**Exhibit10.1**

**EXECUTIVE EMPLOYMENTAGREEMENT**

**THIS EXECUTIVE EMPLOYMENT AGREEMENT** (“Agreement”) is made andentered into August 17, 2005, by and between**Granite City Food & Brewery Ltd.**, a corporation duly organizedand existing under the laws of the State of Minnesota, with a place of businessat 5831 Cedar Lake Road, St. Louis Park, Minnesota 55416 (hereinafter referredto as the “**Company**”), and **Daniel H. Bauer**, a resident of the state ofGeorgia (hereinafter referred to as “**Executive**”).

**BACKGROUNDOF AGREEMENT**

•                                          The Company desires toemploy Executive as its Chief Financial Officer and principal accountingofficer, and Executive desires to accept such employment.

•                                          This Agreement memorializesthe terms and conditions of Executive’s employment.

In consideration of the foregoing, the Company and Executive agree asfollows:

**ARTICLE 1EMPLOYMENT**

1.01  Subject to the terms of Articles 3 and 6, theCompany hereby agrees to employ Executive pursuant to the terms of thisAgreement, and Executive agrees to such employment as its Chief FinancialOfficer and as the Company’s principal accounting officer, and shall continueto hold such title under the terms of this Agreement.  Executive’s primary place of employment shallbe the Company’s executive offices at St. Louis Park, Minnesota.

1.02  Executive shall generally have the authority,responsibilities, and such duties as are customarily performed by the chieffinancial officer and principal accounting officer of a public company ofsimilar size and industry, specifically including, without limitation, thefollowing responsibilities:

(i)            working with senior management ofthe Company and its Board of Directors (the “Board”) in formulating short andlong term goals and developing, implementing, and executing strategies toattain Company objectives;

(ii)           participating as a key member of thesenior management team and as the Chief Executive Officer’s financial advisorin setting and executing on strategies to meet Company objectives;

(iii)          endeavoring to establish and maintaina relationship of trust and credibility with members of the senior managementteam, the Board, its committees, outside auditors and legal counsel;

(iv)          supervising the implementation of theCompany’s policies and business processes in order to meet the corporategovernance and internal control requirements established by the seniormanagement team, the Board and relevant laws, including, but not limitedto:  (A) designing and implementingeffective disclosure controls and procedures that are necessary to insureaccurate financial reporting; (B) conducting periodic reviews and evaluationsof the effectiveness of the Company’s disclosure controls and procedures,including, without limitation, interfacing with the senior management team andother Company personnel, the Board, Audit Committee, outside auditors and legalcounsel to 

 

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insurethe effectiveness of the Company’s disclosure controls and procedures; (C)accurately reporting the results of Company operations and related matters tothe Securities and Exchange Commission, and other regulatory agencies; and (D) acting as a certifying officer ofthe Company’s financial reporting under the Exchange Act and other regulatoryagencies;

(v)           interfacing with thefinancial/investment community;

(vi)          managing and protecting the Company’scapital and liquid assets and monitoring and advising management regarding theavailability of adequate capital at all times;

(vii)         regularly and systematically appraisingand evaluating the Company’s performance results against the Company’sestablished objectives; and

(viii)        consistent with the foregoing, suchother finance functions as the Chief Executive Officer of the Company mayassign to Executive from time to time during his employment period.

Executive shall also rendersuch additional services and duties within the scope of Executive’s experienceand expertise as may be reasonably requested of him from time to time by theBoard.

1.03  Executive shall report to the Board or anycommittee thereof as the Board shall direct, and shall generally be subject todirection, orders and advice of the Board.

**ARTICLE 2BEST EFFORTS OF EXECUTIVE**

2.01  In his capacity as Chief Financial Officer,Executive shall use his best energies and abilities in the performance of hisduties, services and responsibilities for the Company.  As of the date of this Agreement, the Companyis not requiring Executive to relocate his residence to Minnesota.  Executive agrees that on or before December31, 2005, he will relocate his residence to Minnesota.  The Company will pay Executive a relocationpayment in connection with Executive’s move to Minnesota, as set forth on ScheduleA.  Executive will reimburse theCompany for such relocation payment if Executive terminates his employmentwithout Good Reason prior to September 13, 2006.

