**Exhibit 3.1**

 

**ARTICLES OF INCORPORATION**

**OF**

**BREWING VENTURES INC.**

 

The following Articles ofIncorporation are adopted pursuant to Minnesota Statutes, Chapter 302A inaccordance with Section 302A.133, by Brewing Ventures Inc., a corporationorganized and existing under the laws of the State of Minnesota (the“Corporation”).

 

**ARTICLE 1**

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**Name**:  The name of this Corporationshall be Brewing Ventures Inc.

 

**ARTICLE 2**

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**Registered Office**:  Theaddress of the Corporation’s registered office in the State of Minnesota shallbe 2400 IDS Center, Minneapolis, Minnesota 55402.

 

**ARTICLE 3**

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**Authorized Shares**:  Thetotal authorized shares of all classes which the Corporation shall haveauthority to issue is 100,000,000, consisting of: 10,000,000 shares ofpreferred stock of the par value of one cent ($0.01) per share (hereinafter the“preferred shares”); and 90,000,000 shares of common stock of the parvalue of one cent ($0.01) per share (hereinafter the “common shares”).

 

3.1           The Board of Directors of the Corporation (hereinafterreferred to as the “Board of Directors” or “Board”) may, from time to time,establish by resolution, different classes or series of preferred shares andmay fix the rights and preferences of said shares in any class or series.  Specifically, preferred shares of theCorporation may be issued from time to time in one or more series, each ofwhich series shall have such designation or title and such number of shares asshall be fixed by resolution of the Board of Directors prior to the issuancethereof.  Each such series of preferredshares shall have such voting powers, full or limited, or no voting powers, andsuch preferences and relative, participating, optional or other special rights,and such qualifications, limitations or restrictions thereof as shall be statedand expressed in the resolution or resolutions providing for the issuance ofsuch series of preferred shares as may be adopted from time to time by theBoard of Directors prior to the issuance of any shares thereof pursuant to theauthority hereby expressly vested in the Board.

 

3.2           Except as provided or required by law, or as provided inthe resolution or resolutions of the Board of Directors creating any series ofpreferred shares, the common shares shall have the exclusive right to vote, on anoncumulative basis, for the election and removal of directors and for allother purposes.  Unless otherwiseprovided by resolution or resolutions of the Board of Directors, each holder ofcommon shares shall be entitled to one vote for each share held.

 

3.3           The Board of Directors shall have the authority to issueshares of a class or series, shares of which may then be outstanding, toholders of shares of another class or series to effectuate share dividends,splits, or conversion of its outstanding shares.

 

3.4           The Board of Directors is authorized to accept and rejectsubscriptions for and to dispose of authorized shares of the Corporation,including the granting of stock options, warrants and other rights to purchaseshares, without action by the shareholders and upon such terms and conditionsas may be deemed advisable by the Board of Directors in the exercise of itsdiscretion, except as otherwise limited by law.

 

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3.5           The Board of Directors is authorized to issue, sell orotherwise dispose of bonds, debentures, certificates of indebtedness and othersecurities, including those convertible into shares of stock, without action bythe shareholders and for such consideration and upon such terms and conditionsas may be deemed advisable by the Board of Directors in the exercise of itsdiscretion, except as otherwise limited by law.

 

**ARTICLE 4**

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**Certain Shareholder Rights**:  Noshareholder shall be entitled to any preemptive right to purchase, subscribefor or otherwise acquire any new or additional securities of the Corporation,or any options or warrants to purchase, subscribe for or otherwise acquire anysuch new additional securities before the Corporation may offer them to otherpersons.  No shareholder shall be entitledto any cumulative voting rights.

 

**ARTICLE 5**

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**Written Action by Board**:  Anaction required or permitted to be taken by the Board of Directors may be takenby written action signed by the number of directors that would be required totake the same action at a meeting of the Board at which all directors arepresent, except as to those matters which require shareholder approval, inwhich case the written action must be signed by all members of the Board ofDirectors.

 

**ARTICLE 6**

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**Nonliability of Directors for Certain Actions**:  Tothe fullest extent permitted by the Minnesota Business Corporation Act,Minnesota Statutes, Chapter 302A, as it exists on the date hereof or mayhereafter be amended, a director of this Corporation shall not be liable to theCorporation or its shareholders for monetary damages for breach of fiduciaryduty as a director.  No amendment to orrepeal of this Article shall apply to or have any effect on the liability oralleged liability of any director of the Corporation for or with respect to anyacts or omissions of such director occurring prior to such amendment or repeal.

 

**ARTICLE 7**

 

**Initial Director**:  The name and address of theperson constituting the first member of the Company’s Board of Directors is:

 

StevenJ. Wagenheim

5831Cedar Lake Road

St.Louis Park, MN 55416

 

**ARTICLE 8**

 

**Incorporator**:  The name and address of theincorporator is:

 

AvronL. Gordon

2400IDS Center

Minneapolis,MN 55402

 

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**ARTICLE 9**

 

**Indemnification of Directors and Officers**:  TheCorporation shall indemnify and may, in the discretion of the Board ofDirectors, insure current and former directors, officers and employees of theCorporation in the manner and to the fullest extent permitted by law.

