason thereof
shall be made with respect to, the number or

price of shares of Common Stock subject to an Option.

 

13.           CHANGE IN CONTROL
PROVISIONS

 

(a) Notwithstanding any other provision of
the Plan to the contrary, in the event of a Change in Control (as defined in
Section 13(b)), any Options outstanding as of the date such Change in Control is
determined to have occurred and not then exercisable and vested shall become
fully exercisable and vested in the fullest extent of the original grant.

 

(b) For purposes of the Plan, a “Change in
Control” means the happening of any of the following events:

 

(i) The acquisition by any individual, entity
or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange
Act (collectively, a “Person”) of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of thirty percent (30%) or more
of either (1) the then outstanding shares of Common Stock of the Company or (2)
the combined voting power of the then outstanding voting securities of the
Company entitled to vote generally in the election of directors; provided,
however, that the following acquisitions shall not constitute a Change in Control:
(A) any acquisition directly from the Company; (B) any acquisition by the
Company; (C) any acquisition by a Person including the participant or with whom
or with which the participant is affiliated; (D) any acquisition by a Person or
Persons, one or more of which is a member of the Board or an

 

 

officer of the Company or an affiliate of any of the foregoing on the
effective date of the Change in Control, (E) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company; or (F) any acquisition by any corporation
pursuant to a transaction described in clauses (1), (2) and (3) of paragraph
(iii) of this Section 13(b); or

 

(ii) During any period of twenty-four (24) consecutive
months, individuals who, as of the beginning of such period, constituted the
entire Board cease for any reason to constitute at least a majority of the
Board, unless the election, or nomination for election, by the Company’s shareholders
of each new director was approved by a vote of at least two-thirds (2/3rds) of
the Continuing Directors, as hereinafter defined, in office on the date of such
election or nomination for election for the new director. For purposes hereof, “Continuing
Director” means:

 

(a) any member of the Board at the close of business
on the effective date of the Change in Control; or

 

(b) any member of the Board who succeeded any
Continuing Director described in clause (a) above if such successor’s election,
or nomination for election, by the Company’s shareholders, was approved by a
vote of at least two-thirds (2/3rds) of the Continuing Directors then still in
office. The term “Continuing Director” shall not, however, include any individual
whose initial assumption to office occurs as a result of either an actual or
threatened election contest (as such term is used in Rule 14a-11 of Regulation
14A of the Exchange Act) or other actual or threatened solicitation of proxies
or consents by or on behalf of a person other than the Board.

 

(iii) Approval by the shareholders of the
Company of a reorganization, merger or consolidation, in each case, unless,
following such reorganization, merger or consolidation, (1) more than sixty
percent (60%) of the then outstanding securities having the right to vote in
the election of directors of the corporation resulting from such reorganization,
merger or consolidation is then beneficially owned, directly or indirectly, by
all or substantially all of the individuals and entities who were the
beneficial owners of the outstanding securities having the right to vote in the
election of Directors of the Company immediately prior to such reorganization,
merger or consolidation, (2) no Person (excluding the Company, any employee
benefit plan (or related trust) of the Company or such corporation resulting
from such reorganization, merger or consolidation and any Person beneficially
owning, immediately prior to such reorganization, merger or consolidation,
directly or indirectly, thirty percent (30%) or more of the then outstanding
securities having the right to vote in the election of Directors of the Company)
beneficially owns, directly or indirectly, thirty percent (30%) or more of the
then outstanding securities having the right to vote in the election of the
directors of the corporation resulting from such reorganization, merger or consolidation,
and (3) at least a majority of the members of the Board of the corporation
resulting from such reorganization, merger or consolidation are Continuing Directors
at the time of the execution of the initial agreement providing for such
reorganization, merger or consolidation; or

 

(iv) Approval by the shareholders of the
Company of (1) a complete liquidation or dissolution of the Company, or (2) the
sale or other disposition of all or substantially all of the assets of the
Company, other than to a corporation, with respect to which following such sale
or other disposition, (A) more than sixty percent (60%) of the then outstanding
securities having the right to vote in the election of directors of such
corporation is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the beneficial
owners of the outstanding securities having the right to vote in the

 

 

election of Directors of the Company immediately prior to such sale or
other disposition of such outstanding securities, (B) no Person (excluding the
Company and any employee benefit plan (or related trust) of the Company or such
corporation and any Person beneficially owning, immediately prior to such sale
or other disposition, directly or indirectly, thirty percent (30%) or more of
the outstanding securities having the right to vote in the election of
Directors of the Company) beneficially owns, directly or indirectly, thirty
percent (30%) or more of the then outstanding securities having the right to
vote in the election of directors of such corporation and (C) at least a
majority of the members of the board of directors of such corporation are
Continuing Directors at the time of the execution of the initial agreement or
action of the Board providing for such sale or other disposition of assets of
the Company.

 

14.           AMENDMENT AND
TERMINATION OF THE PLAN

 

The Board may
at any time amend, modify or terminate the Plan as it deems proper and in the
best interests of the Company; provided, however, that no amendment or
modification may provide that an Option may be granted after the

Plan is terminated.

 

If any
amendment to the Plan requires approval by the shareholders of the Company for
continued applicability of Rule 16b-3 promulgated under the Exchange Act, or
for initial or continued listing of the Common Stock or other securities of the
Company upon any stock exchange or NASDAQ, then such amendment shall be
approved by the holders of a majority of the Company’s COMMON STOCK PRESENT IN
PERSON OR REPRESENTED BY PROXY AT THE MEETING DURING WHICH SHAREHOLDER APPROVAL
OF THE AMENDMENT IS SOUGHT.

 

15.           CONDITIONS UPON
ISSUANCE OF SHARES

 

Shares shall
not be issued pursuant to the exercise of an Option unless the exercise of such
Option and the issuance and delivery of such Shares pursuant thereto shall
comply with all relevant provisions of law, including, without limitation, the
Act, the Exchange Act, the rules and regulations promulgated thereunder, state
securities laws, and the requirements of the NASD or any stock exchange upon
which the Shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such

compliance.

 

As a condition
to the exercise of an Option, the Company may require the person exercising
such Option to represent and warrant at the time of any such exercise that the
Shares are being purchased only for investment and without any present
intention to sell or distribute such Shares, if, in the opinion of counsel for
the Company, such a representation is required by any of the aforementioned
relevant provisions of law. Such Shares may also be issued with appropriate
legends on stock certificates representing such Shares, and the Company may
place stop transfer orders with respect to such Shares.