2.02  During the term of his employment, Executiveshall devote substantially all of his business time and attention to thebusiness of the Company and its subsidiaries and affiliates and shall notengage in any substantial activity inconsistent with the foregoing, whether ornot such activity shall be engaged in for pecuniary gain, unless approved bythe Board; provided, however, that, to the extent such activities do not violate,or substantially interfere with his performance of his duties, services andresponsibilities under this Agreement, Executive shall be permitted to serve oncivic or charitable boards or committees thereof.

2.03  The Company shall grant Executive a nonincentivestock option pursuant to its 2002 Equity Incentive Plan (the “Plan”), topurchase up to 175,000 shares of common stock at an exercise price equal to theCompany’s closing sale price of a share of common stock on the date of grant,which shall be as soon as reasonably practicable after approval of thisAgreement by the Company and Executive, shall have a ten-year term, and shallvest in three installments as follows: (i) 75,000 shares on the date of commencement of employment; (ii) anadditional 50,000 shares on the first anniversary of the date of employment;and (iii) the remaining 50,000 shares on the second anniversary of employment,subject to acceleration upon a change of control as defined under the Company’s2002 Equity Incentive Plan.  The optionwill in all respects be governed under the terms and conditions of the Plan andthe Company’s standard form of non-qualified stock option agreement.

 

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**ARTICLE 3TERM AND NATURE OF EMPLOYMENT**

3.01  Executive’s employment shall commence onSeptember 13, 2005.  Executive’semployment pursuant to this Agreement shall be on an at-will basis, with eitherExecutive or the Company having the right to terminate Executive’s employmentwith or without cause on not less than sixty (60) days’ prior writtennotice.  The terms and conditions of thisAgreement may be amended from time to time with the consent of the Company andExecutive.  All such amendments shall beeffective when memorialized by a written agreement between the Company andExecutive or by resolutions of the Board or the Company’s CompensationCommittee (the ”Committee”).

**ARTICLE 4COMPENSATION AND BENEFITS**

4.01  During the term ofemployment hereunder, Executive shall be paid a base salary at the rate of TwoHundred Fifteen Thousand ($215,000) per year (“Base Salary”), payable inmonthly installments in accordance with the Company’s established pay periods,reduced by all deductions and withholdings required by law and as otherwisespecified by Executive.  Executive’ssalary may be increased (but not decreased), in the sole discretion of theBoard.  In the event Executive’semployment shall, for any reason, terminate during the Term, Executive’s finalmonthly Base Salary payment shall be made on a pro-rated basis as of the lastday of the month in which such employment terminated.

4.02  During the term of employment, in addition topayments of Base Salary set forth above, Executive shall be eligible toparticipate in any performance-based cash bonus or equity award plan for seniorexecutives of the Company based upon achievement of individual and/or Companygoals established with respect to each fiscal year by the Board or Committeeafter reasonable consultation with Executive. The extent of Executive’s participation in bonus plans shall be withinthe discretion of the Company’s Board or Compensation Committee provided,however, that for the fiscal years 2005 and 2006, Executive shall be eligibleto receive an annual cash bonus of up to $75,000 based upon performance targetsthat are established by the Company’s Compensation Committee.  Annual performance metrics that may beestablished by the compensation committee may include, but not be limited to,objective performance criteria such as revenue, IROP, G&A, openingexpenses, operating weeks and EBITDA, as well as achievement of individualperformance goals.  The annual cash bonuswill be pro-rated for 2005 and any partial future fiscal year in whichExecutive’s employment may terminate.

4.03  During the term of employment, Executiveshall be entitled to participate in employee benefit plans, policies, programs,perquisites and arrangements, as the same may be provided and amended from timeto time, that are provided generally to similarly situated executive employeesof the Company, to the extent Executive meets the eligibility requirements forany such plan, policy, program, perquisite or arrangement.

4.04  The Company shall reimburse Executive for allreasonable business expenses incurred by Executive in carrying out Executive’sduties, services, and responsibilities under this Agreement.  Executive shall comply with generallyapplicable policies, practices and procedures of the Company with respect toreimbursement for, and submission of expense reports, receipts or similardocumentation of, such expenses.

 

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**ARTICLE 5VACATION AND LEAVE OF ABSENCE**

5.01  Executive shall be entitledto four (4) weeks of paid vacation per year, in addition to the Company’s normalholidays.  Vacation time will bescheduled taking into account the Executive’s duties and obligations at theCompany.  Unused paid vacation time shallnot accumulate from year to year, unless otherwise approved in writing by theBoard or Committee.  Sick leave and allother leaves of absence will be in accordance with the Company’s statedpersonnel policies.

