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  Exhibit 4.5    
    

 
    NOMINEE HOLDER CERTIFICATION    
    

 
    TBS INTERNATIONAL PLC    
    

 
    Series A Preference Shares Issuable Upon the Exercise of Subscription
  Rights Distributed to the Record Shareholders of TBS International plc    
    

        THE TERMS AND CONDITIONS OF THE RIGHTS OFFERING ARE SET FORTH IN THE PROSPECTUS OF TBS INTERNATIONAL PLC DATED
[    •    ], 2011 (THE "PROSPECTUS"). 

        The
undersigned, a broker, custodian bank, or other nominee holder (the "Nominee Holder') of non-transferable subscription rights (the "Rights") to purchase Series A
Preference
Shares of TBS International plc (the "Company") pursuant to the rights offering described and provided for in the Prospectus, hereby certifies to the Company and to American Stock
Transfer & Trust Company, LLC, as subscription agent for the rights offering that the undersigned has exercised, on behalf of the beneficial owners thereof (which may include the
undersigned), the rights to purchase the number of Series A Preference Shares specified below, the terms of which are described further in the Prospectus, as to each beneficial owner for whom
the Nominee Holder is acting hereby: 

 

 

			
	Number of Shares Owned on Record Date 	 	Number of Shares Subscribed in the Rights Offering 
	

  	
 	

  
	

  	
 	

  
	

  	
 	

  
	

  	
 	

  
	

  	
 	

  
	

  	
 	

  
	

  	
 	

  
	

  	
 	

  
	

  	
 	

  

 

  

 

 

			
	Print Name of the Nominee Holder:	 	                 

 
	
By:	
 	
                  

 
	
Print Signer's Name:	
 	
                  

 
	
Contact Name:	
 	
                  

 
	
Contact Phone Number:	
 	
                  

 

 

 

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Exhibit 4.5

NOMINEE HOLDER CERTIFICATION

TBS INTERNATIONAL PLC

Series A Preference Shares Issuable Upon the Exercise of Subscription Rights Distributed to the Record Shareholders of TBS International plcQuickLinks
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  EXHIBIT 10.1    
    

STOCK PURCHASE AGREEMENT  

 BY AND BETWEEN  

 GRANITE CITY FOOD & BREWERY LTD.  

 AND  

 CONCEPT DEVELOPMENT PARTNERS LLC  

 FEBRUARY 8, 2011  

 

  TABLE OF CONTENTS  

 

 

						
	 
	 	 
	 	Page 
	 Article 1
	 	 Definitions
	 	

1
	 Article 2
	 	 Purchase and Sale of Preferred Stock
	 	

4
	 	 2.1
	 	 Purchase of Preferred Stock
	 	

4
	 	 2.2
	 	 Purchase Price and Form of Payment
	 	4
	 	 2.3
	 	 Payment of Buyer Fees and Expenses
	 	4
	 	 2.4
	 	 Closing Date
	 	4
	 Article 3
	 	 Buyer's Representations and Warranties
	 	

4
	 	 3.1
	 	 Organization and Qualification
	 	

4
	 	 3.2
	 	 Authorization; Enforcement
	 	5
	 	 3.3
	 	 Securities Matters
	 	5
	 	 3.4
	 	 Information
	 	5
	 	 3.5
	 	 Ownership
	 	5
	 	 3.6
	 	 Financial Capability
	 	5
	 	 3.7
	 	 Brokers and Finders
	 	5
	 	 3.8
	 	 Restrictions on Transfer
	 	5
	 Article 4
	 	 Representations and Warranties of the Company
	 	

6
	 	 4.1
	 	 Organization and Qualification
	 	

6
	 	 4.2
	 	 Authorization; Enforcement
	 	6
	 	 4.3
	 	 Capitalization; Valid Issuance of Securities
	 	7
	 	 4.4
	 	 No Conflicts
	 	7
	 	 4.5
	 	 SEC Documents; Financial Statements
	 	8
	 	 4.6
	 	 Absence of Certain Changes
	 	8
	 	 4.7
	 	 Absence of Litigation
	 	8
	 	 4.8
	 	 Patents, Copyrights
	 	9
	 	 4.9
	 	 Tax Status
	 	9
	 	 4.10
	 	 No Materially Adverse Contracts
	 	9
	 	 4.11
	 	 Certain Transactions
	 	9
	 	 4.12
	 	 Permits; Compliance
	 	9
	 	 4.13
	 	 Environmental Matters
	 	10
	 	 4.14
	 	 Title to Property
	 	10
	 	 4.15
	 	 No Investment Company
	 	10
	 	 4.16
	 	 No Brokers
	 	10
	 	 4.17
	 	 Registration Rights
	 	10
	 	 4.18
	 	 1934 Act Registration
	 	11
	 	 4.19
	 	 Labor Relations
	 	11
	 	 4.20
	 	 Insurance
	 	11
	 	 4.21
	 	 ERISA
	 	11
	 	 4.22
	 	 Disclosure
	 	11
	 	 4.23
	 	 Disclosure Controls
	 	11
	 	 4.24
	 	 Distribution Determination
	 	12
	 Article 5
	 	 Covenants
	 	

12
	 	 5.1
	 	 Interim Operations
	 	

12
	 	 5.2
	 	 Acquisition Proposals
	 	14

 

 i

 
 

 

						
	 
	 	 
	 	Page 
	 	 5.3
	 	 Proxy Statement
	 	17
	 	 5.4
	 	 Shareholder Approval and Board Recommendation
	 	18
	 	 5.5
	 	 Filings; Notification; Access
	 	19
	 	 5.6
	 	 Form D; Blue Sky Laws
	 	20
	 	 5.7
	 	 Use of Proceeds
	 	20
	 	 5.8
	 	 Listing
	 	20
	 	 5.9
	 	 No Integration
	 	20
	 	 5.10
	 	 DHW Common Stock Repurchase
	 	20
	 	 5.11
	 	 Purchase of Dunham Troy Property
	 	20
	 	 5.12
	 	 Insurance
	 	20
	 	 5.13
	 	 Confidentiality
	 	20
	 Article 6
	 	 Conditions to Each Party's Obligations
	 	

21
	 	 6.1
	 	 Approvals by the Company's Shareholders
	 	

21
	 	 6.2
	 	 No Restraints
	 	21
	 Article 7
	 	 Conditions to the Company's Obligation
	 	

21
	 	 7.1
	 	 Execution of Transaction Documents and Payment of Purchase Price
	 	

21
	 	 7.2
	 	 Representations and Warranties
	 	22
	 	 7.3
	 	 Performance of Obligations
	 	22
	 	 7.4
	 	 Credit Facility Agreement
	 	22
	 	 7.5
	 	 Ancillary Agreements
	 	22
	 Article 8
	 	 Conditions to Buyer's Obligation
	 	

22
	 	 8.1
	 	 Delivery of Transaction Documents, Stock Certificate and Material Consents
	 	

22
	 	 8.2
	 	 Execution of Ancillary Agreements
	 	22
	 	 8.3
	 	 Performance of Agreements
	 	22
	 	 8.4
	 	 Financing
	 	22
	 	 8.5
	 	 Due Diligence
	 	22
	 	 8.6
	 	 Filing of Certificate of Designation
	 	22
	 	 8.7
	 	 Landlord Lease Reductions
	 	22
	 	 8.8
	 	 Representations, Warranties and Covenants
	 	23
	 	 8.9
	 	 No Material Adverse Effect
	 	23
	 	 8.10
	 	 Company Certificate
	 	23
	 Article 9
	 	 Indemnification
	 	

23
	 	 9.1
	 	 Survival
	 	

23
	 	 9.2
	 	 Indemnification by the Company
	 	23
	 	 9.3
	 	 Indemnification by the Buyer
	 	23
	 	 9.4
	 	 Limitations
	 	24
	 	 9.5
	 	 Notification
	 	24
	 	 9.6
	 	 Contribution
	 	25
	 Article 10
	 	 Termination
	 	

25
	 	 10.1
	 	 Termination by Mutual Consent
	 	

25
	 	 10.2
	 	 Termination by Either the Buyer or the Company
	 	26
	 	 10.3
	 	 Termination by the Company
	 	26
	 	 10.4
	 	 Termination by the Buyer
	 	26
	 	 10.5
	 	 Effect of Termination and Abandonment
	 	26

 

 ii

 
 

 

						
	 
	 	 
	 	Page 
	 Article 11
	 	 Governing Law; Miscellaneous
	 	28
	 	 11.1
	 	 Governing Law
	 	

28
	 	 11.2
	 	 Counterparts; Signatures by Facsimile
	 	28
	 	 11.3
	 	 Headings
	 	28
	 	 11.4
	 	 Severability
	 	28
	 	 11.5
	 	 No Personal Liability of Directors, Officers, Owners, Etc
	 	28
	 	 11.6
	 	 Entire Agreement; Amendments
	 	28
	 	 11.7
	 	 Notices
	 	28
	 	 11.8
	 	 Successors and Assigns
	 	29
	 	 11.9
	 	 Third Party Beneficiaries
	 	30
	 	 11.10
	 	 Publicity
	 	30
	 	 11.11
	 	 Further Assurances
	 	30
	 	 11.12
	 	 No Strict Construction
	 	30
	 	 11.13
	 	 Remedies
	 	30
	 	 11.14
	 	 Waiver of Jury Trial
	 	30
	  Exhibit A—Certificate of Designation
	 	 
	  Exhibit B—Debt Conversion Agreement
	 	 
	  Exhibit C—DHW Registration Rights Agreement Amendment
	 	 
	  Exhibit D—Master Agreement Amendment
	 	 
	  Exhibit E—Registration Rights Agreement
	 	 
	  Exhibit F—Form of Release and Escrow Agreement
	 	 
	  Company's Disclosure Schedule
	 	 

 

 iii

 

 STOCK PURCHASE AGREEMENT  

        This Stock Purchase Agreement, dated as of February 8, 2011 (this "Agreement"),
is entered into by and between Granite City Food & Brewery Ltd., a Minnesota corporation (the "Company"), and Concept Development
Partners LLC, a Delaware limited liability company (the "Buyer"). 

 RECITALS  

        A.    WHEREAS,
the Company and the Buyer are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by Rule 506 of
Regulation D promulgated under the Securities Act of 1933, as amended (the "1933 Act"); 

        B.    WHEREAS,
the Buyer desires to purchase and the Company desires to issue and sell, upon the terms and conditions set forth in this Agreement, 3,000,000 shares (the
"Shares") of Series A Convertible Preferred Stock, $0.01 par value, of the Company (the "Series A
Preferred"), the terms of which are set forth in a Certificate of Designation of Rights and Preferences to be filed with the Secretary of State of the State of Minnesota,
substantially as set forth in Exhibit A (the "Certificate of Designation"); and 

        C.    WHEREAS,
the parties hereto have agreed to enter into certain other transactions and execute and deliver certain other documents and instruments as contemplated by this
Agreement. 

        NOW
THEREFORE, the Company and the Buyer hereby agree as follows: 

 
 

  ARTICLE 1    
    
    DEFINITIONS    
    

        "Accredited Investor" has the meaning set forth in  Section 3.3. 

        "Acquisition Proposal" has the meaning set forth in Section 5.2(d). 

        "Adverse Recommendation Notice" has the meaning set forth in Section 5.2(b). 

        "Agreement" has the meaning set forth in the opening paragraph hereof. 

        "Alternative Acquisition Agreement" has the meaning set forth in Section 5.2(b). 

        "Ancillary Agreements" means, collectively, the Credit Facility Agreement, the Debt Conversion Agreement Amendment, the DHW Registration
Rights Agreement Amendment, the Employment Agreements, the Lease Amendments, the Master Agreement Amendment, the Release and Escrow Agreements, the Shareholder Voting Agreement and the Troy Purchase
Agreement. 

        "Buyer" has the meaning set forth in the opening paragraph hereof. 

        "Change in Company Recommendation" has the meaning set forth in Section 5.2(b). 

        "Closing" has the meaning set forth in Section 2.3. 

        "Closing Date" means the first business day following the day on which the last to be fulfilled or waived of the conditions set forth in
Article 6 and Article 8 (other than those conditions that by their nature are to be satisfied at the Closing, but subject to the fulfillment or waiver of those conditions) shall be
satisfied or waived in accordance with this Agreement. 

        "Common Stock" means the Company's Common Stock, par value $0.01 per share. 

        "Company" has the meaning set forth in the opening paragraph hereof. 

        "Company Disclosure Schedule" has the meaning set forth in Article 4. 

        "Company Shareholder Approval" has the meaning set forth in Section 5.4(a). 

        "Company Shareholders Meeting" has the meaning set forth in Section 5.4(a). 

        "Credit Facility Agreement" means a third party debt facility which totals at least $10,000,000. 

 

        "Current Filings" means (a) the Company's Annual Report on Form 10-K for the fiscal year ended
December 29, 2009, as amended; (b) the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended March 30, 2010; (c) the Company's Quarterly
Report on Form 10-Q for the quarter ended June 29, 2010; (d) the Company's Quarterly Report on Form 10-Q for the quarter ended September 28,
2010; (e) the Company's Current Reports on Form 8-K filed with the SEC on March 4, 2010, March 16, 2010, June 23, 2010, August 26, 2010,
August 31, 2010, September 7, 2010 and December 28, 2010; and (f) the Company's Definitive Proxy Statement on Schedule 14A for its 2010 Annual Shareholders Meeting,
filed with the SEC on July 21, 2010. 

        "Debt Conversion Agreement Amendment" means Amendment No. 2 to that certain Debt Conversion Agreement between DHW and the Company,
substantially in the form attached as Exhibit B. 

        "DHW" means DHW Leasing, L.L.C., a South Dakota limited liability company. 

        "DHW Stock Repurchase Agreement" means that certain Stock Repurchase Agreement dated the date hereof by and between the Company and DHW. 

        "DHW Registration Rights Agreement Amendment" means Amendment No. 1 to that certain Registration Rights Agreement between DHW and
the Company, substantially in the form attached as Exhibit C. 

        "Dunham" means, collectively, Mr. & Mrs. Donald A. Dunham, Jr., Mr. Charles J. Hey, Dunham
Capital Management, L.L.C., DHW, and each of their and its affiliates. 

        "Employment Agreements" mean (a) the Executive Employment Agreement between the Company and Robert Doran, (b) the Executive
Employment Agreement between the Company and Dean Oakey and (c) the Amended and Restated Executive Employment Agreement between the Company and Steven J. Wagenheim. 

        "Environmental Laws" has the meaning set forth in Section 4.13. 

        "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. 

        "Evaluation Material" has the meaning set forth in Section 5.13. 

        "Hazardous Materials" has the meaning set forth in Section 4.13. 

        "Indemnified Party" has the meaning set forth in Section 9.1. 

        "Intellectual Property" has the meaning set forth in Section 4.8. 

        "Investment Company" has the meaning set forth in Section 4.15. 

        "Knowledge" with respect to the Company means the actual knowledge of any member of the Board of Directors of the Company or the Chief
Executive Officer, Chief Financial Officer or Chief Operating Officer of the Company on the date of this Agreement or the Closing Date, as applicable. 

        "Lease Amendments" shall mean the amendments to the leases between the Company and Dunham regarding the Company's Ft. Wayne, Creve
Coeur, Madison, Roseville, Rockford and Maumee locations. 

        "Lease Restructuring and Option Agreement" means the Lease Restructuring and Option Agreement dated the date hereof, among Dunham Capital
Management, L.L.C., GC Rosedale, L.L.C. and the Company. 

        "Lock-Up Agreements" means the letter agreements signed by the continuing directors and executive officers of the Company
restricting their ability to transfer shares of Common Stock that each beneficially owns for the period of time specified in such letter agreements. 

        "Losses" has the meaning set forth in Section 8.2. 

2

 

        "Master Agreement Amendment" means Amendment No. 3 to the Master Agreement between Dunham Capital Management, L.L.C., DHW Leasing,
L.L.C. and Dunham Equity Management, L.L.C, substantially in the form attached as Exhibit D. 

        "Material Adverse Effect" means any material adverse effect on (a) the transactions contemplated hereby or by the agreements or
instruments to be entered into in connection herewith; or (b) the business, operations, assets, financial condition or prospects of the Company and its Subsidiaries, taken as a whole, other
than (i) any change or effect relating to local, regional or United States national political, economic or financial conditions or resulting from or arising out of developments or conditions in
credit, financial or securities markets, including without limitation, caused by acts of terrorism or war (whether or not declared) or any material worsening of such conditions existing as of the date
of this Agreement, (ii) any change or effect generally affecting the industries, geographic areas or business segments in which the Company and its Subsidiaries operate, including without
limitation, any increase
in the prices of raw materials, to the extent such change or effect does not materially, disproportionately affect the Company relative to other industry participants, (iii) seasonal
fluctuations in the business of the Company and its Subsidiaries that are reasonably consistent with the Company's and its Subsidiaries' historical seasonable fluctuations in operating performance, or
(iv) any change in applicable law, rules or regulations or U.S. generally accepted accounting principles or the interpretation thereof. 

        "MBCA" means Chapter 302A of Minnesota Statutes, also known as the Minnesota Business Corporation Act. 

        "1933 Act" has the meaning set forth in the recitals hereof. 

        "1934 Act" means the Securities Exchange Act of 1934, as amended. 

        "Notice Period" has the meaning set forth in Section 5.2(b). 

        "Potential Superior Proposal" has the meaning set forth in Section 5.2(a). 

        "Proxy Statement" has the meaning set forth in Section 5.3(a). 

        "Purchase Price" has the meaning set forth in Section 2.2. 

        "Registrable Securities" means the shares of common stock of the Company issued by the Company to the holder of the Shares upon a
conversion, pursuant to the Certificate of Designation, of the Shares or any other shares of Common Stock issued pursuant to the terms of this Agreement and held by such holder. 

        "Registration Rights Agreement" means the Registration Rights Agreement, substantially in the form attached as  Exhibit E, executed and delivered on
the Closing Date, pursuant to which the Company agrees to register the resale of the Registrable Securities
under the 1933 Act and the rules and regulations promulgated thereunder, and applicable state securities laws. 

        "Regulation S" means Regulation S promulgated under the 1933 Act. 

        "Release and Escrow Agreements" means the three Release and Escrow Agreements among DHW, the Company and each of DHW's lenders,
substantially in the form attached as Exhibit F. 

        "Representatives" has the meaning set forth in Section 5.2(a). 

        "Rule 144" means Rule 144 promulgated under the 1933 Act. 

        "SEC" means the United States Securities and Exchange Commission. 

        "SEC Documents" has the meaning set forth in Section 4.5. 

        "Series A Preferred" has the meaning set forth in the recitals hereof. 

3

 

        "Shareholder Voting Agreement" means the Shareholder Voting Agreement between the Company and DHW to be entered into as of the Closing. 

        "Shares" has the meaning set forth in the recitals hereof. 

        "Subsidiaries" means any corporation or other organization, whether incorporated or unincorporated, in which the Company owns, directly or
indirectly, any equity or other ownership interest. 

        "Superior Proposal" has the meaning set forth in Section 5.2(d). 

        "Termination Date" has the meaning set forth in Section 10.2(a). 

        "Transaction Documents" means this Agreement, the Registration Rights Agreement, and the DHW Stock Repurchase Agreement. 

        "Troy Property" means the approximately two-acre real property site on Big Beaver Road in Troy, Michigan owned by Dunham. 

        "Troy Purchase Agreement" means the Purchase Agreement between the Company and Dunham Capital Management, L.L.C., regarding the Troy
Property, to be entered into in conjunction with the Closing. 

        "Voting Agreement and Irrevocable Proxy" means the Voting Agreement and Irrevocable Proxy dated the date hereof among DHW Leasing, L.L.C.,
certain shareholders of the Company, the Company, Joel C. Longtin, Steven J. Wagenheim and the Buyer. 

 
 

  ARTICLE 2    
    
    PURCHASE AND SALE OF PREFERRED STOCK    
    

        2.1    Purchase of Preferred Stock.    Subject to the terms and conditions of this Agreement, on the Closing Date, the
Company shall issue and sell the Shares to the Buyer, and the Buyer shall purchase from the Company the Shares. 

        2.2    Purchase Price and Form of Payment.    At the Closing, the Buyer shall pay $9,000,000 (the
"Purchase Price") for the Shares, by wire transfer of immediately available funds in accordance with the Company's written instructions. 

        2.3    Payment of Buyer Fees and Expenses.    Concurrent with Buyer's payment of the Purchase Price, the Company shall
pay to Buyer a cash transaction fee of $485,000 plus all of Buyer's reasonable out-of-pocket expenses incurred in connection with the transactions contemplated by this
Agreement, the other Transaction Documents and the Ancillary Agreements. 

        2.4    Closing Date.    Subject to the satisfaction (or permitted written waiver) of the conditions set forth in  Article 6,
Article 7 and Article 8
below, the closing of the transactions contemplated by this Agreement shall be held on the Closing Date at the offices of Briggs and Morgan, Professional Association, 2200 IDS Center, 80 South Eight
Street, Minneapolis, Minnesota, or at such other location as may be mutually agreed upon by the parties to this Agreement (the "Closing"). 

 
 

  ARTICLE 3    
    
    BUYER'S REPRESENTATIONS AND WARRANTIES    
    

        The Buyer represents and warrants to the Company that: 

        3.1    Organization and Qualification.    The Buyer is a limited liability company duly organized, validly existing
and in good standing under the laws of the jurisdiction in which it is organized, with full power and authority to purchase the Shares. 

4

 

        3.2    Authorization; Enforcement.    This Agreement has been duly and validly authorized by, and duly executed and
delivered on behalf of, the Buyer, and this Agreement constitutes the valid and binding agreement of the Buyer enforceable in accordance with its terms, except as such enforceability may be limited
by: (i) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws in effect that limit creditors' rights generally; (ii) equitable limitations on the
availability of specific remedies; and (iii) principles of equity. 

        3.3    Securities Matters.    In connection with the Company's compliance with applicable securities laws: 

        (a)   The
Buyer understands that the Shares are being offered and sold to it in reliance upon specific exemptions from the registration requirements of United States and state
securities laws and that the Company is relying upon the truth and accuracy of, and the Buyer's compliance with, the representations, warranties, agreements, acknowledgments and understandings of the
Buyer set forth herein in order to determine the availability of such exemption and the eligibility of the Buyer to acquire the Shares. 

        (b)   The
Buyer is purchasing the Shares for its own account, not as a nominee or agent, for investment purposes and not with a present view towards distribution. 

        (c)   The
Buyer is an "accredited investor" as that term is defined in Rule 501(a) of Regulation D promulgated under the 1933 Act (an
"Accredited Investor"), and has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of
an investment in the Shares. The Buyer understands that its investment in the Shares involves a significant degree of risk. The Buyer understands that no United States federal or state agency or any
other government or governmental agency has passed upon or made any recommendation or endorsement of the Shares. 

        3.4    Information.    The Buyer and its advisors, if any, have been furnished with all information relating to the
business, finances and operations of the Company and information relating to the offer and sale of the Shares that has been requested by the Buyer or its advisors. Buyer has access to and has reviewed
the Current Filings. Neither such inquiries nor any other due diligence investigation conducted by Buyer or any of its advisors or representatives shall modify, amend or affect Buyer's right to rely
on the Company's representations and warranties contained in Article 4 below. 