 

Inability of
the Company to obtain authority from any regulatory body having jurisdiction,
which authority is deemed by the Company’s counsel to be necessary to the
lawful issuance and sale of any Shares hereunder, shall relieve the Company of
any liability in respect of the failure to issue or sell such Shares as to
which such requisite authority shall not have been obtained.

 

16.           RESERVATION OF
SHARES

 

The Company,
during the term of this Plan, will at all times reserve and keep available such
number of Shares as shall be sufficient to satisfy the requirements of the
Plan.

 

 

17.           OPTION AGREEMENT

 

Options shall be evidenced by written option agreements in such form as
the Board or Committee shall approve.

 

18.           INFORMATION TO
OPTIONEES

 

The Company shall provide to each Optionee, during the period for which
such Optionee has one or more Options outstanding, copies of all annual reports
and other information which are provided to all shareholders of the Company.

 

 

GRANITE CITY FOOD & BREWERY LTD.

 

AMENDMENT NO. 1

TO

1997 DIRECTOR STOCK OPTION PLAN

 

Pursuant to
the amendment authority retained by the Board of Directors of Granite City Food
& Brewery Ltd. (the “Company”) in Section 14 of the Granite City Food &
Brewery Ltd. 1997 Director Stock Option Plan (the “Plan”) adopted June 29,
1997, and subject to shareholder approval of this Amendment No. 1, the first
sentence of Section 3 of the Plan is hereby amended to read as follows:

 

Subject to the
provisions of Section 12 of the Plan, the maximum aggregate number of Shares
which may be optioned and sold under the Plan is 590,000 shares of Common
Stock.

 

This Amendment
No. 1 shall be effective as of the date approved by the Company’s
shareholders.  But for this change, the
Plan adopted on June 29, 1997, shall remain in full force and effect.

 

IN WITNESS
WHEREOF, an authorized representative of the Company hereby signs and executes
this Amendment No. 1 as of this 30th day of September, 2004.

 

	
   

  	
  GRANITE CITY
  FOOD & BREWERY LTD.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Monica
  A. Underwood

  
	
   

  	
   

  	
  Monica A. Underwood

  
	
   

  	
   

  	
  Interim Chief Financial Officer and

  
	
   

  	
   

  	
  Corporate ControllerExhibit 10.2

 

 

FOUNDERS FOOD & FIRKINS LTD.

 

2002 EQUITY INCENTIVE PLAN

 

SECTION 1

 

DEFINED TERMS

 

In addition to the other
definitions contained herein, the following definitions shall apply:

 

1.1           Award. The term “Award” shall mean any award or
benefit granted in accordance with the terms of the Plan. Awards under the Plan
may be in the form of (i) Stock Options; (ii) Restricted Stock; and/or (iii)
Tax Offset Payments. In addition, any Award may de designated as a “Performance
Award” as described in Section 5. The terms and conditions of the Award shall
be set forth in an “Award Agreement.”

 

1.2           Board. The term “Board” shall mean the Board of
Directors of the Company.

 

1.3           Change in Control. The term “Change in Control” shall mean:

 

(a)           an acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”) of 50% or more of either:

 

(1)           the then outstanding Stock; or

 

(2)           the combined voting power of the Company’s
outstanding voting securities immediately after the merger or acquisition
entitled to vote generally in the election of directors; provided, however,
that the following acquisition shall not constitute a Change of Control:

 

(i)            any acquisition directly from the Company;

 

(ii)           any acquisition by the Company or a
Subsidiary;

 

(iii)          any acquisition by the trustee or other
fiduciary of any employee benefit plan or trust sponsored by the Company or a
Subsidiary; or

 

(iv)          any acquisition by any corporation with
respect to which, following such acquisition, more than 50% of the Stock or
combined voting power of Stock and other voting securities of the Company is
beneficially owned by substantially all of the individuals and entities who
were beneficial owners of Stock and other voting securities of the Company
immediately prior to the acquisition in substantially similar proportions
immediately before and after such acquisition; or

 

(b)           individuals who, as of the Effective Date of
this Plan, constitute the Board (the “Incumbent Board”), cease to constitute at
least a majority of the Board. Individuals nominated by the Incumbent Board and
subsequently elected shall be deemed for this purpose to be members of the
Incumbent Board; or

 

(c)           approval by the shareholders of the Company
of a reorganization, merger, consolidation, liquidation, dissolution, sale or
statutory exchange of Stock which changes the beneficial ownership of Stock and
other voting securities so that after the corporate change the immediately previous
owners of 50% of Stock and other voting securities do not own 50% of the
Company’s Stock and other voting securities either legally or beneficially; or

 

(d)           the sale, transfer or other disposition of
all substantially all of the Company’s assets; or

 

 

(e)           a merger of the Company with another entity
after which the pre-merger shareholders of the Company own less than 50% of the
stock of the surviving corporation.

 

A “Change in Control” shall
not be deemed to occur with respect to a Participant if the acquisition of a
50% or greater interest is by a group that includes the Participant, nor shall
it be deemed to occur if at least 50% of the Stock and other voting securities
owned before the occurrence are beneficially owned subsequent to the occurrence
by a group that includes the Participant.

 

1.4           Code. The term “Code” shall mean the Internal
Revenue Code of 1986, as amended. A reference to any provision of the Code
shall include reference to any successor provision of the Code.

 

1.5           Committee. The term “Committee” shall mean a committee
described in Section 10.

 

1.6           Company. The term “Company” shall mean Founders Food
& Firkins, Ltd.

 

1.7           Covered Shares. The term “Covered Shares” shall mean the
number of shares of Stock that an Eligible Individual may purchase pursuant to
an Option.

 

1.8           Director. The term “Director” shall mean a member of
the Company’s Board.

 

1.9           Eligible Individual. The term “Eligible Individual” shall mean
(a) any common law employee, prospective employee, or officer of the Company,
(b) members of the Company’s Board, (c) consultants and advisors to the
Company, and (d) employees of any Related Company or business partner of the
Company. All Eligible Individuals must be natural persons who provide bona fide
services to the Company or a Related Company. In addition, the services
provided to the Company or Related Company must not be in connection with an
offer or sale of securities in a capital raising transaction and must not
directly or indirectly promote or maintain a market for the Company’s Stock. An
Award may be granted to an Eligible Individual prior to the date the Eligible
Individual performs services for the Company or Related Company, provided that
such Award shall not become vested prior to the date the Eligible Individual first
performs such services.