**ARTICLE6TERMINATION**

6.01  The Company may terminateExecutive’s employment without Cause by giving Executive at least sixty (60)days written notice thereof.  In theevent of such termination (other than a termination due to a Change ofControl), Executive shall be entitled to receive:  (i) his base salary pro-rated as of the dateof termination; (ii) the Severance Payment provided in Section 7.01; and (iii)a pro-rated bonus pursuant to any bonus plan or arrangement established ormutually agreed-upon prior to termination, to the extent earned or performedthrough the date of termination, based upon the requirements or criteria ofsuch bonus plan or arrangement, as the Board shall in good faithdetermine.  Such pro-rated bonus, shallbe payable at the time and in the manner payable to other executives of theCompany who participate in such plan or arrangement.

6.02  Executive’s employment  will be deemed terminated as of the datehereof the death of the Executive.  Inthe event of such termination, there shall be payable to Executive’s estatecompensation earned through the date of death together with a pro-rata portionof any bonus due Executive pursuant to any bonus plan or arrangementestablished or mutually agreed-upon prior to termination, to the extent earnedor performed based upon the requirements or criteria of such plan orarrangement, as the Board shall in good faith determine.  Such pro-rated bonus, shall be payable at thetime and in the manner payable to other executives of the Company whoparticipate in such plan or arrangement.

6.03  Any other provision of this Agreementnotwithstanding, the Company may terminate Executive’s employment upon writtennotice specifying a termination date based on any of the following events thatconstitute Cause:

(a)                                  Any commissionor nolo contendere plea by Executive to a felony, gross misdemeanor ormisdemeanor involving moral turpitude, or any public conduct by Executive thathas or can reasonably be expected to have a detrimental effect on the Company;

(b)                                 Any act ofmaterial misconduct, willful and gross negligence, or breach of duty to theCompany, including, but not limited to, embezzlement, fraud, dishonesty,nonpayment of an obligation owed to the Company, or willful breach of fiduciaryduty to the Company which results in a material loss, damage, or injury to theCompany;

(c)                                  Any materialbreach of any material provision of this Agreement or of the Company’sannounced rules, codes or polices, which remains uncured or uncorrected for aperiod of thirty (30) days following written notice thereof to Executivespecifying such breach;

(d)                                 Any act ofinsubordination by Executive; provided, however, an act of insubordination byExecutive shall not constitute Cause if Executive cures or remedies suchinsubordination within thirty (30) days after written notice to Executive,without material harm or loss to the Company, unless such insubordination is apart of a pattern of chronic insubordination, which may be evidenced by reportsor warning letters given by the Company to Executive, in which case suchinsubordination is deemed not curable.

(e)                                  Anyunauthorized disclosure of any Company trade secret or confidentialinformation, or conduct constituting unfair competition with respect to theCompany, including inducing a party to breach a contract with the Company; or

(f)                                    A willfulviolation of federal or state securities laws.

 

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Theidentification of a significant or material weakness in the Company’s internalcontrol over financial reporting, or an error, inaccuracy or misstatement infinancial statements resulting in a restatement of financial statements shallnot, by itself, constitute Cause, unless the same results from (i) a failure ofExecutive to address recommendations or directives from the Audit Committee orthe Company’s outside auditors; (ii) a chronic failure of Executive to carryout the major duties of his employment or to follow or implement Company’sestablished internal controls over financial reporting; or (iii) a failure onthe part of Executive to communicate material financial information on a timelybasis to the Company’s Audit Committee or outside auditors regarding theCompany’s financial reporting.  In makingsuch determination, the Board shall act in good faith and give Executive areasonably detailed written notice and a reasonable opportunity to be heard onthe issues at a Board or Committee meeting. For purposes of this Agreement, no act or failure by the Executive shallbe considered “willful” if such act is done by Executive in good faith in thebelief that such act is or was lawful and in the best interest of the Companyor one or more of its businesses. Nothing in this paragraph 6.03 shall be construed to prevent Executivefrom contesting the Board or Committee’s determination that Cause exists.  In the event of such termination, and notwithstanding any contrary provision otherwise stated, Executive shall receiveonly his Base Salary earned through the date of termination.

