**Exhibit 10.3**

 

**SUBSCRIPTION AGREEMENT**

**AND**

**LETTER OF INVESTMENT INTENT**

 

GraniteCity Food & Brewery Ltd.

5831Cedar Lake Road

St.Louis Park,  MN 55416

 

Gentlemen:

 

THISAGREEMENT, made effective this 27th day of September, 2002, betweenGranite City Food & Brewery Ltd. (formerly known as Founders Food &Firkins Ltd.), a Minnesota corporation (the “Company”), and Andrew Redleaf, aresident of the State of Minnesota.

 

1.                                       The Company agrees to sell to theundersigned, and the undersigned agrees to purchase from the Company, 4,500shares of Series A Convertible Preferred Stock (the “Preferred”) and warrantsto purchase common stock (collectively, the “Securities”) at a purchase priceequal to $100.00 per Preferred share (minimum investment $25,000).  The conversion price of the Preferred andthe exercise price of the Warrants will be the price established at the initialclosing of the sale of the Securities, which will be the lower of (a) 90% ofthe average closing price of the common stock on Nasdaq for the ten tradingdays preceding the initial closing date, or (b) $1.58.  The undersigned acknowledges that thissubscription is contingent upon acceptance in whole or in part by theCompany.  Once accepted by the Company,this subscription is irrevocable.

 

2.                                       The undersigned will purchase the Securitiesin three installments on October 1, 2002, December 20, 2002 and March 20, 2003(each a “Purchase Date”).  On or beforeOctober 1, 2002, the undersigned will deliver to Highland Bank, St. Paul,Minnesota, as escrow agent for the Company, the sum of $150,000 in payment for1,500 shares of Preferred and the related Warrants.  On or before December 20, 2002, the undersigned will deliver thesecond installment payment to the escrow agent in the amount of $150,000 inpayment for 1,500 shares of the Preferred and the related Warrants.  On or before March 20, 2003, the undersignedwill deliver the third installment payment to the escrow agent in the amount of$150,000 in payment for the remaining 1,500 shares of the Preferred and therelated Warrants.  Purchase and deliveryof the Securities will take place at a time and place specified by the Companyon each Purchase Date or such earlier date as the undersigned shall specify inwriting to the Company.  Payment foreach installment will be made by check or wire transfer payable to “HighlandBank – Founders Food Escrow Account,” at least one business day prior to eachPurchase Date.

 

3.                                       The undersigned acknowledges and representsas follows:

 

(a)                                  That he or she has received and carefullyreviewed the Confidential Private Placement Memorandum of the Company datedFebruary 25, 2002, as supplemented August 16, 2002 (the “Memorandum”), and alldocuments delivered therewith;

 

(b)                                 That he or she believes he or she is able tobear the economic risk of the investment in the Securities;

 

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(c)                                  That he or she believes that he or she hasknowledge and experience in financial and business matters, that he or she iscapable of evaluating the merits and risks of the prospective investment in theSecurities and that he or she is able to bear such risks.

 

(d)                                 That he or she understands an investment inthe Securities is highly speculative but believes that the investment issuitable for him or her based upon his or her investment objectives and financialneeds, and has adequate means for providing for his or her current financialneeds and personal contingencies and has no need for liquidity of investmentwith respect to the Securities;

 

(e)                                  That he or she has been given access to fulland complete information regarding the Company (including the opportunity tomeet with Company officers and review such documents as he or she may haverequested in writing) and has utilized such access to his or her satisfactionfor the purpose of obtaining information in addition to, or verifyinginformation included in, the Memorandum;

 

(f)                                    That he or she recognizes that theSecurities, as an investment, involve a high degree of risk, including, but notlimited to, the risks described in the “Cautionary Statement” which is part of“Management’s Discussion and Analysis or Plan of Operation” in the Company’sForm 10-KSB included within the Memorandum; and

 