 

1.10         Exchange Act. The term “Exchange Act” shall mean the
Securities Act of 1934, as amended.

 

1.11         Exercise Price. The term “Exercise Price” shall mean the
exercise price of each Option granted under Section 4 established by the
Committee and determined by any reasonable method established by the Committee
at the time the Option is granted. Options granted pursuant to Section 4 of the
Plan shall not have an Exercise Price of less than 100% of the Fair Market
Value of the Company’s Stock on the date the Option is granted (or, if greater,
the par value of a share of Company Stock). Notwithstanding the foregoing, any
ISO granted to any shareholder owning 10% or more of the Company’s Stock must
be at an option price of at least 110% of the Fair Market Value of the Stock on
the date the Option is granted.

 

1.12         Fair Market Value. The term “Fair Market Value” of a share of
Stock on a given date shall mean the closing price of the share of Stock as
reported on the Nasdaq Stock Market on such date, if the share of Stock is then
quoted on the Nasdaq Stock Market or, if the market is closed on that date, the
closing price of the share of Stock on the previous trading day. If the Stock
is not listed on the Nasdaq Stock Market, Fair Market Value shall be determined
in good faith by the Board or Committee.

 

1.13         Incentive Stock Option. The term “Incentive Stock Option” or “ISO”
shall mean an Option that is intended to satisfy the requirements of Section
422(b) of the Code. ISO grants may be awarded only to employees of the Company.

 

1.14         Non-Employee Director. The term “Non-Employee Director” shall mean
a “non-employee director” as defined in Rule 16b-3(b)(3)(i) of the Exchange
Act.

 

 

1.15         Non-Qualified Stock Option. The term “Non-Qualified Stock Option” or “NSO”
shall mean an Option that is not intended to satisfy the requirements
applicable to an “incentive stock option” described in Section 422(b) of the
Code. NSO grants may be awarded to any Eligible Individual.

 

1.16         Option. The term “Option” or “Stock Option” shall
mean an ISO or NSO granted pursuant to the Plan. The grant of an Option
entitles the Eligible Individual to purchase shares of Stock at an Exercise
Price established by the Committee.

 

1.17         Performance Award. The term “Performance Award” shall mean an
award or grant of shares based upon the achievement of performance objectives,
as contemplated by Section 5.

 

1.18         Plan. The term “Plan” shall mean this 2002 Equity
Incentive Plan.

 

1.19         Related Company. The term “Related Company” shall mean any
corporation other than the Company and any partnership, joint venture or other
entity in which the Company owns, directly or indirectly, at least a 20%
beneficial ownership interest. A Related Company includes a subsidiary of the
Company and an unbroken chain of corporations beginning with the Company if
each of the corporations other than the last corporation in the unbroken chain
owns 50% or more of the voting stock in one of the other corporations in such
chain.

 

1.20         Stock. The term “stock” shall mean shares of common
stock, $0.01 par value, of the Company.

 

1.21         Stock Option Agreement. The term “Stock Option Agreement” or “Agreement”
shall mean any written agreement evidencing the terms and conditions of an ISO
or NSO granted under the Plan. The Agreement shall be subject to the terms and
conditions of the Plan.

 

SECTION 2

 

PURPOSE

 

The Founders Food &
Firkins, Ltd. 2002 Equity Incentive Plan has been established by Founders Food
& Firkins, Ltd. to (i) attract and retain individuals eligible to
participate in the Plan; (ii) motivate Eligible Individuals, by means of
appropriate incentives, to achieve long-range goals; (3) provide incentive
compensation opportunities that are competitive with those of other similar
companies; and (iv) further identify Eligible Individuals’ interests with those
of the Company’s other shareholders through compensation that is based on the
Company’s common stock; and thereby promote the long-term financial interest of
the Company and any Related Company, including the growth in value of the
Company’s equity and enhancement of long-term shareholder return.

 

SECTION 3

 

PARTICIPATION

 

Subject to the terms and
conditions of the Plan, the Committee may determine and designate, from time to
time, Eligible Individuals who will be granted one or more Awards under the
Plan at the Exercise Price. In its sole discretion and without shareholder
approval, the Committee may grant to an Eligible Individual any Award or Awards
permitted under the provisions of the Plan. Awards may be granted as
alternatives to or replacement of Awards outstanding under the Plan, or any
other plan or arrangement of the Company or Related Company (including a plan
or arrangement of a business or entity, all or a portion of which is acquired
by the Company or a Related Company). Only employees are eligible to be granted
Incentive Stock Options.

 

 

SECTION 4

 

STOCK OPTIONS

 

4.1           General. The grant of an Option entitles the Eligible
Individual to purchase shares of Stock at an Exercise Price established by the
Committee. Any Option awarded to Eligible Individuals under this Section 4 may
be either NSOs or ISOs, as determined in the discretion of the Committee. To
the extent that any Stock Option does not qualify as an ISO, it shall
constitute an NSO.

 

4.2           Option Awards. Subject to the following provisions, Options
awarded under the Plan shall be in such form and shall have such terms as the
Committee may determine and specify in a Stock Option Agreement entered into
between the Eligible Individual and the Company.

 

(a)           Exercise of an Option. An Option shall be exercisable in accordance
with such terms and conditions and during such periods as may be established by
the Committee. In no event shall any fraction of a share of Stock be issued
upon the exercise of an Option. An Option must be exercised for at least 100
shares of Stock, or such lesser number of shares of Stock if the remaining
portion of an Option is for fewer than 100 shares of Stock.

 

(b)           Exercise Price. The Exercise Price of an Option granted under
this Section 4 shall be established by the Committee or shall be determined by
a method established by the Committee at the time the Option is granted, except
that the Exercise Price shall not be less than 100% of the Fair Market Value of
the Company’s Stock on the date of the Option is granted (or, if greater, par
value of a share of stock). Notwithstanding the foregoing, any ISO granted to
any shareholder owning 10% or more of the Company’s Stock must be at an option
price of at least 110% of the Fair Market Value of the Stock subject to the
Option.

 

(c)           Payment of Option Exercise
Price. The payment of the
Exercise Price of an Option granted under this Section 4 shall be subject to
the following:

 

(1)           Subject to the following provisions of this
Subsection 4.2(c), the full Exercise Price for shares of Stock purchased upon
the exercise of any Option shall be paid at the time of such exercise or such
other time as approved by the Committee.