 

6.04  Executive may terminate his employment uponsixty (60) days prior written notice to the Company for “Good Reason.”  For purposes of this Agreement, “Good Reason”means any of the following actions taken by the Company without Cause:

(a)                                  the Company orany of its subsidiaries reduces Executive’s Base Salary or base rate of annualCompensation as in effect immediately prior to the Change of Control, or otherwisefails to provide Executive compensation and benefit plans, arrangements,policies and procedures which, taken as a whole, are materially less favorableto Executive than those, taken as a whole, provided by the Company or any ofits subsidiaries to Executive immediately prior to the Change of Control;

(b)                                 withoutExecutive’s express written consent, the Company or any of its subsidiariessignificantly reduces Executive’s job authority and responsibility as theCompany’s Chief Financial Officer, as conducted on the date preceding a Changeof Control;

(c)                                  withoutExecutive’s express written consent, the Company or any of its subsidiariesrequires Executive to change the location of Executive’s job or office, so thatExecutive will be based at a location more than fifty (50) miles from thelocation of Executive’s job or office immediately prior to the Change ofControl;

(d)                                 a successorcompany fails or refuses to assume the Company’s obligations under thisAgreement;

(e)                                  the Company orany successor company breaches any of the material provisions of thisAgreement; provided, however, that Executive shall provide detailed informationto the Company in such written notice and such grounds for Good Reason are notremedied or continue for a period of thirty (30) days or more following receiptof such notice; or

(f)                                    following aChange of Control (as defined in Section 7.02) Steven J. Wagenheim, if he isthe Chief Executive Officer of the Company immediately preceding the Change ofControl, ceases to be the Chief Executive Officer of the Company within thetwelve-month period following the Change of Control.

IfExecutive intends to terminate this Agreement for Good Reason, Executive mustgive not less than sixty (60) days written notice to the Company of the factsor events giving rise to Good Reason, and must give such notice within ninety(90) days following the facts or event alleged to give rise to GoodReason.  The failure to give such noticeshall be deemed a waiver of the right to terminate this Agreement for GoodReason based on such fact or event.

 

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6.05  During the term of his employment and for 24months after the date of Executive’s termination of employment, (i) Executiveshall not, directly or indirectly, make or publish any disparaging statements(whether written or oral) regarding the Company or any of its affiliatedcompanies or businesses, or the affiliates, directors, officers, agents,principal shareholders or customers of any of them and (ii) neither the Companyor any of its affiliated companies or businesses or their affiliates,directors, or officers shall directly or indirectly, make or publish anydisparaging statements (whether written or oral) regarding Executive.  Information which the Company or Executive is required to make or disclose regardingthe other to comply with laws or regulations, or makes in a pleading on theadvice of litigation counsel, shall not constitute a disparaging statement.

6.06  Upon any termination ofExecutive’s employment with the Company, Executive shall be deemed to haveresigned from all other positions he then holds as an officer, employee ordirector or other independent contactor of the Company or any of itssubsidiaries or affiliates, unless otherwise agreed by the Company andExecutive.

**ARTICLE7SEVERANCE PAYMENTS**

7.01  The Company, its successorsor assigns, will pay Executive as severance pay a lump sum (the “SeverancePayment”) amount equal to twelve (12) months of the Executive’s monthly BaseSalary for full-time employment at the time of Executive’s termination:

(a)                                  if (i) therehas been a Change of Control of the Company (as defined in Section 7.02), and(ii) Executive is an active and full-time employee at the time of the Change ofControl, and (iii) within twelve (12) months following the date of the Changeof Control, Executive employment is involuntarily terminated for any reason(including Good Reason (as definition Section 6.04)), other than for Cause ordeath or disability.  If prior to aChange of Control (a) Executive’s employment is involuntarily terminated by theCompany without cause or (b) Executive voluntarily terminates his employmentfor Good Reason, and such involuntary termination for Good Reason (x) occurredat the request of a person who indicated an intention, or taken stepsreasonably calculated, to effect a Change of Control or (y) otherwise occurredin connection with, or in anticipation of, a Change of Control which actuallyoccurs, then the termination of Executive’s employment shall be deemed to haveoccurred immediately following a Change of Control; or

(b)                                 the employmentof Executive is terminated by the Company without Cause, or by the Executivefor Good Reason.

Nothingin this Subsection 7.01 shall limit the authority of the Committee or Board toterminate Executive’s employment in accordance with Section 6.03.  Payment of the Severance Payment pursuant toSection 7.01, less customary withholdings, shall be made in one lump sum withinthirty (30) days of the Executive’s termination or resignation.