(g)                                 That he or she realizes that (i) the purchaseof the Securities is a long-term investment; (ii) the purchasers of theSecurities must bear the economic risk of investment for an indefinite periodof time because the Securities have not been registered under the SecuritiesAct of 1933, as amended (the “Act”) and, therefore, cannot be sold unless theyare subsequently registered under the Act or an exemption from suchregistration is available; and (iii) the transferability of the Securities isrestricted, and (A) requires the written consent of the Company, (B) requiresconformity with the restrictions contained in paragraphs 4 and 5 below, and (C)will be further restricted by a legend placed on the certificate(s)representing the Securities stating that the Securities have not beenregistered under the Act and referring to the restrictions on transferabilityof the Securities, and by stop transfer orders or notations on the Company’srecords referring to the restrictions on transferability.

 

4.                                       The undersigned has been advised that theSecurities are not being registered under the Act or relevant state securitieslaws pursuant to exemptions from the Act and such laws, and that the Company’sreliance upon such exemptions is predicated in part on the undersigned’srepresentations to the Company as contained herein.  The undersigned represents and warrants that the Securities arebeing purchased for his or her own account and for investment and without theintention of reselling or redistributing the same, that he or she has made noagreement with others regarding any of such Securities and that his or herfinancial condition is such that it is not likely that it will be necessary todispose of any of such Securities in the foreseeable future.  The undersigned is aware that, in the viewof the Securities and Exchange Commission and applicable state bodies thatadminister state securities laws, a purchase of Securities with an intent toresell by reason of any foreseeable specific contingency or anticipated changein market value, or any change in the condition of the Company or its business,or in connection with a contemplated liquidation or settlement of any loanobtained for the acquisition of the Securities and for which the Securitieswere pledged as security, would represent an intent inconsistent with therepresentations set forth above.  Theundersigned further represents and agrees that if, contrary to his or herforegoing intentions, he or she should later desire to dispose of or transferany of such Securities in any manner, he or she shall not do so without firstobtaining (a) the opinion of counsel designated by the

 

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Company that such proposed disposition or transfer lawfully may be madewithout the registration of such Securities for such purpose pursuant to theAct, as then in effect, and applicable state securities laws, or (b) suchregistrations (it being expressly understood that the Company shall not haveany obligation to register the shares for such purpose).  The undersigned agrees that the Company mayplace a restrictive legend on the certificate(s) representing the Securities,containing substantially the following language:

 

Thesecurities represented by this Certificate were issued without registrationunder the Securities Act of 1933, as amended (the “Act”), and withoutregistration under state securities laws, in reliance upon exemptions containedin the Act and such laws.  No transferof these securities or any interest therein may be made except pursuant toeffective registration statements under said laws unless this Corporation hasreceived an opinion of counsel satisfactory to it that such transfer ordisposition does not require registration under said laws and, for any salesunder Rule 144 of the Act, such evidence as it shall request for compliancewith that rule.

 

Theundersigned agrees and consents that the Company may place a stop transferorder on the Certificate(s) representing the Securities to assure theundersigned’s compliance with this Agreement and the matters referenced above.

 

Theundersigned agrees to save and hold harmless, defend and indemnify the Companyand its directors, officers and agents from any claims, liabilities, damages,losses, expenses or penalties arising out of any misrepresentation ofinformation furnished by the undersigned to the Company in this Subscription Agreement.

 

5.                                       The undersigned understands that the Companyat a future date may file a registration or offering statement with theSecurities and Exchange Commission to facilitate a public offering of itssecurities.  The undersigned agrees, forthe benefit of the Company, that should such a public offering be made andshould the managing underwriter of such offering require, the undersigned willnot, without the prior written consent of the Company and such underwriter,during the Lock Up Period as defined herein: (i) sell, transfer or otherwisedispose of, or agree to sell, transfer or otherwise dispose of any of theSecurities beneficially held by the undersigned during the Lock Up Period; (ii)sell, transfer or otherwise dispose of, or agree to sell, transfer or otherwisedispose of any options, rights or warrants to purchase any of the sharesbeneficially held by the undersigned during the Lock Up Period; or (iii) sellor grant, or agree to sell or grant, options, rights or warrants with respectto any of the Securities.  The foregoingdoes not prohibit gifts to donees or transfers by will or the laws of descentto heirs or beneficiaries provided that such donees, heirs and beneficiariesshall be bound by the restrictions set forth herein.  The term “Lock Up Period” shall mean the lesser of (x) 180 daysor (y) the period during which Company officers and directors are restricted bythe managing underwriter from effecting any sales or transfers of the Company’scommon stock.  The Lock Up Period shallcommence on the effective date of the applicable registration statement.