        3.5    Ownership.    As of the date of this Agreement, Buyer owns no Common Stock of the Company. 

        3.6    Financial Capability.    Buyer currently has or will have at Closing available funds necessary to pay the
Purchase Price on the terms contemplated by this Agreement. 

        3.7    Brokers and Finders.    Neither Buyer nor any of its Affiliates has taken any action which would give rise to
any claim by any person for brokerage commissions, transaction fees or similar payments relating to this Agreement or the transactions contemplated hereby. 

        3.8    Restrictions on Transfer.    The Buyer understands that the Shares have not been and are not being registered
under the 1933 Act or any applicable state securities laws. The Shares may not be transferred unless (i) the Shares are sold pursuant to an effective registration statement under the 1933 Act,
(ii) the Buyer shall have delivered to the Company an opinion of counsel to the effect that the Shares to be sold or transferred may be sold or transferred pursuant to an exemption from such
registration, which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions, (iii) the Shares are sold or transferred to an "affiliate" (as
defined in Rule 144 (or a successor rule)) of the Buyer who agrees to sell or otherwise transfer the Shares only in accordance with this  Section 3.8 and who is an Accredited Investor,
(iv) the Shares are sold pursuant to Rule 144, or (v) the Shares are sold
pursuant to Regulation S (or a successor rule), and the Buyer shall 

5

 

have
delivered to the Company an opinion of counsel that shall be in form, substance and scope customary for opinions of counsel in comparable transactions. Notwithstanding the foregoing or anything
else contained herein to the contrary, the Shares may be pledged as collateral in connection with a bona fide margin account or other lending arrangement. 

        The
Buyer understands that until such time as the Shares have been converted to Registrable Securities and have been resold pursuant to a registration statement filed under the 1933 Act
as contemplated by the Registration Rights Agreement, are eligible for resale pursuant to Rule 144(b)(1) under the 1933 Act without volume limitations, or are sold pursuant to another exemption
from registration, certificates evidencing the Shares and the Registrable Securities shall bear a restrictive legend in substantially the following form (and a stop-transfer order may be
placed against transfer of the certificates evidencing such Shares): 

"THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE AND HAVE BEEN ISSUED IN
RELIANCE UPON EXEMPTIONS AFFORDED UNDER APPLICABLE LAWS. THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED, SOLD, HYPOTHECATED, TRANSFERRED OR OTHERWISE ASSIGNED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS, OR AN APPLICABLE EXEMPTION TO THE REGISTRATION REQUIREMENTS OF SUCH LAWS." 

 
 

  ARTICLE 4    
    
    REPRESENTATIONS AND WARRANTIES OF THE COMPANY    
    

        Except as set forth in the Company's Disclosure Schedule attached hereto ("Company Disclosure
Schedule"), the Company represents and warrants to the Buyer that: 

        4.1    Organization and Qualification.    Each of the Company and its Subsidiaries, if any, is a corporation or other
entity duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is incorporated or organized, with full power and authority as a corporation or other entity
to own, lease, use and operate its properties and to carry on its business as now operated and conducted. Each of the Company and its Subsidiaries is duly qualified as a foreign corporation or other
entity to do business and is in good standing in each jurisdiction in which its ownership or use of property or the nature of the business conducted by it makes such qualification necessary. 

        4.2    Authorization; Enforcement.    The Company has all requisite corporate power and authority to enter into and
perform this Agreement and the Transaction Documents and to consummate the transactions contemplated hereby and thereby and to issue the Shares, in accordance with the terms hereof and thereof. The
execution and delivery of this Agreement and the other Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby (including without
limitation, the issuance of the Shares) have been duly authorized by the Company's Board of Directors and no further consent or authorization of the Company, its Board of Directors, or its
shareholders is required, other than the Company Shareholder Approval. This Agreement and the Transaction Documents have been duly executed and delivered by the Company. This Agreement constitutes,
and each of the Transaction Documents will constitute, upon execution and delivery by the Company, a legal, valid and binding obligation of the Company enforceable against the Company in accordance
with its terms, except as such enforceability may be limited by: (i) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws in effect that limit creditors' rights
generally; (ii) equitable limitations on the availability of specific remedies; and (iii) principles of equity. 

6

 

        4.3    Capitalization; Valid Issuance of Securities.    As of the date hereof, the authorized capital stock of the
Company consists of 90,000,000 shares of Common Stock, of which 7,380,304 shares are issued and outstanding, and 10,000,000 shares of preferred stock, $0.01 par value per share, of which, 3,000,000
shares, including the Shares to be sold to the Buyer as contemplated by this Agreement, are issued and
outstanding. All of such outstanding shares of capital stock are duly authorized, validly issued, fully paid and nonassessable. The Shares have been duly authorized and upon issuance pursuant to the
terms of this Agreement, and upon conversion to Registrable Securities, the Registrable Securities, will be validly issued, fully paid and nonassessable. As of the date of this Agreement, the Company
has reserved (i) 6,000,000 shares of Common Stock for issuance upon conversion of the Shares; (ii) 1,000,000 shares of Common Stock issuable in conjunction with any dividends on the
Shares and (iii) 1,362,953 shares of Common Stock upon exercise of options previously approved or awarded by the Company, or the Company's outstanding warrants or convertible debt securities.
No shares of capital stock of the Company are subject to preemptive rights or any other similar rights of the shareholders of the Company or any liens or encumbrances imposed through the actions or
failure to act of the Company. Except as disclosed in the Current Filings, as of the date of this Agreement, (i) there are no outstanding options, warrants, scrip, rights to subscribe for,
puts, calls, rights of first refusal, agreements, understandings, claims or other commitments or rights of any character whatsoever relating to, or securities or rights convertible into or
exchangeable for any shares of capital stock of the Company or any of its Subsidiaries, or arrangements by which the Company or any of its Subsidiaries is or may become bound to issue additional
shares of capital stock, (ii) there are no agreements or arrangements under which the Company or any of its Subsidiaries is obligated to register the sale of any of its or their securities
under the 1933 Act (except the Registration Rights Agreement) and (iii) there are no anti-dilution or price adjustment provisions contained in any security issued by the Company (or
in any agreement providing rights to security holders) that will be triggered by the issuance of the Shares. Except for the agreements contemplated in connection with the Transactions or as disclosed
in the Current Filings, the Company is not a party to, and to the Company's Knowledge, none of its shareholders are a party to, any agreements with respect to the voting or transfer of the Company's
capital stock or with respect to any other material aspect of the Company's affairs. 

        4.4    No Conflicts.    The execution, delivery and performance by the Company of this Agreement, the Transaction
Documents, the Ancillary Agreements and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance of the Shares) will not
(i) conflict with or result in a violation of any provision of the Articles of Incorporation or the Bylaws, each as amended, of the Company, (ii) violate or conflict with, or result in a
breach of any provision of, or constitute a default (or an event which with notice or lapse of time or both could become a default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any material agreement, indenture, patent, patent license or instrument to which the Company or any of its Subsidiaries is a party, or (iii) result in a
material violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations and regulations of any self-regulatory organizations
to which the Company or its securities are subject) applicable to the Company or any of its Subsidiaries or by which any property or asset of the Company or any of its Subsidiaries is bound. Neither
the Company nor any of its Subsidiaries is in violation of its Articles of Incorporation, Bylaws or other organizational documents, and neither the Company nor any of its Subsidiaries is in default
(and no event has occurred which with notice or lapse of time would result in a default) under, and neither the Company nor any of its Subsidiaries has taken any action or failed to take any action
that would give to others any rights of termination, amendment, acceleration or cancellation of, any agreement or instrument to which the Company or any of its Subsidiaries is a party or by which any
property or assets of the Company or any of its Subsidiaries is bound. Except as specifically contemplated by this Agreement and as required under the 1933 Act and any applicable state securities
laws, NASDAQ Marketplace Rules, the Company is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court, governmental agency, 

7

 

regulatory
agency, self regulatory organization or stock market or any third party in order for it to execute, deliver or perform any of its obligations under this Agreement or the Transaction
Documents. All consents, authorizations, orders, filings and registrations which the Company is required to obtain pursuant to the preceding sentence have been obtained or effected on or prior to the
date hereof, except for those required and contemplated by the Registration Rights Agreement. The Company is not in violation of the listing requirements of the NASDAQ Capital Market and does not
reasonably anticipate that the Common Stock will be delisted by the NASDAQ Capital Market in the foreseeable future. The Company and its Subsidiaries are unaware of any facts or circumstances that
might give rise to any of the foregoing. 

        4.5    SEC Documents; Financial Statements.    The Company has timely filed all registration statements, prospectuses,
reports, schedules, forms, proxy statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the 1934 Act (all of the foregoing filed prior to the
date hereof and all exhibits included therein and financial statements and schedules thereto and documents (other than exhibits to such documents) incorporated by reference therein, being hereinafter
referred to herein as the "SEC Documents"). As of their respective dates, the SEC Documents complied as to form in all material respects with the
requirements of the 1934 Act and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents, at the time they were filed with the SEC,
contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. None of the statements made in any such SEC Documents is, or has been, required to be amended or updated under applicable law (except for such statements as
have been amended or updated in any subsequent filing prior to the date hereof.) As of their respective dates, the financial statements of the Company
included in the SEC Documents complied as to form and substance in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect
thereto. Such financial statements have been prepared in accordance with United States generally accepted accounting principles, consistently applied, during the periods involved (except (i) as
may be otherwise indicated in such financial statements or the notes thereto, or (ii) in the case of unaudited interim statements, to the extent they may not include footnotes,
year-end adjustments or may be condensed or summary statements) and fairly present in all material respects the consolidated financial position of the Company and its consolidated
Subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments). Except as set forth in the financial statements of the Company included in the SEC Documents, the Company has no liabilities, contingent or otherwise, other
than (i) liabilities incurred in the ordinary course of business subsequent to September 28, 2010 and (ii) obligations under contracts and commitments incurred in the ordinary
course of business and not required under generally accepted accounting principles to be reflected in such financial statements, which, individually or in the aggregate, are not material to the
financial condition or operating results of the Company. 

        4.6    Absence of Certain Changes.    Since September 28, 2010, the Company has conducted its business only in
the ordinary course, consistent with past practice, and since that date there has been no change and no development in the assets, liabilities, business, properties, operations, financial condition,
results of operations or prospects of the Company or any of its Subsidiaries that has, or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. 

        4.7    Absence of Litigation.    Other than as set forth in the Current Filings, there is no material action, suit,
claim, proceeding, inquiry or investigation pending before or by any court, public board, government agency, self-regulatory organization or body pending or, to the Knowledge of the
Company or any of its Subsidiaries, threatened against the Company or any of its Subsidiaries, or their officers or directors in their capacities as such. The Company and its Subsidiaries are unaware
of any facts or circumstances which might give rise to any of the foregoing. 

8

 

 

        4.8    Patents, Copyrights.    The Company owns or possesses the requisite licenses or rights to use all patents,
patent applications, patent rights, inventions, know-how, trade secrets, trademarks, trademark applications, service marks, service names, trade names and copyrights
("Intellectual Property") which management of the Company has determined are necessary to enable it to conduct its business as now operated (and, to the
Company's Knowledge, as presently contemplated to be operated in the future); there is no claim or action by any person pending or, to the Company's Knowledge, threatened that challenges the right of
the Company or of a Subsidiary with respect to any Intellectual Property necessary to enable it to conduct its business as now operated and, to the Company's Knowledge, as presently contemplated to be
operated in the future; to the Company's Knowledge, the Company's or its Subsidiaries' current and intended products, services and processes do not infringe on any Intellectual Property or other
rights held by any person; and the Company is unaware of any facts or circumstances which might give rise to any of the foregoing. The Company makes no representation that any patent will issue as a
result of any pending or proposed patent application. 

        4.9    Tax Status.    Each of the Company and its Subsidiaries has made or filed all federal, state and foreign income
and all other tax returns, reports and declarations required by any jurisdiction to which it is subject (unless and only to the extent that the Company and each of its Subsidiaries has set aside on
its books provisions reasonably adequate for the payment of all unpaid and unreported taxes) and has paid all taxes and other governmental assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations, except those being contested in good faith and has set aside on its books provisions reasonably adequate for the payment of all taxes
for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any
jurisdiction, and the officers of the Company know of no basis for any such claim. The Company has not executed a waiver with respect to the statute of limitations relating to the assessment or
collection of any foreign, federal, state or local tax. None of the Company's tax returns is presently being audited by any taxing authority. 

        4.10    No Materially Adverse Contracts.    Neither the Company nor any of its Subsidiaries is subject to any charter,
corporate or other legal restriction, or any judgment, decree, order, rule or regulation which in the judgment of the Company's officers has or is expected in the future to have a Material Adverse
Effect. Neither the Company nor any of its Subsidiaries is a party to any contract or agreement which in the judgment of the Company's officers has or is expected to have a Material Adverse Effect. 

        4.11    Certain Transactions.    Except for arm's length transactions, transactions that would not be required to be
disclosed pursuant to Item 404 of Regulation S-K promulgated under the 1933 Act, or transactions described or disclosed in the Current Filings, pursuant to which the Company
or any of its Subsidiaries makes payments in the ordinary course of business upon terms no less favorable than the Company or any of its Subsidiaries could obtain from third parties, none of the
officers, directors, or employees of the Company is presently a party to any transaction with the Company or any of its Subsidiaries (other than for services as employees, officers and directors),
including, but not limited to, any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or
otherwise requiring payments to or from any officer, director or such employee or, to the Knowledge of the Company, any corporation, partnership, trust or other entity in which any officer, director,
or any such employee has a substantial interest or is an officer, director, trustee or partner. 

        4.12    Permits; Compliance.    Each of the Company and its Subsidiaries is in possession of all franchises, grants,
authorizations, licenses, permits, easements, variances, exemptions, consents, certificates, approvals and orders necessary to own, lease and operate its properties and to carry on its business as it
is now being conducted (collectively, the "Permits"), and there is no action pending or, to the Knowledge of the Company, threatened regarding
suspension or cancellation of any of the Permits. 

9

 

Neither
the Company nor any of its Subsidiaries is in conflict with, or in default or violation of, any of the Permits, except for any such conflicts, defaults or violations which, individually or in
the aggregate, would not reasonably be expected to have a Material Adverse Effect. Since September 28, 2010, neither the Company nor any of its Subsidiaries has received any notification with
respect to possible conflicts, defaults or violations of applicable laws, except for notices relating to possible conflicts, defaults or violations, which conflicts, defaults or violations would not
have a Material Adverse Effect. 

        4.13    Environmental Matters.    With respect to the Company or any of its Subsidiaries, the Company has no Knowledge
of past or present violations of Environmental Laws (as defined below), releases of any material into the environment, actions, activities, circumstances, conditions, events, incidents, or contractual
obligations which may give rise to any common law environmental liability or any liability under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 or similar federal,
state, local or foreign laws and neither the Company nor any of its Subsidiaries has received any notice with respect to any of the foregoing, nor is any action pending or, to the Company's Knowledge,
threatened in connection with any of the foregoing. The term "Environmental Laws" means all federal, state, local or foreign laws relating to pollution
or protection of human health or the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata), including, without limitation, laws
relating to emissions, discharges, releases or threatened releases of chemicals, pollutants contaminants, or toxic or hazardous substances or wastes (collectively, "Hazardous
Materials") into the environment, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous
Materials, as well as all authorizations, codes, decrees, demands or demand letters, injunctions, judgments,
licenses, notices or notice letters, orders, permits, plans or regulations issued, entered, promulgated or approved thereunder. Other than those that are or were stored, used or disposed of in
compliance with applicable law, the Company has no Knowledge that Hazardous Materials are contained on or about any real property currently owned, leased or used by the Company or any of its
Subsidiaries, or that Hazardous Materials were released on or about any real property previously owned, leased or used by the Company or any of its Subsidiaries during the period the property was
owned, leased or used by the Company or any of its Subsidiaries, except in the normal course of the Company's or any of its Subsidiaries' business. 

        4.14    Title to Property.    The Company and its Subsidiaries have good and marketable title to all personal property
owned by them and material to the business of the Company and its Subsidiaries, in each case free and clear of all liens, encumbrances and defects, except such as would not have a Material Adverse
Effect. Any real property and facilities held under lease by the Company and its Subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as would not have a
Material Adverse Effect. 

        4.15    No Investment Company.    The Company is not, and upon the issuance and sale of the Shares as contemplated by
this Agreement will not be an "investment company" as defined under the Investment Company Act of 1940 (an "Investment Company"). The Company is not
controlled by an Investment Company. 

        4.16    No Brokers.    The Company has taken no action which would give rise to any claim by any person for brokerage
commissions, transaction fees or similar payments relating to this Agreement or the transactions contemplated hereby. 

        4.17    Registration Rights.    Except pursuant to the Registration Rights Agreement, effective upon the Closing,
neither Company nor any Subsidiary is currently subject to any agreement providing any person or entity any rights (including piggyback registration rights) to have any securities of the Company or
any Subsidiary registered with the SEC or registered or qualified with any other governmental authority. 

10

 

        4.18    1934 Act Registration.    The Common Stock is registered pursuant to Section 12(g) of the 1934 Act, and
the Company has taken no action designed to, or which, to the Knowledge of the Company, is likely to have the effect of, terminating the registration of the Common Stock under the 1934 Act. 

        4.19    Labor Relations.    No labor or employment dispute exists or, to the Knowledge of the Company, is imminent or
threatened, with respect to any of the employees or consultants of the Company that has, or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. 

        4.20    Insurance.    The Company and its Subsidiaries are insured by insurers of recognized financial responsibility
against such losses and risks and in such amounts as are reasonable and customary for companies in the Company's line of business. The Company has no reason to believe that it will not be able to
renew existing insurance coverage for itself and its Subsidiaries as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary or appropriate to continue
business. 

        4.21    ERISA.    Except as disclosed in the Current Filings, the Company does not have any employee benefit plan as
defined in Section 3(3) of ERISA or any other executive or employee compensation program, and the Company has substantially performed all material obligations, whether arising by operation of
law or by contract, respecting the plans and programs disclosed in the Company Disclosure Schedule, has no Knowledge respecting defaults or violations respecting such plans and programs and has timely
made all contributions required to be made to such plans and programs. As to each employee benefit plan disclosed in the Company Disclosure Schedule that is intended to be "qualified" under
Section 401 of the Code, such plan has received a favorable determination letter from the Internal Revenue Service regarding such qualified status and remains so qualified. Neither the Company,
nor any trade or business whether or not incorporated which together with the Company would be deemed to be a "single employer" within the meaning of Section 4001(b) of ERISA, sponsors,
maintains or contributes to, or has at any time in the six-year period preceding the date of this Agreement sponsored, maintained or contributed to any employee pension benefit plan, as
defined in Section 3(2) of ERISA. The consummation of the transactions contemplated by this Agreement will not require the Company to make a larger contribution to, pay greater benefits or
provide any other rights under any plan or program disclosed in the Company Disclosure Schedule or otherwise. 

        4.22    Disclosure.    The Company understands and confirms that each Buyer will rely on the representations and
covenants contained herein in effecting the transactions contemplated by this Agreement and the Transaction Documents. All disclosure provided to the Buyers regarding the Company herein or in the
Current Filings, including the disclosures in the Company Disclosure Schedule attached hereto furnished by or on behalf of the Company, taken as a whole is true and correct in all material respects
and does not contain any untrue statement of material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they
were made, not misleading, except for breaches or inaccuracies of representations or warranties the circumstances giving rise to which, individually or in the aggregate, do not constitute and could
not reasonably be expected to have a Material Adverse Effect. No event or circumstance has occurred or information exists with respect to the Company or its Subsidiaries or its or their businesses,
properties, prospects, operations or financial conditions, which, under applicable law, rule or regulation, requires public disclosure or announcement by the Company but which has not been so publicly
announced or disclosed. 

        4.23    Disclosure Controls.    Each of the Company and its Subsidiaries maintains a system of internal accounting
controls sufficient to provide reasonable assurances that (i) transactions are executed in accordance with management's general or specific authorizations; (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with generally 

11

 

accepted
accounting principles and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management's general or specific authorization; and
(iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. The disclosure controls
and procedures (as such term is defined in Rule 13a-15(e) and 15d-15(e) under the 1934 Act of the Company and each of its Subsidiaries provide reasonable assurance that
material information relating to the Company and its Subsidiaries is made known to the Company's Chief Executive Officer and Chief Financial Officer and, based on an evaluation conducted as of
September 28, 2010, there are no significant deficiencies or weaknesses in the design or operations of internal controls that could adversely affect the Company's ability to record, process and
report financial data and other information required to be disclosed in the reports filed or furnished by the Company pursuant to the 1934 Act. 

        4.24    Distribution Determination.    The Company has made a determination for the purposes of
Section 302A.551 of the of MBCA, that the repurchase of Common Stock from DHW pursuant to the terms of the DHW Stock Repurchase Agreement meets the requirements of such section as of the date
of this Agreement, assuming the consummation of the transactions contemplated by this Agreement, including the Company's drawdown of amounts under the Credit Facility Agreement. 