 

7.02  For the purposes of this Agreement, “Changeof Control” shall mean any one of the following:

(a)                        an acquisitionby any individual, entity or group (within the meaning of Section 13(d)(3) or14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)of 50% or more of either:  (1) the thenoutstanding Stock; or (2) the combined voting power of the Company’soutstanding voting securities immediately after the merger or acquisitionentitled 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 theCompany; (ii) any acquisition by the Company or Subsidiary; (iii) anyacquisition by the trustee or other fiduciary of any employee benefit plan ortrust sponsored by the Company or a Subsidiary; or (iv) any acquisition by anycorporation with respect to which, following such acquisition, more than 50% ofthe Stock or 

 

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                                      combined votingpower of Stock and other voting securities of the Company is beneficially ownedby substantially all of the individuals and entities who were beneficial ownersof Stock and other voting securities of the Company immediately prior to theacquisition in substantially similar proportions immediately before and aftersuch acquisition; or

(b)                       individualswho, as of the date of this Agreement, constitute the Board (the ”IncumbentBoard”), cease to constitute a majority of the Board.  Individuals nominated or whose nominationsare approved by the Incumbent Board and subsequently elected shall be deemedfor this purpose to be members of the Incumbent Board; or

(c)                        approval by theshareholders of the Company of a reorganization, merger, consolidation,liquidation, dissolution, sale or statutory exchange of Stock which changes thebeneficial ownership of Stock and other voting securities so that after thecorporate change the immediately previous owners of 50% of Stock and other votingsecurities do not own 50% of the Company’s Stock and other voting securitieseither 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 theCompany with another entity after which the pre-merger shareholders of theCompany own less than 50% of the stock of the surviving corporation.

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

7.03  In addition to the Severance Payment payablepursuant to Section 7.01, the Company will pay Executive a pro-rata portion ofany bonus earned by Executive as of the date of termination, as provided bySection 6.01.  The payments to Executivepursuant to Sections 6.01, 6.02 or 7.01 are not intended to be cumulative orduplicative and an amount payable as a payment of base salary or pro-rata bonusunder any one of such sections shall be reduced to the extent of similarpayments made under another of such sections. In addition, the Severance Payment shall be reduced by the amount ofcash severance-type benefits to which Executive may be entitled pursuant to anyother cash severance plan, agreement, policy or program of the Company or anyof its subsidiaries; including any payment for post-employment restrictions, provided,however, that if the amount of cash severance benefits payable under such otherseverance plan, agreement, policy or program is greater than the amount payablepursuant to this Agreement, Executive will be entitled to receive the amountspayable under such other plan, agreement, policy or program which exceeds theBase Salary severance payment.  Withoutlimiting other payments which would not constitute “cash severance-typebenefits” hereunder, any cash settlement of stock options, accelerated vestingof stock options and retirement, pension and other similar benefits shall notconstitute “cash severance-type benefits” for purposes of this Section 7.03.

7.04  If Executive becomes entitled to theSeverance Payment pursuant to Section 7.01, Executive shall be entitled toreceive, if Executive is eligible to and elects to continue, medical coveragefrom the Company as provided by law (commonly referred to as the COBRAcontinuation period), as part of his severance benefit, continued medicalcoverage under the Company’s medical plan. The Company will pay the cost of premiums for such COBRA coverage forExecutive and his eligible dependents for a period of one year followingtermination, or until Executive is covered by another medical plan providingmedical benefits to Executive.  Executivemust be eligible for COBRA coverage, elect COBRA during the COBRA electionperiod, and comply with all requirements to obtain such coverage, to beeligible for coverage and for this benefit.

7.05  Notwithstanding any other provision of thisAgreement, the Company and you intend that any payments, benefits or otherprovisions applicable to this Agreement comply with the payout and otherlimitations and restrictions imposed under Section 409A of the Code (“Section409A”), as clarified or modified by guidance from the U.S. Department ofTreasury or the Internal Revenue Service — in each case if and to the extentSection 

 

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409Ais otherwise applicable to this Agreement and such compliance is necessary toavoid the penalties otherwise imposed under Section 409A.  In this connection, the Company and you agreethat the payments, benefits and other provisions applicable to this Agreement,and the terms of any deferral and other rights regarding this Agreement, shallbe deemed modified if and to the extent necessary to comply with the payout andother limitations and restrictions imposed under Section 409A, as clarified orsupplemented by guidance from the U.S. Department of Treasury or the InternalRevenue Service — in each case if and to the extent Section 409A is otherwiseapplicable to this Agreement and such compliance is necessary to avoid thepenalties otherwise imposed under Section 409A.