 

(2)           Payment of the Exercise Price shall be made
in such manner as the Committee may provide in the Award, which may include
cash (including cash equivalents), tendering of shares of Stock acceptable to
the Committee and either already owned by the Eligible Individual or subject to
Awards hereunder (so-called “cashless” or “immaculate” exercise methods), and
any other manner permitted by law and approved by the Committee, or any
combination of the foregoing. If the Company determines that a Stock Option may
be exercised using shares of Restricted Stock, then unless the Committee
provides otherwise, the shares received upon the exercise of a Stock Option
which are paid for using Restricted Stock shall be restricted in accordance
with the original terms of the Restricted Stock Award. In the case of any
deferred payment arrangement, interest shall be compounded at least annually
and shall be charged at the minimum rate of interest necessary to avoid the
treatment as interest, under any applicable provisions of the Code, of any
amounts other than amounts stated to be interest under the deferred payment
arrangement.

 

(3)           An Eligible Individual may elect to pay the
Exercise Price upon the exercise of an Option by irrevocably authorizing a
third party to sell shares of Stock (or a sufficient portion of the shares)
acquired upon exercise of the Option and remit to the Company a sufficient
portion of the sale proceeds to pay the entire Exercise Price and any tax
withholding resulting from such exercise.

 

(d)           Settlement of Option. Shares of Stock delivered pursuant to the
exercise of an Option shall be subject to such conditions, restrictions and
contingencies as the Committee, in its

 

 

discretion, may establish in
addition to such conditions, restrictions, and contingencies set forth in the
Agreement.

 

(e)           Reload Options. The Committee may grant “reload” options,
pursuant to the terms and conditions established by the Committee and any
applicable requirements of Rule 16b-3 of the Exchange Act (“Rule 16b-3”) or any
other applicable law. The Eligible Individual would be granted a new Option
when the payment of the Exercise Price of a previously granted Option is made
by the delivery of shares of the Company’s Stock owned by the Eligible
Individual pursuant to Section 4.2(c)(2) hereof and/or when shares of the
Company’s Stock are tendered or forfeited as payment of the amount to be
withheld under applicable income tax laws in connection with the exercise of an
Option. The new Option would be an Option to purchase the number of shares not
exceeding the sum of (i) the number of shares of the Company’s Stock provided
as consideration upon the exercise of the previously granted Option to which
such “reload” option relates and (ii) the number of shares of the Company’s
Stock tendered or forfeited as payment of the amount to be withheld under applicable
income tax laws in connection with the exercise of the Option to which such “reload”
option relates. “Reload” options may be granted with respect to Options granted
under this Plan. Such “reload” options shall have a per share exercise price
equal to the Fair Market Value as of the date of grant of the new Option.

 

(f)            Vesting. Eligible Individuals shall vest in all
Options in accordance with the terms and conditions of the Agreement entered
into by and between the Eligible Individual and the Company. The total number
of shares of Stock subject to an Option may, but need not, vest and therefore
become exercisable in periodic installments that may, but need not, be equal.

 

(g)           Option Term. The term of each Option shall be fixed by
the Committee. In the event that the Plan is terminated pursuant to terms and
conditions of Section 11, the Plan shall remain in effect as long as any Awards
under it are outstanding; provided, however, that, to the extent required by
the Code, no ISO may be granted under the Plan on a date that is more than ten
years from the date the Plan is adopted or, if earlier, the date the Plan is
approved by shareholders and, further, no ISO may be exercised after the
expiration of ten years from the date the Award is granted, or, in the case of
options granted to 10% or greater shareholders of the Company, after the
expiration of five years from the date the option is granted.

 

(h)           Termination of Employment. Following the termination of Eligible
Individual’s employment with the Company or a Related Company, the Option shall
be exercisable to the extent determined by the Committee and specified in the
Award Agreement. The Committee may provide different post-termination exercise
provisions with respect to termination of employment for different reasons.

 

(i)            Incentive Stock Options. ISO grants may only be awarded to employees
of the Company, a “parent corporation,” or a “subsidiary corporation” as those
terms are defined in Sections 424(e) and 424(f) of the Code. In order for an
employee to be eligible to receive an ISO grant, the employee must be employed
by the Company, parent corporation, or subsidiary corporation during the period
beginning on the date the Option is granted and ending on the day three months
prior to the date such Option is exercised. Notwithstanding the provisions of
Section 4.2, no ISO shall (i) have an Exercise Price which is less than 100% of
the Fair Market Value of the Stock on the date of the ISO Award, (ii) be
exercisable more than ten (10) years after the ISO is awarded, or (3) be
awarded more than ten (10) years after the Effective Date of this Plan, or, if
earlier, the date the Plan was approved by the shareholders. No ISO awarded to
an employee who owns more than 10% of the total combined voting power of all
classes of Stock of the Company, its “parent corporation” or any “subsidiary
corporation” shall (i) have an Exercise Price of less than 110% of the Fair
Market Value of the Stock on the date of the ISO Award or (ii) be exercisable
more than five (5) years after the date of the ISO Award. Notwithstanding
Section 8.7, no ISO shall be

 

 

transferable other than by
will and the laws of descent and distribution. To the extent that the aggregate
fair market value (determined at the time of grant) of shares of Stock with
respect to ISOs are exercisable for the first time by the employee during any
calendar year, in combination with shares first exercisable under all other
plans of the Company and any Related Company, exceeds $100,000, such Options
shall be treated as NSOs.

 

(j)            Early Exercise. The Option may, but need not, include a
provision whereby the Eligible Individual may elect at any time prior to his or
her termination of employment with the Company to exercise the Option as to any
part or all of the shares of Stock subject to the Option prior to the full
vesting of the Option. Any unvested shares of Stock so purchased may be subject
to a repurchase option in favor of the Company or to any other restrictions the
Committee determines to be appropriate.