 

**IN WITNESS WHEREOF**, the undersigned has hereunto set his hand as of 25th day of June,1997.

 
|   | /s/ Avron L. Gordon |   |
|--------|---------------------|--------|
|   | Avron L. Gordon     |
|   | Incorporator        |

 

DraftedBy:

 

Briggs and Morgan, Professional Association

Attention: Avron L. Gordon, Esq.

2400IDS Center

80South Eighth Street

Minneapolis,MN  55402

 

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**ARTICLES OF AMENDMENT TO ARTICLES OF INCORPORATION OF**

 

**BREWING VENTURES INC.**

 

The undersigned officer, onbehalf of Brewing Ventures Inc., a Minnesota corporation (the “Corporation”),hereby certifies an amendment to the Corporation’s Articles of Incorporationwhich has been duly approved by the Corporation’s Board of Directors inaccordance with Sections 302A.239 and 302A.133, of the Minnesota Statutes.  Accordingly, the Articles of Incorporationof the Corporation are hereby amended as follows:

 

Article 1 of the Articles ofIncorporation of the Corporation shall read in its entirety as follows:

 

**ARTICLE 1**

 

**Name****:**Thename of this Corporation shall be Founders Food & Firkins Ltd.

 

**IN WITNESS WHEREOF,** the Corporation has caused these Articles of Amendment to the Articlesof Incorporation of the Corporation to be executed this 26th day of June, 1997.

 
|   | **Brewing Ventures Inc.**                      |
|--------|------------------------------------------------|
|   |                                           |
|   |                                           |
|   | By:                                            | /s/  Steven J. Wagenheim |   |
|   | Its:   Chief  Executive Officer |

 

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**ARTICLES OF AMENDMENT**

**TO THE**

**ARTICLES OF INCORPORATION OF**

**FOUNDERS FOOD & FIRKINS LTD.**

 

The undersigned, Mitchel IWachman, Secretary of Founders Food & Firkins Ltd., a Minnesota corporation(the “Corporation”) with the purpose of amending the Corporation’s Articles ofIncorporation under the provisions of Minnesota Statutes Sections 302A.135 and302A.139, hereby certifies that:

 

1.             The name of the corporation is Founders Food& Firkins Ltd.

 

2.                                       Article 1 of the Articles of Incorporation ofthe Corporation shall read in its entirety as follows:

 

**Article 1**

 

**Name****:** The nameof the Corporation shall be Granite City Food & Brewery Ltd.

 

**IN WITNESS WHEREOF**, the Corporation has caused these Articlesof Amendment to the Articles of Incorporation to be executed this 5thday of September 2002.

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|   | **Founders Food & Firkins Ltd.** |
|--------|--------------------------------------|
|   |                                 |
|   |                                 |
|   | /s/ Mitchel I. Wachman               |   |
|   | Mitchel I. Wachman,  Secretary       |

 

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**GRANITE CITY FOOD & BREWERY LTD.**

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**CERTIFICATE OF DESIGNATION OF RIGHTS ANDPREFERENCESOFSERIES A CONVERTIBLE PREFERRED STOCK**

 

Granite CityFood & Brewery Ltd., a Minnesota corporation (the “Corporation”), doeshereby certify that pursuant to authority vested in it by the provisions of theArticles of Incorporation, as amended, of the Corporation, the Board ofDirectors of the Corporation by action in writing by the Board of Directorstaken pursuant to Section 302A.239 of the Minnesota Business Corporation Act,did adopt the following resolution authorizing the creation and issuance of aseries of preferred stock designated as Series A Convertible PreferredStock:

 

RESOLVED that,pursuant to authority expressly granted to the Board of Directors of theCorporation by the provisions of the Articles of Incorporation of theCorporation, the Board of Directors of the Corporation hereby creates andauthorizes the issuance of a series of shares of preferred stock of theCorporation (such series being hereinafter called “this Series” or the “Series APreferred”) and hereby fixes, in addition to the relative rights, voting power,preferences and restrictions stated in the Articles of Incorporation of theCorporation, the following designation and number of shares of thisSeries and the following voting, dividend rate, liquidation preference,redemption, conversion right and other rights, preferences and restrictionswith respect to the Series A Preferred:

 

1.             Designation ofSeries of Preferred Stock.

 

Of the10,000,000 shares of preferred stock which the Corporation is authorized toissue pursuant to its Articles of Incorporation, 60,000 of such shares aredesignated as shares of Series A Convertible Preferred Stock of theCorporation, par value $.01 per share. Shares of the Series A Preferred shall have a stated value of$100.00 per share (the “Stated Value”). Such shares of Series A Preferred, together with the 90,000,000shares of authorized common stock of the Corporation, the remaining balance ofthe undesignated shares of preferred stock of the Corporation and any othercommon stock or preferred stock that may hereafter be authorized in or pursuantto the Articles of Incorporation of the Corporation, are sometimes hereinaftercollectively referred to as the “capital stock.”