 
 

  ARTICLE 5    
    
    COVENANTS    
    

         

        5.1    Interim Operations.    During the period from the date of this Agreement to the Closing (except as otherwise
expressly provided, contemplated or permitted by the terms of this Agreement), the Company shall carry on its business in the usual, regular and ordinary course in substantially the same manner as
conducted at the date of this Agreement, and, to the extent consistent therewith, use its reasonable commercial efforts to preserve intact its current business organizations, keep available the
services of its current officers and employees and preserve its relationships with customers, suppliers, licensors, governmental entities, licensees, distributors and others having business dealings
with the Company with respect to its business, in each case consistent with past practice. Without limiting the generality of the foregoing, and except as otherwise expressly provided or permitted by
this Agreement,
prior to the Closing, the Company shall not, and shall not permit any of its Subsidiaries to, without the prior written consent of the Buyer (which consent shall not be unreasonably withheld,
conditioned or delayed): 

        (a)   (i) declare,
set aside or pay any dividends on, or make any other distributions in respect of, any of its capital stock, (ii) split, combine or reclassify
any of its capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock or (iii) purchase, redeem or
otherwise acquire any shares of capital stock of the Company or any other securities thereof or any rights (including convertible debt), warrants or options to acquire any such shares or other
securities; 

        (b)   issue,
deliver, grant, sell, pledge, dispose of or otherwise encumber any of its capital stock or any securities convertible into, or any rights, warrants or options to
acquire, any such capital stock, other than (i) the issuance of shares of Common Stock upon the exercise of rights (including convertible debt), warrants or options outstanding on the date of
this Agreement, (ii) options to purchase common stock issuable pursuant to the Company's policy of awarding options to its non-employee directors on the anniversary of their
election to the Company's Board, (iii) modifications to or grants of directors' options as needed to prevent the forfeiture thereof upon a resignation of a director as contemplated by this
Agreement (which modifications are described in the Company's Disclosure Schedule); or (iv) Common Stock or rights to purchase Common Stock triggered or issuable pursuant to antidilution
provisions in warrants or other rights outstanding on the date of this Agreement; 

12

 

        (c)   amend
the Company's articles of incorporation or bylaws; 

        (d)   acquire
or agree to acquire (i) by merging or consolidating with, or by purchasing a substantial portion of the stock, or other ownership interests in, or
substantial portion of assets of, or by any other manner, any business or any corporation, partnership, association, joint venture, limited liability company or other entity or division thereof or
(ii) any assets that would be material, individually or in the aggregate, to the Company, except purchases of supplies, equipment and inventory in the ordinary course of business consistent
with past practice; 

        (e)   sell,
lease, transfer, sublicense, mortgage, pledge, grant a lien, mortgage, pledge, security interest, charge, claim or other encumbrance of any kind or nature on or
otherwise encumber or dispose of any of its properties or assets, except in the ordinary course of business consistent with past practice; 

        (f)    (i) incur
any indebtedness for borrowed money or guarantee any such indebtedness of another person, issue or sell any debt securities or warrants or other rights
to acquire any debt securities of the Company, guarantee any debt securities of another person, enter into any "keep well" or other agreement to maintain any financial statement condition of another
person or enter into any arrangement having the economic effect of any of the foregoing, except for (x) working capital borrowings and increases in letters of credit under revolving credit
facilities incurred in the ordinary course of business consistent with past practice, (y) indebtedness incurred to refund, refinance or replace indebtedness for borrowed money outstanding on
the date of this Agreement and (z) indebtedness existing solely between the Company and its wholly-owned Subsidiaries or between such Subsidiaries or (ii) make any loans, advances or
capital contributions to, or investments in, any other person; 

        (g)   except
for capital expenditures in compliance with the amounts and timing included in the Company's written capital expenditure plan previously made available to the
Buyer, make or incur any capital expenditure, except in the ordinary course of business consistent with past practice; 

        (h)   change
any method of tax accounting, make or change any material election relating to taxes, file any amended tax return, settle or compromise any material tax
liability, agree to an extension or waiver of the statute of limitations with respect to the assessment or determination of taxes, enter into any closing agreement with respect to taxes, or surrender
any right to claim a tax refund; 

        (i)    except
to the extent permitted by Section 5.2 of this Agreement, waive the benefits of, or agree to modify in any
manner, any confidentiality, standstill or similar agreement to which the Company is a party; 

        (j)    adopt
a plan of complete or partial liquidation or resolutions providing for or authorizing such a liquidation or a dissolution, restructuring, recapitalization or
reorganization; 

        (k)   enter
into any new collective bargaining agreement; 

        (l)    change
any accounting principle used by it, except as required by applicable laws or generally accepted accounting principles; 

        (m)  settle
or compromise any material litigation, including any litigation that is brought by any current, former or purported holder of any capital stock or debt securities
of the Company or any of its Subsidiaries relating to the transactions contemplated by this Agreement, or, except in the ordinary course of business consistent with past practice or as otherwise
required pursuant to contracts existing on or prior to the date of this Agreement or entered into in the ordinary course consistent with past practice after the date of this Agreement, and so long as
such settlement would not impose any
injunctive or similar order on the Company or restrict in any way the business of the Company, pay, discharge or satisfy any material claims, liabilities or obligations; 

13

 

        (n)   except
as set forth in the Company Disclosure Schedule, (i) enter into any new, or amend any existing, severance agreement or arrangement, deferred compensation
arrangement or employment agreement with any officer, director or employee whose annual base salary exceeds $150,000, (ii) adopt any new incentive, retirement or welfare benefit arrangements,
plans or programs for the benefit of current, former or retired employees or amend any existing Company compensation or benefit plan (other than amendments required by law or to maintain the tax
qualified status of such plans), (iii) grant any increases in employee compensation, other than in the ordinary course consistent with past practice (which shall include normal individual
periodic performance reviews and related compensation and benefit increases and bonus payments consistent with past practices) provided that any such increase shall not include increases in
compensation to officers or any employee whose annual base salary exceeds $150,000 or (iv) grant any stock options or stock awards; 

        (o)   cancel
any debts or waive any claims or rights of substantial value (including the cancellation, compromise, release or assignment of any indebtedness owed to, or claims
held by, the Company), except for cancellations made or waivers granted with respect to claims other than indebtedness in the ordinary course of business consistent with past practice which, in the
aggregate, are not material or for claims other than indebtedness which are cancelled or waived in connection with the settlement of the actions referred to in, and to the extent permitted by,
clause (m) above; 

        (p)   except
as set forth in the Company Disclosure Schedule, (i) enter into any contract, agreement or other arrangement, or series of contracts, agreements or other
arrangements, not in the ordinary course of business that would require the Company to expend more than $200,000 individually or $500,000 in the aggregate in any fiscal year, (ii) modify, amend
in any material respect, transfer or terminate any material contract of the Company or waive, release or assign any material rights or claims thereto or thereunder, (iii) enter into or extend
in any material respect any lease with respect to the Company's real property, (iv) modify, amend, transfer or terminate in any material respect any Intellectual Property agreements, standstill
or confidentiality agreement with any third party, or waive, release or assign any material rights or claims thereto or thereunder or (v) enter into, modify, amend, transfer or terminate any
contract to provide exclusive rights or obligations; 

        (q)   except
as provided in Section 5.2(b), agree, authorize or commit to do any of the foregoing or any action or fail
to take any action which would result in any of the conditions set forth in Article 8 not being satisfied or that would reasonably be expected to
result in a Material Adverse Effect; or 

        (r)   authorize
any of, or commit or agree to take any of, the foregoing actions. 

        5.2    Acquisition Proposals.    

        (a)    No Solicitation or Negotiation.    The Company hereby covenants that, except as expressly permitted by this  Section 5.2,
 the Company shall not, and the Company shall use its reasonable commercial efforts to instruct and cause its officers, directors,
employees, investment bankers, attorneys, accountants and other advisors or representatives (such officers, directors, employees, investment bankers, attorneys, accountants and other advisors or
representatives, collectively, "Representatives") not to, directly or indirectly: 

          (i)  solicit,
initiate or knowingly take any action to facilitate or encourage, whether publicly or otherwise, the submission of any inquiries or the making of any inquiry,
proposal or offer or other efforts or attempts that constitutes, or could reasonably be expected to lead to, any Acquisition Proposal (as defined below); 

14

 

         (ii)  enter
into, or participate in any discussions or negotiations regarding, or furnish to any person any non-public information for the purpose of encouraging
or facilitating, any Acquisition Proposal; or 

        (iii)  enter
into any letter of intent, memorandum of understanding, agreement in principle, acquisition agreement, merger agreement or similar agreement with respect to any
Acquisition Proposal or enter into any agreement or agreement in principle requiring the Company to abandon, terminate or fail to consummate the transactions contemplated hereby or breach its
obligations hereunder or propose or agree to do any of the foregoing. 

The
Company shall, and shall direct its Representatives to, cease immediately all discussions and negotiations that commenced prior to the date of this Agreement regarding any Acquisition Proposal
existing on the date of this Agreement and shall use its (and will cause the Company Representatives to use their) commercially reasonable efforts to require the other parties thereto to promptly
return or destroy in accordance with the terms of such agreement any confidential information previously furnished by the Company, its Subsidiaries or its Representatives thereunder. 

        Notwithstanding
anything to the contrary set forth in this Agreement the Company may, to the extent failure to do so would reasonably be expected to result in a breach of the fiduciary
obligations of the Company's Board of Directors under applicable law, as determined in good faith by the Company's Board of Directors after consultation with outside counsel, in response to
(1) a Superior Proposal (as defined below) or (2) a bona fide, unsolicited written Acquisition Proposal that the Company's Board of Directors determines in good faith after consultation
with outside counsel and its financial advisor is or is reasonably likely to lead to a Superior Proposal (any such Acquisition Proposal, a "Potential Superior
Proposal"), (x) furnish information with respect to the Company to the person making such Superior Proposal or Potential Superior Proposal and its Representatives
(provided that the Company shall promptly make available to the Buyer any material non-public information concerning the Company or its Subsidiaries that is made available to any person
given such access which was not previously made available to the Buyer) pursuant to a customary confidentiality agreement for a period of not less than eighteen months, with a six-month
standstill provision and an eighteen-month non solicitation provision and (y) participate in discussions or negotiations with such person and its Representatives regarding any such Superior
Proposal or Potential Superior Proposal. The Company shall promptly advise the Buyer of the receipt by the Company of any Acquisition Proposal or any request for non public information made by any
person or group of persons that has informed the Company it is considering making an Acquisition Proposal or any request for discussions or negotiations with the Company or the Company Representatives
relating to an Acquisition Proposal (in each case within 48 hours of receipt thereof), and the Company shall provide to the Buyer (within such 48-hour time frame) a written summary
of the material terms of such Acquisition Proposal (it being understood that such material terms shall include the identity of the person or group of persons making the Acquisition Proposal) and if
the Company determines to begin providing information or to engage in discussions regarding an Acquisition Proposal. The Company shall keep the Buyer reasonably informed of any material change to the
terms and conditions of any Acquisition Proposal. The Company agrees that it and its Subsidiaries will not enter into any confidentiality agreement with any person subsequent to the date hereof which
prohibits the Company from providing such information to the Buyer. 

15

 

        (b)    No Change in Company Recommendation or Alternative Acquisition Agreement.    Except as expressly permitted by
this Section 5.2, the Company's Board of Directors and each committee thereof shall not: 

          (i)  withdraw
or modify (or publicly propose to withdraw or modify), in a manner adverse to the Buyer, the approval or recommendation by the Company's Board of Directors or
any committee thereof with respect to the transactions contemplated by this Agreement, the other Transaction Documents and the Ancillary Agreements; 

         (ii)  cause
or permit the Company to enter into any letter of intent, memorandum of understanding, agreement in principle, acquisition agreement, merger agreement or similar
agreement (an "Alternative Acquisition Agreement") providing for the consummation of a transaction contemplated by any
Acquisition Proposal (other than a confidentiality agreement entered into in the circumstances referred to in Section 5.2(a)); or 

        (iii)  approve,
recommend or propose publicly to approve or recommend any Acquisition Proposal. 

        Notwithstanding
anything to the contrary set forth in this Agreement, at any time prior to obtaining the Company Shareholder Approval, the Company's Board of Directors may withdraw,
qualify or modify or propose publicly to withdraw, qualify or modify in any manner adverse to the Buyer, its approval or recommendation with respect to the transactions contemplated by this Agreement,
the other Transaction Documents and the Ancillary Agreements or approve or recommend any Superior Proposal made or received after the date of this Agreement, if the Company's Board of Directors
determines in good faith, after consultation with outside counsel, that failure to do so would reasonably be expected to result in a breach of its obligations under applicable law (a
"Change in Company Recommendation"); provided, however, that no Change in Company Recommendation may be made in response to a Superior Proposal until
three business days (the "Notice Period") following the Buyer's receipt of written notice from the Company (an "Adverse
Recommendation Notice") (x) advising the Buyer that the Company's Board of Directors intends to make such Change in Company Recommendation and the reason for such
change, (y) specifying the material terms and conditions of such Superior Proposal (including the proposed financing for such proposal) and (z) identifying any party making such Superior
Proposal; provided further prior to effecting such Change in Company Recommendation in response to a Superior Proposal, the Company shall, and shall cause its legal and financial advisors to, during
the Notice Period, negotiate with the Buyer in good faith (to the extent the Buyer desire to negotiate) to make such adjustments to the terms and conditions of this Agreement so that such Acquisition
Proposal ceases to constitute a Superior Proposal. In the event that during the Notice Period any revisions are made to the Superior Proposal to which the proviso in this  Section 5.2(b) applies and
the Company's Board of Directors in its good faith judgment determines such revisions are material (it being agreed
that any change in the purchase price in such Superior Proposal shall be deemed a material revision), the Company shall be required to deliver a new Adverse Recommendation Notice to the Buyer and to
comply with the requirements of this Section 5.2(b) with respect to such new written notice, except that the Notice Period shall be reduced to
two business days. In determining whether to make a Change in Company Recommendation in response to a Superior Proposal, the Company's Board of Directors shall take into account any changes to the
terms of this Agreement proposed by the Buyer (in response to an Adverse Recommendation Notice or otherwise) in determining whether such third party Acquisition Proposal still constitutes a Superior
Proposal. 

        (c)    Certain Permitted Disclosure.    Nothing contained in this Agreement shall be deemed to prohibit the Company
from taking and disclosing to its shareholders a position with respect to a tender offer contemplated by Rule 14d-9 or Rule 14e-2(a) promulgated under the 1934
Act or 

16

 

from
making any other disclosure to the Company's shareholders or the general public if, in the good faith judgment of the Company's Board of Directors, after consultation with outside counsel,
failure to so disclose would reasonably be expected to result in a breach of its fiduciary duties under applicable law; provided, however, that neither the Company nor the Company's Board of Directors
(or any
committee thereof) shall be permitted to recommend that the Company's shareholders tender any securities in connection with any tender or exchange offer (or otherwise approve, endorse or recommend any
Acquisition Proposal), unless in each case, in connection therewith, the Company's Board of Directors effects a Change in Company Recommendation; provided further that any such disclosure (other than
a "stop, look and listen" communication or similar communication of the type contemplated by Rule 14d-9(f) under the 1934 Act) shall be deemed to be a Change in Company
Recommendation unless the Company's Board of Directors expressly reaffirms the Company Recommendation at least two business days prior to the Company Shareholders Meeting if the Buyer has delivered to
the Company a written request to so reaffirm at least 48 hours (or if 48 hours is impracticable, as far in advance as is practicable) prior to the time such reaffirmation is to be made. 

        (d)    Definitions.    As used in this Agreement: 

        "Acquisition Proposal" means (i) any proposal or offer for a merger, consolidation, dissolution, tender offer, recapitalization,
reorganization, share exchange, business combination or similar transaction involving the Company or (ii) any proposal or offer to acquire in any manner, directly or indirectly, 10% or more of
the equity securities or consolidated total assets (including, without limitation, equity securities of its Subsidiaries) of the Company, in each case other than the transactions contemplated by this
Agreement. 

        "Superior Proposal" means any bona fide written Acquisition Proposal made by a third party and not solicited in violation of  Section 5.2(a) to acquire more
than 50% of the equity securities or more than 50% of the assets of the Company and its Subsidiaries, taken as a
whole, pursuant to a tender or exchange offer, a merger, a recapitalization, a consolidation or a sale of its assets, which the Company's Board of Directors determines in its good faith judgment
(after consultation with its financial advisor) (i) to be more favorable from a financial point of view to the holders of Common Stock than the transactions contemplated by this Agreement and
(ii) is reasonably capable of being completed on the terms proposed therein, after taking into account the likelihood and timing of completion (as compared to the transactions contemplated by
this Agreement) and after taking into account all financial (including the financing terms of such Acquisition Proposal), regulatory, legal and other aspects of such proposal. 

        5.3    Proxy Statement.    

        (a)   As
soon as practicable following the date of this Agreement, the Company shall, in consultation with the Buyer, prepare and file with the SEC a proxy statement to be
sent to the shareholders of the Company regarding the Company Shareholder Approval (the "Proxy Statement"). Each of the parties hereto shall provide
promptly to the other parties hereto such information concerning its business and financial statements and affairs as, in the reasonable judgment of such party and its counsel, may be required or
appropriate for inclusion in the Proxy Statement or in any amendments or supplements thereto, and to cause its counsel and auditors to cooperate with the other party's counsel and auditors in the
preparation of the Proxy Statement. Each of the Company and the Buyer shall use its reasonable commercial efforts to respond as promptly as practicable to any comments of the SEC to the Proxy
Statement, and the Company shall use its reasonable commercial efforts to cause the definitive Proxy Statement to be mailed to the shareholders of the Company. 

17

 

 

        (b)   The
Company agrees, as to itself and its Subsidiaries, that none of the information supplied or to be supplied by it or its Subsidiaries for inclusion or incorporation
by reference in the Proxy Statement and any amendment or supplement thereto will, at the date of mailing to shareholders and at the date of the meeting of shareholders of the Company to obtain the
Company Shareholders Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading, except that no representation or warranty is made by the Company with respect to information supplied in writing by the Buyer
expressly for inclusion therein. No filing of, or amendment or supplement to, or correspondence to the SEC or its staff with respect to the Proxy Statement will be made by the Company without
providing the Buyer a reasonable opportunity to review and comment thereon. If at any time prior to the Closing any information relating to the Company or the Buyer, or any of their respective
affiliates, officers or directors, should be discovered by such party and which should be set forth in an amendment or supplement to the Proxy Statement, so that any of such documents would not
include any misstatement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, the
party which discovers such information shall promptly notify the other party or parties hereto, as applicable, and an appropriate amendment or supplement to the Proxy Statement describing such
information shall be promptly filed with the SEC and, to the extent required by applicable law, disseminated to the shareholders of the Company. The Company shall cause the Proxy Statement to comply
as to form and substance in all material respects with the applicable requirements of the 1934 Act and the rules of the NASDAQ Capital Market. 

        (c)   The
Buyer agrees, as to itself and its Subsidiaries, that none of the information supplied or to be supplied by any of them for inclusion or incorporation by reference
in the Proxy Statement and any amendment or supplement thereto, at the date of mailing to shareholders and at the date of the Company Shareholders Meeting, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, except that
no representation or warranty is made by the Buyer with respect to information supplied in writing by the Company expressly for inclusion therein. 

        5.4    Shareholder Approval and Board Recommendation.    

        (a)   The
Company, acting through the Company's Board of Directors, will take, in accordance with applicable law and its articles of incorporation and bylaws, all action
necessary to convene a meeting of shareholders of the Company (the "Company Shareholders Meeting") as promptly as practicable after the Proxy Statement
is available for mailing to secure the necessary approval of the transactions contemplated by this Agreement and the other Transaction Documents and Ancillary Agreements from (i) a majority of
the voting power of the Company's outstanding common stock and (ii) a majority of the voting power of the Company's common stock not owned by DHW and its affiliates present in person or by
proxy at the Company Shareholders Meeting, each in accordance with (A) the provisions of the Company's organizational and other governance documents, (B) the resolutions of the Company's
board of directors, (C) the MBCA, (D) the continued listing requirements of the NASDAQ Capital Market and (E) any other applicable legal requirements (collectively, the
"Company Shareholder Approval"). The Company will hire, at its sole expense, Georgeson Inc. as a proxy solicitor to seek the Company Shareholder
Approval. 

        (b)   Subject
to Section 5.2, (i) the Company's independent directors shall unanimously recommend that the
shareholders of the Company vote in favor of the transactions contemplated by this Agreement and the other Transaction Documents and Ancillary Agreements; (ii) the Proxy Statement shall include
a statement to the effect the Company's independent directors have unanimously recommended that the shareholders of the Company vote in favor of the transactions; 

18

 

and
(iii) neither the Company's independent directors nor any committee of the Company's Board of Directors shall withhold, withdraw, amend or modify, or propose or resolve to withhold,
withdraw, amend or modify in a manner adverse to Buyer, the unanimous recommendation of the Company's independent directors that the shareholders of the Company vote in favor of the transactions
contemplated by this Agreement and the other Transaction Documents and Ancillary Agreements. 

        5.5   Filings; Notification; Access. 

        (a)   The
Company and Buyer shall cooperate with each other and use their respective reasonable best efforts to take or cause to be taken all actions, and do or cause to be
done all things, necessary, proper or advisable on its part under this Agreement and applicable laws to consummate and make effective the transactions contemplated by this Agreement, the other
Transaction Documents and the Ancillary Agreements as soon as practicable, including preparing and filing as promptly as practicable all documentation to effect all necessary notices, reports and
other filings and to obtain as promptly as practicable all consents, registrations, approvals, permits and authorizations necessary or advisable to be obtained from any third party or any governmental
entity in order to consummate the transactions contemplated by this Agreement, the other Transaction Documents and the Ancillary Agreements. Subject to applicable laws relating to the exchange of
information, the Buyer and the Company shall have the right to review in advance, and to the extent practicable each will consult the other on, all the information relating to the Buyer or the
Company, as the case may be, that appear in any filing made
with, or written materials submitted to, any third party or any governmental entity in connection with the transactions contemplated by this Agreement, the other Transaction Documents and the
Ancillary Agreements. In exercising the foregoing right, each of the Company and the Buyer shall act reasonably and as promptly as practicable. 

        (b)   Subject
to applicable laws relating to the exchange of such information, the Company and the Buyer each shall, upon request by the other, furnish the other with all
information concerning itself, its directors, officers and shareholders and such other matters as may be reasonably necessary or advisable in connection with any other statement, filing, notice or
application made by or on behalf of the Buyer or the Company to any third party or any governmental entity in connection with the transactions contemplated by this Agreement, the other Transaction
Documents and the Ancillary Agreements. 

        (c)   Subject
to applicable law and the instructions of any governmental entity, the Company and the Buyer each shall keep the other apprised of the status of matters relating
to completion of the transactions contemplated hereby, including promptly furnishing the other with copies of notice or other communications received by the Buyer or the Company, as the case may be,
from any third party or any governmental entity with respect to the transactions contemplated by this Agreement, the other Transaction Documents and the Ancillary Agreements. The Company and the Buyer
each shall give prompt notice to the other of any change that is reasonably likely to result in a Material Adverse Effect or prevent, materially delay or materially impair the ability of the Company
and the Buyer to consummate the transactions contemplated by this Agreement. 

        (d)   Upon
reasonable notice, and except as may otherwise be required by applicable law, the Company shall (and shall cause each of its Subsidiaries to) afford the
Representatives of the Buyer reasonable access, during normal business hours throughout the period prior to the Closing, to its properties, books, contracts, records and personnel and, during such
period, the Company shall (and shall cause each of its Subsidiaries to) furnish promptly to the Buyer all information concerning its business, properties and personnel as may reasonably be requested,
provided that no investigation pursuant to this Section 5.5(d) shall affect or be deemed to modify any representation or warranty made by the
Company herein. 

19

 

        5.6    Form D; Blue Sky Laws.    Following the Closing, the Company shall file with the SEC a Form D
with respect to the Shares as required under Regulation D and each applicable state securities commission and will provide a copy thereof to the Buyer promptly after such filing. 

        5.7    Use of Proceeds.    The Company shall use the proceeds from the sale of the Shares and proceeds obtained from
drawdowns under the Credit Facility Agreement to (a) repurchase shares of Common
Stock pursuant to the DHW Stock Repurchase Agreement, (b) purchase the Troy Property, (c) repay indebtedness of the Company substantially as set forth in Section 5.7 of the
Company Disclosure Schedule or as otherwise directed by the Company's Board of Directors and (d) otherwise for general corporate purposes. 

        5.8    Listing.    The Company will obtain and, for so long as the Buyer owns any of the Shares or Registrable
Securities, use its best efforts to maintain the listing of its Common Stock on the NASDAQ Capital Market or any equivalent replacement exchange and will comply in all respects with the Company's
reporting, filing and other obligations under the bylaws or rules of the NASDAQ Capital Market and such exchanges, as applicable. Notwithstanding the foregoing, action taken after the Closing by the
board of directors of the Company that results in the cessation of such listing, whether due to a merger, exchange, sale of assets or other transaction that result in a delisting of the Common Stock
shall not give rise to liability on the part of the Company to Buyer. 

        5.9    No Integration.    The Company shall not make any offers or sales of any security (other than the Shares
hereunder) under circumstances that would require registration of the securities being offered or sold hereunder under the 1933 Act or cause the offering of the Shares or Registrable Securities to be
integrated with any other offering of securities by the Company for the purpose of any shareholder approval provision applicable to the Company or its securities. 

