Document:

EXHIBIT 10.1

 

AMENDMENT
NO. 2 TO BRIDGE LOAN AGREEMENT

 

AMENDMENT
NO. 2 TO BRIDGE LOAN AGREEMENT (“Amendment”), dated as of April 30,
2009, is made by and among Granite City Food & Brewery Ltd. (“Granite
City”), and Granite City Restaurant Operations, Inc. (“GCROI”) and Harmony
Equity Income Fund, L.L.C. and Harmony Equity Income Fund II, L.L.C., each
South Dakota limited liability companies.

 

RECITALS

 

A.            This Amendment amends the Bridge Loan
Agreement by and among the foregoing parties dated March 30, 2009 (as
amended, the “Agreement”).

 

B.            All capitalized terms used in this
Amendment and not otherwise defined shall have the meanings set forth in the
Agreement.

 

C.            The parties hereto desire to extend the
date by which the Lenders are required to make additional loans to the
Borrowers.

 

In consideration of the
foregoing, the parties hereto agree as follows:

 

1.             Loans. 
The reference to “April 30, 2009” in Section 2.1 of the
Agreement is hereby replaced with “May 29, 2009.”

 

2.             Remainder of Agreement. 
Except as provided herein, the terms of the Agreement unaffected by the
Amendment shall remain in full force and effect.

 

[Signature Pages Follow]

 

 

IN WITNESS WHEREOF, the
parties hereto have caused this Amendment to be executed as of the date first
above written.

 

	
  BORROWERS:

  	
  GRANITE CITY FOOD & BREWERY LTD.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ James G. Gilbertson

  
	
   

  	
   

  	
  Name: James G. Gilbertson

  
	
   

  	
   

  	
  Its: Chief Financial
  Officer

  
	
   

  	
   

  
	
   

  	
  Address for Notices:

  
	
   

  	
  5402 Parkdale Drive,
  Suite 101

  
	
   

  	
  Minneapolis, MN 55416

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  GRANITE CITY RESTAURANT
  OPERATIONS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James G. Gilbertson

  
	
   

  	
   

  	
  Name: James G. Gilbertson

  
	
   

  	
   

  	
  Its: Chief Financial
  Officer

  
	
   

  	
   

  
	
   

  	
  Address for Notices:

  
	
   

  	
  5402 Parkdale Drive,
  Suite 101

  
	
   

  	
  Minneapolis, MN 55416

  
	
   

  	
   

  
	
   

  	
   

  
	
  ADMINISTRATIVE AGENT:

  	
  HARMONY EQUITY INCOME FUND, L.L.C.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Eugene E. McGowan

  
	
   

  	
   

  	
  Name: Eugene E. McGowan

  
	
   

  	
   

  	
  Its: Managing Member

  
	
   

  	
   

  
	
   

  	
  Address for Notices:

  
	
   

  	
  201 S. Phillips Avenue,
  Suite 100

  
	
   

  	
  Sioux Falls, SD 57104

  

 

2

 

	
  LENDERS:

  	
  HARMONY EQUITY INCOME FUND, L.L.C.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Eugene E. McGowan

  
	
   

  	
   

  	
  Name: Eugene E. McGowan

  
	
   

  	
   

  	
  Its: Managing Member

  
	
   

  	
   

  
	
   

  	
  Address for Notices:

  
	
   

  	
  201 S. Phillips Avenue,
  Suite 100

  
	
   

  	
  Sioux Falls, SD 57104

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  HARMONY EQUITY INCOME FUND II,
  L.L.C.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Eugene E. McGowan

  
	
   

  	
   

  	
  Name: Eugene E. McGowan

  
	
   

  	
   

  	
  Its: Managing Member

  
	
   

  	
   

  
	
   

  	
  Address for Notices:

  
	
   

  	
  201 S. Phillips Avenue,
  Suite 100

  
	
   

  	
  Sioux Falls, SD 57104

  

 

3EXHIBIT 10.2

 

AMENDMENT
NO. 1 TO BRIDGE LOAN AGREEMENT

 

AMENDMENT
NO. 1 TO BRIDGE LOAN AGREEMENT (“Amendment”), dated as of April 22,
2009, is made by and among Granite City Food & Brewery Ltd. (“Granite
City”), and Granite City Restaurant Operations, Inc. (“GCROI”) and Harmony
Equity Income Fund, L.L.C. and Harmony Equity Income Fund II, L.L.C., each
South Dakota limited liability companies.

 

RECITALS

 

A.            This Amendment amends the Bridge Loan
Agreement by and among the foregoing parties dated March 30, 2009 (the “Agreement”).

 

B.            All capitalized terms used in this
Amendment and not otherwise defined shall have the meanings set forth in the
Agreement.

 

C.            The parties hereto desire to amend the
Agreement to enable Granite City to continue to comply with the Nasdaq Listing
Rules.

 

In consideration of the
foregoing, the parties hereto agree as follows:

 

1.             The form of Note payable to each
respective Lender is hereby amended in the form attached hereto as Exhibit A.  Each Lender hereby agrees to surrender its
existing Note to accept in replacement thereof, amended notes in the form of Exhibit A.

 

2.             The form of Warrant payable to each
respective Lender is hereby amended in the form attached hereto as Exhibit B.  Each Lender hereby agrees to surrender its
existing Warrant to accept in replacement thereof, amended notes in the form of
Exhibit B.

 

3.             Remainder of Agreement. 
Except as provided herein, the terms of the Agreement unaffected by the
Amendment shall remain in full force and effect.

 

[Signature Pages Follow]

 

 

IN WITNESS WHEREOF, the
parties hereto have caused this Amendment to be executed as of the date first
above written.

 

	
  BORROWERS:

  	
  GRANITE CITY FOOD & BREWERY LTD.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James G. Gilbertson

  
	
   

  	
   

  	
  Name: James G. Gilbertson

  
	
   

  	
   

  	
  Its: Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
  Address for Notices:

  
	
   

  	
  5402 Parkdale Drive, Suite 101

  
	
   

  	
  Minneapolis, MN 55416

  
	
   

  	
   

  
	
   

  	
  GRANITE CITY RESTAURANT OPERATIONS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ James G. Gilbertson

  
	
   

  	
   

  	
  Name: James G. Gilbertson

  
	
   

  	
   

  	
  Its: Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
  Address for Notices:

  
	
   

  	
  5402 Parkdale Drive, Suite 101

  
	
   

  	
  Minneapolis, MN 55416

  
	
   

  	
   

  
	
  ADMINISTRATIVE AGENT:

  	
  HARMONY EQUITY INCOME FUND, L.L.C.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Eugene E. McGowan

  
	
   

  	
   

  	
  Name: Eugene E. McGowan

  
	
   

  	
   

  	
  Its: Managing Member

  
	
   

  	
   

  
	
   

  	
  Address for Notices:

  
	
   

  	
  201 S. Phillips Avenue, Suite 100

  
	
   

  	
  Sioux Falls, SD 57104

  

 

2

 

	
  LENDERS:

  	
  HARMONY EQUITY INCOME FUND, L.L.C.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Eugene E. McGowan

  
	
   

  	
   

  	
  Name: Eugene E. McGowan

  
	
   

  	
   

  	
  Its: Managing Member

  
	
   

  	
   

  
	
   

  	
  Address for Notices:

  
	
   

  	
  201 S. Phillips Avenue, Suite 100

  
	
   

  	
  Sioux Falls, SD 57104

  
	
   

  	
   

  
	
   

  	
  HARMONY EQUITY INCOME FUND II, L.L.C.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Eugene E. McGowan

  
	
   

  	
   

  	
  Name: Eugene E. McGowan

  
	
   

  	
   

  	
  Its: Managing Member

  
	
   

  	
   

  
	
   

  	
  Address for Notices:

  
	
   

  	
  201 S. Phillips Avenue, Suite 100

  
	
   

  	
  Sioux Falls, SD 57104

  

 

3

 

EXHIBIT
A

 

NEITHER
THIS NOTE NOR THE SECURITIES ISSUABLE UPON EXERCISE OF THIS NOTE HAVE BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY.