 

6.                                       The undersigned represents and warrants thatthe undersigned is a bona fide resident of, and is domiciled in, the statelisted in the Recital to this Agreement and that the Securities are beingpurchased solely for the beneficial interest of the undersigned and not asnominee, for, or on behalf of, or for the beneficial interest of, or with theintention to transfer to, any other person, trust or organization, except asspecifically set forth in paragraph 11 of this Agreement.

 

PARAGRAPH7 IS REQUIRED IN CONNECTION WITH THE EXEMPTIONS FROM THE ACT AND STATE LAWSBEING RELIED ON BY THE COMPANY WITH

 

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RESPECTTO THE OFFER AND SALE OF THE SECURITIES. ALL OF SUCH INFORMATION WILL BE KEPT CONFIDENTIAL AND WILL BE REVIEWEDONLY BY THE COMPANY AND ITS COUNSEL. The undersigned agrees to furnish any additional information which theCompany deems necessary in order to verify the responses set forth below.

 

7.                                       Accredited Status.  Theundersigned represents and warrants as follows (CHECK IF APPLICABLE):

 
| ý |   | A.     |   | The  undersigned is an individual with a net worth, or a joint net worth together  with his or her spouse, in excess of $1,000,000.  (In calculating net worth, you may include equity in personal  property and real estate, including your principal residence, cash,  short-term investments, stock and securities.  Equity in personal property and real estate should be based on  the fair market value of such property minus debt secured by such property.) |
|--------|--------|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| ý |   | B.     |   | The  undersigned is an individual with income in excess of $200,000 in each of the  prior two years and reasonably expects an income in excess of $200,000 in the  current year.                                                                                                                                                                                                                                                                                               |
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| ý |   | C.     |   | The  undersigned is an individual who, with his or her spouse, had joint income in  excess of $300,000 in each of the prior two years and reasonably expects  joint income in excess of $300,000 in the current year.                                                                                                                                                                                                                                                          |
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| o      |   | D.     |   | The  undersigned is a director or executive officer of Granite City Food &  Brewery Ltd.                                                                                                                                                                                                                                                                                                                                                                                   |
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| o      |   | E.     |   | The  undersigned, if other than an individual, is an entity all of whose equity  owners meet one of the tests set forth in (A) through (D) above.                                                                                                                                                                                                                                                                                                                              |
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| o      |   | F.     |   | The  undersigned is an entity, and is an “Accredited Investor” as defined in Rule  501(a) of Regulation D under the Act.   This representation is based on the following (check one or more, as  applicable):                                                                                                                                                                                                                                                   |
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   |   |   |   | o                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | 1. | The  undersigned (or, in the case of a trust, the undersigned trustee) is a bank  or savings and loan association as defined in Sections 3(a)(2) and  3(a)(5)(A), respectively, of the Act acting either in its individual or  fiduciary capacity. |
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |   |
|   |   |   |   | o                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | 2. | The  undersigned is an insurance company as defined in section 2(13) of the Act. |
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |   |
|   |   |   |   | o                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | 3. | The  undersigned is an investment company registered under the Investment Company  Act of 1940 or a business development company as defined in Section 2(a)(48)  of that act. |
|   |   |   |   | o                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | 4. | The  undersigned is a Small Business Investment Company licensed by the United  States Small Business Administration under Section 301(c) or (d) of the Small  Business Investment Act of 1958. |

 