        5.10    DHW Common Stock Repurchase.    On the Closing Date, the Company shall repurchase 3,000,000 shares of Common
Stock owned by DHW pursuant to the terms of the DHW Stock Repurchase Agreement. The Company agrees that it shall not materially amend or consent to any material provision of the DHW Stock Repurchase
Agreement without obtaining the prior written consent of Buyer. 

        5.11    Purchase of Dunham Troy Property.    On the Closing Date or as soon as practicable thereafter, the Company
will, subject to the terms of the real estate purchase agreement with DHW, purchase fee simple title (free and clear of all liens and encumbrances) to the Troy Property, together with all the plans,
permits, related assets and other costs associated with the Troy Property and held by Dunham. Upon completing such purchase of the Troy Property, the Company shall be responsible for paying the real
estate taxes payable in 2010 and in all future years thereafter; provided, however, any penalties, late fees or assessments incurred by the Company as a result of not paying the real estate taxes
payable in 2009 and 2010 when due shall be deducted from the purchase price of the Troy Property. 

        5.12    Insurance.    For so long as Buyer beneficially owns (as defined in Rule 13d-3 promulgated
under the 1934 Act) the Shares or Registrable Securities, the Company shall use its best efforts and, where applicable, shall cause each Subsidiary to maintain or cause to be maintained with
financially sound and reputable insurers that have a rating of "A-" or better as established by Best's Rating Guide (or an equivalent rating with such other publication of a similar nature
as shall be in current use), directors' liability insurance providing at least the same coverage and amounts and containing terms and conditions which are not less advantageous in any material respect
than the directors' liability insurance maintained by the Company as of the Closing Date. 

        5.13    Confidentiality.    The parties acknowledge that the letter agreement dated August 24, 2010 executed by
James G. Gilbertson on behalf of the Company and Dean S. Oakey on behalf of CDP Management Partners LLC is hereby terminated and of no further force and effect and that the 

20

 

provisions
of this Section 5.13 shall control the confidentiality of discussions and information exchanged between the Company and the Buyer;
provided, however, that Buyer shall retain all liability to the Company arising from any breach of the obligations under such letter agreement prior to the date hereof. The Company and the Buyer agree
that all discussions between them and all information that the Company, its affiliates or its representatives furnish to the Buyer or its representatives, whether before or after the date hereof,
including any discussions, reports, analyses, compilation, memoranda, notes and any reports or analyses prepared by the Buyer or its representatives which reflect or are based upon such information
(collectively the "Evaluation Material"), will be kept confidential; provided, however, that (i) any of such information may be disclosed to
officers, directors, employees, counsel and other representatives of the Buyer who need to know such information for the purpose of evaluating the transactions contemplated by this Agreement, the
other Transaction Documents and the Ancillary Agreements (it being understood that the Buyer will cause its representatives to treat such information confidentially and in accordance with the terms of
this Section 5.13 and be responsible for any violation by them of the terms hereof) and (ii) any disclosure of such information may be
made to which the Company consents in writing. The Buyer agrees that all Evaluation Material will be used solely for the purpose of evaluating and documenting the transactions contemplated by this
Agreement, the other Transaction Documents and the Ancillary Agreements. The term "Evaluation Material" does not include information which was or becomes generally available on a
non-confidential basis. In the event this Agreement is terminated, the Buyer will (and will cause its representatives to) promptly, upon the request of the Company, destroy the Evaluation
Material without retaining any copy thereof. The provisions of this Section 5.13 shall terminate two years from the date hereof. 

 
 

  ARTICLE 6    
    
    CONDITIONS TO EACH PARTY'S OBLIGATIONS    
    

        The respective obligations of each party to effect the purchase and sale of the Shares and complete the other transactions contemplated
by this Agreement is subject to the satisfaction or waiver on or prior to the Closing Date of the following conditions, which conditions may be waived by the Company and the Buyer: 

        6.1    Approvals by the Company's Shareholders.    This Agreement and the Stock Repurchase Agreement shall have
received the Company Shareholder Approval. 

        6.2    No Restraints.    No statute, rule, regulation, temporary restraining order, preliminary or permanent
injunction or other order enacted, entered, promulgated, enforced or issued by any governmental entity or other legal restraint or prohibition preventing, or rendering illegal, the consummation and
performance of this Agreement; provided, however, that prior to asserting this condition, the Company shall have used reasonable best efforts to prevent the entry of any such injunction or other
order, to have any such order or injunction lifted or withdrawn, and to appeal as promptly as practicable any such injunction or other order that may be entered. 

 
 

  ARTICLE 7    
    
    CONDITIONS TO THE COMPANY'S OBLIGATION    
    

        In addition to the satisfaction of the conditions of Article 6, the obligation of the Company hereunder to issue and sell the
Shares to the Buyer at the Closing is subject to the satisfaction, at or before the Closing Date of each of the following conditions, provided that these conditions are for the Company's sole benefit
and may be waived by the Company at any time in its sole discretion: 

        7.1    Execution of Transaction Documents and Payment of Purchase Price.    Buyer shall have executed and delivered
the Transaction Documents and shall have delivered the Purchase Price in accordance with Section 2.2 above. 

21

 

        7.2    Representations and Warranties.    The representations and warranties of the Buyer shall be true and correct in
all material respects as of the date when made and as of the Closing Date as though made at that time (except for representations and warranties that speak as of a specific date). 

        7.3    Performance of Obligations.    Buyer shall have performed, satisfied and complied in all material respects with
the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Buyer at or prior to the Closing, and the Company shall have received a
certificate to such effect signed on behalf of Buyer by an executive officer of Buyer. 

        7.4    Credit Facility Agreement.    The Credit Facility Agreement shall have been signed and closed and the proceeds
available thereunder shall have been available to draw down. 

        7.5    Ancillary Agreements.    Buyer shall have executed and delivered the Ancillary Agreements to which it is a
party and to which a form of the Ancillary Agreement is attached as an exhibit to this Agreement. 

 
 

  ARTICLE 8    
    
    CONDITIONS TO BUYER'S OBLIGATION    
    

        In addition to the satisfactions of the conditions of Article 6, obligation of the Buyer hereunder to purchase the Shares at the
Closing is subject to the satisfaction, at or before the Closing Date, of each of the following conditions, provided that these conditions are for Buyer's sole benefit and may be waived by Buyer at
any time in its sole discretion: 

        8.1    Delivery of Transaction Documents, Stock Certificate and Material Consents.    The Company shall have executed
and delivered the Transaction Documents to the Buyer. The Company shall have delivered to the Buyer a stock certificate representing the Shares duly executed by the appropriate officers of the
Company. The Company shall have obtained all material consents required to complete the Transactions. 

        8.2    Execution of Ancillary Agreements.    The Ancillary Agreements shall have been executed and delivered by the
applicable parties. 

        8.3    Performance of Agreements.    The respective parties (other than the Buyer) have performed their material
obligations under (i) the Stock Repurchase Agreement, (ii) the Lease Restructuring and Option Agreement, (iii) the Voting Agreement and Irrevocable Proxy and (iv) the
Lock-Up Agreements. 

        8.4    Financing.    The Buyer shall have secured financing by arranging for the Credit Facility Agreement, on terms
and conditions acceptable to Buyer. 

        8.5    Due Diligence.    The Buyer shall have completed its due diligence investigation of the Company and the results
of such due diligence investigation shall be acceptable to Buyer; provided, however, that Buyer may only claim a failure to meet this condition at any time prior to the commencement of printing of the
final Proxy Statement prior to mailing to the Company's shareholders. 

        8.6    Filing of Certificate of Designation.    The Company shall have provided evidence to the Buyer of the filing of
the Certificate of Designation with the Secretary of State of the state of Minnesota in substantially the form set forth in Exhibit A. 

        8.7    Landlord Lease Reductions.    The Company shall have provided evidence to the Buyer that it has secured
permanent rent reductions of $250,000 per year from either (i) non-Dunham affiliated landlords on the Dunham land leases or (ii) the fee-simple restaurants owned
by third-party landlords other than Dunham. The $250,000 rent reduction contemplated by this Section 8.7 is in addition to any rent reductions to
Dunham-owned properties required or contemplated by the Stock Repurchase Agreement. 

22

 

        8.8    Representations, Warranties and Covenants.    The representations and warranties of the Company shall be true
and correct in all material respects (provided, however, that such qualification shall only apply to representations or warranties not otherwise qualified by materiality) as of the date when made and
as of the Closing Date as though made at such time (except for representations and warranties that speak as of a specific date), and the Company shall have performed, satisfied and complied in all
material respects with the material covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company, as applicable, at or prior to the
Closing Date. 

        8.9    No Material Adverse Effect.    There shall have been no change in the assets, liabilities (contingent or
otherwise), affairs, business, operations, prospects or conditions (financial or otherwise) of the Company or its Subsidiaries that would constitute a Material Adverse Effect. 

        8.10    Company Certificate.    The Company shall have delivered to the Buyer a certificate, signed by its Chief
Executive Officer and Chief Financial Officer, as to the Company's compliance with the conditions set forth in Sections 8.8 and 8.9.

 
 

  ARTICLE 9    
    
    INDEMNIFICATION    
    

        9.1    Survival.    The representations and warranties of the Company set forth in Sections 4.5, 4.9, 4.13, and
4.21 shall survive the Closing, notwithstanding any due diligence investigation conducted by or on behalf of the Buyer, for the greater of (a) 15 months from the Closing Date and
(b) the applicable statute of limitations period. The other representations and warranties of the Company in Article 4 and the Buyer in Article 3 shall survive for a period of
15 months from the Closing Date, notwithstanding any due diligence investigation conducted by or on behalf of the Buyer. 

        9.2    Indemnification by the Company.    Except as otherwise provided in this Article 9, the Company agrees to
indemnify, defend and hold harmless the Buyer and its affiliates and their respective officers, directors, agents, employees, subsidiaries, partners, members and controlling persons (each, a
"Buyer Indemnified Party") to the fullest extent permitted by law from and against any and all losses, claims, or written threats thereof, damages,
expenses or other liabilities (including reasonable fees, disbursements and other charges of counsel incurred by the Buyer Indemnified Party resulting from or arising out of any breach of any
representation or warranty, covenant or agreement by the Company to such Buyer Indemnified Party set forth in this Agreement or any of the Transaction Documents ("Buyer
Losses"), other than Buyer Losses incurred by a Buyer Indemnified Party relating to a claim or action by the Company against any Buyer Indemnified Party for the breach (or
alleged breach) of this Agreement or any documents contemplated by this Agreement by such Buyer Indemnified Party. In addition to all other factors that may affect the amount of indemnification paid
to Buyer hereunder, in determining the amount of any such indemnification payment, Buyer and the Company shall consider the fact that Buyer has ownership interest in the Company and will bear a
portion of the burden of any indemnification payment by the Company to Buyer. 

        9.3    Indemnification by the Buyer.    Except as otherwise provided in this Article 9, the Buyer agrees to
indemnify, defend and hold harmless the Company and its affiliates and their respective officers, directors, agents, employees, subsidiaries, partners, members and controlling persons (each, a
"Company Indemnified Party") to the fullest extent permitted by law from and against any and all Losses (including reasonable fees, disbursements and
other charges of counsel incurred by the Company Indemnified Party) resulting from or arising out of any breach of any representation or warranty, covenant or agreement by the Buyer to such Company
Indemnified Party set forth in this Agreement or any of the Transaction Documents ("Company Losses"), other than Company Losses incurred by a Company
Indemnified Party relating to a claim or action by the Buyer against any Company Indemnified Party for the breach (or alleged breach) of this Agreement or any documents contemplated by this Agreement
by such Company Indemnified Party. 

23

 

        9.4    Limitations.    The entitlement of any Buyer Indemnified Party or Company Indemnified Party (each, an
"Indemnified Party") to be indemnified shall be subject to the following: 

        (a)   No
claim for Buyer Losses due to a breach of representation or warranty by the Company shall be made unless the aggregate of all Buyer Losses for which claims are made
hereunder by the Buyer Indemnified Parties exceeds $250,000 (the "Buyer Threshold"). If the total amount of such Buyer Losses exceeds the Buyer
Threshold, then the Buyer Indemnified Party shall be entitled to be indemnified against and compensated and reimbursed for the portion of such Buyer Losses exceeding the Buyer Threshold. 

        (b)   No
claim for Company Losses due to a breach of representation or warranty by the Buyer shall be made unless the aggregate of all Company Losses for which all claims are
made hereunder by the Company Indemnified Parties exceeds $250,000 (the "Company Threshold"). If the total amount of such Company Losses exceeds the
Company Threshold, then the Company Indemnified Party shall be entitled to be indemnified against and compensated and reimbursed for the portion of such Company Losses exceeding the Company Threshold. 

        (c)   In
no event shall the Company be responsible for an aggregate amount of Buyer Losses in excess of $2,500,000. 

        (d)   In
no event shall the Buyer be responsible for an aggregate amount of Company Losses in excess of $2,500,000. 

        (e)   Qualifications
as to materiality using the term "material" (or any variation thereof) or Material Adverse Effect in any representation, warranty or covenant shall only
be taken into account in determining whether a breach of such representation, warranty or covenant (or failure of any representation or warranty to be true and correct) exists, and shall not be taken
into account in determining the amount of any Buyer Losses or Company Losses with respect to such breach of representation, warranty or covenant (or failure of any representation or warranty to be
true and correct). 

        (f)    Except
with respect to Buyer Losses or Company Losses actually awarded to a third party in an action brought against an Indemnified Person, no Indemnified Person is
entitled to indemnity for punitive damages, or for lost profits, consequential, exemplary or special damages. 

        (g)   All
Indemnity Amounts to be paid by the Company to a Buyer Indemnified Party hereunder shall be paid in cash or, if the Company's Board of Directors determines in good
faith that the Company does not have sufficient cash to pay such Indemnity Amounts or the Company is otherwise contractually restricted from making payments to shareholders of the Company, pursuant to
a subordinated note that (i) bears interest at 8% per annum, (ii) will be due in full on the earlier to occur of (A) two years following the date of such note and (B) a
merger involving the Company, sale of all or substantially all of the assets of the Company or other change of control of the Company and (iii) shall be prepaid without penalty if the Company's
Board of Directors determines in good faith that the Company has sufficient cash and is contractually permitted to prepay such note. 

        (h)   Without
duplication, no indemnification payment by the Company shall be considered an additional Buyer Loss. 

        9.5    Notification.    Each Indemnified Party under this Article 9 shall, promptly after the receipt of notice
of the commencement of any claim against such Indemnified Party in respect of which indemnity may be sought from the other party under this Article 9, notify the other party in writing of the
commencement thereof. The omission of any Indemnified Party to so notify the other party of any such action shall not relieve the other party from any liability which it may have to such Indemnified
Party except and only to the extent that such omission results in the other party's forfeiture of substantive rights or defenses and such forfeiture results in more damages than would otherwise have
resulted. In case any such claim shall be brought against any Indemnified Party, and it shall notify the other party of the commencement thereof, the other party shall be entitled to assume the
defense thereof at its 

24

 

own
expense, with counsel satisfactory to such Indemnified Party in its reasonable judgment; provided, however, that any Indemnified Party may, at its own expense, retain separate counsel to
participate in such defense at its own expense. Notwithstanding the foregoing, such Indemnified Party shall have the right to employ separate counsel and to control its own defense of such claim if,
in the reasonable opinion of counsel to such Indemnified Party, either (x) one or more defenses are available to the Indemnified Party that are not available to the other party or (y) a
conflict or potential conflict exists between the other party, on the one hand, and such Indemnified Party, on the other hand, that would make such separate representation advisable; provided,
however, that the other party (i) shall not be liable for the fees and expenses of more than one counsel to all Indemnified Parties and (ii) shall reimburse the Indemnified Parties for
all of such fees and expenses of such counsel incurred in any action between the other party and the Indemnified Parties or between the Indemnified Parties and any third party, as such expenses are
incurred. The other party agrees that it will not, without the prior written consent of the Indemnified Party, settle, compromise or consent to the entry of any judgment in any pending or threatened
claim relating to the matters contemplated hereby (if any Indemnified Party is a party thereto or has been actually threatened to be made a party thereto) unless such settlement, compromise or consent
includes an unconditional release of each Indemnified Party from all liability arising, or that may arise, out of such claim, including any injunctive relief against any Indemnified Party. The other
party shall not be liable for any settlement of any claim effected against an Indemnified Party without its written consent, which consent shall not be unreasonably withheld. The rights accorded to an
Indemnified Party hereunder shall be in addition to any rights that any Indemnified Party may have at common law, by separate agreement or otherwise, in the case of any fraud committed by the other
party. 

        9.6    Contribution.    If the indemnification provided for in this Article 9 from the other party is
unavailable to an Indemnified Party hereunder in respect of any Buyer Losses or Company Losses referred to herein, then the other party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a result of such Buyer Losses or Company Losses in such proportion as is appropriate to reflect the relative fault of the other
party and Indemnified Party in connection with the actions which resulted in such Buyer Losses or Company Losses, as well as any other relevant equitable considerations. The relative faults of such
other party and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact, has been made by, or relates to information supplied by, such other party or Indemnified Party, and the parties relative intent, knowledge,
access to information and opportunity to correct or prevent such action. The amount paid or payable by a party as a result of the Buyer Losses or Company Losses referred to above shall be deemed to
include, subject to the limitations set forth in this Article 9, any legal or other fees, charges or expenses reasonably incurred by such party in connection with any investigation or
proceeding. 

 
 

  ARTICLE 10    
    
    TERMINATION    
    

        10.1    Termination by Mutual Consent.    This Agreement may be terminated at any time prior to the Closing, whether
before or after the Company Shareholder Approval has been obtained, by mutual written consent of the Company and the Buyer. 

25

 

 

        10.2    Termination by Either the Buyer or the Company.    This Agreement may be terminated at any time prior to
the
Closing by either the Company or the Buyer: 

        (a)   if
the Closing shall not have occurred by July 31, 2011, whether such date is before or after the date of the Company Shareholder Approval (the "Termination
Date"); provided, however, that the right to terminate this Agreement pursuant to this Section 10.2(a) shall not be available to any party that has breached in any material respect its
obligations under this Agreement in any manner that shall have proximately contributed to the failure of the transactions contemplated by this Agreement to be consummated by the Termination Date;
provided, further, however, that the Termination Date may be extended up to December 31, 2011 if the termination date under the Stock Repurchase Agreement is extended past July 31, 2011,
in which case the Termination Date shall be changed hereunder to the new termination date under the Stock Repurchase Agreement; 

        (b)   if
the conditions of Article 6 have not been satisfied or waived; or 

        (c)   if
any order permanently restraining, enjoining or otherwise prohibiting consummation of the transactions contemplated by this Agreement shall become final and
non-appealable (whether before or after the Company Shareholder Approval). 

        10.3    Termination by the Company.    This Agreement may be terminated at any time prior to the Closing, by action of
the Company's Board of Directors: 

        (a)   if,
prior to obtaining the Company Shareholder Approval, (i) the Company's Board of Directors authorizes the Company, subject to complying with the terms of this
Agreement, to enter into a binding written agreement concerning a transaction that constitutes a Superior Proposal and the Company notifies the Buyer in writing that it intends to enter into such an
agreement, attaching the most current
version of such agreement to such notice, and (ii) the Buyer does not make, within two business days of receipt of the Company's written notification of its intention to enter into a binding
agreement for a Superior Proposal, an offer that the Company's Board of Directors determines, in good faith after consultation with its financial advisors, is at least as favorable, from a financial
point of view, to the shareholders of the Company as the Superior Proposal. 

        (b)   if
the conditions of Article 7 have not been satisfied or waived, provided that the Company is not then in breach of this Agreement such that any of the
conditions set forth in Section 8.8 would not be satisfied. 

        10.4    Termination by the Buyer.    This Agreement may be terminated at any time prior to the Closing by the Buyer: 

        (a)   in
the event that (i) the Company's Board of Directors shall have effected a Change in Company Recommendation or (ii) the Company's Board of Directors
fails publicly to reaffirm its adoption and recommendation of the transactions contemplated by this Agreement, the other Transaction Documents or the Ancillary Agreements within twenty business days
of receipt of a written request by the Buyer to provide such reaffirmation following an Acquisition Proposal; or 

        (b)   if
the conditions of Article 8 have not been satisfied or waived, such that Section 8.8 would not be
satisfied and such breach or condition is not curable by the Termination Date, provided that the Buyer is not then in breach of this Agreement such that
the conditions set forth in Sections 7.2 and 7.3 would not be satisfied. 

        10.5    Effect of Termination and Abandonment.    

        (a)   In
the event of termination of this Agreement pursuant to this Section 10, this Agreement shall , except as
provided herein, become void and of no effect with no liability on the part of any 

26

 

party
hereto (or of any of its directors, officers, employees, agents, legal and financial advisors or other representatives); provided, however, except as otherwise provided herein, no such
termination shall relieve any party hereto of any liability or damages resulting from any willful or intentional breach of this Agreement. 

        (b)   If
this Agreement is terminated because the condition of Sections 6.2, 8.5 or 8.7 have not been satisfied, or Section 10.2(c) or 10.3(b) has not been
satisfied, then no Expenses or Break-up Fees shall be payable by the Company. 

        (c)   If
this Agreement is terminated under the provisions set forth below, the Company agrees to pay Buyer, as Buyer's exclusive remedy under or arising from the transactions
contemplated by this Agreement and the other Transaction Documents and the Ancillary Agreements, Buyer's reasonable out-of-pocket expenses incurred in connection with the
transactions contemplated by this Agreement ("Expenses"), upon the other Transaction Document and the Ancillary Agreements and, where applicable, a break-up fee ("Break-up
Fee") as follows: 

          (i)  If
the Company shall terminate this Agreement pursuant to Section 10.2(a) (and the Company consummates an Acquisition Proposal within twelve months of such
termination) or Section 10.3(a) or Buyer shall terminate this Agreement pursuant to Section 10.2(a) (and the Company consummates an Acquisition Proposal within twelve months of such
termination), Section 10.4(a) or Section 10.4(b), the Company shall pay Buyer (without duplication) its Expenses (which shall not exceed $500,000) and a Break-up Fee in the
amount of $500,000. 

         (ii)  If
Buyer or the Company shall terminate this Agreement (x) pursuant to Section 10.2(b) because the condition of Section 6.1 shall not have been
satisfied, or (y) the proposed lender(s) to the Company under the Credit Facility Agreement or a commitment letter therefor shall have withdrawn its commitment such that the Company cannot
perform its obligations under this Agreement, then in either such case the Company shall pay Buyer (without duplication) its expenses equal to, at the Buyer's sole option, either (i) $100,000
in immediately available funds plus the issuance of 200,000 shares of Common Stock (which shares of Common Stock shall be subject to a registration rights agreement to be entered into between the
Company and the Buyer in form and substance similar to the Registration Rights Agreement) or (ii) $100,000 in immediately available funds and $100,000 payable without interest equally over a
period of 24 months ($4,166.67 per month). 

        (d)   The
fees set forth in Section 10.5(c) shall be paid promptly by the Company, but in no event later than (x) two business days after the first to occur of
the execution of an acquisition agreement or the consummation of the Acquisition Proposal, in the case of a termination under clause (c)(i) above pursuant to Section 10.2(a);
(y) on the date of termination of this Agreement in the other cases of clause (c)(i) above; and (z) two business days after termination of this Agreement in the case of
clause (c)(ii) above. The Company acknowledges that that agreements contained in this Section 10.5 are an integral part of the transactions contemplated by this Agreement, and that,
without these agreements, Buyer would not enter into this Agreement. 