 

Granite City Food & Brewery Ltd.

Granite City Restaurant Operations, Inc.

 

FORM OF

9% CONVERTIBLE PROMISSORY NOTE

(As Amended April 21, 2009)

 

	
  $400,000.00

  	
   

  	
  Minneapolis, Minnesota

  
	
  Note
  No. 2009-        

  	
   

  	
             ,
  2009

  

 

FOR
VALUE RECEIVED, GRANITE CITY FOOD & BREWERY LTD.,
a Minnesota corporation (the “Company”), and Granite City Restaurant Operations, Inc., a Minnesota
corporation (“GCROI”, and together with the
Company, the “Borrowers”) hereby jointly and
severally promise to pay to the order of                                                 ,
a South Dakota limited liability company, or assigns (“Holder”),
at the address for notices to “Lender” set
forth in the Credit Agreement (as defined below) (or such other address as
Holder shall designate in writing from time to time), the principal amount of FOUR
HUNDRED THOUSAND AND NO/100 DOLLARS ($400,000.00) in lawful money of the United
States of America, together with interest from the date hereof on the principal
balance outstanding from time to time at the rate of nine percent (9%) per year
(computed on the basis of the actual number of days elapsed and a 360-day year)
or such lesser rate as shall be the maximum rate allowable under applicable
law.  Unless converted or prepaid earlier
pursuant to the provisions of this Note set forth below, the principal amount
shall be payable in six equal monthly installments commencing on May 1,
2010 and on the first day of each month thereafter, with the final installment
of any unpaid principal amount being due and payable on October 1, 2010
(the “Maturity Date”).  All accrued interest on this Note shall be
due and payable (i) quarterly in arrears commencing on July 1, 2009
and on the first day of each consecutive calendar quarter thereafter, to and
including April 1, 2010; and (ii) monthly in arrears commencing on May 1,
2010 and on the first day of each month thereafter; with a final payment of any
accrued and unpaid interest due on the Maturity Date. This Note is one in the
series of promissory notes substantially identical in form and designated as No. -1
which may be issued in the Offering (as defined below).

 

A-1

 

1.             Loan Agreement.  This Note has been issued pursuant to that
certain Bridge Loan Agreement dated of even date herewith by and between the
Borrower and Holder (the “Credit Agreement”)
which contemplates (a) an initial offer and sale by the Borrower of an
aggregate of $1,000,000 in principal amount of convertible promissory notes and
warrants to purchase an aggregate of 400,000 shares of the Company’s common
stock, $0.01 par value per share (the “Common Stock”),
and (b) potential future offers and sales by the Borrower of an aggregate
of $2,000,000 in additional principal amount of convertible promissory notes
and warrants to purchase an aggregate of 800,000 additional shares of Common
Stock.  The convertible promissory notes
and warrants specified in 1(a) and (b) are collectively referred to
herein as the “Notes” and “Warrants”,
respectively. The Borrowers’ offer and sale of the Notes and Warrants is
referred to herein as the “Offering”.  The provisions of the Loan Agreement are
incorporated herein by reference with the same force and effect as if fully set
forth herein.  All capitalized terms not
defined herein shall have the meanings ascribed to them in the Loan Agreement.

 

2.             Prepayment.  The Borrowers may, or may be required to,
prepay this Note pursuant to Section 2.4 of the Credit Agreement.

 

3.             Conversion.

 

(a)           Conversion.  At any time prior to the Maturity Date,
Holder shall have the right to convert all or any portion of up to twenty
percent (20%) of the original outstanding principal balance of this Note into
shares of Common Stock (the “Conversion Shares”)
at a conversion price per share (the “Conversion Price”)
equal to $0.50 (subject to adjustment as provided in Section 4).
Notwithstanding the foregoing, the number of Conversion Shares issuable upon
exercise of this Note, when combined with the aggregate number of Conversion
Shares previously issued upon conversion of the Notes and the aggregate number
of shares of Common Stock previously issued upon exercise of the Warrants (“Warrant Shares”), may not, in the absence of approval by the
Company’s shareholders, exceed 19.9% of the number of shares of Common Stock
issued and outstanding immediately prior to the effective date of the Loan
Agreement.  If any conversion of this
Note pursuant to this Section 3(a) would otherwise result in the
issuance of Conversion Shares in excess of the limitation set forth in the
immediately preceding sentence (the “Excess Conversion”),
the Company will use its reasonable best efforts to prepare and file requisite
proxy materials with the Securities and Exchange Commission and hold a meeting
of its shareholders for the purpose of seeking approval for the Excess
Conversion (the “Proposal”).  In furtherance of its obligations under this Section 3(a),
the Company’s Board of Directors shall recommend to the Company’s shareholders,
which recommendation shall not be revoked or amended, that the shareholders
vote in favor of and approve the Proposal and shall cause the Company to use
its best efforts to solicit approval of the shareholders for the Proposal.  If the Company’s shareholders approve the
Proposal, the Company will promptly effect the Excess Conversion.  If the Company’s shareholders do not approve
the Proposal, the Holder acknowledges that the Company will not make the Excess
Conversion and that the Company may not otherwise compensate the Holder for the
failure to make the Excess Conversion. 
In the event there shall be an Excess Conversion, the Company shall 

 

A-2

 

have
the right to deposit the principal balance of the Note represented by the
Excess Conversion and defease the Note (or portion thereof) following
performance of all obligations of the Company under the Loan Agreement.

 

(b)           Manner of Conversion.  To convert any indebtedness evidenced by this
Note into shares of Common Stock, Holder shall (i) surrender this Note at
the principal office of the Company, duly endorsed in blank, and (ii) give
written notice to the Company, substantially in the form attached hereto as Exhibit A,
of the dollar amount of principal and accrued interest that Holder elects to
convert into shares Common Stock. As promptly as possible thereafter, and in no
event later than ten (10) days after the Company’s receipt of such notice,
the Company shall issue and deliver to Holder stock certificates representing
the number of shares of Common Stock into which the indebtedness evidenced by
this Note has been converted. In the event of conversion of an amount less than
the entire principal balance that remains outstanding, the Company shall
deliver to Holder a convertible promissory note, with the terms and provisions
of this Note, in the principal amount equal to any remaining indebtedness of
this Note not converted by Holder, including accrued and unpaid interest.

 

4.             Conversion Price Adjustments.  The provisions of this Note are subject to
adjustment as provided in this Section 4.

 

(a)           Stock Dividends and Splits.  If the Company, at any time while this Note
is outstanding, (i) pays a stock dividend on its Common Stock or otherwise
makes a distribution on any class of capital stock that is payable in shares of
Common Stock, (ii) subdivides outstanding shares of Common Stock into a
larger number of shares, or (iii) combines outstanding shares of Common
Stock into a smaller number of shares, then in each such case the Conversion
Price shall be multiplied by a fraction of which the numerator shall be the
number of shares of Common Stock outstanding immediately before such event and
of which the denominator shall be the number of shares of Common Stock
outstanding immediately after such event. 
Any adjustment made pursuant to clause (i) of this paragraph shall
become effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution, and any
adjustment pursuant to clause (ii) or (iii) of this paragraph shall
become effective immediately after the effective date of such subdivision or
combination.