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|   |   |   |   | o      | 5.     | The  undersigned is an employee benefit plan within the meaning of Title I of the  Employee Retirement Income Security Act of 1974 (“ERISA”) and either (check  one or more, as applicable):                                                                                                                                                                                                                                                                                                                                           |
|--------|--------|--------|--------|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |   |   |   |
|   |   |   |   |   | o      | a.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | the  investment decision is made by a plan fiduciary, as defined in Section 3(21)  of ERISA, which is either a bank, savings and loan association, insurance  company, or registered investment advisor; or |
|   |   |   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |
|   |   |   |   |   | o      | b.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | the  employee benefit plan has total assets in excess of $5,000,000; or |
|   |   |   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |
|   |   |   |   |   | o      | c.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | the  plan is a self-directed plan with investment decisions made solely by persons  who are “Accredited Investors” as defined under the Act. |
|   |   |   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |
|   |   |   |   | o      | 6.     | The  undersigned is a private business development company as defined in Section  202(a)(22) of the Investment Advisors Act of 1940.                                                                                                                                                                                                                                                                                                                                                                                                             |
|   |   |   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|   |   |   |   | o      | 7.     | The  undersigned has total assets in excess of $5,000,000, was not formed for the  specific purpose of acquiring securities of the Company and is one or  more of the following (check one or more, as appropriate):                                                                                                                                                                                                                                                                                                                             |
|   |   |   |   |   |
|   |   |   |   |   | o      | a.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | an  organization described in Section 501(c)(3) of the Internal Revenue Code; or |
|   |   |   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |
|   |   |   |   |   | o      | b.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | a  corporation; or |
|   |   |   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |
|   |   |   |   |   | o      | c.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | a  Massachusetts or similar business trust; or |
|   |   |   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |
|   |   |   |   |   | o      | d.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | a  partnership. |
|   |   |   |   |   |
|   |   |   |   | o      | 8.     | The  undersigned is a trust with total assets exceeding $5,000,000 which was not  formed for the specific purpose of acquiring securities of the Company and  whose purchase is directed by a person who has such knowledge and experience  in financial and business matters that he or she is capable of evaluating the  merits and risks of the investment in the shares.  (IF ONLY THIS RESPONSE IS CHECKED, please contact the Company  to receive and complete an information statement before this subscription can  be considered). |

 

 

8.             Registration Rights.

 

(a)                                  Definitions. As used in this paragraph 8, the following terms shall have thefollowing meanings:

 

“Advice”has the meaning set forth in paragraph 8(c).

 

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“Affiliate”means, with respect to any specified person, any other person who, directly orindirectly, controls, is controlled by, or is under common control with suchspecified person.

 

“ExchangeAct” means the Securities Exchange Act of 1934, as amended from time totime, or any successor statute, and the rules and regulations of the Securitiesand Exchange Commission promulgated thereunder.

 

“Holder”means the undersigned.

 

“Prospectus”means the prospectus included in any Registration Statement (including withoutlimitation, a prospectus that discloses information previously omitted from aprospectus filed as part of an effective Registration Statement in relianceupon Rule 430A promulgated under the Act), as amended or supplemented by anyprospectus supplement, and by all other amendments and supplements to theprospectus, including post-effective amendments, and in each case including allmaterial incorporated by reference or deemed to be incorporated by reference insuch prospectus.

 

“RegistrableSecurities” means the shares of common stock issuable upon exercise orconversion of the Securities and any shares of common stock issued as paymentin lieu of cash dividends on the Series A Convertible Preferred Stock; provided,however, that such securities shall cease to be Registrable Securitieswhen (i) a Registration Statement covering the Registrable Securities has beendeclared effective and such Registrable Securities have been disposed ofpursuant to such effective Registration Statement, or (ii) the RegistrableSecurities become eligible for sale pursuant to Rule 144 (or any similar rulethen in force) under the Act, or (iii) the Securities cease to be outstanding.

 

“RegistrationStatement” means any registration statement of the Company that covers anyof the Registrable Securities pursuant to the provisions of this Agreement andall amendments and supplements to any such registration statement, includingpost-effective amendments, in each case including the Prospectus, all exhibits,and all material incorporated by reference or deemed to be incorporated byreference in such registration statement.