 

SECTION 5

 

PERFORMANCE AWARDS

 

The Committee shall have the
right to designate Awards as “Performance Awards.” The Committee may designate
whether any Award being granted to any Participant is intended to be “performance-based
compensation” as that term is used in section 162(m) of the Code. Any such
Awards designated as intended to be “performance-based compensation” shall be
conditioned on the achievement of one or more performance measures, to the
extent required by Code section 162(m). The performance measures that may be
used by the Committee for such Awards shall be based on any one or more of the
following criteria, in each case applied to the Company on a consolidated basis
or to a business unit, as specified by the Committee in an Award Agreement, and
which the Committee may use as an absolute measure, as a measure of improvement
relative to prior performance, or as a measure of comparable performance
relative to a peer group of companies: sales, operating profits, operating
profits before interest expenses and taxes, net earnings, earnings per share,
return on equity, return on assets, return on invested capital, total
shareholder return, cash flow, debt to equity ratio, market share, stock price,
economic value added, and market value added. The terms and conditions of a
Performance Award shall be set forth in an Award Agreement entered into between
the Company and the Eligible Individual, as selected by the Committee. For
Awards under this Section 5 intended to be “performance-based compensation,”
the grant of the Awards and the establishment of the performance measures shall
be made during the period required under Code section 162(m).

 

SECTION 6

 

RESTRICTED STOCK

 

Subject to the following
provisions, the Committee may grant Awards of Restricted Stock to an Eligible
Individual in such form and on such terms and conditions as the Committee may
determine and specify in a Restricted Stock Award Agreement entered into
between the Company and the Eligible Individual:

 

(a)           The Restricted Stock Award shall specify the
number of shares of Restricted Stock to be awarded, the price, if any, to be
paid by the Eligible Individual and the date or dates on which, or the
conditions upon the satisfaction of which, the Restricted Stock will vest. The
grant and/or the vesting of Restricted Stock may be conditioned upon the
completion of a specified period of service with the Company or a Related
Company, upon the attainment of specified performance objectives or upon such
other criteria as the Committee may determine.

 

(b)           Stock certificates representing the
Restricted Stock awarded to an Eligible Individual shall be registered in the
Eligible Individual’s name, but the Committee may direct that such certificates
be held by the Company or its designee on behalf of the Eligible Individual.
Except as may be

 

 

permitted by the Committee,
no share of Restricted Stock may be sold, transferred, assigned, pledged or
otherwise encumbered by an Eligible Individual until such share has vested in
accordance with the terms of the Restricted Stock Award. At the time the
Restricted Stock vests, a certificate for such vested shares shall be delivered
to the Eligible Individual (or his or her designated beneficiary in the event
of death), free from the restrictions imposed thereon except that any
restrictions under federal or state securities laws shall continue to apply.

 

(c)           The Committee may provide that the Eligible
Individual shall have the right to vote or receive dividends on Restricted
Stock. Unless the Committee provides otherwise, Stock received as a dividend
on, or in connection with a stock split of, Restricted Stock shall be subject
to the same restrictions as the Restricted Stock.

 

(d)           Except as may be provided by the Committee,
in the event of an Eligible Individual’s termination of employment or
relationship with the Company prior to all of his or her Restricted Stock
becoming vested, or in the event any conditions to the vesting of Restricted
Stock have not been satisfied prior to any deadline for the satisfaction of
such conditions as set forth in the Restricted Stock Award, the shares of
Restricted Stock which have not vested shall be forfeited, and the Committee
may provide that (i) any purchase price paid by the Eligible Individual be
returned to the Eligible Individual or (ii) a cash payment equal to the
Restricted Stock’s fair market value on the date of forfeiture, if lower, be
paid to the Eligible Individual.

 

(e)           The Committee may waive, in whole or in part,
any or all of the conditions to receipt of, or restrictions with respect to,
any or all of the Eligible Individual’s Restricted Stock.

 

SECTION 7

 

TAX OFFSET PAYMENTS

 

The Committee may provide
for a Tax Offset Payment to be made by the Company to an Eligible Individual
with respect to one or more Awards granted under the Plan. The Tax Offset
Payment shall be in an amount specified by the Committee, which shall not
exceed the amount necessary to pay the federal, state, local and other taxes
payable with respect to the applicable Award, assuming that the Eligible Individual
is taxed at the maximum tax rate applicable to such income. The Tax Offset
Payment shall be paid solely in cash. No Eligible Individual shall be granted a
Tax Offset Payment in any fiscal year with respect to more than the number of
shares of Stock covered by Awards granted to such Eligible Individual in such
fiscal year. The terms and conditions of a Tax Offset Payment Award shall be
set forth in an Award Agreement entered into between the Company and the
Eligible Individual.

 

SECTION 8

 

OPERATION AND ADMINISTRATION

 

8.1           General. The operation and administration of this
Plan, including any Awards granted under this Plan, shall be subject to the
provisions of Section 8.

 

8.2           Effective Date. Subject to the approval of the shareholders
of the Company, the Plan shall be effective as of July 12, 2002 (the “Effective
Date”) provided, however, that to the extent that Awards are granted under the
Plan prior to its approval by the shareholders of the Company, the Awards shall
be subject to the approval of the Plan by the shareholders of the Company. The
Plan shall be unlimited in duration and, in the event of Plan termination,
shall remain in effect as long as any Awards under it are outstanding;
provided, however, that, to the extent required by the Code, no ISO may be
granted under the Plan on a date that is more than ten years from the date the
Plan is adopted or, if earlier, the date the Plan is approved by shareholders
and, further, no ISO may be exercised after the expiration of ten years from
the date the Award is granted, or, in the case of

 

 

options granted to 10% or
greater shareholders of the Company, after the expiration of five years from
the date the option is granted.

 

8.3           Shares Subject to Plan. The shares of Stock for which Awards may be
granted under this Plan shall be subject to the following:

 

(a)           The shares of Stock with respect to which
Awards may be made under the Plan shall be shares currently authorized but
unissued or currently held or subsequently acquired by the Company, including
shares purchased in the open market or in private transactions.

 

(b)           Subject to the following provisions of this
Section 8.3, the maximum aggregate number of shares of Stock that may be issued
and sold under the Plan shall be 600,000 shares. The number of shares of Stock
so reserved for issuance shall be subject to adjustment pursuant to Sections
8.3 (b) and 8.3(d). The shares of Stock may be authorized, but unissued, or
reacquired Stock.

 

(c)           On January 1st of each year, commencing with
year 2003, the aggregate number of shares of Stock that may be awarded under
the Plan shall automatically increase by the greater of (a) 80,000 shares of
Stock or (b) 2.0% of the outstanding shares of Stock on such date.