 

2.             Voting Privileges.

 

(a)                                  General.  Each holder of Series A Preferred shallhave that number of votes on all matters submitted to the shareholders that isequal to the number of shares of common stock into which such holder’s sharesof Preferred Stock are then convertible, as hereinafter provided; provided, however, that (1) such number shallnot exceed the Stated Value divided by 100% of the average inside bid price ofthe common stock for the five trading days preceding the closing date, and (2)no additional votes shall accrue pursuant to any adjustment of the ConversionPrice pursuant to subparagraph 6(d) hereof.  Each holder of common stock shall have one vote on all matterssubmitted to the shareholders for each share of common stock standing in thename of such holder on the books of the Corporation.  Except as otherwise provided herein, and except as otherwiserequired by agreement or law, all shares of capital stock of the Corporationshall vote as a single class on all matters submitted to the shareholders.

 

(b)                                 AdditionalClass Votes by Series A Preferred. Without the affirmative vote or written consent of the holders (actingtogether as a class) of a majority of the shares of Series A Preferred atthe time outstanding, the Corporation shall not: (i) authorize or issue anyshares of stock having priority over Series A Preferred as to the paymentof dividends or the payment or distribution of assets

 

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upon theliquidation or dissolution, voluntary or involuntary, of the Corporation; or(ii) amend the Articles of Incorporation of the Corporation or this Certificateof Designation so as to alter adversely any existing provision relating toSeries A Preferred or the holders thereof or waive any of the rightsgranted to the holders of the Series A Preferred by the Articles ofIncorporation of the Corporation or this Certificate of Designation.

 

3.             Dividends.

 

(a)                                  Theholders of shares of Series A Preferred shall be entitled to receivecumulative cash dividends, out of funds legally available therefor, at a rateof $8.00 per share per annum and no more, before any dividend or distributionin cash or other property on common stock or any class or series of stock ofthe Corporation ranking junior to the Series A Preferred as to dividendsor on liquidation, dissolution or winding-up shall be declared or paid or setapart for payment.

 

(b)                                 Dividendson the Series A Preferred shall be payable on September 30,December 31, March 31 and June 30 of each year (each such date beinghereinafter individually a “Dividend Payment Date” and collectively the“Dividend Payment Dates”), except that if such date is a Saturday, Sunday orlegal holiday then such dividend shall be payable on the first immediatelypreceding calendar day which is not a Saturday, Sunday or legal holiday, toholders of record as they appear on the books of the Corporation on suchrespective dates, not exceeding sixty (60) days preceding such Dividend PaymentDate, as may be determined by the Board of Directors in advance of the paymentof each particular dividend.  Dividendsin arrears may be declared and paid at any time, without reference to anyregular Dividend Payment Date, to holders of record on such date as may befixed by the Board of Directors of the Corporation.  Dividends declared and paid in arrears shall be applied first tothe earliest dividend period or periods for which any dividends remainoutstanding.  The amount of dividendspayable per share of this Series for each dividend period shall be computed bydividing the annual rate of $8.00 by four. Dividends payable on this Series for the initial dividend period and forany other period less than a full quarterly period shall be computed andprorated on the basis of a 360-day year of twelve 30-day months.

 

(c)                                  Dividendson the Series A Preferred shall be cumulative and accrue from and afterthe date of original issuance thereof, whether or not declared by the Board ofDirectors.  Accrued dividends shall bearinterest at a rate of ten percent (10%) per annum.

 

(d)                                 Nocash dividend may be declared on any other class or series of stock ranking ona parity or junior with the Series A Preferred as to dividends in respectof any dividend period unless there shall also be or have been declared andpaid on the Series A Preferred accrued, unpaid dividends for all quarterlyperiods coinciding with or ending before such quarterly period, ratably inproportion to the respective annual dividend rates fixed therefor.

 

(e)                                  Dividendsmay, at the option of the Corporation, be paid in shares of fully-paid andnonassessable common stock of the Corporation, valued at the then applicableConversion Price of the Series A Preferred, as hereinafter defined.  Any portion of a dividend that would resultin issuance of a fractional share of common stock shall be paid in cash at thedividend rate.  Such securities may be“restricted securities” of the Corporation as that term is defined under Rule501(a) of the Securities and Exchange Commission under the Securities Act of1933, as amended.

 

4.             LiquidationPreference.

 

(a)                                  Inthe event of an involuntary or voluntary liquidation or dissolution of theCorporation at any time, the holders of shares of Series A Preferred shallbe entitled to receive out of the assets of the

 

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Corporation anamount per share equal to the Stated Value, plus dividends unpaid andaccumulated or accrued thereon, and any interest due thereon if any.  In the event of either an involuntary or avoluntary liquidation or dissolution of the Corporation, payment shall be madeto the holders of shares of Series A Preferred in the amounts herein fixedbefore any payment shall be made or any assets distributed to the holders ofthe common stock or any other class of shares of the Corporation ranking juniorto the Series A Preferred with respect to payment upon dissolution orliquidation of the Corporation.  If uponany liquidation or dissolution of the Corporation, the assets available fordistribution shall be insufficient to pay the holders of all outstanding sharesof Series A Preferred and any liquidation preference on any other class orseries of preferred stock of the Corporation ranking on a parity with theSeries A Preferred, to which they respectively shall be entitled, theholders of such shares of Series A Preferred and the holders of any suchother class or series of preferred stock of the Corporation ranking on a paritywith the Series A Preferred shall share pro rata in any such distributionin proportion to full amounts to which they would otherwise be respectivelyentitled.