 

“SuspensionNotice” has the meaning set forth in paragraph 8(c).

 

(b)                               Resale Registration.  The rightsdescribed in this paragraph 8(b) will be available to holders of RegistrableSecurities until the second anniversary of the expiration of the warrants topurchase common stock issued with the Series A Convertible Preferred Stock.

 

(i)                                     Demand Registration.  If holders of at least one-third of theRegistrable Securities request that the Company file a registration statementhaving an aggregate offering price to the public of not less than $1.0 million,the Company will use its best efforts to cause such common stock to beregistered; provided, however, that the Company will not be obligated to effectmore than two such registrations, and will not be obligated to effect more thanone such registration during any 12-month period.  If registration is demanded under any subsection of paragraph8(b), the Company may elect to register all of the Registrable Securities.  The number of demand registrations availableunder this paragraph 8(b)(i) will be reduced by the number of Form S-3registrations demanded under paragraph 8(b)(iii).

 

(ii)                                  Incidental Registration.  If the Company proposes to register underthe Act (except by a Form S-4 or Form S-8 Registration Statement or anysuccessor forms thereto) or qualify for a public distribution underSection 3(b) of the Act, any of its equity securities or debt with equityfeatures, it will give written notice to all Holders of

 

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Registrable Securities of its intention to do so and, on the writtenrequest of any such Holder given within twenty (20) days after receipt of anysuch notice (which written request shall specify the interest in theRegistrable Securities intended to be sold or disposed of by such Holder anddescribe the nature of any proposed sale or other disposition thereof), theCompany will use its best efforts to cause all such Registrable Securities, theHolders of which shall have requested the registration or qualificationthereof, to be included in such Registration Statement proposed to be filed bythe Company; provided, however, that if a greater number of RegistrableSecurities is offered for participation in the proposed offering than in thereasonable opinion of the managing underwriter of the proposed offering can beaccommodated without adversely affecting the proposed offering, then the amountof Registrable Securities proposed to be offered by such Holders forregistration, as well as the number of securities of any other sellingshareholders participating in the registration, shall be proportionatelyreduced to a number deemed satisfactory by the managing underwriter.

 

(iii)                               S-3 Registration.  Holders ofRegistrable Securities are entitled to demand up to three registrations on FormS-3 (if available to the Company) so long as each such offering is in an amountof at least $500,000 (based upon the closing bid price of the common stock onthe trading day before the demand is made). The Company will not be obligated to file more than one Form S-3 in anysix-month period.

 

(c)                                  Registration Procedures.  In connection with the obligations of theCompany to effect or cause the registration of any Registrable Securitiespursuant to the terms and conditions of this Agreement, the Company shall usereasonable efforts to effect the registration and sale of such RegistrableSecurities in accordance with the intended method of distribution thereof, andin connection therewith:

 

(i)                                     The Company shall prepare and file with theSecurities and Exchange Commission a Registration Statement on Form S-3 orother similar form under the Act which permits secondary sales of securities ina “shelf registration,” and use reasonable efforts to cause such RegistrationStatement to become effective and remain effective in accordance with theprovisions of this Agreement;

 

(ii)                                  The Company shall promptly prepare and filewith the Securities and Exchange Commission such amendments and post-effectiveamendments to each Registration Statement as may be necessary to keep suchRegistration Statement effective and shall timely file with the Securities andExchange Commission all required filings under the Exchange Act as arenecessary to keep the Registration Statement effective for as long as suchregistration is required to remain effective pursuant to the terms hereof;shall cause the Prospectus to be supplemented by any required Prospectussupplement, and, as so supplemented, to be filed pursuant to Rule 424 under theAct; and shall comply with the provisions of the Act applicable to it withrespect to the disposition of all Registrable Securities covered by suchRegistration Statement during the applicable period in accordance with theintended methods of disposition by Holder set forth in such RegistrationStatement or supplement to the Prospectus;

 