 

(d)           To the extent an Award terminates without
having been exercised, or shares awarded are forfeited, such shares shall again
be available issue under the Plan. Shares of Stock surrendered in payment of
the Exercise Price and shares of Stock which are withheld in order to satisfy
federal, state or local tax liability, shall not count against the maximum
aggregate number of shares authorized to be issued pursuant to this Plan, and
shall again be available for issuance pursuant to the terms of the Plan.

 

(e)           If the exercise price of any stock option
granted under the Plan is satisfied by tendering shares of Stock to the Company
(by either actual delivery or by attestation), only the number of shares of
Stock issued net of the shares of Stock tendered shall be deemed delivered for
purposes of determining the maximum number of shares of Stock available for
delivery under the Plan.

 

(f)            Options granted hereunder shall be treated as
ISOs under Code Section 422 only to the extent that the aggregate fair market
value (determined at the time of grant) of Shares exercisable for the first
time by the Participant during any calendar year, in combination with shares
first exercisable under all other plans of the Company and its Subsidiaries or
affiliates, does not exceed $100,000, with any options or portions of options
in excess of such limit (according to the order in which they were granted)
being treated as NQOs.

 

(g)           For Awards that are intended to be “performance-based
compensation” (as that term is used for purposes of Code section 162(m)), no
more than 150,000 shares of Stock may be subject to such Awards granted to any
one individual during any one-calendar-year period.

 

(h)           In the event of any merger, reorganization,
consolidation, sale of substantially all assets, recapitalization, stock
dividend, stock split, combination or reverse stock split, spin-off, split-up,
split-off, distribution of assets or other change in corporate structure
affecting the Stock, a substitution or adjustment, as may be determined to be
appropriate by the Committee or the Board in its sole discretion, shall be made
in the aggregate number of shares reserved for issuance under the Plan.
However, no such adjustment shall exceed the aggregate value of any outstanding
Award prior to such substitution or adjustment. The Board or Committee may make
such other adjustments as it deems appropriate.

 

8.4           Securities Laws
Restrictions. Issuance of
shares of Stock or other amounts under the Plan shall be subject to the
following:

 

(a)           If at any time the Committee determines that
the issuance of Stock under the Plan is or may be unlawful under the laws of
any applicable jurisdiction (including, without limitation, the

 

 

requirements of the
Securities Act of 1933), or the applicable requirements of any securities
exchange or similar entity, the right to exercise any Stock Option or receive
any Restricted Stock shall be suspended until the Committee determines that
such issuance is lawful. The Company shall have no obligation to effect any
registration of qualification of the Stock under federal or state laws.

 

(b)           Any person exercising a Stock Option or
receiving Restricted Stock shall make such representations (including
representations to the effect that such person will not dispose of the Stock so
acquired in violation of federal and state securities laws) and furnish such
information as may, in the opinion of counsel for the Company, be appropriate
to permit the Company to issue the Stock in compliance with applicable federal
and state securities laws. The Committee may refuse to permit the exercise of a
Stock Option or issuance of Restricted Stock until such representations and
information have been provided.

 

(c)           The Company may place an appropriate legend
evidencing any transfer restrictions on all shares of Stock issued under the
Plan and may issue stop transfer instructions in respect thereof.

 

(d)           To the extent that the Plan provides for
issuance of stock certificates to reflect the issuance of shares of Stock, the
issuance may be effected on a non-certificated basis, to the extent not
prohibited by applicable law or the applicable rules of any stock exchange.

 

8.5           Tax Withholding. All distributions under the Plan are subject
to withholding of all applicable taxes, and the Committee may condition the
delivery of any shares or other benefits under the Plan on satisfaction of the
applicable withholding obligations. The Committee, in its discretion, and
subject to such requirements as the Committee may impose prior to the
occurrence of such withholding, may permit such withholding obligations to be
satisfied through cash payment by the Participant, through the surrender of
shares of Stock which the Participant already owns, or through the surrender of
shares of Stock to which the Participant is otherwise entitled under the Plan.

 

8.6           Use of Shares. In the discretion of the Committee, a
Participant may be granted any Award permitted under the provisions of the
Plan, and more than one Award may be granted to a Participant. Awards may be
granted as alternatives to or replacement of awards granted or outstanding under
the Plan, or any other plan or arrangement of the Company or a Subsidiary
(including a plan or arrangement of a business or entity, all or a portion of
which is acquired by the Company or a Subsidiary). Subject to the overall
limitation on the number of shares of Stock that may be delivered under the
Plan, the Committee may use available shares of Stock as the form of payment
for compensation, grants or rights earned or due under any other compensation
plans or arrangements of the Company or a Subsidiary, including the plans and
arrangements of the Company or a Subsidiary assumed in business combinations.

 

8.7           Dividends and Dividend
Equivalents. An Award may
provide the Participant with the right to receive dividend payments or dividend
equivalent payments with respect to Stock subject to the Award (both before and
after the Stock subject to the Award is earned, vested, or acquired), which
payments may be either made currently or credited to an account for the
Participant, and may be settled in cash or Stock as determined by the
Committee. Any such settlements, and any such crediting of dividends or
dividend equivalents or reinvestment in shares of Stock, may be subject to such
conditions, restrictions and contingencies as the Committee shall establish, including
the reinvestment of such credited amounts in Stock equivalents.

 

8.8           Payments. Awards may be settled in any of the methods
described in Section 4.2(c). Any Award settlement, including payment deferrals,
may be subject to such conditions, restrictions and contingencies as the
Committee shall determine. The Committee may permit or require the deferral of
any Award payment, subject to such rules and procedures as it may establish,
which may include provisions for the payment or crediting of interest, or
dividend equivalents, including converting such

 

 

credits into deferred Stock
equivalents. Each Related Company shall be liable for payment of cash due under
the Plan with respect to any Eligible Individual to the extent that such
benefits are attributable to the services rendered for that Related Company by
the Eligible Individual. Any disputes relating to liability of a Related
Company for cash payments shall be resolved by the Committee.

 

8.9           Transferability. Except as otherwise provided by the Committee,
Awards under the Plan may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by beneficiary
designation, will or by the laws of descent and distribution. If the Committee
makes an Award transferable, the Award Agreement shall set forth such
additional terms and conditions regarding transferability as the Committee
deems appropriate.