 

(b)                                 Nothinghereinabove set forth shall affect in any way the right of each holder ofshares of Series A Preferred to convert such shares at any time and fromtime to time in accordance with Section 6 below.

 

5.             Redemption.

 

TheCorporation shall have the right to redeem all of the Series A Preferredon the following terms and conditions:

 

(a)                                  TheSeries A Preferred shall be redeemable by the Corporation at its soleoption at any time on or after the third anniversary of the first issuance ofthe Series A Preferred.  TheCorporation shall redeem such shares out of funds legally available forredemptions.  Immediately prior to authorizingor making any such redemption with respect to the Series A Preferred (andin no event later than the date specified for redemption in the redemptionnotice described below), the Corporation, by resolution of its Board ofDirectors, shall declare a dividend on the Series A Preferred to beredeemed, which shall be in an amount equal to any accrued and unpaid dividendson such Series A Preferred up to and including the date designated forsuch redemption (the “Redemption Date”). Redemption shall be made on the Redemption Date at a redemption priceper share equal to two hundred percent (200%) of the Stated Value plus anamount in cash equal to all dividends unpaid, accumulated or accrued thereonand any interest due thereon.

 

(b)                                 Noticeof any redemption pursuant to this Section 5 shall be mailed at leasttwenty (20) days in advance of the Redemption Date to the holders of record ofSeries A Preferred to be redeemed at their respective addresses shown inthe books of the Corporation.  Each suchnotice shall state:  (i) the RedemptionDate; (ii) the redemption price; (iii) the place or places where certificatesfor such shares are to be surrendered for payment of the redemption price; and(iv) that dividends on the shares to be redeemed will cease to be paid oraccrue on the Redemption Date.  To facilitatethe redemption of the Series A Preferred, the Board of Directors may fix arecord date for the determination of holders of Series A Preferred to beredeemed not more than sixty (60) days prior to the Redemption Date.

 

(c)                                  Onor before the Redemption Date, each holder of Series A Preferred shallsurrender to the Corporation the certificates representing the shares redeemed,duly endorsed or assigned to the Corporation, and the holder shall thereafterbe entitled to receive payment of the redemption price.

 

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(d)                                 Onthe Redemption Date and subject to the complete satisfaction by the Company ofits obligations due to the holders of the Series A Preferred,(i) dividends on the Series A Preferred called for redemption shallcease to accrue, (ii) such shares shall be deemed no longer outstanding,and (iii) all rights of such holder as a holder of Series A Preferred(except the right to receive from the Corporation the amounts payable uponredemption upon surrender of the certificates evidencing such shares),including the right to convert the Series A Preferred, shall cease.  Notwithstanding the delivery to any holderof Series A Preferred of a redemption notice described above, if, prior tothe close of business on the business day preceding the Redemption Date, suchholder gives written notice to the Corporation of its election to convert,pursuant to Section 6 below, any or all of the shares to be redeemed heldby such holder (accompanied by a certificate or certificates for such shares,duly endorsed or assigned to the Corporation), then the conversion of suchshares which would otherwise have been redeemed shall become effective asprovided in Section 6 hereof.

 

(e)                                  TheCorporation shall, on or after any Redemption Date, deposit with its transferagent or other redemption agent selected by the Board of Directors, as a trustfund, a sufficient sum to redeem, on the date fixed for redemption thereof, theshares then called for redemption, with instructions and authority to suchtransfer agent or other redemption agent to pay the redemption price on orafter the Redemption Date or prior thereto upon the surrender of thecertificates representing the shares then being redeemed, then and from andafter the date of such deposit, and notwithstanding that any certificate forshares so called for redemption shall not have been surrendered forcancellation, the shares so called for redemption shall no longer be deemed tobe outstanding and all rights with respect thereto shall forthwith cease andterminate, except only the right of the holders thereof to receive from suchtransfer agent or other redemption agent, at any time after the date of suchdeposit, the sum so deposited.  Anyfunds so deposited and unclaimed at the end of two (2) years from such RedemptionDate shall be released or repaid to the Corporation, after which the holders ofthe shares so called for redemption shall be entitled to receive payment of theredemption price only from the Corporation. Any interest accrued on any funds deposited shall belong to theCorporation, and shall be paid to it from time to time on demand.

 

6.             Conversion Right.

 

(a)                                  Theholder of any shares of this Series may at any time (except that if any suchshares shall have been called for redemption, then, as to such shares, suchright shall terminate at the close of business on the Redemption Date, unlessdefault shall be made by the Corporation in providing money for the payment ofthe redemption price of the shares called for redemption) convert any or all ofthe shares of this Series into fully paid and non-assessable shares of CommonStock at the rate of 63.291139 shares of Common Stock for each share of thisSeries, equivalent to a conversion price of $1.58 per share (the “ConversionPrice”), subject to adjustment pursuant to the provisions of subparagraph (c)of this paragraph 6.  Subject to theprovisions of the next sentence, shares of this Series surrendered forconversion during the period from the close of business on any record date forthe payment of dividends next preceding any Dividend Payment Date to theopening of business on such Dividend Payment Date shall (except in the case ofshares which have been called for redemption on a Redemption Date within suchperiod) be accompanied by payment of an amount equal to the dividend payable onsuch Dividend Payment Date on the shares being surrendered for conversion.  A holder of Convertible Preferred Stock onthe record date preceding a Dividend Payment Date who (or whose transferee)converts shares of Convertible Preferred Stock on a Dividend Payment Date, willreceive the dividend payable on such Convertible Preferred Stock by theCorporation on such Dividend Payment Date, and the

 

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convertingholder need not include payment in the amount of such dividend upon surrenderof shares of Convertible Preferred Stock for conversion.