7.06  The Company may withholdfrom any amounts payable under this Agreement all federal, state, city or othertaxes required by applicable law to be withheld by the Company.

7.07  The provisions of thisArticle 7 will be deemed to survive the termination of this Agreement for thepurposes of satisfying the obligations of the Company and Executive hereunder.

**ARTICLE8NONDISCLOSURE**

8.01  Except as permitted ordirected by the Company or as may be required in the proper discharge ofExecutive’s employment hereunder, Executive shall not, during his employment orat any time thereafter, divulge, furnish or make accessible to anyone or use inany way any Confidential Information of the Company.  “Confidential Information” means anyinformation or compilation of information that the Executive learns or developsduring the course of his/her employment that is not generally known, that isproprietary to or within the unique knowledge of the Company, from which itderives economic value (whether or not conceived, originated, discovered, ordeveloped in whole or in part by Executive). Confidential Information includes but is not limited to, the followingtypes of information and other information of a similar nature (whether or notreduced to writing), all of which Executive agrees constitutes the valuabletrade secrets of the Company: research, designs, development, know how,computer programs and processes, marketing plans and techniques, existing andcontemplated products and services, customer and product names and relatedinformation, prices sales, inventory, personnel, computer programs and relateddocumentation, technical and strategic plans, and finances.  Confidential Information also includes anyinformation of the foregoing nature that the Company treats as proprietary ordesignates as Confidential Information, whether or not owned or developed bythe Company.  “Confidential Information”does not include information that (a) is or becomes generally available to thepublic through no fault of Executive, (b) was known to Executive prior to itsdisclosure by the Company, as demonstrated by files in existence at the time ofthe disclosure, (c) becomes known to Executive, without restriction, from asource other than the Company, without breach of this Agreement by Executiveand otherwise not in violation of the Company’s rights, or (d) is explicitlyapproved for release by written authorization of the Company.

8.02  In the event of a breach or threatened breachby Executive of the provisions of this Article 8, the Company shall be entitledto an injunction restraining Executive from directly or indirectly disclosing,disseminating, lecturing upon, publishing or using such confidential, tradesecret or proprietary information (whether in whole or in part) and restrainingExecutive from rendering any services or participating with any person, firm,corporation, association or other entity to whom such knowledge or information(whether in whole or in part) has been disclosed, without the posting of a bondor other security.  Nothing herein shallbe construed as prohibiting the Company from pursuing any other equitable orlegal remedies available to it for such breach or threatened breach, includingthe recovery of damages from Executive.

8.03  Executive agrees that all notes, data,reference materials, documents, business plans, business and financial records,computer programs, and other materials that in any way incorporate, embody, orreflect any of the Confidential Information, whether prepared by Executive orothers, are the exclusive property of the Company, and Executive agrees toforthwith deliver to the Company all such materials, including all copies or 

 

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memorializations thereof, inExecutive’s possession or control, whenever requested to do so by the Company,and in any event, upon termination of Executive’s employment with the Company.

8.04  The Executive understands and agrees that anyviolation of this Article 8 while employed by the Company may result inimmediate disciplinary action by the Company, including termination ofemployment for Cause.

8.05  The provisions of this Article 8 shallsurvive termination of this Agreement indefinitely.

**ARTICLE 9NON-INTERFERENCE AND NON-RECRUITMENT**

9.01  Executive agrees that during the term of hisemployment and for a period of two (2) years after termination of employment(the “Restricted Period”) he will not directly or indirectly (i) in any wayinterfere or attempt to interfere with the Company’s relationships with any ofits current or potential customers, vendors, investors, business partners, or(ii) employ or attempt to employ any of the Company’s employees on behalf ofany other entity, whether or not such entity competes with the Company.

9.02  Executive agrees that breach by him of theprovisions of this Article 9 will cause the Company irreparable harm that isnot fully remedied by monetary damages. In the event of a breach or threatened breach by Executive of theprovisions of this Article 9, the Company shall be entitled to an injunctionrestraining Executive from directly or indirectly competing or recruiting asprohibited herein, without posting a bond or other security.  Nothing herein shall be construed as prohibitingthe Company from pursuing any other equitable or legal remedies available to itfor such breach or threatened breach, including the recovery of damages fromExecutive.