 

(b)           Fundamental Transactions.  If, at any time while this Note is
outstanding, (i) the Company effects any merger or consolidation of the
Company with or into another Person in which the Company is not the survivor, (ii) the
Company effects any sale of all or substantially all of its assets in one or a
series of related transactions, (iii) any tender offer or exchange offer
(whether by the Company or another Person) is completed pursuant to which
holders of Common Stock are permitted to tender or exchange their shares for
other securities, cash or property, or (iv) the Company effects any
reclassification of the Common Stock or any compulsory share exchange pursuant
to which the Common Stock is effectively converted into or exchanged for other
securities, cash or property (other than as a result of a subdivision or
combination of shares of Common Stock covered by Section 4(a) above)
(in any such case, a “Fundamental Transaction”),
then the Holder shall have the right thereafter to receive, upon conversion of
this Note, the same amount and kind of securities, cash or property as it would
have 

 

A-3

 

been entitled to receive upon the occurrence
of such Fundamental Transaction if it had been, immediately prior to such
Fundamental Transaction, the holder of the number of Conversion Shares then issuable
upon conversion of this Note without regard to any limitations on exercise
contained herein (the “Alternate Consideration”).  For purposes of any such exercise, the
determination of the Conversion Price shall be appropriately adjusted to apply
to such Alternate Consideration based on the amount of Alternate Consideration
issuable in respect of one share of Common Stock in such Fundamental
Transaction, and the Company shall apportion the Conversion Price among the
Alternate Consideration in a reasonable manner reflecting the relative value of
any different components of the Alternate Consideration.  If holders of Common Stock are given any
choice as to the securities, cash or property to be received in a Fundamental
Transaction, then the Holder shall be given the same choice as to the Alternate
Consideration it receives upon any conversion of this Note following or
concurrent with such Fundamental Transaction. 
The terms of any agreement pursuant to which a Fundamental Transaction
is effected shall include terms requiring any such successor or surviving
entity to comply with the provisions of this paragraph (b) and insuring
that the Note (or any such replacement security) will be similarly adjusted
upon any subsequent transaction analogous to a Fundamental Transaction.

 

(c)           Subsequent
Equity Sales.

 

(i)            Subject to the limitations
set forth below, if the Company at any time while this Note is outstanding,
shall issue or sell any New Securities (including any Convertible Securities)
at a price per share less than the Conversion Price then in effect, then and in
each such case thereafter, the then applicable Conversion Price shall be
reduced to an adjusted Conversion Price as of the opening of
business on the date of such issue or sale, determined by multiplying
such applicable Conversion Price by a fraction, the numerator of which shall be
the number of shares of Common Stock outstanding immediately prior to such
issuance plus the number of shares of Common Stock which the aggregate
consideration received by the Company for the total number of New Securities so
issued would purchase at such Conversion Price in effect immediately prior to
such issuance, and the denominator of which shall be the sum of the number of
shares of Common Stock outstanding immediately prior to such issuance plus the
number of such New Securities so issued. 
Such adjustment shall be made whenever such Common Stock or Common Stock
Equivalents are issued.  For purposes of
adjusting the Conversion Price under this Section 4(c)(i), Common Stock
outstanding shall include all shares of Common Stock actually issued and
outstanding and shares of Common Stock issuable upon conversion of Convertible
Securities actually issued and outstanding. 
Notwithstanding the provisions of this Section 4(c)(i), unless the
Company receives the approval of its shareholders as prescribed by the NASDAQ
Marketplace Rules, such adjustment shall not result in the Conversion Price
being reduced below $0.345, as such price may be adjusted from time to time
pursuant to Sections 4(a) or (b). 
The foregoing limitation shall not apply to adjustments to the
Conversion Price required to be made pursuant to Sections 4(a) or (b) hereof.

 

A-4

 

(ii)           Subject to Section 4(c)(i),
if at any time while this Note is outstanding, the Company shall issue or sell
any Convertible Securities, there shall be determined as of the date of issue
the conversion or exercise price per share for which New Securities are
issuable upon the conversion or exchange thereof, such determination to be made
by dividing (X) the total amount received or receivable by the Company as
consideration for the issue or sale of such Convertible Securities, plus the
minimum aggregate amount of additional consideration, if any, payable to the
Company upon the conversion or exchange thereof, by (Y) the maximum number
of New Securities issuable upon conversion or exchange of all of such
Convertible Securities; and such issue or sale shall be deemed to be an issue
or sale for cash (as of the date of issue or sale of such Convertible
Securities) of such maximum number of New Securities at the price per share so
determined.  If such Convertible
Securities shall by their terms provide for an increase or increases, with the
passage of time, in the amount of additional consideration, if any, payable to
the Company, or in the rate of exchange, upon the conversion or exchange
thereof the adjusted Conversion Price shall, forthwith upon any such increase
becoming effective, be readjusted (but to no greater extent than originally
adjusted) to reflect the same. If any rights of conversion or exchange
evidenced by such Convertible Securities shall expire without having been
exercised, any adjusted Conversion Price shall forthwith be readjusted to be
the adjusted Conversion Price which would have been in effect had an adjustment
been made on the basis that the only New Securities issued or sold were those
actually issued upon the conversion or exchange of such Convertible Securities,
and that they were issued or sold for the consideration actually received by
the Company upon such conversion or exchange, plus the consideration, if any,
actually received by the Company for the issue or sale of such Convertible
Securities as were actually converted or exchanged.  If any adjustment to the Conversion Price
would result in a price below $0.345 (as such price may be adjusted from time
to time pursuant to Section 4(a) or (b)) the Company will, upon
written request of Holder, use its reasonable best efforts to prepare and file
requisite proxy materials with the Securities and Exchange Commission and hold
a meeting of the shareholders for the purpose of seeking approval of such lower
Conversion Price (the “Conversion Price Proposal”).  In furtherance of its obligations under this Section 3(c),
the Company’s Board of Directors shall recommend to the Company’s shareholders,
which recommendations shall not be revoked or amended, that the shareholders
vote in favor of and approve the lower Conversion Price Proposal and shall
cause the Company to use its best efforts to solicit approval of the
shareholders for the lower Price Conversion Proposal.  If the Company’s shareholders approve the
lower Price Conversion Proposal, the Company will promptly effect the adjustment
to the Conversion Price which is below $.345 (subject to any adjustment
pursuant to Sections 4(a) or (b). 
If the Company’s shareholders do not approve the lower Conversion Price
Proposal, the Holder acknowledges that the Company may not effect an adjustment
to the Conversion Price and may not otherwise compensate the Holder for the
failure to make such adjustment

 

A-5

 

(iii)          Upon any issuance or sale
for a consideration other than cash, or a consideration part of which is other
than cash, of any New Securities or Convertible Securities or any rights,
warrants or options to subscribe for, purchase or otherwise acquire any New
Securities or Convertible Securities, the amount of the consideration other than
cash received by the Company shall be deemed to be the fair value of such
consideration as determined in good faith by the Board.  In case any New Securities or Convertible
Securities or any rights, warrants or options to subscribe for, purchase or
otherwise acquire any New Securities or Convertible Securities shall be issued
or sold together with other stock or securities or other assets of the Company
for a consideration which covers two or more thereof, the consideration for the
issue or sale of such New Securities or Convertible Securities or such rights,
warrants or options shall be deemed to be the portion of such consideration
allocated thereto in good faith by the Board.

 

(d)           Definitions.  For purposes of this Note:

 

(i)            “Board” means the
Board of Directors of the Company.

 

(ii)           “Convertible Securities” shall mean
evidences of indebtedness, shares of stock or other securities that are at any
time, directly or indirectly, convertible into or exchangeable for New
Securities.