        (e)   In
addition to its right to terminate this Agreement as set forth in Section 7, the Company may pursue any other remedy it may otherwise have, at law, in equity
or under any statute. If the Company pursues any such remedy, it shall be entitled to recover, in addition to damages or costs, its reasonable attorneys fees. All rights and remedies of the Company
under this Agreement shall be cumulative and not exclusive. 

27

 
 
 

  ARTICLE 11    
    
    GOVERNING LAW; MISCELLANEOUS    
    

        11.1    Governing Law.    This Agreement shall be enforced, governed by and construed in accordance with the laws of
the State of Minnesota applicable to agreements made and to be performed entirely within such state, without regard to the principles of conflict of laws. All parties agree that service of process
upon a party mailed by first class mail shall be deemed in every respect effective service of process upon the party in any such suit or proceeding. Nothing herein shall affect any party's right to
serve process in any other manner permitted by law. The party which does not prevail in any dispute arising under this Agreement shall be responsible for all fees and expenses, including attorneys'
fees, incurred by the prevailing party in connection with such dispute. 

        11.2    Counterparts; Signatures by Facsimile.    This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original but all of which shall constitute one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other
party. This Agreement, once executed by a party, may be delivered to the other party hereto by facsimile or other electronic transmission of a copy of this Agreement bearing the signature of the party
so delivering this Agreement. 

        11.3    Headings.    The headings of this Agreement are for convenience of reference only and shall not form part of,
or affect the interpretation of, this Agreement. 

        11.4    Severability.    In the event that any provision of this Agreement is invalid or unenforceable under any
applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform to such statute or rule of law.
Any provision hereof which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision hereof. 

        11.5    No Personal Liability of Directors, Officers, Owners, Etc.    No director, officer, employee, shareholder,
managing member, member, general partner, limited partner, principal or other agent of either Buyer or the Company shall have any liability for any obligations of the Buyer or the Company, as
applicable, under this Agreement or for any claim based on, in respect of, or by reason of, the respective obligations of the Buyer or the Company, as applicable, under this Agreement. Each party
hereby waives and releases all such liability. This waiver and release is a material inducement to each party's entry into this Agreement. 

        11.6    Entire Agreement; Amendments.    This Agreement and the instruments referenced herein contain the entire
understanding of the parties with respect to the matters covered herein and therein and supersedes all prior written and oral agreement and understandings relating to the matters covered herein,
including, without limitation, any confidentiality agreements. No provision of this Agreement may be waived or amended other than by an instrument in writing signed by the party to be charged with
enforcement; provided, however that after the Closing the Buyer shall be permitted to approve any waiver or amendment related to any rights Buyer has transferred to a third party in accordance with
this Agreement. The parties hereto agree that the letter agreement dated December 23, 2010, among the Company, Dunham and the Buyer shall be void and of no further force or effect. 

        11.7    Notices.    Any notices required or permitted to be given under the terms of this Agreement shall be sent by
certified or registered mail (return receipt requested) or delivered personally or by courier (including a recognized overnight delivery service) and shall be effective five days after being placed in
the mail, if mailed by regular United States mail, or upon receipt, if delivered personally or 

28

 

by
courier (including a recognized overnight delivery service), in each case addressed to a party. The addresses for such communications shall be: 

If
to the Company: 

Granite
City Food & Brewery Ltd.

5402 Parkdale Drive, Suite 101

Minneapolis, Minnesota 55416

Attention: James G. Gilbertson, Chief Financial Officer

Telephone: 952-215-0676

Facsimile: 952-215-0671 

With
a copy to: 

Briggs
and Morgan, P.A.

2200 IDS Center

80 South Eighth Street

Minneapolis, MN 55402

Attention: Avron L. Gordon

Telephone: (612) 977-8455

Facsimile: (612) 977-8650 

If
to Buyer: 

Concept
Development Partners LLC

5724 Calpine Drive

Malibu, California 90265

Attention: Dean S. Oakey

Telephone: (310) 457-0356

Facsimile: (310) 457-0256 

With
a copy to: 

CIC II LP

500 Crescent Court, Suite 250

Dallas, Texas 75201

Attention: Fouad Bashour

Telephone: (214) 871-6825

Facsimile: (214) 880-4491 

and

Fulbright &
Jaworski LLP

1301 McKinney Street, Suite 5100

Houston, Texas 77010

Attention: Edward Rhyne

Telephone: (713) 651-8334

Facsimile: (713) 651-5246 

        Each
party shall provide notice to the other party of any change in address in accordance with this section. 

        11.8    Successors and Assigns.    This Agreement shall be binding upon and inure to the benefit of the parties and
their successors and assigns. Neither the Company nor the Buyer shall assign this Agreement or any rights or obligations hereunder without the prior written consent of the other. Notwithstanding the
foregoing, the Buyer may assign its rights hereunder (a) to any of its "affiliates," as that term is defined under the 1934 Act, without the consent of the Company, provided that such 

29

 

affiliate
is an accredited investor (as that term is defined under SEC Regulation D) or (b) subject to the consent of the Company, to any accredited investor (as that term is defined
under SEC Regulation D) who purchases the Shares or Registrable Securities in a private transaction from the Buyer. 

        11.9    Third Party Beneficiaries.    This Agreement is intended for the benefit of the parties hereto and their
respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other person. 

        11.10    Publicity.    The Buyer shall have a reasonable advance period of time to review and approve any press
releases or any other public statements with respect to the transactions contemplated hereby; provided, however, that the Company shall be entitled, without the prior approval of the Buyer, to make
any press release with respect to such transactions as is required by applicable law and regulations (although the Buyer shall be consulted by the Company in connection with any such press release
prior to its release and shall be provided with a copy thereof and be given an opportunity to comment thereon). Notwithstanding the foregoing, the Company shall file with the SEC a
Form 8-K disclosing this Agreement and the transactions contemplated hereby and attaching the relevant agreements and instruments within four business days following the execution
of this Agreement. 

        11.11    Further Assurances.    Each party shall do and perform, or cause to be done and performed, all such further
acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby. 

        11.12    No Strict Construction.    The language used in this Agreement will be deemed to be the language chosen by
the parties to express their mutual intent, and no rules of strict construction will be applied against any party. 

        11.13    Remedies.    The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable
harm to the Buyer by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this
Agreement will be inadequate and agrees, in the event of a breach or threatened breach by
the Company of the provisions of this Agreement, that the Buyer shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein,
to an injunction or injunctions restraining, preventing or curing any breach of this Agreement and to enforce specifically the terms and provisions hereof, without the necessity of showing economic
loss and without any bond or other security being required. 

        11.14    Waiver of Jury Trial.    The Company and the Buyer hereby (i) irrevocably and unconditionally waive,
to the fullest extent permitted by law, trial by jury in any legal action or proceeding relating to this Agreement or any Transaction Documents and for any counterclaim therein; (ii) certify
that no party hereto nor any representative or administrative agent of counsel for any party hereto has represented, expressly or otherwise, or implied that such party would not, in the event of
litigation, seek to enforce the foregoing waiver, and (iii) acknowledge that such party has been induced to enter into this Agreement or any of the Transaction Documents and the transactions
contemplated hereby and thereby by, among other things, the mutual waivers and certifications contained in this Section 11.14. 

[Remainder of page intentionally left blank ; signature page follows]

30

 

 
        IN WITNESS WHEREOF, the undersigned have caused this Agreement to be duly executed as of the date first above written. 

 

 

					
	 	 	 GRANITE CITY FOOD & BREWERY LTD.
	

 	
 	
By:	
 	
/s/ JAMES G. GILBERTSON

 
	 	 	Name:	 	James G. Gilbertson
	 	 	Title:	 	 Chief Financial Officer
	

 	
 	
 BUYER:

CONCEPT DEVELOPMENT PARTNERS LLC
	

 	
 	
By:	
 	
/s/ FOUAD BASHOUR

 
	 	 	Name:	 	Fouad Bashour
	 	 	Title:	 	 Manager

 

 31

 

 

 
 

  EXHIBIT A    
    

 
  GRANITE CITY FOOD & BREWERY LTD.    
    
    CERTIFICATE OF DESIGNATION OF RIGHTS AND PREFERENCES    
    
    OF    
    
    SERIES A CONVERTIBLE PREFERRED
STOCK

        Granite
City Food & Brewery Ltd., a Minnesota corporation (the "Corporation"), does hereby
certify that pursuant to authority vested in it by the provisions of the Articles of Incorporation, as amended, of the Corporation, the Board of Directors of the Corporation by action in writing by
the Board of Directors taken pursuant to Section 302A.239 of the Minnesota Business Corporation Act, did adopt the following resolution authorizing the creation and issuance of a series of
preferred stock designated as Series A Convertible Preferred Stock: 

        RESOLVED
that, pursuant to authority expressly granted to the Board of Directors of the Corporation by the provisions of the Articles of Incorporation of the Corporation, the Board of
Directors of the Corporation hereby creates and authorizes the issuance of a series of shares of preferred stock of the Corporation and hereby fixes, in addition to the relative rights, voting power,
preferences and restrictions stated in the Articles of Incorporation of the Corporation, the following designation and number of shares of such preferred stock of the Corporation and the following
voting, dividend rate, liquidation preference, conversion and other rights, preferences and restrictions with respect to such shares of preferred stock of the Corporation: 

1.    Designation of Series of Preferred Stock.    

        Of
the 10,000,000 shares of preferred stock which the Corporation is authorized to issue pursuant to its Articles of Incorporation, 3,000,000 of such shares are designated as shares of
Series A Convertible Preferred Stock of the Corporation, par value $.01 per share ("Series A Preferred"). Shares of Series A
Preferred shall have a stated value of $3.00 per share (the "Stated Value"). Such shares of Series A Preferred, together with the 90,000,000
shares of authorized common stock of the Corporation, the remaining balance of the undesignated shares of preferred stock of the Corporation and any other common stock or preferred stock that may
hereafter be authorized in or pursuant to the Articles of Incorporation of the Corporation, are sometimes hereinafter collectively referred to as the "capital stock." 

2.    Voting Privileges.    

        (a)    General.    Each holder of Series A Preferred shall have that number of votes on all matters submitted
to the shareholders that is equal to the number of shares of common stock into which such holder's shares of Preferred Stock are then convertible, as hereinafter provided. Each holder of common stock
shall have one vote on all matters submitted to the shareholders for each share of common stock standing in the name of such holder on the books of the Corporation. Except as otherwise provided
herein, and except as otherwise required by agreement or law, all shares of capital stock of the Corporation shall vote as a single class on all matters submitted to the shareholders. 

        (b)    Additional Class Votes by Series A Preferred.    Without the affirmative vote or written consent of the
holders (acting together as a class) of a majority of the shares of Series A Preferred at the time outstanding, the Corporation shall not: (i) declare, or pay, or set apart for payment,
any dividends (other than dividends payable in stock ranking junior to Series A Preferred as to dividends and upon liquidation, dissolution or winding-up) or make any distribution
in cash or other property on any other class or series of stock of the Corporation ranking junior to Series A Preferred either as to dividends or upon liquidation, dissolution or
winding-up and will not redeem, purchase or otherwise acquire any shares of any such junior class or series if at the time of making such declaration, payment, distribution, redemption,
purchase or acquisition the Corporation shall be in default with respect to any 

A-1

 

dividend
payable on, or any obligation to retire shares of, Series A Preferred; (ii) authorize, create or issue, or increase the authorized or issued amount, of any class or series of
stock ranking senior to Series A Preferred as to payment of dividends, as to payment or distribution of assets upon the liquidation or dissolution of the corporation, or as to voting rights (on
an as-if-converted basis or otherwise); (iii) amend, alter or repeal (whether by merger, consolidation or otherwise) any of the provisions of the Corporation's Articles
of Incorporation, or of this Certificate of Designation, so as to adversely affect the preferences, rights, privileges or powers of Series A Preferred; (iv) acquire or agree to acquire
(x) by merging or consolidating with, or by purchasing a substantial portion of the stock, or other ownership interests in, or substantial portion of assets of, or by any other manner, any
business or any corporation, partnership, association, joint venture, limited liability company or other entity or division thereof or (y) any assets that would be material, individually or in
the aggregate, to the Corporation, except purchases of supplies, equipment and inventory in the ordinary course of business consistent with past practice; or (v) sell, lease, exchange or
dispose in any other manner, all or substantially all of the assets of the Corporation. 

3.    Dividends.    

        (a)   The
holders of shares of Series A Preferred shall be entitled to receive cumulative dividends, out of funds legally available therefor, at a rate of nine percent
(9%) per annum, before any dividend or distribution in cash or other property on common stock or any class or series of stock of the Corporation ranking junior to Series A Preferred as to
dividends or on liquidation, dissolution or winding-up shall be declared or paid or set apart for payment. 

        (b)   Dividends
on Series A Preferred shall be payable on March 31, June 30, September 30 and December 31 of each year through
December 31, 2013 (each such date being hereinafter individually a "Dividend Payment Date"), except that if such date is a Saturday, Sunday or
legal holiday then such dividend shall be payable on the first immediately preceding calendar day which is not a Saturday, Sunday or legal holiday, to holders of record as they appear on the books of
the Corporation on such respective dates, not exceeding sixty (60) days preceding such Dividend Payment Date, as may be determined by the Board of Directors in advance of the payment of each
particular dividend. Dividends in arrears may be declared and paid at any time, without reference to any regular Dividend Payment Date, to holders of record on such date as may be fixed by the Board
of Directors of the Corporation. Dividends declared and paid in arrears shall be applied first to the earliest dividend period or periods for which any dividends remain outstanding. The amount of
dividends payable per share of Series A Preferred for each dividend period shall be computed by dividing the annual rate of 9% by four. Dividends payable on Series A Preferred for the
initial dividend period and for any other period less than a full quarterly period shall be computed and prorated on the basis of a 360-day year of twelve 30-day months. 

        (c)   If
the Corporation is unable to pay a dividend on a Dividend Payment Date, the dividend shall be cumulative and shall accrue from and after the date of original issuance
thereof, whether or not declared by the Board of Directors. Accrued dividends shall bear interest at a rate of ten percent (10%) per annum. 

        (d)   No
cash dividend may be declared on any other class or series of stock ranking on a parity or junior with Series A Preferred as to dividends in respect of any
dividend period unless there shall also be or have been declared and paid on Series A Preferred accrued, unpaid dividends for all quarterly periods coinciding with or ending before such
quarterly period, ratably in proportion to the respective annual dividend rates fixed therefor. 

        (e)   Dividends
on Series A Preferred shall be paid 50% in cash and 50% in shares of fully-paid and nonassessable common stock of the Corporation, valued at
the market price per share of the common stock of the Corporation. As used in this Section 3, the term "market price" shall mean (i) if
the common stock is traded on a securities exchange or on the NASDAQ Stock Market, the closing 

A-2

 

sale
price of the common stock on such exchange or the NASDAQ Stock Market, or if the common stock is otherwise traded in the over-the-counter market, the closing bid price, in
each case averaged over a period of ninety (90) consecutive trading days prior to the date as of which "market price" is being determined, (ii) if the common stock is not traded on an
exchange or the NASDAQ Stock Market, or otherwise traded in the over-the-counter market, the higher of (A) the book value thereof as determined by any firm of
independent public accountants of recognized standing selected by the Board of Directors of the Corporation as of the last day of any month ending within sixty (60) days preceding the date as
of which the determination is to be made, or (B) the fair value thereof determined in good faith by the Board of Directors of the Corporation as of a date which is within fifteen
(15) days of the date as of which the determination is to be made. 

        (f)    Any
portion of a dividend that would result in issuance of a fractional share of common stock shall be paid in cash at the dividend rate set forth in  Section 3(a). 

4.    Liquidation Preference.    

        (a)   In
the event of an involuntary or voluntary liquidation or dissolution of the Corporation at any time, the holders of shares of Series A Preferred shall be
entitled to receive out of the assets of the Corporation an amount per share equal to the Stated Value, plus dividends unpaid and accumulated or accrued thereon, and any interest due thereon if any.
In the event of either an involuntary or a voluntary liquidation or dissolution of the Corporation, payment shall be made to the holders of shares of Series A Preferred in the amounts herein
fixed before any payment shall be made or any assets distributed to the holders of the common stock or any other class of shares of the Corporation ranking junior to Series A Preferred with
respect to payment upon dissolution or liquidation of the Corporation. If upon any liquidation or dissolution of the Corporation, the assets available for distribution shall be insufficient to pay the
holders of all outstanding shares of Series A Preferred and any liquidation preference on any other class or series of preferred stock of the Corporation ranking on a parity with
Series A Preferred, to which they respectively shall be entitled, the holders of such shares of Series A Preferred and the holders of any such other class or series of preferred stock of
the Corporation ranking on a parity with Series A Preferred shall share pro rata in any such distribution in proportion to the full amounts to which they would otherwise be respectively
entitled. 

        (b)   Nothing
hereinabove set forth shall affect in any way the right of each holder of shares of Series A Preferred to convert such shares at any time and from time to
time in accordance with Section 5 below. 

5.    Optional Conversion Right.    

        (a)   The
holder of any shares of Series A Preferred may at any time prior to December 31, 2014 convert any or all of the shares of Series A Preferred
into fully paid and non-assessable shares of common stock of the Corporation at the rate of two shares of common stock for each share of Series A Preferred, equivalent to a
conversion price of $1.50 per share (the "Conversion Price"), subject to adjustment pursuant to  Section 5(c). Subject to the provisions of the
next sentence, shares of Series A Preferred surrendered for conversion during the period
from the close of business on any record date for the payment of dividends next preceding any Dividend Payment Date to the opening of business on such Dividend Payment Date shall be accompanied by
payment of an amount equal to the dividend payable on such Dividend Payment Date on the shares being surrendered for conversion. A holder of Series A Preferred on the record date preceding a
Dividend Payment Date who (or whose transferee) converts shares of Series A Preferred on a Dividend Payment Date, will receive the dividend payable on such Series A Preferred by the
Corporation on such Dividend Payment Date together with all accumulated but unpaid dividends on such Series A Preferred, and the converting holder need not include payment in the amount of such
dividend upon surrender of shares of Series A Preferred for conversion. 

A-3

 

        (b)   In
order to convert shares of Series A Preferred into shares of common stock of the Corporation, the holder thereof shall give written notice to the Corporation
at such office that such holder elects to convert such shares and shall surrender at the Corporation's corporate offices the certificate or certificates therefor, duly endorsed to the Corporation or
in blank, within two business days following delivery of such notice. Shares of Series A Preferred shall be deemed to have been converted immediately prior to the close of business on the day
of the surrender of such shares for conversion as herein provided, and the person entitled to receive the shares of common stock of the Corporation issuable upon such conversion shall be treated for
all purposes as the record holder of such shares of common stock at such time. As promptly as practicable on or after the conversion date, the Corporation shall issue and deliver or cause to be issued
and delivered a certificate or certificates for the number of shares of common stock of the Corporation issuable upon such conversion. 

        (c)   The
Conversion Price shall be subject to adjustment from time to time as hereinafter provided. Upon each adjustment of the Conversion Price each holder of shares of
Series A Preferred shall thereafter be entitled to receive the number of shares of common stock of the Corporation obtained by multiplying the Conversion Price in effect immediately prior to
such adjustment by the number of shares issuable pursuant to conversion immediately prior to such adjustment and dividing the product thereof by the Conversion Price resulting from such adjustment. 

        (d)   Except
for (i) options, warrants or other rights to purchase securities outstanding on the date of the first issuance of Series A Preferred (provided there
is no adjustment to the terms of such options, warrants or other securities on or after the date of issuance of Series A Preferred, other than pursuant to the Corporation's option exchange
program approved by the compensation committee of the Board of Directors of the Corporation on December 28, 2010); (ii) options to purchase shares of common stock and the issuance of
awards of common stock pursuant to stock option or employee stock purchase plans adopted by the Corporation and shares of common stock issued upon the exercise of such options granted pursuant to such
plans (provided there is no adjustment to the terms of such options, awards or other securities on or after the date of issuance of Series A Preferred), appropriately adjusted to reflect stock
splits, combinations, stock dividends, reorganizations, consolidations and similar changes; or (iii) common stock issued to holders of Series A Preferred or upon conversion or in lieu of
cash dividends on Series A Preferred, if and whenever the Corporation shall issue any additional securities, warrants or rights or any security convertible or exchangeable into equity,
securities, warrants or rights (collectively, "Convertible Securities") without consideration or for a consideration per share less than the Conversion
Price in effect immediately prior to the time of such issue or sale, then, forthwith upon such issue or sale, the Conversion Price shall be adjusted to a price determined by multiplying such
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 that the
aggregate consideration received by the Corporation for such issuance would purchase at such Conversion Price; and the denominator of which shall be the number of shares of such additional common
stock and the number of shares of common stock outstanding prior to such issuance. For the purpose of the above calculation, the number of shares of common stock immediately prior to such issuance
shall be calculated on a fully-diluted basis, as if all shares of Series A Preferred had been fully converted into shares of common stock and any outstanding warrants, options or other rights
for the purchase of shares of stock or Convertible Securities with an exercise price at or less than the then current market value of the common stock of the Corporation had been fully exercised as of
such date. Except as provided in Section 5(g) below, no further adjustments of the Conversion Price shall be made upon the actual issuance of
common stock or of any Convertible Securities upon the exercise of such rights or options or upon the actual issue of such common stock upon conversion or exchange of such Convertible Securities. 

        (e)   For
purposes of this Section 5, in case any shares of common stock or Convertible Securities or any rights or
options to purchase any such common stock or Convertible Securities shall be issued or 

A-4

 

sold
for cash, the consideration received therefor shall be deemed to be the amount received by the Corporation therefor, without deducting therefrom any expenses incurred or any underwriting
commissions, discounts or concessions paid or allowed by the Corporation in connection therewith. In case any shares of common stock or Convertible Securities or any rights or options to purchase any
such common stock or Convertible Securities shall be issued or sold for a consideration other than cash, the amount of the consideration other than cash received by the Corporation shall be deemed to
be the fair value of such consideration as determined by the Board of Directors of the Corporation, without deducting therefrom any expenses incurred or any underwriting commissions, discounts or
concessions paid or allowed by the Corporation in connection therewith. In case any shares of common stock or Convertible Securities or any rights or options to purchase such common stock or
Convertible Securities shall be issued in connection with any merger or consolidation in which the Corporation is the surviving corporation, the amount of consideration therefor shall be deemed to be
the fair value as determined by the Board of Directors of the Corporation of such portion of the assets and business of the non-surviving corporation or corporations as such Board shall
determine to be
attributable to such common stock, Convertible Securities, rights or options, as the case may be. In the event of any consolidation or merger of the Corporation in which the Corporation is not the
surviving corporation or in the event of any sale of all or substantially all of the assets of the Corporation for stock or other securities of any other corporation, the Corporation shall be deemed
to have issued a number of shares of its common stock for stock or securities of the other corporation computed on the basis of the actual exchange ratio on which the transaction was predicated and
for a consideration equal to the fair market value on the date of such transaction of such stock or securities of the other corporation, and if any such calculation results in adjustment of the
Conversion Price, the determination of the number of shares of common stock issuable upon conversion immediately prior to such merger, conversion or sale, for purposes of  Section 5(h), shall be
made after giving effect to such adjustment of the Conversion Price. 