 

(b)                                 Inorder to convert shares of Series A Preferred into shares of common stockof the Corporation, the holder thereof shall surrender at the officehereinabove mentioned the certificate or certificates therefor, duly endorsedto the Corporation or in blank, and give written notice to the Corporation atsuch office that such holder elects to convert such shares.  Shares of Series A Preferred shall bedeemed to have been converted immediately prior to the close of business on theday of the surrender of such shares for conversion as herein provided, and theperson entitled to receive the shares of common stock of the Corporationissuable upon such conversion shall be treated for all purposes as the recordholder of such shares of common stock at such time.  As promptly as practicable on or after the conversion date, theCorporation shall issue and deliver or cause to be issued and delivered acertificate or certificates for the number of shares of common stock of theCorporation issuable upon such conversion.

 

(c)                                  TheConversion Price shall be subject to adjustment from time to time ashereinafter provided.  Upon eachadjustment of the Conversion Price each holder of shares of Series APreferred shall thereafter be entitled to receive the number of shares ofcommon stock of the Corporation obtained by multiplying the Conversion Price ineffect immediately prior to such adjustment by the number of shares issuablepursuant to conversion immediately prior to such adjustment and dividing theproduct thereof by the Conversion Price resulting from such adjustment.

 

(d)                                 Exceptfor (i) options, warrants or other rights to purchase securities outstanding onthe date of the first issuance of this Series (provided there is no adjustmentto the terms of such options, warrants or other securities on or after the dateof issuance of the Series A Preferred); (ii) options to purchase shares ofcommon stock and the issuance of awards of common stock pursuant to stockoption or employee stock purchase plans adopted by the Corporation and sharesof common stock issued upon the exercise of such options granted pursuant tosuch plans (provided there is no adjustment to the terms of such options,awards or other securities on or after the date of issuance of the Series APreferred) (appropriately adjusted to reflect stock splits, combinations, stockdividends, reorganizations, consolidations and similar changes); or (iii)common stock issued to holders of the Series A Preferred or uponconversion or in lieu of cash dividends on the Series A Preferred, if andwhenever the Corporation shall issue any additional securities, warrants orrights or any security convertible or exchangeable into equity, securities,warrants or rights (collectively, “Convertible Securities”) withoutconsideration or for a consideration per share less than the Conversion Pricein effect immediately prior to the time of such issue or sale, then, forthwithupon such issue or sale, the Conversion Price shall be adjusted to a pricedetermined by multiplying such Conversion Price by a fraction, the numerator ofwhich shall be the number of shares of common stock outstanding immediatelyprior to such issuance plus the number of shares of common stock that theaggregate consideration received by the Corporation for such issuance wouldpurchase at such Conversion Price; and the denominator of which shall be thenumber of shares of such additional common stock and the number of shares ofcommon stock outstanding prior to such issuance.  For the purpose of the above calculation, the number of shares ofcommon stock immediately prior to such issuance shall be calculated on afully-diluted basis, as if all shares of Series A Preferred had been fullyconverted into shares of common stock and any outstanding warrants, options orother rights for the purchase of shares of stock or Convertible Securities hadbeen fully exercised as of such date. Except as provided in Section 6(g) below, no further adjustments ofthe Conversion Price shall be made upon the actual issuance of common stock orof any Convertible Securities upon the exercise of such rights or options orupon the actual issue of such common stock upon conversion or exchange of suchConvertible Securities.

 

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(e)           For purposes of thisSection 6:

 

(i)  in case any shares ofcommon stock or Convertible Securities or any rights or options to purchase anysuch common stock or Convertible Securities shall be issued or sold for cash,the consideration received therefor shall be deemed to be the amount receivedby the Corporation therefor, without deducting therefrom any expenses incurredor any underwriting commissions, discounts or concessions paid or allowed bythe Corporation in connection therewith. In case any shares of common stock or Convertible Securities or anyrights or options to purchase any such common stock or Convertible Securitiesshall be issued or sold for a consideration other than cash, the amount of theconsideration other than cash received by the Corporation shall be deemed to bethe fair value of such consideration as determined by the Board of Directors ofthe Corporation, without deducting therefrom any expenses incurred or anyunderwriting commissions, discounts or concessions paid or allowed by theCorporation in connection therewith.  Incase any shares of common stock or Convertible Securities or any rights oroptions to purchase such common stock or Convertible Securities shall be issuedin connection with any merger or consolidation in which the Corporation is thesurviving corporation, the amount of consideration therefor shall be deemed tobe the fair value as determined by the Board of Directors of the Corporation ofsuch portion of the assets and business of the non–surviving corporationor corporations as such Board shall determine to be attributable to such commonstock, Convertible Securities, rights or options, as the case may be.  In the event of any consolidation or mergerof the Corporation in which the Corporation is not the surviving corporation orin the event of any sale of all or substantially all of the assets of theCorporation for stock or other securities of any other corporation, theCorporation shall be deemed to have issued a number of shares of its commonstock for stock or securities of the other corporation computed on the basis ofthe actual exchange ratio on which the transaction was predicated and for aconsideration equal to the fair market value on the date of such transaction ofsuch stock or securities of the other corporation, and if any such calculationresults in adjustment of the Conversion Price, the determination of the numberof shares of common stock issuable upon conversion immediately prior to suchmerger, conversion or sale, for purposes of Section 6(h) below, shall bemade after giving effect to such adjustment of the Conversion Price.