9.03  The Executive understands and agrees that anyviolation of this Article 9 while employed by the Company may result inimmediate disciplinary action by the Company, including termination ofemployment for Cause.

9.04  The obligations contained in this Article 9shall survive the termination of this Agreement indefinitely.

**ARTICLE10MISCELLANEOUS**

10.01  Governing Law.  This Agreement shall be governed andconstrued according to the laws of the State of Minnesota without regard toconflicts of law provisions.  The Companyand Executive agree that if any action is brought pursuant to this Agreementthat is not otherwise resolved by arbitration pursuant to Section 10.06, suchdispute shall be resolved only in the District Court of Hennepin County,Minnesota, or the United States District Court for Minnesota, and each partyhereto unconditionally (a) submits for itself in any proceeding relating tothis Agreement, or for recognition and enforcement of any judgment in respectthereof, to the exclusive jurisdiction of the Hennepin County, MinnesotaDistrict Courts or the United States Federal District Court for Minnesota, andagrees that all claims in respect to any such proceeding shall be heard anddetermined in Hennepin County, Minnesota, Minnesota District Court or, to theextent permitted by law, in such federal court, (b) consents that any suchproceeding may and shall be brought in such courts and waives any objectionthat it may now or thereafter have to the venue or jurisdiction of any suchproceeding in any such court or that such proceeding was brought in aninconvenient court and agrees not to plead or claim the same; waives all rightto trial by jury in any proceeding (whether based on contract, tort orotherwise) arising out of or relating to this Agreement, or its performanceunder or the enforcement of this Agreement; (d) agrees that service of processin any such proceeding may be effected by mailing a copy of such process byregistered or certified mail (or any substantially similar form of mail),postage prepaid, to such party at its address as provided in Section 10.06; and

 

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(e) agrees that nothing inthis Agreement shall affect the right to effect service of process in any othermanner permitted by the laws of the State of Minnesota.

10.02  Successors.  This Agreement is personal to Executive andExecutive may not assign or transfer any part of his rights or dutieshereunder, or any compensation due to him hereunder, to any other person orentity.  This Agreement may be assignedby the Company and the Company.  TheCompany shall require any successor or assignee, whether direct or indirect, bypurchase, merger, consolidation or otherwise, to all or substantially all thebusiness or assets of the Company, expressly and unconditionally to assume andagree to perform the Company’s obligations under this Agreement, in the samemanner and to the same extent that the Company would be required to perform ifno such succession or assignment had taken place.  In such event, the term “Company,” as used inthis Agreement, shall mean the Company as defined above and any successor orassignee to the business or assets which by reason hereof becomes bound by theterms and provisions of this Agreement.

10.03  Waiver.  The waiver by the Company of the breach ornonperformance of any provision of this Agreement by Executive will not operateor be construed as a waiver of any future breach or nonperformance under anysuch provision of this Agreement or any similar agreement with any otherExecutive.

10.04  Entire Agreement; Modification.  This Agreement supersedes, revokes and replacesany and all prior oral or written understandings, if any, between the partiesrelating to the subject matter of this Agreement.  The parties agree that this Agreement: (a) isthe entire understanding and agreement between the parties; and (b) is thecomplete and exclusive statement of the terms and conditions thereof, and thereare no other written or oral agreements in regard to the subject matter of thisAgreement.  Except for modificationsdescribed in Article 3, this Agreement shall not be changed or modifiedexcept by a written document signed by the parties hereto.

10.05  Severability and Blue Penciling.  To the extent that any provision of thisAgreement shall be determined to be invalid or unenforceable as written, thevalidity and enforceability of the remainder of such provision and of thisAgreement shall be unaffected.  If anyparticular provision of this Agreement shall be adjudicated to be invalid orunenforceable, the Company and Executive specifically authorize the tribunalmaking such determination to edit the invalid or unenforceable provision toallow this Agreement, and the provisions thereof, to be valid and enforceableto the fullest extent allowed by law or public policy.