        (f)    In
case the Corporation shall at any time subdivide its outstanding shares of common stock into a greater number of shares, the Conversion Price in effect immediately
prior to such subdivision shall be proportionately reduced, and conversely, in case the outstanding shares of common stock of the Corporation shall be combined into a smaller number of shares, the
Conversion Price in effect immediately prior to such combination shall be proportionately increased. 

        (g)   If
(i) the purchase price provided for in any right or option referred to in Section 5(d), or
(ii) the additional consideration, if any, payable upon the conversion or exchange of Convertible Securities, or (iii) the rate at which any Convertible Securities are convertible into
or exchangeable for common stock, shall change at any time (other than under or by reason of provisions designed to protect against dilution and other than pursuant to the Corporation's option
exchange program approved by the compensation committee of the Board of Directors of the Corporation on December 28, 2010), or any Convertible Securities shall terminate, expire or cease to be
outstanding without exercise thereof, the Conversion Price then in effect hereunder shall forthwith be increased or decreased to such Conversion Price as would have applied had the adjustments made
upon the issuance of such rights, options or Convertible Securities been made upon the basis of (x) the issuance of the number of shares of common stock theretofore actually delivered upon the
exercise of such options or rights or upon the conversion or exchange of such Convertible Securities, and the total consideration received therefor, and (y) the issuance at the time of such
change of any such options, rights, or Convertible Securities then still outstanding for the consideration, if any, received by the Corporation therefor and to be received on the basis of such changed
price; and on the expiration of any such option or right or the termination of any such right to convert or exchange such Convertible Securities, the Conversion Price then in effect hereunder shall
forthwith be increased to such Conversion Price as would have been obtained had the adjustments made upon the issuance of such rights or options or Convertible Securities been made upon the basis of
the issuance of the shares of common stock theretofore actually delivered (and the total consideration received therefor) upon the exercise of such 

A-5

 

rights
or options or upon the conversion or exchange of such Convertible Securities. If the purchase price provided for in any right or option referred to in  Section 5(d), or the rate at which any
Convertible Securities referred to in Section 5(d)
are convertible into or exchangeable for common stock, shall decrease at any time under or by reason of provisions with respect thereto designed to protect against dilution, then in case of the
delivery of common stock upon the exercise of any such right or option or upon conversion or exchange of any such Convertible Securities, the Conversion Price then in effect hereunder shall forthwith
be decreased to such Conversion Price as would have
applied had the adjustments made upon the issuance of such right, option or Convertible Securities been made upon the basis of the issuance of (and the total consideration received for) the shares of
common stock delivered as aforesaid. 

        (h)   If
any capital reorganization or reclassification of the capital stock of the Corporation, or consolidation or merger of the Corporation with another corporation, or the
sale of all or substantially all of its assets to another corporation shall be effected in such a way that holders of common stock shall be entitled to receive stock, securities or assets with respect
to or in exchange for common stock, then, as a condition of such reorganization, reclassification, consolidation, merger or sale, and except as otherwise provided herein, lawful and adequate provision
shall be made whereby the holders of Series A Preferred shall thereafter have the right to receive upon the basis and upon the terms and conditions specified herein and in lieu of the shares of
the common stock of the Corporation immediately theretofore receivable upon the conversion of Series A Preferred, such shares of stock, securities or assets as may be issued or payable with
respect to or in exchange for a number of outstanding shares of such common stock equal to the number of shares of such stock immediately theretofore receivable upon the conversion of Series A
Preferred had such reorganization, reclassification, consolidation, merger or sale not taken place, plus all dividends unpaid and accumulated or accrued thereon to the date of such reorganization,
reclassification, consolidation, merger or sale, and in any such case appropriate provision shall be made with respect to the rights and interests of the holders of Series A Preferred to the
end that the provisions hereof (including without limitation provisions for adjustments of the Conversion Price and of the number of shares receivable upon the conversion of Series A Preferred)
shall thereafter be applicable, as nearly as may be in relation to any shares of stock, securities or assets thereafter receivable upon the conversion of Series A Preferred. The Corporation
shall not effect any such consolidation, merger or sale, unless prior to the consummation thereof the successor corporation (if other than the Corporation) resulting from such consolidation or merger
or the corporation purchasing such assets shall assume by written instrument executed and mailed to the registered holders of Series A Preferred, at the last addresses of such holders appearing
on the books of the Corporation, the obligation to deliver to such holders such shares of stock, securities or assets as, in accordance with the foregoing provisions, such holders may be entitled to
receive. 

        (i)    Upon
any adjustment of the Conversion Price, the Corporation shall give written notice thereof, by first-class mail, postage prepaid, addressed to the registered holders
of Series A Preferred, at the addresses of such holders as shown on the books of the Corporation, which notice shall state the Conversion Price resulting from such adjustment and the increase
or decrease, if any, in the number of shares receivable at such price upon the conversion of Series A Preferred, setting forth in reasonable detail the method of calculation and the facts upon
which such calculation is based. No adjustment to the Conversion Price shall be required unless such adjustment would require an increase or decrease of at least one percent (1%) in such Conversion
Price; provided, however, that any adjustments which by reason of this Section 5(i) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment; and, provided further, that adjustment shall be required and made in accordance with the provisions of this  Section 5 (other than this Section 5(i)) not later than such time as may be required in
order to preserve the tax-free nature of a distribution to the holders of shares of common stock. All calculations under this  Section 5 shall be made to the nearest cent or to the nearest
one-hundredth of a share, as the case may be. Anything in this  Section 5 to the contrary 

A-6

 

notwithstanding,
the Corporation shall be entitled to make such increases in the Conversion Price in addition to those required by this Section 5
as it in its discretion shall determine to be advisable in order that any stock dividends, subdivisions of shares, distribution of rights to purchase stock or securities, or distribution of securities
convertible into or exchangeable for stock, hereafter made by the Corporation to its stockholders shall not be taxable. 

        (j)    In
case at any time: (i) there shall be any capital reorganization, or reclassification of the capital stock of the Corporation, or consolidation or merger of the
Corporation with, or sale of all or substantially all of its assets to, another corporation; or (ii) there shall be a voluntary or involuntary dissolution, liquidation or winding up of the
Corporation; then, in any one or more of said cases, the Corporation shall give written notice, by first-class mail, postage prepaid, addressed to the registered holders of Series A Preferred
at the addresses of such holders as shown on the books of the Corporation, of the date on which (x) the books of the Corporation shall close or a record shall be taken for such dividend,
distribution or subscription rights, or (y) such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding up shall take place, as the case may be. Such
notice shall also specify the date as of which the holders of common stock of record shall participate in such dividend, distribution or subscription rights, or shall be entitled to exchange their
common stock for securities or other property 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 least twenty (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
transfer books are closed in respect thereto. 

        (k)   If
any event occurs as to which in the opinion of the Board of Directors of the Corporation the other provisions of this  Section 5 are not strictly applicable or if strictly applicable would not
fairly protect the rights of the holders of Series A Preferred
in accordance with the essential intent and principles of such provisions, then the Board of Directors shall make an adjustment in the application of such provisions, in accordance with such essential
intent and principles, so as to protect such rights as aforesaid. 

        (l)    As
used in this Section 5 the term "common stock" shall mean and include the Corporation's presently authorized
common stock and any additional common stock that may be authorized by due action of the Corporation's Board of Directors and shareholders entitled to vote thereon. 

        (m)  No
fractional shares of common stock shall be issued upon conversion, but, instead of any fraction of a share which would otherwise be issuable, the Corporation shall
pay a cash adjustment in respect of such fraction in an amount equal to the same fraction of the market price per share of common stock as of the close of business on the day of conversion. As used in
this Section 5, the term "market price" shall mean (i) if the common stock is traded on a securities exchange or on the NASDAQ Stock
Market, the closing sale price of the common stock on such exchange or the NASDAQ Stock Market, or if the common stock is otherwise traded in the over-the-counter market, the
closing bid price, in each case averaged over a period of twenty (20) consecutive trading days prior to the date as of which "market price" is being determined, (ii) if at any time the
common stock is not traded on an exchange or the NASDAQ Stock Market, or otherwise traded in the over-the-counter market, the higher of (A) the book value thereof as
determined by any firm of independent public accountants of recognized standing selected by the Board of Directors of the Corporation as of the last day of any month ending within sixty
(60) days preceding the date as of which the determination is to be made, or (B) the fair value thereof determined in good faith by the Board of Directors of the Corporation as of a date
which is within fifteen (15) days of the date as of which the determination is to be made. 

        (n)   The
Corporation covenants that it will at all times reserve and keep available, solely for the purpose of issue upon conversion of the shares of Series A
Preferred, such number of shares of 

A-7

 

common
stock as shall be issuable upon the conversion of all such outstanding shares; provided, that nothing contained herein shall be construed to preclude the Corporation from satisfying its
obligations in respect of the conversion of the shares by delivery of purchased shares of common stock of the Corporation. 

        (o)   The
Corporation covenants that if any shares of common stock required to be reserved for purposes of conversion of the shares of Series A Preferred require
approval of any governmental authority under any federal or state law, before such shares may be issued upon conversion, the Corporation will cause such shares to be duly approved. 

        (p)   The
Corporation covenants that all shares of common stock issued upon conversion of the shares of Series A Preferred will upon issue be fully paid and
nonassessable and not subject to any preemptive rights. 

6.    Automatic Conversion.    

        (a)   Series A
Preferred shall automatically be converted into shares of common stock of the Corporation, without any act by the Corporation or the holders of
Series A Preferred, on December 31, 2014. 

        (b)   Upon
such automatic conversion, each holder of certificates for shares of Series A Preferred shall immediately surrender such certificates in exchange for
appropriate stock certificates representing shares of common stock of the Corporation. Each holder of a share of Series A Preferred so converted shall be entitled to receive the full number of
shares of common stock into which such share of Series A Preferred held by such holder could be converted if such holder had exercised its conversion right. 

        IN
WITNESS WHEREOF, the undersigned has executed this Certificate of Designation of Rights and Preferences on behalf of the Corporation as of
the                        day
of                                    ,
2011. 

 

 

						
	 	 	 	GRANITE CITY FOOD & BREWERY LTD.
	 	 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	By	 	 
	 	 	 	 	 	

  
	 	 	 	Name:	 	 
	 	 	 	 	 	

  
	 	 	 	Title:	 	 
	 	 	 	 	 	

  

 

 A-8

  EXHIBIT B  

 AMENDMENT NO. 2

TO

DEBT CONVERSION AGREEMENT

BY AND BETWEEN

GRANITE CITY FOOD & BREWERY LTD.

AND

DHW LEASING, L.L.C.  

        AMENDMENT NO. 2 to Debt Conversion Agreement (this "Amendment") by and between Granite
City Food & Brewery Ltd. ("GCFB") and DHW Leasing, L.L.C. ("DHW") effective as of                        , 2011.

WITNESSETH:

        WHEREAS, DHW and GCFB entered into a Debt Conversion Agreement dated September 21, 2009, as amended by Amendment No. 1
thereto (the "Debt Conversion Agreement"); 

        WHEREAS, the parties hereto have entered into an agreement under which GCFB will repurchase 3,000,000 shares of GCFB common stock from
DHW, dated February 7, 2011 (the "Stock Repurchase Agreement") and, in connection with the transactions contemplated by GCFB's agreement to sell preferred stock to Concept Development
Partners, LLC ("CDP"), dated February 8, 2011, (the "Stock Purchase Agreement,") and have agreed in connection therewith to amend this Debt Conversion Agreement in connection with
Section 7.4 of the Debt Conversion Agreement. 

        NOW, THEREFORE, for good and valuable consideration, the nature, receipt and sufficiency of which are hereby acknowledged, the parties
have agreed to amend the Debt Conversion Agreement as set forth below. All capitalized terms not otherwise defined herein shall have the meanings set forth in the Debt Conversion Agreement. 

        1.     Section 2.5
of the Debt Conversion Agreement is amended by deleting the second paragraph and adding the following language in its place: 

        "DHW
agrees that it will not sell or dispose of any of the Shares from the period from the Closing Date through December 31, 2015, except as provided under the Stock Repurchase
Agreement dated February 8, 2011." 

        2.     Sections 4.10
(relating to DHW's right to participate in future issuances) and 4.11 (relating to DHW's rights to appoint certain GCFB directors) are hereby
deleted, and each is replaced with "Removed and Reserved." 

        3.    Effect of Amendment.    All references to the Debt Conversion Agreement in any document or instrument are hereby
amended and shall refer to the Debt Conversion Agreement as amended by this Amendment. Except as amended hereby, the provisions of the Debt Conversion Agreement shall remain unmodified and in full
force and effect. 

 

        IN WITNESS WHEREOF, the parties have executed and delivered this Amendment effective the date first above written. 

 

 

					
	 	 	 GRANITE CITY FOOD & BREWERY LTD
	

 	
 	
By:	
 	
 

 
	 	 	 	 	James G. Gilbertson

Chief Financial Officer
	

 	
 	

 	
 	

 
	 	 	 DHW LEASING, L.L.C.
	

 	
 	
By:	
 	
  

 
	 	 	 	 	Donald A. Dunham, Jr.

 

 B-2

  EXHIBIT C  

 AMENDMENT NO. 1

TO

REGISTRATION RIGHTS AGREEMENT

BY AND BETWEEN

GRANITE CITY FOOD & BREWERY LTD.

AND

DHW LEASING, L.L.C.  

        AMENDMENT NO. 1 to Registration Rights Agreement (this "Amendment") by and between
Granite City Food & Brewery Ltd. ("GCFB") and DHW Leasing, L.L.C. ("DHW") effective as of                        ,
2011. 

WITNESSETH:

        WHEREAS, DHW and GCFB entered into a Registration Rights Agreement dated October 5, 2009 (the "Registration Rights Agreement"); 

        WHEREAS, the parties hereto have entered into an agreement under which GCFB will repurchase 3,000,000 shares of GCFB common stock from
DHW, dated February 8, 2011 (the "Stock Repurchase Agreement"), in connection with the transactions contemplated by GCFB's agreement to sell preferred stock to Concept Development
Partners, LLC ("CDP"), dated February    , 2011 (the "Stock Purchase Agreement,") and have agreed in connection therewith to amend this Registration Rights Agreement in accordance
with Section 7.1 of the Registration Rights Agreement. 

        NOW, THEREFORE, for good and valuable consideration, the nature, receipt and sufficiency of which are hereby acknowledged, the parties
have agreed to amend the Registration Rights Agreement as set forth below. All capitalized terms not otherwise defined herein shall have the meanings set forth in the Registration Rights Agreement. 

        1.    Suspension of Registration Right.    Section 2.2 of the Registration Rights Agreement is amended by
adding the following language as a new paragraph thereto: 

        "Notwithstanding
the foregoing, DHW may not submit any Registration Requests to GCFB until a minimum of 780,000 of the shares of common stock underlying the preferred stock issued to
Investor under the Stock Purchase Agreement dated February 8, 2011 between GCFB and Concept Development Partners LLC have been registered for resale." 

        2.    Effect of Amendment.    All references to the Registration Rights Agreement in any document or instrument are
hereby amended and shall refer to the Registration Rights Agreement as amended by this Amendment. Except as amended hereby, the provisions of the Registration Rights Agreement shall remain unmodified
and in full force and effect. 

 

        IN WITNESS WHEREOF, the parties have executed and delivered this Amendment No. 1 effective the date first above written. 

 

 

					
	 	 	 GRANITE CITY FOOD & BREWERY LTD.
	

 	
 	
By:	
 	
 

 
	 	 	 	 	James G. Gilbertson

Chief Financial Officer
	

 	
 	

 	
 	

 
	 	 	 DHW LEASING, L.L.C.
	

 	
 	
By:	
 	
  

 
	 	 	 	 	Donald A. Dunham, Jr.

 

 C-2

 EXHIBIT D  

 
 

  AMENDMENT NO. 3 TO
  MASTER AGREEMENT    
    

        THIS AMENDMENT NO. 3 TO MASTER AGREEMENT entered into effective the
             day of                         , 2011, by and
between DUNHAM CAPITAL MANAGEMENT, L.L.C.,
DHW LEASING, L.L.C., and DUNHAM EQUITY MANAGEMENT, L.L.C., all South Dakota limited
liability companies with a business address of 230 South Phillips Avenue, Suite 202, Sioux Falls, South Dakota 57104 (individually referred to as "DCM," "DHW," and "DEM," and collectively
referred to as the "Dunham Entities"); and GRANITE CITY FOOD & BREWERY LTD., a Minnesota corporation ("Corporation" or "Granite City"). 

WITNESSETH:

        WHEREAS, the Dunham Entities and the Corporation entered into a Master Agreement dated February 7, 2009, as amended by Amendment
No. 1 thereto dated October 5, 2009 and Amendment No. 2 thereto dated January 14, 2011 (collectively, the "Master Agreement"); 

        WHEREAS, one or more of the Dunham Entities have entered into an agreement dated February 8, 2011 (the "Stock Repurchase
Agreement"), whereby the Corporation will purchase certain common stock of the Corporation from DHW; and 

        WHEREAS, the parties hereto desire to further amend the Master Agreement pursuant to Section 16 of the Master Agreement to reflect
their agreements and understandings. 

        NOW, THEREFORE, for good and valuable consideration, the nature, receipt and sufficiency of which are hereby acknowledged, the parties
have agreed to amend the Master Agreement as set forth below. 

        1.    Removal of Certain Provisions.    Sections 10 (relating to board observers), 11
(relating to information covenants), and 12 (relating to the appointment of a Chairman of the Board) are hereby deleted, and the text of each is replaced with "Removed and Reserved." Section 13
shall be deleted effective upon the date the Corporation purchases from one of the Dunham Entities the Troy, Michigan real estate referred to therein, and upon such purchase, all obligations of the
Corporation to the Dunham Entities with respect to such real estate shall be deemed satisfied. 

        2.    Effect of Amendment.    All references to the Master Agreement in any document or
instrument are hereby amended and shall refer to the Master Agreement as amended by this Amendment. Except as amended hereby, the provisions of the Master Agreement shall remain unmodified and in full
force and effect. 

[Remainder
of page intentionally left blank; signature page follows] 

 

        IN WITNESS WHEREOF, the parties have caused this Amendment No. 3 to Master Agreement to be duly executed as of the date first
written above. 

 

 

					
	DUNHAM CAPITAL MANAGEMENT, L.L.C.	 	 	 	DHW LEASING, L.L.C.
	
 By  

 	
 	
 	
 	
By  

 
	Its  

 	 	 	 	Its  

 
	
 DUNHAM EQUITY MANAGEMENT, L.L.C.	
 	
 	
 	
GRANITE CITY FOOD & BREWERY LTD.
	
 By  

 	
 	
 	
 	
By  

 
	Its  

 	 	 	 	Its  

 

 

 D-1

 

 EXHIBIT E  

 REGISTRATION RIGHTS AGREEMENT  

        This Registration Rights Agreement, dated as
of                        , 2011 (this
"Agreement"), is entered into by and between Granite City Food & Brewery Ltd., a Minnesota corporation (the  "Company"), and
Concept Development Partners LLC, a Delaware limited liability company (the  "Buyer"). 

 
 

RECITALS    
    

        A.    The
Company has issued and sold 3,000,000 shares of its Series A Convertible Preferred Shares to the Buyer (the
"Shares"), as set forth in that certain Stock Purchase Agreement, dated as of the date hereof (the "Stock Purchase
Agreement"), entered into by and between the Company and the Buyer, which Shares are convertible into shares of common stock, $0.01 par value, of the Company (the
"Common Stock"); and 

        B.    It
is a condition precedent to the consummation of the transactions contemplated by the Stock Purchase Agreement that the Company provide for the rights set forth in this
Agreement with respect to the Common Stock issuable upon conversion of the Shares. 

 
 

AGREEMENT    
    

        NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants and agreements hereinafter contained, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, intending to be legally bound, the parties hereto hereby agree as follows: 

 
 

  ARTICLE I
  
    DEFINITIONS    
    

        Capitalized terms used but not otherwise defined herein shall have the respective meanings assigned to such terms in the Stock Purchase
Agreement. 

        "Affiliate" means any Person that directly or indirectly controls, or is under common control with, or is controlled by such Person. As
used in this definition, "control" (including with its correlative meanings, "controlled by" and "under common control with") shall mean the possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of a Person (whether through ownership of securities or partnership or other ownership interests, by contract or otherwise). 

        "Buyer" has the meaning set forth in the preamble. 

        "Common Stock" has the meaning set forth in the recitals. 

        "Company" has the meaning set forth in the preamble. 

        "Designated Holder" means the Buyer and any transferee or transferees of Registrable Securities that have not ceased to be Registrable
Securities, provided the registration rights conferred by this Agreement have been transferred to such transferee or transferees in compliance with this Agreement. 

        "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder. 

        "FINRA" has the meaning set forth in  Section 2.2. 

        "Indemnified Party" has the meaning set forth in Section 2.5. 

        "Indemnifying Party" has the meaning set forth in Section 2.5. 

        "Losses" has the meaning set forth in Section 2.5. 

        "Person" means any individual, company, partnership, firm, joint venture, association, joint-stock company, trust, unincorporated
organization, governmental body or other entity. 

 

        "Registrable Securities" means, subject to the immediately following sentence, (i) the shares of Common Stock issuable upon
conversion of the Shares, (ii) any shares of Common Stock or other equity securities of the Company issued or issuable, directly or indirectly, with respect to the securities referred to in
clause (i) by way of stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization, and (iii) any other
equity security of the Company issued as a dividend or other distribution with respect to, in exchange for or in replacement of the securities referred to in the preceding clauses. As to any
particular shares of equity securities of the Company constituting Registrable Securities, such shares of equity securities will cease to be Registrable Securities ten years following the date hereof
or earlier upon (a) being effectively registered under the Securities Act and disposed of in accordance with a Registration Statement covering them, (b) having been sold to the public
pursuant to Rule 144 (or by similar provision under the Securities Act), or (c) becoming eligible for resale under Rule 144(b)(1) (or by similar provision under the Securities
Act) without any limitation on the amount of securities that may be sold under paragraph (e) thereof. 

        "Registration Statement" means a registration statement (including the prospectus, amendments and supplements to such registration
statement, including post-effective amendments, all exhibits and all material incorporated by reference in such registration statement) on Form S-3 (or, if the Company
is not eligible to use Form S-3, such other appropriate registration form of the SEC pursuant to which the Company is eligible to register the resale of Registrable Securities)
filed by the Company under the Securities Act that registers the resale of the Registrable Securities on a delayed or continuous basis pursuant to Rule 415 under the Securities Act pursuant to
the provisions of this Agreement and permits or facilitates the resale of all the Registrable Securities in the manner (including the manner of sale) reasonably requested by the Designated Holders. 

        "Representatives" has the meaning set forth in Section 2.5. 

        "SEC" means the United States Securities and Exchange Commission or any other federal agency at the time administering the Securities Act. 

        "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations of the SEC promulgated thereunder. 

        "Shares" has the meaning set forth in the recitals. 