 

(f)                                    Incase the Corporation shall at any time subdivide its outstanding shares ofcommon stock into a greater number of shares, the Conversion Price in effectimmediately prior to such subdivision shall be proportionately reduced, andconversely, in case the outstanding shares of common stock of the Corporationshall be combined into a smaller number of shares, the Conversion Price ineffect immediately prior to such combination shall be proportionatelyincreased.

 

(g)                                 If(i) the purchase price provided for in any right or option referred to inSection 6(d), or (ii) the additional consideration, if any, payable uponthe conversion or exchange of Convertible Securities, or (iii) the rate atwhich any Convertible Securities are convertible into or exchangeable forcommon stock, shall change at any time (other than under or by reason ofprovisions designed to protect against dilution), or any Convertible Securitiesshall terminate, expire or cease to be outstanding without exercise thereof,the Conversion Price then in effect hereunder shall forthwith be increased ordecreased to such Conversion Price as would have applied had the adjustmentsmade upon the issuance of such rights, options or Convertible Securities beenmade upon the basis of (a) the issuance of the number of shares of commonstock theretofore actually delivered upon the exercise of such options orrights or upon the conversion or exchange of such Convertible Securities, andthe total consideration received therefor, and (b) the issuance at thetime of such change of any such options, rights, or Convertible Securities thenstill outstanding for the consideration, if any, received by the Corporationtherefor and to be received on the basis of such changed price; and on theexpiration of any such option or right or

 

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thetermination of any such right to convert or exchange such ConvertibleSecurities, the Conversion Price then in effect hereunder shall forthwith beincreased to such Conversion Price as would have been obtained had theadjustments made upon the issuance of such rights or options or ConvertibleSecurities been made upon the basis of the issuance of the shares of commonstock theretofore actually delivered (and the total consideration receivedtherefor) upon the exercise of such rights or options or upon the conversion orexchange of such Convertible Securities. If the purchase price provided for in any right or option referred to inSection 6(d), or the rate at which any Convertible Securities referred toin Section 6(d) are convertible into or exchangeable for common stock,shall decrease at any time under or by reason of provisions with respectthereto designed to protect against dilution, then in case of the delivery ofcommon stock upon the exercise of any such right or option or upon conversionor exchange of any such Convertible Security, the Conversion Price then ineffect hereunder shall forthwith be decreased to such Conversion Price as wouldhave applied had the adjustments made upon the issuance of such right, optionor Convertible Security been made upon the basis of the issuance of (and thetotal consideration received for) the shares of common stock delivered asaforesaid.

 

(h)                                 Ifany capital reorganization or reclassification of the capital stock of theCorporation, or consolidation or merger of the Corporation with anothercorporation, or the sale of all or substantially all of its assets to anothercorporation shall be effected in such a way that holders of common stock shallbe entitled to receive stock, securities or assets with respect to or inexchange for common stock, then, as a condition of such reorganization,reclassification, consolidation, merger or sale, and except as otherwiseprovided herein, lawful and adequate provision shall be made whereby theholders of Series A Preferred shall thereafter have the right to receiveupon the basis and upon the terms and conditions specified herein and in lieuof the shares of the common stock of the Corporation immediately theretoforereceivable upon the conversion of Series A Preferred, such shares ofstock, securities or assets as may be issued or payable with respect to or inexchange for a number of outstanding shares of such common stock equal to thenumber of shares of such stock immediately theretofore receivable upon theconversion of Series A Preferred had such reorganization,reclassification, consolidation, merger or sale not taken place, plus alldividends unpaid and accumulated or accrued thereon to the date of suchreorganization, reclassification, consolidation, merger or sale, and in anysuch case appropriate provision shall be made with respect to the rights andinterests of the holders of Series A Preferred to the end that theprovisions hereof (including without limitation provisions for adjustments ofthe Conversion Price and of the number of shares receivable upon the conversionof Series A Preferred) shall thereafter be applicable, as nearly as may bein relation to any shares of stock, securities or assets thereafter receivableupon the conversion of Series A Preferred.  The Corporation shall not effect any such consolidation, mergeror sale, unless prior to the consummation thereof the successor corporation (ifother than the Corporation) resulting from such consolidation or merger or thecorporation purchasing such assets shall assume by written instrument executedand mailed to the registered holders of Series A Preferred, at the lastaddresses of such holders appearing on the books of the Corporation, theobligation to deliver to such holders such shares of stock, securities orassets as, in accordance with the foregoing provisions, such holders may beentitled to receive.