10.06  Arbitration.  Any dispute, claim or controversy arisingunder this Agreement shall, at the request of any party hereto be resolved bybinding arbitration in Hennepin County, Minnesota by a single arbitratorselected by employer and Executive, with arbitration governed by The UnitedStates Arbitration Act (Title 9, U.S. Code); provided, however, that a dispute,claim or controversy shall be subject to adjudication by a court in anyproceeding against the Company or Executive involving third parties (inaddition to the Company or Executive). Such arbitrator shall be a disinterested person who is either anattorney, retired judge or labor relations arbitrator.  In the event employer and Executive areunable to agree upon such arbitrator, the arbitrator shall, upon petition byeither the Company or Executive, be designated by a judge of the HennepinCounty District Court.  The arbitratorshall have the authority to make awards of damages as would any court inMinnesota having jurisdiction over a dispute between employer and Executive,except that the arbitrator may not make an award of exemplary damages orconsequential damages.  In addition, theCompany and Executive agree that all other matters arising out of Executive’semployment relationship with the Company shall be arbitrable, unless otherwiserestricted by law.

(a)                                  In anyarbitration proceeding, each party shall pay the fees and expenses of its orhis own legal counsel.

(b)                                 The arbitrator,in his or her discretion, shall award legal fees and expenses and costs of thearbitration, including the arbitrator’s fee, to a party who substantiallyprevails in its claims in such proceeding.

(c)                                  Notwithstandingthis Section 10.06, in the event of noncompliance or violation, as the case maybe, of Sections 8 or 9 of this Agreement, the Company may alternatively apply toa court of 

 

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                                                competentjurisdiction for a temporary restraining order, injunctive and/or such otherlegal and equitable remedies as may be appropriate, if it and such courtreasonably determines that the Company would have no adequate remedy at law forsuch violation or noncompliance.

10.07  Legal Fees.  If any contest or dispute shall arise betweenthe Company and Executive regarding any provision of this Agreement, and suchdispute results in court proceedings or arbitration, a party that prevails to asubstantial extent with respect to a claim brought and pursued in connectionwith such dispute, shall be entitled to recover its legal fees and expensesreasonably incurred in connection with such dispute.  Such reimbursement shall be made as soon aspracticable following the resolution of the dispute (whether or not appealed)to the extent a party receives documented evidence of such fees and expenses.

10.08  Notices.  For purposes of this Agreement, notices andall other communications provided for herein shall be in writing and shall bedeemed to have been duly given when personally delivered or may send bycertified mail, return receipt requested, postage prepaid, addressed toExecutive at his residence address appearing on the records of the Company andto the Company at its then current executive offices to the attention of theBoard.  All notices and communicationsshall be deemed to have been received on the date of delivery thereof or on thethird business day after the mailing thereof, except that notice of change ofaddress shall be effective only upon actual receipt.  No objection to the method of delivery may bemade if the written notice or other communication is actually received.

10.09  Survival.  The provisions of this Article 10 shallsurvive the termination of this Agreement, indefinitely.

IN WITNESSWHEREOF the following parties have executed the above instrument the day andyear first above written.
|       | GRANITE CITY FOOD & BREWERY LTD. |
|------------|--------------------------------------|
|       |                                 |   |
|       | By                                   | /s/ Steven J. Wagenheim |   |
|       |                                 | Steven J. Wagenheim, Chief Executive  Officer |
|       |                                 |   |
|       | EXECUTIVE                            |
|       |                                 |   |
|       | By                                   | /s/ Daniel H. Bauer |   |
| ** ** | ** **                           | **Daniel H. Bauer** |

 

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**SCHEDULE A**

 

1.             Payments to Executive in connection with relocation:

(a)                                  To compensateExecutive for costs he will incur in disposing of his current residence, movinghis family and goods to a new location in Minnesota and related expenses, theCompany will pay Executive $20,000 upon commencement of employment.  Such amount will be treated as fully taxableto the Executive and subject to normal withholding taxes.

(b)                                 The Companywill reimburse Executive for his reasonable travel expenses and those of hisspouse for two “house hunting” trips to Minneapolis for the purpose ofsearching for housing.  At the Company’srequest, Executive will reimburse the Company for air fare for Executive’sspouse for a trip to Minneapolis in July 2005. Such trip will not be considered one of the two house hunting trips.

(c)                                  The Companywill pay the reasonable housing and commuting expenses of Executive for themonths of September, October and November, 2005.

2.             Executive Benefits:

(d)                                 Monthlyallowance for cellular telephone.

(e)                                  $350 monthlyallowance for automobile.

(f)                                    Participation,with family coverage, in Company health plan.

(g)                                 Participationin Company group life insurance program, which is generally two times basesalary.

3.             Executive will be furnished with a Company laptopcomputer fully-loaded with appropriate software.

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