        "Stock Purchase Agreement" has the meaning set forth in the recitals. 

 
 

  ARTICLE II
  
    REGISTRATION RIGHTS    
    

        2.1    Shelf Registration.    

        (a)   The
Company shall, as soon as practicable and at its own expense, but in no event later than seventy-five (75) calendar days after the Closing Date,
file a Registration Statement with the SEC covering the resale of all of the Registrable Securities and shall use its best efforts to cause
the Registration Statement to be declared effective under the Securities Act within 120 days after the Closing Date. The Company agrees to include in the Registration Statement all information
regarding the Designated Holders and the intended methods of distribution which the Designated Holders shall reasonably request. If the SEC precludes the Company from including all of the Registrable
Securities in the Registration Statement for any reason, including but not limited to the availability of Rule 415 under the Securities Act, the Designated Holders hereby agree that the Company
shall not be in breach of its obligations under Section 2.1 of this Agreement, provided that the Company agrees to file one or more additional Registration Statements, when permitted by the
SEC, registering additional Registrable Securities until the earlier to occur of (1) all Registrable Securities being registered under the Securities Act or (2) the unregistered
Registrable Securities ceasing to be Registrable Securities. 

E-2

 

        (b)   The
Company shall use its best efforts to keep the Registration Statement filed pursuant to this Section 2.1
continuously effective until the date all of the securities registered thereby cease to be Registrable Securities. 

        2.2    Registration Procedures.    The Company will use its best efforts to effect the registration of Registrable
Securities pursuant to this Agreement in accordance with the intended methods of disposition thereof, and pursuant thereto the Company will as expeditiously as possible: 

        (a)   within
a reasonable period of time, and not less than three days, before filing the Registration Statement, or any amendment or supplement, furnish to the counsel
selected by the Designated Holders a copy of such Registration Statement, and will provide such counsel with all correspondence with the SEC regarding the Registration Statement and notice of the
effectiveness of the Registration Statement; 

        (b)   prepare
and file with the SEC such amendments and supplements to the Registration Statement and the prospectus used in connection therewith as may be necessary to comply
with the Securities Act or otherwise keep such Registration Statement effective for the period provided for in Section 2.1(b); 

        (c)   furnish
to each Designated Holder such number of copies of the Registration Statement, each amendment and supplement thereto, the prospectus included in the Registration
Statement (including each preliminary prospectus), any documents incorporated by reference therein and such other documents as such seller may reasonably request in order to facilitate the disposition
of the Registrable Securities owned by such Designated Holder; 

        (d)   use
its best efforts to register or qualify such Registrable Securities under such state securities or blue sky laws as any Designated Holder reasonably requests and do
any and all other acts and things that may be reasonably necessary or advisable to enable such Designated Holder to consummate the disposition in such jurisdictions of the Registrable Securities owned
by such Designated Holder and to keep each such registration or qualification (or exemption therefrom) effective during the period that the Registration Statement is required to be kept effective;  provided, however, that the Company will not be required to (i) qualify generally to do business
in any jurisdiction where it would not otherwise be required to qualify but for this subparagraph, (ii) subject itself to taxation in any such jurisdiction, or (iii) consent to general
service of process in any such jurisdiction; 

        (e)   notify
each Designated Holder, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event as a
result of which the prospectus included in the Registration Statement contains an untrue statement of a material fact or omits any fact necessary to make the statements therein not misleading in the
light of the circumstances under which they were made, and, the Company will, as soon as possible, prepare and furnish to each Designated Holder the number of copies reasonably requested by such
Designated Holder of a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus will not contain an untrue
statement of a material fact or omit to state any fact necessary to make the statements therein not misleading in the light of the circumstances under which they were made; 

        (f)    cause
all such Registrable Securities to be listed on each securities exchange on which similar securities issued by the Company are then listed and, if not so listed,
to be approved for trading on any automated quotation system of a national securities association on which similar securities of the Company are quoted; 

        (g)   enter
into such customary agreements (including underwriting agreements containing customary representations and warranties by the Company and customary indemnification
and contribution provisions to and from the underwriters) and take all other customary and 

E-3

 

appropriate
actions as the Designated Holders reasonably request in order to expedite or facilitate the disposition of such Registrable Securities; 

        (h)   notify
each Designated Holder of any stop order issued or threatened by the SEC or any order suspending or preventing the use of any related prospectus or suspending the
qualification of any securities included in the Registration Statement for sale in any jurisdiction; 

        (i)    otherwise
comply with all applicable rules and regulations of the SEC, and make available to its security holders, as soon as reasonably practicable, an earnings
statement covering the period of at least twelve months beginning with the first day of the Company's first full calendar quarter after the
effective date of the Registration Statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder; 

        (j)    in
the event of the issuance of any stop order suspending the effectiveness of the Registration Statement, or of any order suspending or preventing the use of any
related prospectus or suspending the qualification of any securities included in the Registration Statement for sale in any jurisdiction, use its best efforts to promptly obtain the withdrawal of such
order; 

        (k)   if
such registration includes an underwritten offering and if requested by a Designated Holder, use its best efforts to obtain one or more comfort letters, dated the
effective date of the Registration Statement and dated the date of the closing under the underwriting agreement, signed by the Company's independent public accountants in customary form and covering
such matter of the type customarily covered by comfort letters as the Designated Holders reasonably request; 

        (l)    if
such registration includes an underwritten offering and if requested by a Designated Holder, provide a legal opinion of the Company's outside counsel, dated the
effective date of the Registration Statement and dated the date of the closing under the underwriting agreement, with respect to the Registration Statement, each amendment and supplement thereto, the
prospectus included therein (including the preliminary prospectus) and such other documents relating thereto in customary form and covering such matters of the type customarily covered by legal
opinions of such nature; 

        (m)  subject
to execution and delivery of mutually satisfactory confidentiality agreements, make available at reasonable times for inspection by any seller of Registrable
Securities, and any attorney, accountant or other agent retained by such seller, during normal business hours of the Company at the Company's corporate office and without unreasonable disruption of
the Company's business or unreasonable expense to Company and for the purpose of due diligence with respect to the Registration Statement, legally disclosable, financial and other records and
pertinent corporate documents of the Company and its subsidiaries reasonable requested by such persons, and cause the Company's officers, directors, employees and independent accountants to supply all
similar information reasonably requested by any such seller, managing underwriter, attorney, accountant or agent in connection with the Registration Statement, as shall be reasonably necessary to
enable them to exercise their due diligence responsibility; 

        (n)   if
the Designated Holders become entitled, pursuant to an event described in clauses (ii) or (iii) of the definition of Registrable Securities, to receive
any securities in respect of Registrable Securities that were already included in a Registration Statement, subsequent to the date such Registration Statement is declared effective, and the Company is
unable under the securities laws to add such Registrable Securities to the then effective Registration Statement, promptly file, in accordance with the procedures set forth herein, an additional
Registration Statement with respect to such newly issued Registrable Securities and will use its best efforts to (i) cause any such additional Registration Statement, when filed, to become
effective within 120 days of the date that the need to file the Registration Statement arose, and (ii) keep such additional Registration Statement effective during for the period
described in Section 2.1(b); 

E-4

 

        (o)   if
requested by a Designated Holder, (i) incorporate in, as soon as practicable, a prospectus supplement or post-effective amendment such information
as a Designated Holder reasonably requests to be included therein relating to the sale and distribution of Registrable Securities, including, without limitation, information with respect to the number
of Registrable Securities being offered or sold, the purchase price being paid therefor and any other terms of the offering of the Registrable Securities to be sold in such offering; (ii) as
soon as practicable make all required filings of such prospectus supplement or post-effective amendment after being notified of the matters to be incorporated in such prospectus supplement
or post-effective amendment; and (iii) as soon as practicable, supplement or make amendments to the Registration Statement if reasonably requested by a Designated Holder selling any
Registrable Securities pursuant to the Registration Statement; 

        (p)   cooperate
with each seller of Registrable Securities and its counsel in connection with any filings required to be made with the Financial Industry Regulatory
Authority, Inc. ("FINRA"); and 

        (q)   take
all other steps reasonably necessary to effect the registration of the. Registrable Securities contemplated hereby. 

        2.3    Conditions Precedent to Company's Obligations Pursuant to this Agreement.    It shall be a condition precedent
to the obligations of the Company to take any action pursuant to this Agreement that each of the Designated Holders whose Registrable Securities are to be registered pursuant to this Agreement furnish
its written agreement to be bound by the terms and conditions of this Agreement prior to performance by the Company of its obligations hereunder. By executing and delivering this Agreement, each
Designated Holder represents and warrants that the information concerning, and representations and warranties by, such Designated Holder, including information concerning the securities of the Company
held, beneficially or of record, by such Designated Holder, furnished to the Company pursuant to the Stock Purchase Agreement or otherwise, are true and correct as if the same were represented and
warranted on the date the Registration Statement is filed with the SEC or the date of filing with the SEC of any amendment thereto, and each Designated Holder covenants to immediately notify the
Company in writing of any change in any such information, representation or warranty and to refrain from offering or disposing of any securities pursuant to the Registration Statement until the
Company has reflected such change in the Registration Statement. By executing and delivering this Agreement, each Designated Holder further agrees to furnish any additional information as the Company
may reasonably request in connection with any action to be taken by the Company pursuant to this Agreement, and to pay such Designated Holder's expenses which are not required to be paid by the
Company pursuant to this Agreement. 

        2.4    Fees and Expenses.    All expenses incident to the Company's performance of or compliance with this Agreement
including, without limitation, all registration and filing fees payable by the Company, fees and expenses of compliance by the Company with securities or blue sky laws, printing expenses of the
Company, messenger and delivery expenses of the Company, fees and disbursements of counsel for the Company, all independent certified public accountants of the Company, and other Persons retained by
the Company will be borne by the Company, and the Company will pay its internal expenses (including, without limitation, all salaries and expenses of the Company's employees performing legal or
accounting duties), the expense of any annual audit or quarterly review, the expense of any liability insurance of the Company and the expenses and fees for listing or approval for trading of the
securities to be registered on each securities exchange on which similar securities issued by the Company are then listed or on any automated quotation system of a national securities association on
which similar securities of the Company are quoted. The Company shall have no obligation to pay any underwriting discounts or commissions attributable to the sale of Registrable Securities or any of
the expenses incurred by any Designated Holder that are not payable by the Company, such costs to be borne by such Designated Holder or Holders, including, without limitation, underwriting fees,
discounts and expenses, if any, applicable to any Designated Holder's Registrable Securities; fees and disbursements of counsel or other professionals that any Designated Holder may 

E-5

 

choose
to retain in connection with the Registration Statement filed pursuant to this Agreement; selling commissions or stock transfer taxes applicable to the Registrable Securities registered on
behalf of any Designated Holder; FINRA filing fees; and any other expenses incurred by or on behalf of such Designated Holder in connection with the offer and sale of such Designated Holder's
Registrable Securities other than expenses that the Company is expressly obligated to pay pursuant to this Agreement. 

        2.5    Indemnification.    

        (a)   The
Company agrees to indemnify and hold harmless, to the fullest extent permitted by law, each Designated Holder and its general or limited partners, officers,
directors, members, shareholders, managers, employees, advisors, representatives, agents and Affiliates (collectively, the "Representatives") from and
against any loss, claim, damage, liability, attorney's fees, cost or expense and costs and expenses of investigating and defending any such claim (collectively, the  "Losses"), joint or several,
and any action in respect thereof to which such Designated Holder or its Representatives may become subject under the
Securities Act or otherwise, insofar as such Losses (or actions or proceedings, whether commenced or threatened, in respect thereto) arise out of or are based upon (i) any untrue or alleged
untrue statement of a material fact contained in any Registration Statement, prospectus or preliminary or summary prospectus or any amendment or supplement thereto or (ii) any omission or
alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and the Company shall advance to and reimburse each such
Designated Holder and its Representatives for any legal or any other expenses incurred by them in connection with investigating or defending or preparing to defend against any such Loss, action or
proceeding; provided, however, that the Company shall not be liable to any such Designated Holder,
Representative or other indemnitee under this Section 2.5(a) in any such case to the extent that any such Loss (or action or proceeding, whether
commenced or threatened, in respect thereof) arises out of or is based upon (x) an untrue statement or alleged untrue statement or omission or alleged omission, made in such Registration
Statement, any such prospectus or preliminary or summary prospectus or any
amendment or supplement thereto, in reliance upon, and in conformity with, written information prepared and furnished to the Company by such Designated Holder or its Representatives expressly for use
therein and, with respect to any untrue statement or omission or alleged untrue statement or omission made in any preliminary prospectus relating to the Registration Statement, to the extent a
prospectus relating to the Registrable Securities was required to be delivered by such Designated Holder under the Securities Act in connection with such purchase, there was not sent or given to such
person, at or prior to the written confirmation of the sale of such Registrable Securities to such person, a copy of the final prospectus that corrects such untrue statement or alleged untrue
statement or omission or alleged omission, if the Company had previously furnished copies thereof to such Designated Holder, or (y) such Designated Holder's use of a Registration Statement or
the related prospectus during a period when a stop order has been issued in respect of such Registration Statement or any proceedings for that purpose have been initiated or use of a prospectus when
use of such prospectus has been suspended pursuant to Section 2.2(e) or 2.2(h); provided that in
each case, that such Designated Holder received prior written notice of such stop order, initiation of proceedings or suspension from the Company. In connection with an underwritten offering, the
Company will indemnify such underwriters, their officers and directors and each Person who controls such underwriters (within the meaning of the Securities Act) to the same extent as provided above
with respect to the indemnification of the Designated Holders. 

        (b)   In
connection with the filing of the Registration Statement by the Company pursuant to this Agreement, the Designated Holders will furnish to the Company in writing such
information as the Company reasonably requests for use in connection with such Registration Statement and the related prospectus and, to the fullest extent permitted by law, each such Designated
Holder will indemnify and hold harmless the Company and its Representatives from and against any 

E-6

 

Losses,
severally but not jointly, and any action in respect thereof to which the Company and its Representatives may become subject under the Securities Act or otherwise, insofar as such Losses (or
actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon (i) the purchase or sale of Registrable Securities during a suspension as set forth
in Section 2.2(e) or 2.2(h) in each case after such Designated Holder's receipt of written notice of
such suspension, (ii) any untrue or alleged untrue statement of a material fact contained in the Registration Statement, prospectus or preliminary or summary prospectus or any amendment or
supplement thereto, or (iii) any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, but, with respect to
clauses (ii) and (iii) above, only to the extent such untrue statement or omission is made in such Registration Statement, any such prospectus or preliminary or summary prospectus or any
amendment or supplement thereto in connection with a sale of Registrable Securities and as required under the Securities Act, in reliance upon and in conformity with written information prepared and
furnished to the Company by such Designated Holder expressly for use therein or by failure of such Designated Holder to deliver a copy of the Registration Statement or prospectus or any amendments or
supplements thereto, and such Designated Holder will reimburse the Company and each Representative for any legal or any other expenses incurred by them in connection with investigating or defending or
preparing to defend against any such Loss, action or proceeding; provided, however, that such Designated
Holder shall not be liable in any such case if, prior to the filing of any such Registration Statement or prospectus or amendment or supplement thereto, such Designated Holder has furnished in writing
to the Company information expressly for use in such Registration Statement or prospectus or any amendment or supplement thereto that corrected or made not misleading information previously furnished
to the Company. The obligation of each Designated Holder to indemnify the Company and its Representatives shall be limited to the net proceeds received
by such Designated Holder from the sale of Registrable Securities under such Registration Statement. In no event, however, shall any Designated Holder be liable for indirect, incidental or
consequential or special damages of any kind. 

        (c)   Promptly
after receipt by any Person in respect of which indemnity may be sought pursuant to Section 2.5(a) or  2.5(b) (an "Indemnified Party") of notice of any claim or the commencement of any action, the
Indemnified Party shall, if a claim in respect thereof is to be made against the Person against whom such indemnity may be sought (an "Indemnifying
Party"), promptly notify the Indemnifying Party in writing of the claim or the commencement of such action; provided, that the failure to notify the Indemnifying Party shall
not relieve the Indemnifying Party from any liability that it may have to an Indemnified Party under Section 2.5(a) or  2.5(b) except to the extent of
any actual prejudice resulting therefrom. If any such claim or action shall be brought against an Indemnified Party, and
it shall notify the Indemnifying Party thereof, the Indemnifying Party shall be entitled to participate therein, and, to the extent it wishes, jointly with any other similarly notified Indemnifying
Party, to assume the defense thereof with counsel reasonably satisfactory to the Indemnified Party. After notice from the Indemnifying Party to the Indemnified Party of its election to assume the
defense of such claim or action, and provided, and for so long as, the Indemnifying Party diligently pursues the defense of such claim or action, the Indemnifying Party shall not be liable to the
Indemnified Party for any legal or other expenses subsequently incurred by the Indemnified Party in connection with the defense thereof other than reasonable costs of investigation; provided, that the
Indemnified Party shall have the right to employ separate counsel to represent the Indemnified Party and its Representatives who may be subject to liability arising out of any claim in respect of
which indemnity may be sought by the Indemnified Party against the Indemnifying Party, but the fees and expenses of such counsel shall be for the account of such Indemnified Party unless
(i) the Indemnifying Party and the Indemnified Party shall have mutually agreed to the retention of such counsel or (ii) in the written opinion of counsel to such Indemnified Party,
representation of both parties by the same counsel would be inappropriate due to actual or potential conflicts of interest between them, it being 

E-7

 

understood,
however, that the Indemnifying Party shall not, in connection with any one such claim or action or separate but substantially similar or related claims or actions in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for the fees and expenses of more than one separate firm of attorneys (together with appropriate local counsel) at any time for
all Indemnified Parties. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any claim or pending or threatened proceeding in respect of
which the Indemnified Party is or could have been a party and indemnity could have been sought hereunder by such Indemnified Party, unless such settlement includes an unconditional release of such
Indemnified Party from all liability arising out of such claim or proceeding other than the payment of monetary damages by the Indemnifying Party on behalf of the Indemnified Party. 

        (d)   If
the indemnification provided for in this Section 2.5 is unavailable to the Indemnified Parties in respect of
any Losses referred to herein, then each Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of
such Losses in such proportion as is appropriate to reflect the relative fault of the Company on the one hand and the Designated Holders on the other in connection with the statements or omissions
which resulted in such Losses, as well as any other relevant equitable considerations. The relative fault of the Company on the one hand and of each Designated Holder on the other shall be determined
by
reference to, among other things, whether any action taken, including any untrue or alleged untrue statement of a material fact, or the omission or alleged omission to state a material fact relates to
information supplied by such party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. 

        The
Company and the Designated Holders agree that it would not be just and equitable if contribution pursuant to this  Section 2.5(d) were determined by pro rata allocation or by any other method of
allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount paid or payable by an Indemnified Party as a result of the Losses referred to in the immediately preceding paragraph shall
be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 2.5, no Designated Holder shall be required to contribute any amount in excess of
the amount by which the total price at which the Registrable Securities of such Designated Holder were offered to the public exceeds the amount of any Losses that such Designated Holder has otherwise
paid by reason of such untrue or alleged untrue statement or omission or alleged omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11 (f) of the
Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. Each Designated Holder's obligations to contribute pursuant to this  Section 2.5 is several in the proportion that the proceeds of the offering received by such Designated Holder bears to the total proceeds of the
offering. The indemnification provided by this Section 2.5 shall be a continuing right to indemnification with respect to sales of Registrable
Securities and shall survive the registration and sale of any Registrable Securities by any Designated Holder and the expiration or termination of this Agreement. The indemnity and contribution
agreements contained herein are in addition to any other liability that any Indemnifying Party might have to any Indemnified Party. 

E-8

 

        2.6    Participation in Registrations.    Each Person that is participating in any registration under this
Agreement
agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 2.2(e) or  2.2(h) above, such
Person will forthwith discontinue the disposition of its Registrable Securities pursuant to the Registration Statement and all use of
the Registration Statement or any prospectus or related document until such Person's receipt of the copies of a supplemented or amended prospectus as contemplated by such  Section 2.2(e) and, if so
directed by the Company, will deliver to the Company (at the Company's expense) all copies thereof, other than
permanent file copies, then in such Designated Holder's possession of such documents at the time of receipt of such notice. Furthermore, each Designated Holder agrees that if such Designated Holder
uses a prospectus in connection with the offering and sale of any of the Registrable Securities, the Designated Holder will use only the latest version of such prospectus provided by Company. 

 
 

  ARTICLE III
  
    TRANSFERS OF CERTAIN RIGHTS    
    

        3.1    Transfer.    The rights granted to the Buyer by the Company under this Agreement to cause the Company to
register Registrable Securities may be transferred or assigned (in whole or in part) to the Buyer's Affiliates and members and to CIC II L.P. and to the partners of CIC II L.P., to the
extent Registrable Securities are transferred or assigned to such Persons, and all other rights granted to the Buyer by the Company hereunder may be transferred or assigned to any such transferee or
assignee of Registrable Securities; provided, in each case, that the Buyer must give written notice of any such transfer or assignment to the Company at the time of, or within a reasonable time after,
any such transfer or assignment, stating the name and address of the transferee(s) or assignee(s) and identifying the Registrable Securities with respect to which such registration rights are being
transferred or assigned. 

        3.2    Transferees.    Any permitted transferee or assignee to whom rights under this Agreement are transferred or
assigned shall, as a condition to such transfer or assignment, deliver to the Company a written instrument by which such transferee or assignee agrees to be bound by the obligations imposed upon the
Buyer under this Agreement to the same extent as if such transferee or assignee were the Buyer hereunder. 

        3.3    Subsequent Transferees or Assignees.    A transferee or assignee to whom rights are transferred or assigned
pursuant to this ARTICLE III may not again transfer or assign such rights to any other person or entity, other than as provided in  Section 3.1 or
3.2 above. 

 
 

  ARTICLE IV
  
    MISCELLANEOUS    
    

        4.1    Current Public Information.    The Company covenants that it will use its best efforts to timely file all
reports required to be filed by it under the Exchange Act and the rules and regulations adopted by the SEC thereunder, and will use its best efforts to take such further action as the Buyer may
reasonably request, all to the extent required to enable the holders of Registrable Securities to sell Registrable Securities pursuant to Rule 144 or Rule 144A adopted by the SEC under
the Securities Act or any similar rule or regulation hereafter adopted by the SEC. The Company shall, upon the request of a Designated Holder, deliver to such Designated Holder a written statement as
to whether it has complied with such requirements during the 12-month period immediately preceding the date of such request. 

        4.2    Recapitalizations, Exchanges, etc.    The provisions of this Agreement shall apply to the full extent set forth
herein with respect to (i) the Registrable Securities, (ii) any and all shares of capital stock into which the Registrable Securities are converted, exchanged or substituted in any 

E-9

 

recapitalization
or other capital reorganization by the Company and (iii) any and all equity securities of the Company or any successor or assign of the Company (whether by merger,
consolidation, sale of assets or otherwise) that may be issued in respect of, in conversion of, in exchange for or in substitution of, the Registrable Securities and shall be appropriately adjusted
for any stock dividends, splits, reverse splits, combinations, recapitalizations and the like occurring after the date hereof. The Company shall cause any successor or assign (whether by merger,
consolidation, sale of assets or otherwise) to enter into a new registration rights agreement with the Designated Holders on terms substantially the same as this Agreement as a condition of any such
transaction. 