 

(i)                                     Uponany adjustment of the Conversion Price, the Corporation shall give writtennotice thereof, by first–class mail, postage prepaid, addressed to theregistered holders of Series A Preferred, at the addresses of such holdersas shown on the books of the Corporation, which notice shall state theConversion Price resulting from such adjustment and the increase or decrease,if any, in the number of shares receivable at such price upon the conversion ofSeries A Preferred, setting forth in reasonable detail the method ofcalculation and the facts upon which such calculation is based.  No adjustment to the conversion rate shallbe required unless such adjustment would require an increase or decrease of atleast one percent (1%) in such rate; provided, however, that any

 

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adjustmentswhich by reason of this Section 6(i) are not required to be made shall becarried forward and taken into account in any subsequent adjustment; and,provided further, that adjustment shall be required and made in accordance withthe provisions of this Section 6 (other than this Section 6(i)) notlater than such time as may be required in order to preserve the tax-freenature of a distribution to the holders of shares of common stock.  All calculations under this Section 6shall be made to the nearest cent or to the nearest one-hundredth of a share,as the case may be.  Anything in thisSection 6 to the contrary notwithstanding, the Corporation shall beentitled to make such increases in the conversion rate in addition to thoserequired by this Section 6 as it in its discretion shall determine to beadvisable in order that any stock dividends, subdivisions of shares,distribution of rights to purchase stock or securities, or distribution ofsecurities convertible into or exchangeable for stock hereafter made by theCorporation to its stockholders shall not be taxable.

 

(j)                                     Incase at any time: (i) there shall be any capital reorganization, orreclassification of the capital stock of the Corporation, or consolidation ormerger of the Corporation with, or sale of all or substantially all of itsassets to, another Corporation; or (ii) there shall be a voluntary orinvoluntary dissolution, liquidation or winding up of the Corporation; then, inany one or more of said cases, the Corporation shall give written notice, byfirst–class mail, postage prepaid, addressed to the registered holders ofSeries A Preferred at the addresses of such holders as shown on the booksof the Corporation, of the date on which (a) the books of the Corporationshall close or a record shall be taken for such dividend, distribution orsubscription rights, or (b) such reorganization, reclassification,consolidation, merger, sale, dissolution, liquidation or winding up shall takeplace, as the case may be.  Such noticeshall also specify the date as of which the holders of common stock of recordshall participate in such dividend, distribution or subscription rights, orshall be entitled to exchange their common stock for securities or otherproperty deliverable upon such reorganization, reclassification, consolidation,merger, sale, dissolution, liquidation, or winding up, as the case may be.  Such written notice shall be given at leasttwenty (20) days prior to the action in question and not less than twenty (20)days prior to the record date or the date on which the Corporation’s transferbooks are closed in respect thereto.

 

(k)                                  Ifany event occurs as to which in the opinion of the Board of Directors of theCorporation the other provisions of this Section 6 are not strictlyapplicable or if strictly applicable would not fairly protect the rights of theholders of Series A Preferred in accordance with the essential intent andprinciples of such provisions, then the Board of Directors shall make anadjustment in the application of such provisions, in accordance with suchessential intent and principles, so as to protect such rights as aforesaid.

 

(l)                                     Asused in this Section 6 the term “common stock” shall mean and include theCorporation’s presently authorized common stock and any additional common stockthat may be authorized by due action of the Corporation’s Board of Directorsand shareholders entitled to vote thereon.

 

(m)                               Nofractional shares of common stock shall be issued upon conversion, but, insteadof any fraction of a share which would otherwise be issuable, the Corporationshall pay a cash adjustment in respect of such fraction in an amount equal tothe same fraction of the market price per share of common stock as of the closeof business on the day of conversion. “Market price” shall mean if the common stock is traded on a securitiesexchange or on the NASDAQ Stock Market, the closing sale price of the commonstock on such exchange or the NASDAQ Stock Market, or, if the common stock isotherwise traded in the over-the-counter market, the closing bid price, in eachcase averaged over a period of twenty (20) consecutive trading days prior tothe date as of which “market price” is being determined.  If at any time the common stock is nottraded on an exchange or the NASDAQ Stock Market, or otherwise traded in theover-the-counter

 

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market, the“market price” shall be deemed to be the higher of (i) the book valuethereof as determined by any firm of independent public accountants ofrecognized standing selected by the Board of Directors of the Corporation as ofthe last day of any month ending within sixty (60) days preceding the date asof which the determination is to be made, or (ii) the fair value thereofdetermined in good faith by the Board of Directors of the Corporation as of adate which is within fifteen (15) days of the date as of which thedetermination is to be made.