(iii)                               The Company shall promptly furnish to Holder such number of copies ofthe Prospectus (including each preliminary Prospectus) and any amendments orsupplements thereto, as Holder may reasonably request in order to facilitatethe public sale or other disposition of the Registrable Securities being soldby Holder;

 

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(iv)                              The Company shall promptly notify Holder, (A) when a Prospectus or anyProspectus supplement or post–effective amendment has been filed and,with respect to a Registration Statement or any post–effective amendment,when the same has become effective, (B) of any request by the Securities andExchange Commission or any state securities authority for amendments andsupplements to a Registration Statement and Prospectus or for additionalinformation after the Registration Statement has become effective, (C) of theissuance by the Securities and Exchange Commission of any stop order suspendingthe effectiveness of a Registration Statement, (D) of the issuance by any statesecurities commission or other regulatory authority of any order suspending thequalification or exemption from qualification of any of the RegistrableSecurities under state securities or “blue sky” laws, and (E) of the happeningof any event which makes any statement made in a Registration Statement orrelated Prospectus untrue or which requires the making of any changes in suchRegistration Statement or Prospectus so that they will not contain any untruestatement of a material fact or omit to state any material fact required to bestated therein or necessary to make the statements therein, in light of thecircumstances under which they were made, not misleading.  As soon as practicable following expirationof the Suspension Period (as defined below), the Company shall prepare and filewith the Securities and Exchange Commission and furnish a supplement oramendment to such Prospectus so that, as thereafter deliverable to thepurchasers of such Registrable Securities, such Prospectus will not contain anyuntrue statement of a material fact or omit to state a material fact necessaryto make the statements therein, in light of the circumstances under which theywere made, not misleading.

 

Uponreceipt of any notice (a “Suspension Notice”) by Holder from the Company of thehappening of any event of the kind described in paragraph 8(c)(iv), Holdershall forthwith discontinue disposition of the Registrable Securities pursuantto the Registration Statement covering such Registrable Securities until suchHolder’s receipt of the copies of the supplemented or amended Prospectuscontemplated by paragraph 8(c)(iv) or until Holder is advised in writing (the“Advice”) by the Company that the use of the Prospectus may be resumed, and hasreceived copies of any additional or supplemental filings which areincorporated by reference in the Prospectus, and, if so directed by theCompany, will, or will request any broker–dealer acting as Holder’s agentto, deliver to the Company (at the Company’s expense) all copies, other thanpermanent file copies then in Holder’s or broker–dealer’s possession, ofthe Prospectus covering such Registrable Securities current at the time ofreceipt of such notice; provided, however, that in no event shallthe period from the date on which Holder receives a Suspension Notice to thedate on which Holder receives either the Advice or copies of the supplementedor amended Prospectus contemplated by paragraph 8(c)(iv) (the “SuspensionPeriod”) exceed 90 days.

 

(d)                                 Registration Expenses.  The Company shall bear all expenses incurredin connection with the registration of Registrable Securities pursuant toparagraph 8(b).  Such expenses shallinclude, without limitation, all printing, legal and accounting expensesincurred by the Company and all registration and filing fees imposed by theSecurities and Exchange Commission, any state securities commission or TheNasdaq Stock Market.  Each Holder shallbe responsible for any underwriting discounts, brokerage fees or commissionsand taxes of any kind (including, without limitation, transfer taxes) withrespect to any disposition, sale or transfer of Registrable Securities and forany legal, accounting and other expenses incurred by such Holder.

 

(e)                                  Indemnification and Contribution.

 