 

8.10         Form and Time of Elections. Unless otherwise specified herein, each
election required or permitted to be made by any Eligible Individual or other
person entitled to benefits under the Plan, and any permitted modification, or
revocation thereof, shall be in writing filed with the Committee at such times,
in such form, and subject to such restrictions and limitations, not inconsistent
with the terms of the Plan, as the Committee shall require.

 

8.11         Agreement With Company. Any Award under the Plan shall be subject to
such terms and conditions, not inconsistent with the Plan, as the Committee
shall, in its sole discretion, prescribe. The terms and conditions of any Award
shall be reflected in an Award Agreement. A copy of the Award Agreement shall
be provided to the Eligible Individual, and the Committee may, but need not
require, the Eligible Individual to sign the Award Agreement.

 

8.12         Action by Company or
Subsidiary. Any action
required or permitted to be taken by the Company or any Subsidiary shall be by
resolution of its Board, or by action of one or more members of the Board
(including a committee of the Board) who are duly authorized to act for the
Board, or (except to the extent prohibited by applicable law or applicable
rules of any stock exchange) by a duly authorized officer of such company.

 

8.13         Limitation of Implied
Rights.

 

(a)           Neither an Eligible Individual nor any other
person shall, by reason of participation in the Plan, acquire any right in or
title to any assets, funds or property of the Company or any Related Company
whatsoever, including, without limitation, any specific funds, assets, or other
property which the Company or any Related Company, in its sole discretion, may
set aside in anticipation of a liability under the Plan. An Eligible Individual
shall have only a contractual right to the Stock or amounts, if any, payable
under the Plan, unsecured by any assets of the Company or any Related Company,
and nothing contained in the Plan shall constitute a guarantee that the assets
of the Company or any Related Company shall be sufficient to pay any benefits
to any Eligible Individual.

 

(b)           This Plan does not constitute a contract of
employment, and selection as a Eligible Individual will not give the Eligible
Individual the right to be retained in the employ of the Company or any Related
Company, nor any right or claim to any future grants or to any benefit under
the Plan, unless such right or claim has specifically accrued under the terms
of the Plan. Except as otherwise provided in the Plan, no Award under the Plan
shall confer upon an Eligible Individual any rights of a shareholder of the
Company prior to the date on which the Eligible Individual fulfills all
conditions for receipt of such rights.

 

8.14         Termination for Cause. If the employment of an Eligible Individual
is terminated by the Company or a Related Company for “cause,” then the
Committee shall have the right to cancel any Options granted to the Eligible
Individual under the Plan. The term “cause” shall mean (1) the Eligible
Individual’s violation of any provision of any non-competition agreement or
confidentiality agreement with the Company; (2) an illegal or negligent action
by the Eligible Individual that materially and adversely affects the Company;
(3) the Eligible Individual’s failure or refusal to perform his/her duties

 

 

(except when prevented by
reason of illness or disability); or (4) conviction of the Eligible Individual
of a felony involving moral turpitude.

 

8.15         Evidence. Evidence required of anyone under the Plan
may be by certificate, affidavit, document or other information which the
person acting on it considers pertinent and reliable, and signed, made or
presented by the proper party or parties.

 

SECTION 9

 

CHANGE IN CONTROL

 

In the event of a Change in
Control, if specifically documented in either a special form of Award Agreement
at the time of grant or amendment to an existing Award Agreement, in each case
on an individual-by-individual basis:

 

(a)           all or a portion (as determined by the
Committee) of outstanding Stock Options awarded to such individual under the
Plan shall become fully exercisable and vested; and

 

(b)           the restrictions applicable to all or a
portion (as determined by the Committee) of any outstanding Restricted Stock
awards under the Plan held by an Eligible Individual shall lapse and such
shares shall be deemed fully vested.

 

Notwithstanding the
foregoing, no acceleration of vesting or termination of restrictions on
Restricted Stock shall occur if (a) all Awards are assumed by a surviving
corporation or its parent or (b) the surviving corporation or its parent
substitutes Awards with substantially the same terms for such Awards. The
Committee shall have the right to cancel Awards in the event of a Change in
Control, provided that in exchange for such cancellation, the Eligible
Individual shall receive a cash payment equal to the Change in Control
consideration less the exercise price of the Awards.

 

SECTION 10

 

COMMITTEE

 

10.1         Administration. The Plan shall be administered by the
Compensation Committee of the Board or such other committee of Directors as the
Board shall designate, which shall consist of not less than two Non-Employee
Directors. The members of the Committee shall be Non-Employee Directors and
shall serve at the pleasure of the Board. To the extent that the Board
determines it to be desirable to qualify Awards granted hereunder as “performance-based
compensation” within the meaning of Section 162(m) of the Code, the Plan shall
be administered by a Committee of two or more “outside directors” within the
meaning of Section 162(m) of the Code. To the extent that the Board determines
it to be desirable to qualify Awards as exempt under Rule 16b-3, the Award
transactions contemplated hereunder shall be structured to satisfy the
requirements for exemption under Rule 16b-3. All determinations made by the
Committee pursuant to the provisions of the Plan shall be final and binding on
all persons, including the Company and Eligible Individuals. The Board may
administer the Plan or exercise any or all of the administration duties of the
Committee at any time when a Committee meeting the requirements of this Section
has not been appointed, and the Board may exempt Awards pursuant to Rule
16b-3(d)(1) of the Exchange Act.

 

10.2         Powers of Committee. The Committee shall have the following
authority with respect to Awards under the Plan: to grant Awards; to adopt,
alter and repeal such administrative rules, guidelines and practices governing
the Plan as it shall deem advisable; to interpret the terms and provisions of
the Plan and any Award granted under the Plan; and to otherwise supervise the

 

 

administration of the Plan.
In particular, and without limiting its authority and powers, the Committee
shall have the authority:

 

(a)           to determine whether and to what extent any
Award or combination of Awards will be granted hereunder;

 

(b)           to select the Eligible Individuals to whom
Awards will be granted;

 

(c)           to determine the number of shares of Stock to
be covered by each Award granted hereunder subject to the limitations contained
herein;

 

(d)           to determine the terms and conditions of any
Award granted hereunder, including, but not limited to, any vesting or other
restrictions based on such performance objectives and such other factors as the
Committee may establish, and to determine whether the performance objectives
and other terms and conditions of the Award are satisfied;

 

(e)           to determine the treatment of Awards upon the
Eligible Individual’s retirement, disability, death, termination for cause or
other termination of employment or service;

 

(f)            to determine that amounts equal to the amount
of any dividends declared with respect to the number of shares covered by an
Award (i) will be paid to the Eligible Individual currently or (ii) will be
deferred and deemed to be reinvested or (3) will otherwise be credited to the
Eligible Individual or that the Eligible Individual has no rights with respect
to such dividends;

 

(g)           to amend the terms of any Award,
prospectively or retroactively; provided, however, that no amendment shall
impair the rights of the Eligible Individual without his or her written
consent; and

 

(h)           to substitute new Stock Options for
previously granted Stock Options, or for options granted under other plans or
agreements, in each case including previously granted options having higher
option prices.