 

(iii)          “New Securities” shall mean
equity securities of the Company, whether now authorized or not, or rights,
options, or warrants to purchase said equity securities, or securities of any
type whatsoever that are, or may become, convertible into or exchangeable into
or exercisable for said equity securities, other than (i) shares of Common
Stock or options or other rights to acquire such Common Stock issued to
employees, consultants, officers or directors of the Company pursuant to any
stock option plan or other compensatory arrangement approved by the Board; (ii) shares
of Common Stock issued by the Company in a firm commitment underwritten public
offering pursuant to a registration under the Securities Act of 1933, as
amended; (iii) the issuance of securities pursuant to the acquisition of
another business entity or business segment of any such entity by the Company
by merger, purchase of all or substantially all the assets or other
reorganization whereby the Company will own greater than 50% of the voting
power of such business entity or business segment of any such entity, if such
issuance is approved by the Board; (iv) securities issued in connection
with any stock split, stock dividend or recapitalization of the Company; (v) securities
issued in the future in connection with the transactions contemplated by the
Loan Agreement, or (vi) securities issued upon exercise or conversion of
any option, warrant or other convertible security outstanding as of the date
hereof.

 

(iv)          “Person” shall mean any
natural person, company, corporation, limited liability company, general
partnership, limited partnership, trust, proprietorship, joint venture,
business organization or governmental entity.

 

A-6

 

(e)           Calculations.  All calculations under this Section 4
shall be made to the nearest cent.  The
number of shares of Common Stock outstanding at any given time shall not
include shares owned or held by or for the account of the Company, and the
disposition of any such shares shall be considered an issue or sale of Common
Stock.

 

(f)            Notice of Adjustments.  Upon the occurrence of each adjustment
pursuant to this Section 4, the Company at its expense will promptly
compute such adjustment in accordance with the terms of this Note and prepare a
certificate setting forth such adjustment, including a statement of the
adjusted Conversion Price, describing the transactions giving rise to such
adjustments and showing in detail the facts upon which such adjustment is
based.  Upon written request, the Company
will promptly deliver a copy of each such certificate to the Holder.

 

(g)           Notice of Corporate Events.  If, while this Note remains outstanding, the
Company (i) declares a dividend or any other distribution of cash,
securities or other property in respect of its Common Stock, including without
limitation any granting of rights or warrants to subscribe for or purchase any
capital stock of the Company, (ii) authorizes or approves, enters into any
agreement contemplating or solicits stockholder approval for any Fundamental
Transaction or (iii) authorizes the voluntary dissolution, liquidation or
winding up of the affairs of the Company, then the Company shall deliver to the
Holder a notice describing the material terms and conditions of such
transaction (but only to the extent such disclosure would not result in the
dissemination of material, non-public information to the Holder) at least 10
calendar days prior to the applicable record or effective date on which a Person
would need to hold Common Stock in order to participate in or vote with respect
to such transaction, and the Company will take all steps reasonably necessary
in order to insure that the Holder is given the practical opportunity to
convert this Note prior to such time so as to participate in or vote with
respect to such transaction; provided, however, that the failure to deliver
such notice or any defect therein shall not affect the validity of the
corporate action required to be described in such notice.

 

5.             Events of Default.  Any default in the payment
or performance of any obligation under this Note, or any defined “Event of
Default” under the Loan Agreement, shall constitute an “Event of
Default” under this Note.

 

6.             Remedies Upon Events of Default.  Upon the occurrence of an Event of Default,
the Holder may exercise such rights and remedies in accordance with, and as
permitted under, the Credit Agreement.

 

7.             Investment Intent.  The Holder adopts and agrees to be bound by Section 2.9(a) if
the Investor Rights Agreement of even date herewith between the Company and
Holder, the terms of which are incorporated herein by reference.

 

8.             Successors or Assigns. The Borrowers
and Holder agree that all of the terms of this Note shall be binding on their
respective successors and assigns, and that the term “Borrowers” and the term “Holder”
as used herein shall be deemed to include, for all purposes, the respective
designees, successors, assigns, heirs, executors and administrators.

 

A-7

 

9.             Presentment.  The Borrowers hereby waive presentment for
payment, notice of dishonor, protest and notice of protest and, in the event of
default hereunder.  The Borrowers agree
to be jointly and severally liable for and to pay all costs of collection,
including reasonable attorneys’ fees.

 

IN
WITNESS WHEREOF, each Borrower has caused this Note to be executed on its
behalf by its duly authorized officer on the day and year first above written.

 

	
   

  	
  GRANITE
  CITY FOOD & BREWERY LTD.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  GRANITE
  CITY RESTAURANT OPERATIONS, INC. 

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  

 

A-8

 

EXHIBIT A

 

To:          Granite City Food &
Brewery Ltd.

 

	
  NOTICE
  OF CONVERSION OF PROMISSORY NOTE —

  	
  To
  be Completed and Signed by the Registered Holder to Convert Promissory Note

  

 

The
undersigned is the Holder named in the original Promissory Note (the “Note”) attached hereto in the original principal amount of
$                  
and dated                     ,
2009 made payable by Granite City Food & Brewery Ltd. (the “Company”) and Granite City Restaurant Operations, Inc.
(“GCROI”, and together with the Company,
the “Borrowers”) to the Holder.  The Holder hereby irrevocably elects to
exercise its rights to convert
$                      
in principal amount of the Note and
$                  
of interest accrued to date into
                    
shares of the Company’s common stock, $0.01 par value per share, at a
conversion price of
$                    
per share, and requests that stock certificates for such shares shall be issued
in the name of

 

 

	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Print
  Name)

  
	
   

  	
   

  	
   

  
	
  Please
  insert social security or other identifying number of registered Holder of
  Note:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Address:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Signature*

  
				

 

*The
signature on the Notice of Conversion of Promissory Note must exactly
correspond to the name as written upon the face of the Note in every particular
without alteration or any change whatsoever. 
When signing on behalf of a corporation, partnership, trust of other
entity, please indicate your position(s) and title(s) with such
entity.  If the Note is registered in the
name of more than one Holder, all Holders must sign.

 

A-9

 

EXHIBIT
B

 

FORM OF
AMENDED WARRANT

 

NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON EXERCISE OF
THESE SECURITIES HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY.  THESE SECURITIES AND THE
SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT SECURED BY SUCH SECURITIES.

 

GRANITE
CITY FOOD & BREWERY LTD.

FORM OF WARRANT

 

	
  Warrant No. 2009-BL-

  	
   

  	
  Original Issue Date: March 30, 2009

  
	
   

  	
   

  	
  (As Amended April 21, 2009)

  

 

Pursuant to the terms of a
Loan Agreement of even date (the “Loan Agreement”), Granite City Food &
Brewery Ltd., a Minnesota corporation (the “Company”),
hereby certifies that, for value received,
                                          
or its registered assigns (the “Holder”), is
entitled to purchase from the Company up to a total of One Hundred Sixty
Thousand (160,000) shares of Common Stock (each such share, a “Warrant Share” and all such shares, the “Warrant Shares”), at any time and from time to time from
and after the six month anniversary of the Original Issue Date and until 5:30 p.m.,
Minneapolis time on the fifth anniversary of the Original Issue Date (the “Expiration Date”), and subject to the following terms and
conditions:

 

2.             Definitions.  As used in this Warrant, the following terms
shall have the respective definitions set forth in this Section 1.  Capitalized terms that are used and not defined
in this Warrant that are defined in the Loan Agreement (as defined below) shall
have the respective definitions set forth in the Loan Agreement.

 

“Board” means the
Board of Directors of the Company.

 

“Business
Day” means any day except Saturday, Sunday and any day that is a federal
legal holiday in the United States or a day on which banking institutions in
the State of Minnesota are authorized or required by law or other government
action to close.