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(i)                                     Indemnification by the Company.  The Company agrees to indemnity and holdharmless, to the full extent permitted by law, each Holder from and against alllosses, claims, damages, liabilities and expenses (including without limitationreasonable legal fees and expenses incurred by Holder (collectively, the“Damages”) to which Holder may become subject under the Act or otherwise,insofar as such Damages (or proceedings in respect thereat) arise out of or arebased upon any untrue statement of material fact contained in any RegistrationStatement (or any amendment thereto) pursuant to which Registrable Securitieswere registered under the Act, or caused by any omission to state therein amaterial fact necessary to make the statements therein in light of thecircumstances under which they were made not misleading, or caused by anyuntrue statement of a material fact contained in any Prospectus (as amended orsupplemented if the Company shall have furnished any amendments or supplementsthereto), or caused by any omission to state therein a material fact necessaryto make the statements therein in light of the circumstances under which theywere made not misleading, except insofar as such Damages arise out of or arebased upon any such untrue statement or omission based upon informationrelating to Holder furnished in writing to the Company by Holder specificallyfor use therein; provided, however, that the Company shall not beliable to Holder under this paragraph 8(e)(i) to the extent that any suchDamages were caused by the fact that Holder sold securities to a person as towhom it shall be established that there was not sent or given, at or prior tothe written confirmation of such sale, a copy of the Prospectus as then amendedor supplemented if, but only if, (A) the Company has previously furnishedcopies of such amended or supplemented Prospectus to Holder and (B) suchDamages were caused by any untrue statement or omission contained in theProspectus so delivered which was corrected in such amended or supplementedProspectus.

 

(ii)                                  Indemnification by the Holder.  Holder agrees to indemnify and hold harmlessthe Company, its stockholders, directors, officers and each person, if any, whocontrols  the Company within the meaningof either Section 15 of the Act or Section 20 of the Exchange Act to the sameextent as the foregoing indemnity from the Company to Holder, but only withreference to information relating to Holder furnished in writing to the Companyby Holder specifically for use in any Registration Statement (or any amendmentthereto) or any Prospectus (or any amendment or supplement thereto); provided,however, that Holder shall not be obligated to provide such indemnity tothe extent that such Damages result from the failure of the Company to promptlyamend or take action to correct or supplement any such Registration Statementor Prospectus on the basis of corrected or supplemental information provided byHolder to the Company expressly for such purpose.  In no event shall the liability of Holder hereunder be greater inamount than the amount of the proceeds received by Holder upon the sale of theRegistrable Securities giving rise to such indemnification obligation.

 

(iii)                               Contribution.  To the extentthat the indemnification provided for in paragraph 8(e)(i) or paragraph8(e)(ii) is unavailable to an indemnified party or insufficient in respect ofany Damages, then each indemnifying party under such paragraph, in lieu ofindemnifying such indemnified party thereunder, shall contribute to the amountpaid or payable by such indemnified party as a result of such Damages in suchproportion as is appropriate to reflect the relative fault of the Company onthe one hand and Holder on the other hand in connection with the statements oromissions that resulted in such Damages, as well as any other relevantequitable considerations.  The relativefault of the Company on the one hand and of Holder on the other hand shall bedetermined by reference to, among other things, whether the untrue statement ofa

 

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material fact or the omission to state amaterial fact relates toinformation supplied by the Company or by Holder and the parties’ relativeintent, knowledge, access to information and opportunity to correct or preventsuch statement or omission.

 

Ifindemnification is available under subsection (i) or (ii) of this paragraph8(e), the indemnifying parties shall indemnify each indemnified party to thefull extent provided in such paragraphs without regard to the relative fault ofsaid indemnifying party or indemnified party or any other equitable considerationprovided for in this paragraph 8(e)(iii). The Company and Holder agree that it would not be just or equitable ifcontribution pursuant to this paragraph 8(e)(iii) were determined by pro rataallocation or by any other method of allocation that does not take account ofthe equitable considerations referred to herein.

 

9.                                       NASD Affiliation.  Theundersigned is affiliated or associated, directly or indirectly, with aNational Association of Securities Dealers, Inc. (“NASD”) member firm orperson.

 

Yes o                                    No      ý     .

 

If yes, list the affiliated member firm or person:

 

Your relationship to such member firm or person:

 

 

10.                                 Entities.  If the undersigned is not anindividual but an entity, the individual signing on behalf of such entity andthe entity jointly and severally agree and certify that:

 

A.                                   The undersigned was not organized for thespecific purpose of acquiring securities of the Company; and

 

B.                                     This Agreement has been duly authorized byall necessary action on the part of the undersigned, has been duly executed byan authorized officer or representative of the undersigned, and is a legal,valid and binding obligation of the undersigned enforceable in accordance withits terms.