 

Determinations by the
Committee under the Plan relating to the form, amount, and terms and conditions
of Awards need not be uniform, and may be made selectively among Eligible
Individuals who receive Awards under the Plan, whether or not such Eligible
Individuals are similarly situated. The Committee shall have the power to
accelerate the time at which an Award may first be exercised or the time during
which an Award or any part thereof will vest in accordance with the Plan,
notwithstanding any provisions in an Award Agreement stating the time at which
the Award may first be exercised or the time during which the Award will vest.

 

10.3         Delegation by Committee. Except to the extent prohibited by
applicable law or the applicable rules of a stock exchange, the Committee may
allocate all or any portion of its responsibilities and powers to any one or
more of its members and may delegate all or any part of its responsibilities
and powers to any person or persons selected by it. Any such allocation or
delegation may be revoked by the Committee at any time.

 

10.4         Information to be Furnished
to Committee. The Company
and any Related Company shall furnish the Committee with such data and
information as it determines may be required for it to discharge its duties.
The records of the Company and any Related Company as to an Eligible Individual’s
employment, termination of employment, leave of absence, reemployment and
compensation shall be conclusive on all persons unless determined to be
incorrect. Eligible Individuals and other persons entitled to benefits under
the Plan must furnish the Committee such evidence, data or information as the
Committee considers desirable to carry out the terms of the Plan.

 

10.5         Non-Liability of Board and
Committee. No member of the
Board or the Committee, nor any officer or employee of the Company acting on
behalf of the Board or the Committee, shall be personally liable for any
action, determination or interpretation taken or made with respect to the Plan,

 

 

and all members of the Board
or the Committee and all officers or employees of the Company acting on their
behalf shall, to the extent permitted by law, be fully indemnified and
protected by the Company with respect to any such action, determination or
interpretation.

 

SECTION 11

 

AMENDMENT AND TERMINATION

 

The Board may, at any time,
amend or terminate the Plan, provided that no amendment or termination may, in
the absence of written consent to the change by the affected Eligible
Individual (or, if the Eligible Individual is not then living, the affected
beneficiary), adversely affect the rights of any Eligible Individual or
beneficiary under any Award granted under the Plan prior to the date such
amendment is adopted by the Board; provided that adjustments made pursuant to
Subsection 8.3(d) shall not be subject to the foregoing limitations of this
Section 11. An amendment shall be subject to approval by the Company’s
shareholders only to the extent required by applicable laws, regulations or
rules.

 

SECTION 12

 

GENERAL PROVISIONS

 

12.1         Award Agreements. No Eligible Individual will have rights under
an Award granted to such Eligible Individual unless and until an Award
Agreement has been duly executed on behalf of the Company and the Eligible
Individual.

 

12.2         No Limit on Other
Compensation Arrangements.
Nothing contained in the Plan shall prevent the Company or any Related Company
from adopting or continuing in effect other or additional compensation
arrangements, and such arrangements may be either generally applicable or
applicable only in specific cases.

 

12.3         Headings. The headings of the sections and subsections
of this Plan are intended for the convenience of the parties only and shall in
no way be held to explain, modify, construe, limit, amplify or aid in the
interpretation of the provisions hereof.

 

12.4         Beneficiaries. An Eligible Individual may, from time to
time, name any beneficiary or beneficiaries (who may be named contingently or
successively) to whom any benefit under the Plan may be paid or transferred in
case of death. Each designation will revoke all prior designations, shall be in
a form prescribed by the Committee, and will be effective only when filed by
the Eligible Individual in writing with the Committee during his or her
lifetime. In the absence of any such designation, benefits outstanding at the
Eligible Individual’s death shall be paid or transferred to his or her estate.
There shall be no third party beneficiaries of or to this Plan. Any beneficiary
of the Eligible Individual shall have only a claim to such benefits as may be
determined to be payable hereunder, if any, and shall not, under any
circumstances other than the right to claim such benefits, be deemed a third
party beneficiary of or to this Plan.

 

12.5         Repurchase Option. The terms of any repurchase option shall be
specified in the Award Agreement.

 

12.6         Governing Law. The Plan, and all agreements hereunder,
shall be construed in accordance with and governed by the laws of the State of
Minnesota, except to the extent preempted by federal law, without regard to the
principles of comity or the conflicts of law provisions of any jurisdiction.

 

 

GRANITE CITY FOOD & BREWERY LTD.

 

AMENDMENT NO. 1

TO

2002 EQUITY INCENTIVE PLAN

 

Pursuant to
the amendment authority retained by the Board of Directors of Granite City Food
& Brewery Ltd. (the “Company”) in Section 11 of the Granite City Food &
Brewery Ltd. 2002 Equity Incentive Plan (the “Plan”) adopted by the board on
July 12, 2002 and approved by the shareholders on August 27, 2002, and subject
to shareholder approval of this Amendment No. 1, the first sentence of Section
8.3(b) of the Plan is hereby amended to read as follows:

 

Subject to the
following provisions of this Section 8.3, the maximum aggregate number of
shares of Stock that may be issued and sold under the Plan shall be 1,062,287
shares.

 

This Amendment
No. 1 shall be effective as of the date approved by the Company’s
shareholders.  But for this change, the
Plan adopted by the board of July 12, 2002 and approved by the shareholders on
August 27, 2002, shall remain in full force and effect.

 

IN WITNESS
WHEREOF, an authorized representative of the Company hereby signs and executes
this Amendment No. 1 as of this 30th day of September, 2004.

 

	
   

  	
  GRANITE CITY
  FOOD & BREWERY LTD.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Monica
  A. Underwood

  	
   

  
	
   

  	
   

  	
  Monica A. Underwood

  
	
   

  	
   

  	
  Interim Chief Financial Officer and

  
	
   

  	
   

  	
  Corporate Controller

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