 

B-1

 

“Common
Stock” means the common stock of the Company, par value $0.01 per share, and
any securities into which such common stock may hereafter be reclassified.

 

“Convertible
Securities” shall mean evidences of indebtedness, shares of
stock or other securities that are at any time, directly or indirectly,
convertible into or exchangeable for New Securities.

 

“Exercise
Price” means $0.25267 per share, subject to adjustment in accordance with Section 9.

 

“Loan
Agreement” means the Loan Agreement, dated March 30,
2009, to which the Company and the original Holder are parties.

 

“Minnesota
Courts” means the state and federal courts sitting in the City of Minneapolis,
State of Minnesota.

 

“New
Securities” shall mean equity securities of the Company,
whether now authorized or not, or rights, options, or warrants to purchase said
equity securities, or securities of any type whatsoever that are, or may
become, convertible into or exchangeable into or exercisable for said equity
securities, other than (i) shares of Common Stock or options or other
rights to acquire such Common Stock issued to employees, consultants, officers
or directors of the Company pursuant to any stock option plan or other
compensatory arrangement approved by the Board; (ii) shares of Common Stock
issued by the Company in a firm commitment underwritten public offering
pursuant to a registration under the Securities Act of 1933, as amended; (iii) the
issuance of securities pursuant to the acquisition of another business entity
or business segment of any such entity by the Company by merger, purchase of
all or substantially all the assets or other reorganization whereby the Company
will own greater than 50% of the voting power of such business entity or
business segment of any such entity, if such issuance is approved by the Board;
(iv) securities issued in connection with any stock split, stock dividend
or recapitalization of the Company; (v) securities issued in the future in
connection with the transactions contemplated by the Loan Agreement, or (vi) securities
issued upon exercise or conversion of any option, warrant or other convertible
security outstanding as of the date hereof.

 

“Original
Issue Date” means the Original Issue Date first set forth on
the first page of this Warrant.

 

“Person” shall mean any
natural person, company, corporation, limited liability company, general
partnership, limited partnership, trust, proprietorship, joint venture,
business organization or governmental entity.

 

“Trading
Day” means (i) a day on which the Common Stock is traded on a trading
market (other than the OTC Bulletin Board), or (ii) if the Common Stock is
not listed on a trading market (other than the OTC Bulletin Board), a day on
which the Common Stock is traded in the over-the-counter market, as reported by
the OTC Bulletin Board, or (iii) if the Common Stock is not quoted on any
trading market, a day on which the Common Stock is quoted in the
over-the-counter market as reported by the National Quotation Bureau
Incorporated (or any similar organization or agency succeeding to its functions
of reporting prices); provided, that in 

 

B-2

 

the
event that the Common Stock is not listed or quoted as set forth in (i), (ii) and
(iii) hereof, then Trading Day shall mean a Business Day.

 

3.             Registration of Warrant.  The Company shall register this Warrant upon
records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder hereof
from time to time.  The Company may deem
and treat the registered Holder of this Warrant as the absolute owner hereof
for the purpose of any exercise hereof or any distribution to the Holder, and
for all other purposes, absent actual notice to the contrary.

 

4.             Registration of Transfers.  The Company shall register the transfer of
any portion of this Warrant in the Warrant Register, upon surrender of this
Warrant, with the Form of Assignment attached hereto duly completed and
signed, to the Company at its address specified herein.  Upon any such registration or transfer, a new
Warrant to purchase Common Stock, in substantially the form of this Warrant
(any such new Warrant, a “New Warrant”),
evidencing the portion of this Warrant so transferred shall be issued to the
transferee and a New Warrant evidencing the remaining portion of this Warrant
not so transferred, if any, shall be issued to the transferring Holder.  The acceptance of the New Warrant by the
transferee thereof shall be deemed the acceptance by such transferee of all of
the rights and obligations of a holder of a Warrant.

 

5.             Exercise and Duration of
Warrants.  This
Warrant shall be exercisable by the registered Holder at any time and from time
to time on or after the six month anniversary of the Original Issue Date
through and including the Expiration Date. 
At 5:30 p.m., Minneapolis time on the Expiration Date, the portion
of this Warrant not exercised prior thereto shall be and become void and of no
value.

 

6.             Delivery of Warrant Shares.

 

(a)           To effect exercises
hereunder, the Holder shall not be required to physically surrender this
Warrant unless the aggregate Warrant Shares represented by this Warrant is
being exercised.  Upon delivery of the
Exercise Notice (in the form attached hereto) to the Company (with the attached
Warrant Shares Exercise Log) at its address for notice set forth herein and
upon payment of the Exercise Price multiplied by the number of Warrant Shares
that the Holder intends to purchase hereunder, the Company shall promptly (but
in no event later than three Trading Days after the Date of Exercise (as
defined herein)) issue and deliver to the Holder, a certificate for the Warrant
Shares issuable upon such exercise, which, if eligible for sale under Rule 144
without volume restrictions, shall be free of restrictive legends.  The Company shall, upon request of the Holder
and subsequent to the date on which a registration statement covering the
resale of the Warrant Shares has been declared effective by the Securities and
Exchange Commission, use its reasonable best efforts to deliver Warrant Shares
hereunder electronically through the Depository Trust Corporation or another
established clearing corporation performing similar functions, if available, provided,
that, the Company may, but will not be required to change its transfer agent if
its current transfer agent cannot deliver Warrant Shares electronically through
the Depository Trust Corporation.  A “Date of Exercise” means the date on which the Holder shall
have delivered to the Company: (i) the Exercise Notice (with the Warrant
Exercise Log attached to it), 

 

B-3

 

appropriately completed and duly signed and (ii) if
such Holder is not utilizing the cashless exercise provisions set forth in this
Warrant, payment of the Exercise Price for the number of Warrant Shares so
indicated by the Holder to be purchased.

 

(b)           The Company’s obligations to
issue and deliver Warrant Shares in accordance with the terms hereof are
absolute and unconditional, irrespective of any action or inaction by the
Holder to enforce the same, any waiver or consent with respect to any provision
hereof, the recovery of any judgment against any Person or any action to
enforce the same, or any setoff, counterclaim, recoupment, limitation or
termination, or any breach or alleged breach by the Holder or any other Person
of any obligation to the Company or any violation or alleged violation of law
by the Holder or any other Person, and irrespective of any other circumstance
which might otherwise limit such obligation of the Company to the Holder in
connection with the issuance of Warrant Shares. 
Nothing herein shall limit a Holder’s right to pursue any other remedies
available to it hereunder, at law or in equity including, without limitation, a
decree of specific performance and/or injunctive relief with respect to the
Company’s failure to timely deliver certificates representing Warrant Shares
upon exercise of the Warrant as required pursuant to the terms hereof.

 

7.             Charges, Taxes and Expenses.  Issuance and delivery of Warrant Shares upon
exercise of this Warrant shall be made without charge to the Holder for any
issue or transfer tax, withholding tax, transfer agent fee or other incidental
tax or expense in respect of the issuance of such certificates, all of which
taxes and expenses shall be paid by the Company; provided, however, that the
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the registration of any certificates for Warrant
Shares or Warrants in a name other than that of the Holder.  The Holder shall be responsible for all other
tax liability that may arise as a result of holding or transferring this
Warrant or receiving Warrant Shares upon exercise hereof.

 

8.             Replacement of Warrant.  If this Warrant is mutilated, lost, stolen or
destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation hereof, or in lieu of and substitution
for this Warrant, a New Warrant, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and customary
and reasonable indemnity (which shall not include a surety bond), if
requested.  Applicants for a New Warrant
under such circumstances shall also comply with such other reasonable
regulations and procedures and pay such other reasonable third-party costs as
the Company may prescribe.  If a New
Warrant is requested as a result of a mutilation of this Warrant, then the
Holder shall deliver such mutilated Warrant to the Company as a condition
precedent to the Company’s obligation to issue the New Warrant.