 

11.                                 Miscellaneous.

 

A.            Manner in whichtitle is to be held: (check one)

 

ý            IndividualOwnership

o            JointTenants with Right of Survivorship*

o            Partnership*

o            Tenantsin Common*

o            Corporation

o            Trust

o            Other                                      (describe)

 

B.                                     The undersigned agrees that the undersignedunderstands the meaning and legal consequences of the agreements,representations and warranties contained herein, agrees that such agreements,representations and warranties shall survive and remain in full force andeffect after the execution hereof and payment for the shares, and furtheragrees to indemnify and hold harmless the Company, each current and futureofficer, director, employee, agent and shareholder from and against any and allloss, damage or liability due to, or arising out of, a breach of any agreement,representation or warranty of the undersigned contained herein.

 

10

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The undersigned acknowledges that the undersigned has retained his, heror its own independent legal counsel to the extent that the undersigned determinedit to be necessary or helpful.  Theundersigned further acknowledges that the undersigned was not represented bycounsel for Aethlon Capital, LLC.

 

C.                                     This Agreement shall be construed andinterpreted in accordance with Minnesota law without regard to conflict of lawprovisions.

 

D.                                    The agreements and covenants of the partieshereto shall survive the delivery of the Securities and be binding upon theparties and their respective successors, personal representatives and assigns.

 

E.                                      The undersigned agrees to furnish to theCompany or the Agent, if applicable, upon request, such additional informationas may be deemed necessary to determine the undersigned’s suitability as aninvestor.

 

F.                                      This Agreement supersedes all previousSubscription Agreements by the undersigned and all previous SubscriptionAgreements are hereby withdrawn.

 

G.                                     In the event of a party’s default or breachof this Agreement, the prevailing party in any action to enforce this Agreementor to recover damages as a result of a breach or default, will be entitled torecover its reasonable costs and expenses therein, including reasonableattorneys fees.

 

[NOTE: SIGNATURE PAGES TO FOLLOW]

 

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*Multiplesignatures required.

 

11

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**SIGNATURE PAGE**

 

 

 

Dated: September     ,2002.

 

 
| /s/  Andrew J. Redleaf                         |                                           |   |   |
|------------------------------------------------|------------------------------------------------|--------|--------|
| Signature                                      | Signature                                      |
|                                           |                                           |
|                                           |                                           |
| Andrew  J. Redleaf                             |                                           |   |   |
| Name  Typed or Printed                         | Name  Typed or Printed                         |
|                                           |                                           |
|                                           |                                           |
| 1720  Franklin Avenue West                     |                                           |   |   |
| Residence  Address                             | Residence  Address                             |
|                                           |                                           |
|                                           |                                           |
| Minneapolis,  MN 55405                         |                                           |   |   |
| City,  State and Zip Code                      | City,  State and Zip Code                      |
|                                           |                                           |
|                                           |                                           |
| 3033  Excelsior Boulevard, Suite 300           |                                           |   |   |
| Mailing  Address                               | Mailing  Address                               |
|                                           |                                           |
|                                           |                                           |
| Minneapolis,  MN 55416                         |                                           |   |   |
| City,  State and Zip Code                      | City,  State and Zip Code                      |
|                                           |                                           |
|                                           |                                           |
| ###-##-####                                    |                                           |   |   |
| Tax  Identification or Social  Security Number | Tax  Identification or Social  Security Number |
|                                                |                                                |        |        |  |

 

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Acceptanceby the Company

 

Granite City Food &Brewery Ltd.  hereby accepts theforegoing Subscription Agreement to the extent of 1,500 shares of Series AConvertible Preferred Stock and warrants to purchase 47,468 shares of commonstock.

 
|   | Granite City Food &  Brewery Ltd. |
|--------|---------------------------------------|
|   |                                  |
|   | By                                    |  /s/ Steven J. Wagenheim |   |
|   | Steven J. Wagenheim                   |
|   | Chief Executive Officer               |

 

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