 

(n)                                 TheCorporation covenants that it will at all times reserve and keep available,solely for the purpose of issue upon conversion of the shares of this Series,such number of shares of common stock as shall be issuable upon the conversionof all such outstanding shares; provided, that nothing contained herein shallbe construed to preclude the Corporation from satisfying its obligations inrespect of the conversion of the shares by delivery of purchased shares ofcommon stock of the Corporation.  Forthe purpose of this Section 6(n), the full number of shares of commonstock issuable upon the conversion of all outstanding shares of this Seriesshall be computed as if at the time of computation of such number of shares ofcommon stock all outstanding shares of this Series were held by a singleholder.

 

(o)                                 TheCorporation covenants that if any shares of common stock required to bereserved for purposes of conversion of the shares of this Series requireregistration with or approval of any governmental authority under any federalor state law, before such shares may be issued upon conversion, the Corporationwill cause such shares to be duly registered or approved, as the case may be.

 

(p)                                 TheCorporation covenants that all shares of common stock issued upon conversion ofthe shares of this Series will upon issue be fully paid and nonassessable andnot subject to any preemptive rights.

 

7.             AutomaticConversion.

 

(a)                                  TheSeries A Preferred shall automatically be converted into shares of commonstock of the Corporation, without any act by the Corporation or the holders ofthe Series A Preferred, at any time after the second anniversary of theinitial issuance of Series A Preferred (i) when the market price of thecommon stock for twenty (20) consecutive trading days exceeds two hundredpercent (200%) of the Conversion Price and the common stock has an averagedaily trading volume of at least ten thousand (10,000) shares during suchconsecutive twenty (20) day period; or (ii) upon the closing of a publicoffering by the Corporation in which (1) the aggregate public offering price ofthe securities sold for cash by the Corporation in the offering is at least$8,000,000 (exclusive of any overallotment amount); (2) the public offeringprice per share is at least $4.00; and (3) the offering is underwritten on afirm commitment basis by an underwriter or a group of underwriters representedby an underwriter or underwriters, that is a member of the National Associationof Securities Dealers, Inc.; provided that in the case of (i) or (ii), aregistration statement has been filed and has become effective with the U.S.Securities and Exchange Commission and applicable “blue sky” laws of each statein which a holder of the Series A Preferred resides with respect to thecommon stock underlying the Series A Preferred to permit resale of theshares received upon conversion.

 

(b)                                 Uponsuch conversion, each holder of certificates for shares of Series APreferred shall immediately surrender such certificates in exchange forappropriate stock certificates representing a share or shares of common stockof the Corporation.  Each holder of ashare of Series A Preferred so converted shall be entitled to receive thefull number of shares of common stock into

 

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which suchshare of Series A Preferred held by such holder could be converted if suchholder had exercised its conversion right at the time of closing of such publicoffering.

 

(c)                                  Asused herein, the term “closing” shall mean the delivery by the Corporation tothe underwriters of certificates representing the shares of common stock of theCorporation offered to the public against delivery to the Corporation by suchunderwriters of payment therefor.  Theterm “firm commitment basis” with respect to the underwriting of such publicoffering shall mean a commitment pursuant to a written underwriting agreementunder which the nature of the underwriters’ commitment is such that allsecurities must be purchased by such underwriters, if any shares are purchased.

 

8.             Relative Rights ofSeries A Preferred Stock.

 

So long as anyof the Series A Preferred is outstanding the Corporation will not withoutthe affirmative vote or written consent of the holders of at least a majorityof the Series A Preferred at the time outstanding, voting separately as aclass:  (i) declare, or pay, or setapart for payment, any dividends (other than dividends payable in stock rankingjunior to the Series A Preferred as to dividends and upon liquidation,dissolution or winding-up) or make any distribution in cash or other propertyon any other class or series of stock of the Corporation ranking junior to theSeries A Preferred either as to dividends or upon liquidation, dissolutionor winding-up and will not redeem, purchase or otherwise acquire any shares ofany such junior class or series if at the time of making such declaration,payment, distribution, redemption, purchase or acquisition the Corporationshall be in default with respect to any dividend payable on, or any obligationto retire shares of, Series A Preferred; or (ii) authorize, create orissue, or increase the authorized or issued amount, of any class or series ofstock ranking senior to the Series A Preferred as to payment of dividends,as to payment or distribution of assets upon the liquidation or dissolution ofthe corporation, or as to voting rights (on an as-if-converted basis orotherwise); or (iii) amend, alter or repeal (whether by merger, consolidationor otherwise) any of the provisions of the Corporation’s Articles ofIncorporation, or of this Certificate of Designation of Rights and Preferences,so as to adversely affect the preferences, rights, privileges or powers of theSeries A Preferred; provided, however, that any increase in the number ofauthorized preferred stock or the creation and issuance of other series ofpreferred stock ranking in a parity with or junior to the Series APreferred shall not be deemed to affect such preferences, rights, privileges orpowers.

 

IN WITNESSWHEREOF, the undersigned has executed this Certificate of Designation of Rightsand Preferences on behalf of the Corporation as of the 30th day ofSeptember, 2002.

 
|   | GRANITE CITY  FOOD & BREWERY LTD. |
|--------|---------------------------------------|
|   |                                  |
|   | By                                    | /s/ Steven J. Wagenheim |   |
|   |                                  | Steven J. Wagenheim |
|   | Its                                   | President and Chief  Executive Officer |
|        |                                       |  |  |  |

 

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