 

9.             Reservation of Warrant
Shares.  The Company covenants that it
will at all times reserve and keep available out of the aggregate of its
authorized but unissued and otherwise unreserved Common Stock, solely for the
purpose of enabling it to issue Warrant Shares upon exercise of this Warrant as
herein provided, the number of Warrant Shares which are then issuable and
deliverable upon the exercise of this entire Warrant, free from preemptive
rights or any other contingent purchase rights of Persons other than the Holder
(taking into account the adjustments and restrictions of Section 9).
The Company covenants that all Warrant Shares so 

 

B-4

 

issuable
and deliverable shall, upon issuance and the payment of the applicable Exercise
Price in accordance with the terms hereof, be duly and validly authorized,
issued and fully paid and nonassessable.

 

10.           Certain Adjustments.  The Exercise Price and number of Warrant
Shares issuable upon exercise of this Warrant are subject to adjustment from
time to time as set forth in this Section 9.

 

(a)           Stock Dividends and Splits.  If the Company, at any time while this
Warrant is outstanding, (i) pays a stock dividend on its Common Stock or
otherwise makes a distribution on any class of capital stock that is payable in
shares of Common Stock, (ii) subdivides outstanding shares of Common Stock
into a larger number of shares, or (iii) combines outstanding shares of
Common Stock into a smaller number of shares, then in each such case the
Exercise Price shall be multiplied by a fraction of which the numerator shall
be the number of shares of Common Stock outstanding immediately before such
event and of which the denominator shall be the number of shares of Common
Stock outstanding immediately after such event. 
Any adjustment made pursuant to clause (i) of this paragraph shall
become effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution, and any
adjustment pursuant to clause (ii) or (iii) of this paragraph shall
become effective immediately after the effective date of such subdivision or
combination.

 

(b)           Fundamental Transactions.  If, at any time while this Warrant is
outstanding, (1) the Company effects any merger or consolidation of the
Company with or into another Person in which the Company is not the survivor, (2) the
Company effects any sale of all or substantially all of its assets in one or a
series of related transactions, (3) any tender offer or exchange offer
(whether by the Company or another Person) is completed pursuant to which
holders of Common Stock are permitted to tender or exchange their shares for
other securities, cash or property, or (4) the Company effects any
reclassification of the Common Stock or any compulsory share exchange pursuant
to which the Common Stock is effectively converted into or exchanged for other
securities, cash or property (other than as a result of a subdivision or
combination of shares of Common Stock covered by Section 9(a) above)
(in any such case, a “Fundamental Transaction”),
then the Holder shall have the right thereafter to receive, upon exercise of
this Warrant, the same amount and kind of securities, cash or property as it
would have been entitled to receive upon the occurrence of such Fundamental
Transaction if it had been, immediately prior to such Fundamental Transaction,
the holder of the number of Warrant Shares then issuable upon exercise in full
of this Warrant without regard to any limitations on exercise contained herein
(the “Alternate Consideration”).  For purposes of any such exercise, the
determination of the Exercise Price shall be appropriately adjusted to apply to
such Alternate Consideration based on the amount of Alternate Consideration
issuable in respect of one share of Common Stock in such Fundamental
Transaction, and the Company shall apportion the Exercise Price among the
Alternate Consideration in a reasonable manner reflecting the relative value of
any different components of the Alternate Consideration.  If holders of Common Stock are given any
choice as to the securities, cash or property to be received in a Fundamental
Transaction, then the Holder shall be given the same choice as to the Alternate
Consideration it 

 

B-5

 

receives upon any exercise of this Warrant
following or concurrent with such Fundamental Transaction.  The terms of any agreement pursuant to which
a Fundamental Transaction is effected shall include terms requiring any such
successor or surviving entity to comply with the provisions of this paragraph (b) and
insuring that the Warrant (or any such replacement security) will be similarly
adjusted upon any subsequent transaction analogous to a Fundamental
Transaction.

 

(c)           Subsequent
Equity Sales.

 

(i)            Subject to the limitations
set forth below, if the Company at any time while this Warrant is outstanding,
shall issue or sell any New Securities (including any Convertible Securities)
at a price per share less than the Exercise Price then in effect, then and in
each such case thereafter, the then applicable Exercise Price shall be reduced
to an adjusted Exercise Price as of the opening of business
on the date of such issue or sale, determined by multiplying such applicable
Exercise Price by a fraction, the numerator of which shall be the number of
shares of Common Stock outstanding immediately prior to such issuance plus the
number of shares of Common Stock which the aggregate consideration received by
the Company for the total number of New Securities so issued would purchase at
such Exercise Price in effect immediately prior to such issuance, and the
denominator of which shall be the sum of the number of shares of Common Stock
outstanding immediately prior to such issuance plus the number of such New
Securities so issued.  Such adjustment
shall be made whenever such Common Stock or Common Stock Equivalents are
issued.  For purposes of adjusting the
Exercise Price under this Section 9(c)(i), Common Stock outstanding shall
include all shares of Common Stock actually issued and outstanding and shares
of Common Stock issuable upon conversion of Convertible Securities actually
issued and outstanding. Notwithstanding the provisions of this Section 9(c)(i),
unless the Company receives the approval of its shareholders as prescribed by
applicable NASDAQ Marketplace Rules, such adjustment shall not result in the
Exercise Price being reduced below $.22, as such price may be adjusted pursuant
to Section 9(a) or 9(b) hereof. 
The foregoing limitation shall not apply to adjustments to the Exercise
Price required to be made pursuant to Sections 9(a) or (b) hereof.

 

(ii)           Subject to the preceding
last sentient of Section 9(c)(i), if at any time while this Warrant is
outstanding, the Company shall issue or sell any Convertible Securities, there
shall be determined as of the date of issue the conversion or exercise price
per share for which New Securities are issuable upon the conversion or exchange
thereof, such determination to be made by dividing (X) the total amount
received or receivable by the Company as consideration for the issue or sale of
such Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the conversion or exchange
thereof, by (Y) the maximum number of New Securities issuable upon
conversion or exchange of all of such Convertible Securities; and such issue or
sale shall be deemed to be an issue or sale for cash (as of the date of issue
or sale of such Convertible Securities) of such maximum number of New 

 

B-6

 

Securities at the price per
share so determined.  If such Convertible
Securities shall by their terms provide for an increase or increases, with the
passage of time, in the amount of additional consideration, if any, payable to
the Company, or in the rate of exchange, upon the conversion or exchange
thereof the adjusted Exercise Price shall, forthwith upon any such increase
becoming effective, be readjusted (but to no greater extent than originally
adjusted) to reflect the same. If any rights of conversion or exchange
evidenced by such Convertible Securities shall expire without having been
exercised, any adjusted Exercise Price shall forthwith be readjusted to be the
adjusted Exercise Price which would have been in effect had an adjustment been
made on the basis that the only New Securities issued or sold were those
actually issued upon the conversion or exchange of such Convertible Securities,
and that they were issued or sold for the consideration actually received by
the Company upon such conversion or exchange, plus the consideration, if any,
actually received by the Company for the issue or sale of such Convertible
Securities as were actually converted or exchanged.

 

(iii)          Upon any issuance or sale
for a consideration other than cash, or a consideration part of which is other
than cash, of any New Securities or Convertible Securities or any rights,
warrants or options to subscribe for, purchase or otherwise acquire any New
Securities or Convertible Securities, the amount of the consideration other
than cash received by the Company shall be deemed to be the fair value of such
consideration as determined in good faith by the Board.  In case any New Securities or Convertible
Securities or any rights, warrants or options to subscribe for, purchase or
otherwise acquire any New Securities or Convertible Securities shall be issued
or sold together with other stock or securities or other assets of the Company
for a consideration which covers two or more thereof, the consideration for the
issue or sale of such New Securities or Convertible Securities or such rights,
warrants or options shall be deemed to be the portion of such consideration
allocated thereto in good faith by the Board.

 

(iv)          Notwithstanding the
foregoing, the number of Warrant Shares issuable (inclusive of all
anti-dilution adjustments applicable to such securities), when combined with
the aggregate number of Conversion Shares previously issued upon conversion of
the Notes and the aggregate number of Warrant Shares previously issued upon
exercise of the Warrants, may not, in the absence of approval by the Company’s
shareholders, equal or exceed 19.9% of the number of shares of Common Stock
issued and outstanding immediately prior to the effective date of the Loan
Agreement.  If any adjustments made
pursuant to this Section 9(c) would otherwise result in Warrant
Shares issuable in excess of the limitation set forth in the immediately
preceding sentence (the “Excess Adjustment”),
the Company will use reasonable best efforts to prepare and file preliminary
proxy materials with the Securities and Exchange Commission and hold a meeting
of its shareholders for the purpose, among others, of seeking approval of the
Excess Adjustment (the “Proposal”).  In furtherance of its obligations under this Section 9(c),
the Board shall recommend to the Company’s shareholders (and not revoke or
amend such recommendation) that the shareholders vote in favor of and approve
the Proposal and shall cause the

 

B-7

 

Company to use its best
efforts to solicit approval of the shareholders for the Proposal.  If the Company’s shareholders approve the
Proposal, the Company will make the Excess Adjustment.  If the Company’s shareholders do not approve
the Proposal, the Holders hereby acknowledge that the Company will not make the
Excess Adjustment and that the Company may not otherwise compensate the Holders
for the failure to make the Excess Adjustment.

 

(v)           If any adjustment to the Exercise Price would result
in a price below $0.22 (as such price may be adjusted from time to time
pursuant to Section 9(a) or (b)) the Company will, upon written
request of Holder, use its reasonable best efforts to prepare and file
requisite proxy materials with the Securities and Exchange Commission and hold
a meeting of the shareholders for the purpose of seeking approval of such lower
Exercise Price (the “Exercise Price Proposal”). 
In furtherance of its obligations under this Section 9(c), the
Company’s Board of Directors shall recommend to the Company’s shareholders,
which recommendation shall not be revoked or amended, that the shareholders
vote in favor of and approve the lower Exercise Price Proposal and shall cause
the Company to use its best efforts to solicit approval of the shareholders for
the lower Price Exercise Proposal.  If
the Company’s shareholders approve the lower Price Exercise Proposal, the
Company will promptly effect the adjustment to the Exercise Price which is
below $.22 (subject to any adjustment pursuant to Sections 9(a) or
(b).  If the Company’s shareholders do
not approve the lower Exercise Price Proposal, the Holder acknowledges that the
Company may not effect an adjustment to the Exercise Price and may not
otherwise compensate the Holder for the failure to make such adjustment

 

(d)           Number of Warrant Shares.  Simultaneously with any adjustment to the
Exercise Price pursuant to Sections 9(a) hereunder, the number of Warrant
Shares that may be purchased upon exercise of this Warrant shall be increased
or decreased proportionately, so that after such adjustment the aggregate
Exercise Price payable hereunder for the adjusted number of Warrant Shares
shall be the same as the aggregate Exercise Price in effect immediately prior
to such adjustment.

 

(e)           Calculations.  All calculations under this Section 9
shall be made to the nearest cent or the nearest 1/100th of a share, as applicable.  The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by or for
the account of the Company, and the disposition of any such shares shall be
considered an issue or sale of Common Stock.

 

(f)            Notice of Adjustments.  Upon the occurrence of each adjustment
pursuant to this Section 9, the Company at its expense will promptly
compute such adjustment in accordance with the terms of this Warrant and
prepare a certificate setting forth such adjustment, including a statement of
the adjusted Exercise Price and adjusted number or type of Warrant Shares or
other securities issuable upon exercise of this Warrant (as applicable),
describing the transactions giving rise to such adjustments and showing in
detail the facts upon which such adjustment is based.  Upon written request, the Company 

 

B-8

 

will promptly deliver a copy of each such
certificate to the Holder and to the Company’s transfer agent.

 

(g)           Notice of Corporate Events.  If, while this Warrant remains outstanding,
the Company (i) declares a dividend or any other distribution of cash,
securities or other property in respect of its Common Stock, including without
limitation any granting of rights or warrants to subscribe for or purchase any
capital stock of the Company, (ii) authorizes or approves, enters into any
agreement contemplating or solicits stockholder approval for any Fundamental
Transaction or (iii) authorizes the voluntary dissolution, liquidation or
winding up of the affairs of the Company, then the Company shall deliver to the
Holder a notice describing the material terms and conditions of such
transaction (but only to the extent such disclosure would not result in the
dissemination of material, non-public information to the Holder) at least 10
calendar days prior to the applicable record or effective date on which a
Person would need to hold Common Stock in order to participate in or vote with
respect to such transaction, and the Company will take all steps reasonably
necessary in order to insure that the Holder is given the practical opportunity
to exercise this Warrant prior to such time so as to participate in or vote
with respect to such transaction; provided, however, that the failure to
deliver such notice or any defect therein shall not affect the validity of the
corporate action required to be described in such notice.

 

11.           Payment of Exercise Price.  The Holder may pay the Exercise Price in one
of the following manners:

 

(a)           Cash Exercise.  The Holder may deliver the Exercise Price
immediately available funds; or

 

(b)           Cashless Exercise.  The Holder may, in its discretion, satisfy
the obligation to pay the Exercise Price through a “cashless exercise”, in
which event the Company shall issue to the Holder the number of Warrant Shares
determined as follows:

 

	
   

  	
  X = Y [(A-B)/A]

  
	
   

  	
   

  
	
  where:    

  	
   

  
	
   

  	
  X = the number of Warrant Shares to be issued to the
  Holder.

  
	
   

  	
   

  
	
   

  	
  Y = the number of Warrant Shares with respect to
  which this Warrant is being exercised.

  
	
   

  	
   

  
	
   

  	
  A = the average of the Closing Sale Prices of the
  Common Stock for the five Trading Days immediately prior to (but not
  including) the Exercise Date.

  
	
   

  	
   

  
	
   

  	
  B = the Exercise Price.

  

 

For purposes of this Warrant, “Closing
Sale Price” means, for any security as of any date, the last trade
price for such security on the principal securities exchange or trading market
for such security, or if the foregoing does not apply, the last trade price of
such security in the over-the-counter

 

B-9

 

market on the electronic bulletin board for such security, or, if no
last trade price is reported for such security, the average of the bid prices,
or the ask prices, respectively, of any market makers for such security as
reported in the “pink sheets” by Pink Sheets LLC.  If the Closing Sale Price cannot be
calculated for a security on a particular date on any of the foregoing bases,
the Closing Sale Price of such security on such date shall be the fair market
value as determined in good faith by the Board of directors of the
Company.  For purposes of Rule 144
promulgated under the Securities Act, it is intended, understood and
acknowledged that the Warrant Shares issued in a cashless exercise transaction
shall be deemed to have been acquired by the Holder, and the holding period for
the Warrant Shares shall be deemed to have commenced, on the date this Warrant
was originally issued (provided that the Securities and Exchange Commission
continues to take the position that such treatment is proper at the time of
such exercise).

 

12.           No Fractional
Shares.  N fractional shares of Warrant
Shares will be issued in connection with any exercise of this Warrant.  In lieu of any fractional shares which would,
otherwise be issuable, the Company shall pay cash equal to the product of such
fraction multiplied by the closing price of one Warrant Share as reported by
the applicable trading market on the date of exercise.

 

13.           Notices.  Any and all notices or other communications
or deliveries hereunder (including, without limitation, any Exercise Notice)
shall be in writing and shall be deemed given and effective on the earliest of (i) the
date of transmission, if such notice or communication is delivered via
facsimile at the facsimile number specified in this Section prior to 5:30 p.m.
(Minneapolis time) on a Trading Day, (ii) the next Trading Day after the
date of transmission, if such notice or communication is delivered via
facsimile at the facsimile number specified in this Section on a day that
is not a Trading Day or later than 5:30 p.m. (Minneapolis time) on any
Trading Day, (iii) the Trading Day following the date of mailing, if sent
by nationally recognized overnight courier service, or (iv) upon actual
receipt by the party to whom such notice is required to be given.  The addresses for such communications shall
be:  (i) if to the Company, to
Granite City Food & Brewery Ltd., Attn: Chief Financial Officer, 5402
Parkdale Drive, Suite 101, Minneapolis, MN 55416, or to Facsimile No.: 952-215-0671 (or such other
address as the Company shall indicate in writing in accordance with this
Section), or (ii) if to the Holder, to the address or facsimile
number appearing on the Warrant Register or such other address or facsimile
number as the Holder may provide to the Company in accordance with this
Section.

 

14.           Warrant Agent.  The Company shall serve as warrant agent
under this Warrant.  Upon 10 days’ notice
to the Holder, the Company may appoint a new warrant agent.  Any corporation into which the Company or any
new warrant agent may be merged or any corporation resulting from any
consolidation to which the Company or any new warrant agent shall be a party or
any corporation to which the Company or any new warrant agent transfers
substantially all of its corporate trust or shareholders services business
shall be a successor warrant agent under this Warrant without any further act.  Any such successor warrant agent shall
promptly cause notice of its succession as warrant agent to be mailed (by first
class mail, postage prepaid) to the Holder at the Holder’s last address as
shown on the Warrant Register.

 

B-10

 

15.           Miscellaneous.

 

(a)           This Warrant shall be
binding on and inure to the benefit of the parties hereto and their respective
successors and assigns.  Subject to the
preceding sentence, nothing in this Warrant shall be construed to give to any Person
other than the Company and the Holder any legal or equitable right, remedy or
cause of action under this Warrant.  This
Warrant may be amended only in writing signed by the Company and the Holder
and, as applicable, their successors and assigns.  Disposition of this Warrant and the Warrant
Shares are subject to the terms, conditions and restrictions of an Investor
Rights Agreement dated the Original Issue Date hereof between the Company and
the original Holder hereof, a copy of which is available from the Company upon
written request.

 

(b)           All questions concerning the
construction, validity, enforcement and interpretation of this Warrant shall be
governed by and construed and enforced in accordance with the internal laws of
the State of Minnesota, without regard to the principles of conflicts of law
thereof.  Each party agrees that all
legal proceedings concerning the interpretations, enforcement and defense of
this Warrant and the transactions herein contemplated (“Proceedings”)
(whether brought against a party hereto or its respective Affiliates, employees
or agents) shall be commenced exclusively in the Minnesota Courts.  Each party hereto hereby irrevocably submits
to the exclusive jurisdiction of the Minnesota Courts for the adjudication of
any dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and
agrees not to assert in any Proceeding, any claim that it is not personally
subject to the jurisdiction of any Minnesota Court, or that such Proceeding has
been commenced in an improper or inconvenient forum.  Each party hereto hereby irrevocably waives
personal service of process and consents to process being served in any such Proceeding
by mailing a copy thereof via registered or certified mail or overnight
delivery (with evidence of delivery) to such party at the address in effect for
notices to it under this Warrant and agrees that such service shall constitute
good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to
limit in any way any right to serve process in any manner permitted by
law.  Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable law, any and
all right to trial by jury in any legal proceeding arising out of or relating
to this Warrant or the transactions contemplated hereby.  If either party shall commence a Proceeding
to enforce any provisions of this Warrant, then the prevailing party in such
Proceeding shall be reimbursed by the other party for its attorney’s fees and
other costs and expenses incurred with the investigation, preparation and
prosecution of such Proceeding.

 

(c)           The headings herein are for
convenience only, do not constitute a part of this Warrant and shall not be
deemed to limit or affect any of the provisions hereof.

 

(d)           In case any one or more of
the provisions of this Warrant shall be invalid or unenforceable in any
respect, the validity and enforceability of the remaining terms and provisions
of this Warrant shall not in any way be affected or impaired thereby and the
parties will attempt in good faith to agree upon a valid and enforceable
provision 

 

B-11

 

which shall be a commercially reasonable substitute
therefor, and upon so agreeing, shall incorporate such substitute provision in
this Warrant.

 

(e)           Prior to exercise of this
Warrant, the Holder hereof shall not, by reason of by being a Holder, be
entitled to any rights of a stockholder with respect to the Warrant Shares

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK, SIGNATURE PAGE FOLLOWS]

 

B-12

 

IN WITNESS WHEREOF, the
Company has caused this Warrant to be duly executed by its authorized officer
as of the date first indicated above.

 

	
   

  	
  GRANITE
  CITY FOOD & BREWERY LTD.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
  James G. Gilbertson

  
	
   

  	
  Title:

  	
  Chief Financial Officer

  

 

B-13

 

EXERCISE NOTICE

Granite City Food & Brewery Ltd.

WARRANT DATED March 30, 2009

 

The undersigned Holder hereby irrevocably elects to purchase 
                          
shares of Common Stock pursuant to the above referenced Warrant.  Capitalized terms used herein and not
otherwise defined have the respective meanings set forth in the Warrant.

 

(1)           The undersigned
Holder hereby exercises its right to purchase
                                  
Warrant Shares pursuant to the Warrant.

(2)           The Holder
intends that payment of the Exercise Price shall be made as (check one):

	
   

  	
  o

  	
  “Cash Exercise” under Section 10

  
	
   

  	
  o

  	
  “Cashless Exercise” under Section 10

  

(3)           If the holder
has elected a Cash Exercise, the holder shall pay the sum of
$                        
to the Company in accordance with the terms of the Warrant.

(4)           Pursuant to
this Exercise Notice, the Company shall deliver to the holder
                              
Warrant Shares in accordance with the terms of the Warrant.

 

 

	
  Dated:
                         ,       

  	
  Name of Holder:

  
	
   

  	
  (Print)

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
  (Signature must conform in
  all respects to name of holder as specified on the face of the Warrant)

  

 

 

Warrant Shares Exercise Log

 

	
  Date

  	
   

  	
  Number of Warrant

  Shares Available to be

  Exercised

  	
   

  	
  Number of Warrant Shares

  Exercised

  	
   

  	
  Number of

  Warrant Shares

  Remaining to be

  Exercised

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

GRANITE CITY FOOD & BREWERY LTD.

WARRANT ORIGINALLY ISSUED MARCH 30, 2009

WARRANT NO. 2009-BL-1-A

 

FORM OF ASSIGNMENT

 

[To be completed and signed
only upon transfer of Warrant]

 

FOR VALUE RECEIVED, the undersigned
hereby sells, assigns and transfers unto                                                           
the right represented by the above-captioned Warrant to purchase                          
shares of Common Stock to which such Warrant relates and appoints                                 
attorney to transfer said right on the books of the Company with full power of
substitution in the premises.

 

	
  Dated:                   ,         

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Signature must conform in
  all respects to name of holder as specified on the face of the Warrant)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Address of Transferee

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  In the presence of:

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