        4.3    No Inconsistent Agreements.    The Company has not and shall not enter into any agreement with respect to its
securities that is inconsistent with the rights granted to the Buyer in this Agreement. The parties hereto acknowledge and agree that the Company has granted registration rights heretofore and may
grant registration rights hereafter, which are or shall be pari passu with the registration rights of the Buyer, and shall not be deemed to conflict with this covenant. 

        4.4    Amendments and Waivers.    The provisions of this Agreement may be amended and the Company may take action
herein prohibited, or omit to perform any act herein required to be performed by it, if, but only if, the Company has obtained the written consent of the Designated Holders. 

        4.5    Severability.    Whenever possible, each provision of this Agreement shall be interpreted in such manner as to
be effective and valid under applicable law, but if any provision of this Agreement shall be held to be prohibited by or invalid wider applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. 

        4.6    Counterparts.    This Agreement may be executed in one or more counterparts each of which shall be deemed an
original, but all of which together shall constitute one and the same instrument. 

        4.7    Notices.    All notices, requests and other communications to any party hereunder shall be in writing
(including telecopy, telex or similar writing) and shall be deemed given or made as of the date delivered, if delivered personally or by telecopy (provided that delivery by telecopy shall be followed
by delivery of an additional copy personally, by mail or overnight courier), one day after being delivered by overnight courier or five days after being placed in the mail, if mailed by regular United
States mail, to the parties at the following addresses (or to such other address or telex or telecopy number as a party may have specified by notice given to the other party pursuant to this
provision): 

        If
to the Company: 

Granite
City Food & Brewery Ltd.

5402 Parkdale Drive, Suite 101

Minneapolis, Minnesota 55416

Attention: James G. Gilbertson

Telephone: (952) 215-0676

Facsimile: (952) 215-0671 

        With
a copy to: 

Briggs
and Morgan, P.A.

2200 IDS Center

80 South Eighth Street

Minneapolis, MN 55402

Attention: Avron L. Gordon

Telephone: (612) 977-8455

Facsimile: (612) 977-8650 

E-10

 

        If
to Buyer: 

Concept
Development Partners LLC

5724 Calpine Drive

Malibu, California 90265

Attention: Dean S. Oakey

Telephone: (310) 457-0356

Facsimile: (310) 457-0256 

        With
a copy to: 

CIC
II LP

500 Crescent Court, Suite 250

Dallas, Texas 75201

Attention: Fouad Bashour

Telephone: (214) 871-6825

Facsimile: (214) 880-4491 

        and 

Fulbright &
Jaworski LLP

1301 McKinney Street, Suite 5100

Houston, Texas 77010

Attention: Edward Rhyne

Telephone: (713) 651-8334

Facsimile: (713) 651-5246 

        4.8    Governing Law.    This Agreement shall be governed by and construed in accordance with the laws of the State of
Minnesota, without regard to the conflicts of laws rules or provisions. 

        4.9    Captions.    The captions, headings and arrangements used in this Agreement are for convenience only and do not
in any way limit or amplify the terms and provisions hereof. 

        4.10    No Prejudice.    The terms of this Agreement shall not be construed in favor of or against any party hereto on
account of its participation in the preparation hereof. 

        4.11    Words in Singular and Plural Form.    Words used in the singular form in this Agreement shall be deemed to
import the plural, and vice versa, as the sense may require. 

        4.12    Remedy for Breach.    The Company hereby acknowledges that in the event of any breach or threatened breach by
the Company of any of the provisions of this Agreement, the Designated Holders would have no adequate remedy at law and could suffer substantial and irreparable damage. Accordingly, the Company hereby
agrees that, in such event, the Designated Holders shall be entitled, and notwithstanding any election by any Designated Holder to claim damages, to obtain a temporary and/or permanent injunction to
restrain any such breach or threatened breach or to obtain specific performance of any such provisions, all without prejudice to any and all other remedies which any Designated Holders may have at law
or in equity. 

        4.13    Successors and Assigns, Third Party Beneficiaries.    This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto, each assignee of the Designated Holders permitted pursuant to ARTICLE III and their
respective permitted successors and assigns and executors, administrators and heirs. Designated Holders are intended third party beneficiaries of this Agreement and this Agreement may be enforced by
such Designated Holders. 

        4.14    Entire Agreement.    This Agreement sets forth the entire agreement and understanding between the parties as
to the subject matter hereof and merges and supersedes all prior discussions, agreements and understandings of any and every nature among them. 

E-11

  
        4.15    Attorneys' Fees.    In the event of any action or suit based upon or arising out of any actual or alleged
breach by any party of any representation, warranty, covenant or agreement in this Agreement, the prevailing party shall be entitled to recover its reasonable attorneys' fees and expenses of such
action or suit from the other party in addition to any other relief ordered by any court. 

        IN
WITNESS WHEREOF, the parties hereto have caused this Registration Rights Agreement to be duly executed as of the date and year first written above. 

 

 

					
	 	 	 THE COMPANY:
	

 	
 	
 GRANITE CITY FOOD & BREWERY LTD.
	

 	
 	
By	
 	
  

 
	 	 	Name: James G. Gilbertson

Title:  Chief Financial Officer

 

 

 

					
	

 	
 	
 BUYER:
	

 	
 	
 CONCEPT DEVELOPMENT PARTNERS LLC
	

 	
 	
By	
 	
  

 
	 	 	Name:	 	  

 
	 	 	Title:	 	  

 

 

 Registration Rights Agreement
  Signature Page 

 EXHIBIT F  

 FORM OF

RELEASE AND ESCROW AGREEMENT  

        This Release and Escrow Agreement (the "Agreement") has been executed as of the date shown below by and between: 

        (a)   DHW
Leasing, L.L.C., 230 S. Phillips Avenue, Suite 202, Sioux Falls, South Dakota 57104 (the "Borrower"); 

        (b)   Granite
City Food & Brewery Ltd., 5402 Parkdale Drive, Suite 101, St. Louis Park, MN 55416 (the "Issuer"); 

        (c)
                                       (the
"Bank"); and 

        (d)   First
Dakota Title, 600 South Main Avenue, Sioux Falls, South Dakota 57104 (the "Escrow Agent"). 

 
 

  RECITALS:    
    

        WHEREAS, the Bank is the holder of a certain promissory note (the "Note") executed by the Borrower in favor of the Bank on or about
September 1, 2010, in the original principal amount of $            ; 

        WHEREAS,
the Note is secured by a certain pledge agreement (the "Pledge Agreement") executed by the Borrower as of September 1, 2010, describing certain shares of common stock,
par value $.01 per share of Issuer owned by Borrower (the "Pledged Shares"); and 

        WHEREAS,
by letter agreement dated on or about December     , 2010 (the "Letter Agreement"), the Bank consented to the sale
of                        (the "Sale Shares") of the
Pledged Shares and further agreed to release the Sale Shares from all liens and encumbrances held by the Bank, including those under the Pledge Agreement or otherwise, at the closing contemplated
under the definitive agreement described below, without a requirement of additional or replacement collateral, it being understood that the remainder of the Pledged Shares shall continue to be subject
to the Pledge Agreement; and 

        WHEREAS,
as contemplated under the letter agreement, the Borrower, Issuer and the Investor identified therein have entered into a certain definitive stock repurchase agreement (the
"Stock Repurchase Agreement") executed as of February 8, 2011 relating, among other things, to the Issuer's repurchase from Borrower of an aggregate of 3,000,000 shares of the Issuer's common
stock and the grant of a right of first refusal option (the "ROFR"); and 

        WHEREAS,
the parties have entered into this Agreement to establish the terms and conditions under which the Sale Shares shall be released from the lien of the Pledge Agreement upon the
closing under the Stock Repurchase Agreement; and 

        WHEREAS,
the Bank is party to a certain Intercreditor Agreement among the Bank,                        Bank
and                        Bank, dated October 5, 2009 (the "Intercreditor
Agreement"). 

        NOW,
THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties do hereby agree as follows: 

        1.     DEFINITIONS. 

        Terms
not otherwise defined herein shall be defined in accordance with the Stock Repurchase Agreement, which has been furnished to the Bank and is incorporated herein for reference of
certain provisions thereof. 

 

        2.     ESTABLISHMENT OF ESCROW. 

        (a)   The
Bank has deposited with the Escrow Agent upon execution hereof Certificate No.                         representing the total
amount of shares held by the Bank,
Escrow Agent is directed to deliver such Certificate No.       to Wells Fargo Shareowner Services ("Transfer Agent") directing the Transfer Agent to reissue two Certificates, with one
representing the Sale Shares, together with an assignment separate from certificate authorizing the transfer of the Sale Shares, and a Certificate representing the remaining shares held by the Bank.
The Transfer Agent shall cause the remaining shares to be imprinted thereon with the following restrictive legend which gives notice of the ROFR. Once the restrictive legend has been placed on the
Certificate evidencing the remaining shares, such Certificate shall be returned to the Bank: 

 

 

			
	  	 	THESE SECURITIES ARE SUBJECT TO A RIGHT OF FIRST REFUSAL BY GRANITE CITY FOOD & BREWERY LTD. AND ITS SUCCESSORS AND ASSIGNS, PURSUANT TO THE TERMS OF A STOCK REPURCHASE AGREEMENT DATED
FEBRUARY 8, 2011 (THE "REPURCHASE RIGHT"). ANY SALE, TRANSFER OR OTHER DISPOSITION OF THESE SECURITIES SHALL BE SUBJECT TO SUCH REPURCHASE RIGHT AND ANY PURPORTED SALE, TRANSFER OR OTHER DISPOSITION WHICH DOES NOT REFERENCE THE REPURCHASE RIGHT
SHALL BE NULL AND VOID. ANY PERSON ACQUIRING ANY PORTION OF THESE SECURITIES SHALL BE DEEMED TO HAVE ADOPTED AND BE BOUND BY SUCH REPURCHASE RIGHTS. A COPY OF THE STOCK REPURCHASE AGREEMENT HAS BEEN FILED BY GRANITE CITY FOOD &
BREWERY LTD. WITH THE SECURITIES AND EXCHANGE COMMISSION AND IS AVAILABLE WITHOUT CHARGE BY CONTACTING THE CHIEF FINANCIAL OFFICER AND/OR SECRETARY OF THE COMPANY AT ITS REGISTERED OFFICE IN THE STATE OF MINNESOTA.

 

         (b)   The
Escrow Agent hereby acknowledges receipt of the Sale Shares described in subparagraph (a) (the "Escrow Property") and hereby agrees to act as Escrow
Agent and to hold, safeguard and disburse the Escrow Property, pursuant to the terms and conditions hereof. 

        3.     DISTRIBUTION OF ESCROW PROPERTY. 

        (a)   Subject
to the terms and conditions of this Agreement, the Escrow Agent shall distribute the Sale Shares upon receipt by the Escrow Agent of total consideration in the
amount of $7,050,000 (the "Purchase Price"). Upon such receipt, Sale Shares delivered to the Escrow Agent under Sections 2(a) above shall be immediately delivered by the Escrow Agent to the
Issuer, or to such entity as may be designated by the Issuer. 

        (b)   Upon
receipt of the Purchase Price, the parties agree that the Purchase Price shall be distributed by the Escrow Agent to the Bank and other secured creditors identified
in the Intercreditor Agreement as, follows: 

 

 

					
	Bank

 
	 	Amount 	 
	 Great Western Bank
	 	$	4,406,251.14	 
	 Dacotah Bank
	 	$	881,249.62	 
	 CorTrust Bank
	 	$	1,762,499.24	 
	 	 	 	 
	 Total
	 	$	7,050,000.00	 

 

         4.     RELEASE OF LIENS. 

        (a)   Any
and all liens of the Bank in the Sale Shares shall be deemed released and discharged upon distribution of the Escrow Property in accordance with this Agreement
without the necessity of any further act on the part of any party. The Bank agrees to cooperate with Issuer with regard to the 

F-2

 

execution
and filing of any documents and instruments as may be necessary to evidence the release of any and all liens as security interests in the Sale Shares. 

        (b)   The
parties agree that the lien of the Bank in the Sale Shares shall continue pending receipt by the Escrow Agent of the Purchase Price and delivery of the Purchase
Price in accordance with Section 3 above. Pending such receipt, the Escrow Agent agrees to hold the Sale Shares as agent and bailee for the Bank. 

        5.     TERMINATION OF ESCROW. 

        The
escrow contemplated under this agreement shall terminate on July 31, 2011, unless the Closing has occurred on or before such date. Upon termination of the escrow, the Escrow
Property shall be returned to the Bank or the Borrower, as appropriate. 

        6.     RIGHT OF FIRST REFUSAL. 

        Subject
to compliance with the applicable provisions of the Uniform Commercial Code regarding the disposition of pledged collateral by a secured party following default, the Bank hereby
consents to the grant of ROFR granted by Borrower to the Issuer and the Investor, as set forth in the Stock Repurchase Agreement, to purchase any of the shares of Common Stock beneficially owned by
the Borrower that Borrower desires to sell after the Closing, but prior to the fifth anniversary of the Closing or, if later, the repayment of the Note. The Issuer agrees that any proceeds from the
sale of the pledged collateral shall be paid to the Bank, as its interest appears. The Bank agrees to (i) provide written notice of a default by Borrower to the Borrower, the Issuer and the
Investor promptly following a default, and at least 10 days prior to any proposed disposition of any of the Pledged Shares, and (ii) to provide the Issuer and the Investor with the date,
time, place and terms of sale, the opportunity to participate as a bidder in any sale of the Pledged Shares and (subject to compliance with such applicable provisions of the Uniform Commercial Code
regarding the disposition of pledged collateral by a secured party following default) to permit the Issuer or the Investor, as the case may be, to exercise the right of first refusal. The Bank agrees
that its obligations under this Section shall survive the Closing, 

        7.     DUTIES OF ESCROW AGENT. 

        (a)   The
Escrow Agent shall have the duty to give the Escrow Property held by it hereunder no lesser degree of care than it gives its own similar property. 

        (b)   The
Escrow Agent shall not be liable, except for its own gross negligence or willful misconduct and, except with respect to claims based upon such gross negligence or
willful misconduct that are successfully asserted against the Escrow Agent, the Borrower and Issuer shall jointly and severally indemnify and hold harmless the Escrow Agent (and any successor Escrow
Agent) from and against any and all losses, liabilities, claims, actions, damages and expenses, including reasonable attorneys' fees, arising out of and in connection with this Agreement. Without
limiting the foregoing, the Escrow Agent shall in no event be liable in connection with its investment or reinvestment of any cash held by it hereunder in good faith, in accordance with the terms
hereof, including, without limitation, any liability for any delays (not resulting from its gross negligence or willful misconduct) in the investment or reinvestment of the Escrow Property, or any
loss of interest incident to any such delays. 

        (c)   The
Escrow Agent shall be entitled to rely upon any order, judgment, certification, demand, notice, instrument or other writing delivered to it hereunder without being
required to determine the authenticity or the correctness of any fact stated therein or the propriety or validity of the service thereof. The Escrow Agent may act in reliance upon any instrument or
signature believed by it to be genuine and may assume that the person purporting to give receipt or advice or make any statement or execute any document in connection with the provisions hereof has
been duly authorized to do so. The 

F-3

 

Escrow
Agent may conclusively presume that the undersigned representative of any party hereto which is an entity other than a natural person has full power and authority to instruct the Escrow Agent
on behalf of that party unless written notice to the contrary is delivered to the Escrow Agent. 

        (d)   The
Escrow Agent may act pursuant to the advice of counsel with respect to any matter relating to this Agreement and shall not be liable for any action taken or omitted
by it in good faith in accordance with such advice. 

        (e)   The
Escrow Agent does not have any interest in the Escrow Property deposited hereunder but is serving as escrow holder only and having only possession thereof. 

        (f)    The
Escrow Agent shall not be called upon to advise any party as to the advisability of selling or retaining or taking or refraining from any action with respect to any
securities or other property deposited hereunder. 

        (g)   The
Escrow Agent (and any successor Escrow Agent) may at any time resign as such by delivering the Escrow Property to any successor of the Escrow Agent jointly
designated by the Bank and Borrower in writing, or to any court of competent jurisdiction, whereupon the Escrow Agent shall be discharged of and from any and all further obligations arising in
connection with this Agreement. The resignation of the Escrow Agent will take effect on the earlier of (i) the appointment of a successor (including a court of competent jurisdiction) or
(ii) the day which is thirty (30) days after the date of delivery of its written notice of resignation to the other parties. If at that time the Escrow Agent has not received a
designation of a successor Escrow Agent, the Escrow Agent's sole responsibility after that time shall be to retain and safeguard the Escrow Property until receipt of (A) a joint written
designation of a successor Escrow Agent or a joint written disposition instruction by the Bank and Borrower or (B) a final non-appealable order of a court of competent jurisdiction
regarding the designation of a successor Escrow Agent or the disbursement of the Escrow Property. 

        (h)   In
consideration for the Escrow Agent's services hereunder, the Issuer agrees to pay the fees, costs, charges and expenses of the Escrow Agent, including reasonable
attorneys' fees, which are incurred in connection with the performance of its duties and obligations hereunder (the "Fees"). The Escrow Agent's fees are described in Exhibit A hereto. The
Escrow Agent shall submit written information (including copies of receipts) to the Bank and Issuer with respect to the nature and amount of all expenses which it may incur prior to payment of the
same. 

        8.     LIMITED RESPONSIBILITY. 

        This
Agreement expressly sets forth the duties of the Escrow Agent with respect to any and all matters pertinent hereto. No implied duties or obligations shall be read into this
agreement against the Escrow Agent. 

        9.     NOTICES. 

        All
notices, requests or other communications required under this Agreement will be in writing and will be deemed "given": (i) if delivered in person or by courier, upon receipt
by the intended recipient or upon the date of delivery (as confirmed by, if delivered by courier, the records of such courier); (ii) if sent by facsimile transmission, when the sender receives
confirmation from the sending facsimile machine that such facsimile transmission was transmitted to the facsimile number of the addressee; (iii) if mailed, upon the date of delivery as shown by
the return receipt therefor; or (iv) if delivered by a nationally recognized mail delivery service, upon the date of delivery. Notices must be sent to the addresses set forth in the
introduction to this Agreement. 

        10.   EXCLUSIVE JURISDICTION; SERVICE OF PROCESS.

        The
parties agree and consent that any proceeding seeking to enforce any provision of this Agreement will be instituted and adjudicated solely and exclusively in any state or federal
court of 

F-4

 

competent
jurisdiction located in Minnehaha County in the State of South Dakota. Each party hereto agrees that each such court will have personal jurisdiction over it with respect to such proceeding,
and waives any objections it may have, and expressly consents, to such personal jurisdiction. EACH PARTY HERETO WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT 

        11.   SECTION HEADINGS. 

        The
headings of sections in this Agreement are provided for convenience only and will not affect its construction or interpretation. 

        12.   WAIVER. 

        The
rights and remedies of the parties are cumulative and not alternative. Neither the failure nor any delay by any party in exercising any right, power, or privilege under this
Agreement or the documents referred to in this Agreement will operate as a waiver of such right, power, or privilege, and no single or partial exercise of any such right, power, or privilege will
preclude any other or further exercise of such right, power, or privilege or the exercise of any other right, power, or privilege. To the maximum extent permitted by applicable law, (a) no
claim or right arising out of this Agreement or the documents referred to in this Agreement can be discharged by one party, in whole or in part, by a waiver or renunciation of the claim or right
unless in writing signed by the other party; (b) no waiver that may be given by a party will be applicable except in the specific instance for which it is given; and (c) no notice to or
demand on one party will be deemed to be a waiver of any obligation of such party or of the right of the party giving such notice or demand to take further action without notice or demand as provided
in this Agreement or the documents referred to in this Agreement. 

        13.   EXCLUSIVE AGREEMENT AND MODIFICATION. 

        This
Agreement supersedes all prior agreements among the parties with respect to its subject matter and constitutes (along with the documents referred to in this Agreement) a complete
and exclusive statement of the terms of the agreement between the parties with respect to its subject matter. This Agreement may not be amended except by a written agreement executed by the parties. 

        14.   GOVERNING LAW. 

        This
Agreement will be governed by and construed in accordance with the laws of the State of South Dakota (exclusive of conflicts of law provisions of any jurisdiction and the principles
of comity). 

        15.   ASSIGNMENT. 

        No
party may assign any of its rights and/or obligations hereunder without the consent of all other parties. 

        16.   EXECUTION IN COUNTERPARTS AND DELIVERY OF ELECTRONIC SIGNATURES. 

        This
Agreement may be executed in any number of counterparts. All such counterparts will be deemed to be originals and will together constitute but one and the same instrument. This
Agreement will become effective upon its execution by the parties thereto. The executed counterparts of this Agreement and any ancillary documents thereto, such as amendments, may be delivered by
electronic means, such as email and/or facsimile, and the receiving party may rely on the receipt of such executed counterpart as if the original had been received. 

        IN
WITNESS WHEREOF, the parties have executed this Escrow Agreement as of                        day
of                                    2011.
 

F-5

 

			
	  	 	GRANITE CITY FOOD & BREWERY LTD.
	
 	
 	
By:  

 
	 	 	        Steven J. Wagenheim
	 	 	        Its: President

 

 

Signature page to Release and Escrow

Agreement executed February             , 2011 

 

 

			
	
 	
 	
[BANK]
	
 	
 	
By:  

 
	 	 	Its:  

 

 

 

Signature page to Release and Escrow

Agreement executed February             , 2011 

 

 

			
	  	 	GRANITE CITY FOOD & BREWERY LTD
	
 	
 	
By:  

 
	 	 	        Steven J. Wagenheim
	 	 	        Its: President

 

 

Signature page to Release and Escrow

Agreement executed February             , 2011 

DISCLOSURE SCHEDULES  

 TO  

 STOCK PURCHASE AGREEMENT  

 BY AND BETWEEN  

 GRANITE CITY FOOD & BREWERY LTD.  

 AND  

 CONCEPT DEVELOPMENT PARTNERS LLC  

February 8, 2011  

 

  TABLE OF CONTENTS  

 

 

			
	 
	 	Page 
	 SCHEDULE 4.3—CAPITALIZATION
	 	1
	 SCHEDULE 4.4—NO CONFLICTS
	 	

2
	 SCHEDULE 4.6—ABSENCE OF CERTAIN CHANGES
	 	

3
	 SCHEDULE 4.7—LITIGATION
	 	

4
	 SCHEDULE 4.14—TITLE TO PROPERTY
	 	

5
	 SCHEDULE 4.16—NO BROKERS
	 	

6
	 SCHEDULE 4.17—REGISTRATION RIGHTS
	 	

7
	 SCHEDULE 4.21—ERISA
	 	

8
	 SCHEDULE 5.1(b)—ISSUANCES OF STOCK—EXCEPTIONS
	 	

9
	 SCHEDULE 5.1(n)—BENEFITS/COMPENSATION ARRANGEMENTS—EXCEPTIONS
	 	

10
	 SCHEDULE 5.1(p)—NEW CONTRACTS—EXCEPTIONS
	 	

11
	 SCHEDULE 5.7—USE OF PROCEEDS
	 	

12

 

 i

 

  SCHEDULE 4.3—CAPITALIZATION  

	1.
	Options: In addition to the options disclosed in the SEC
Documents:

        1.     The
Company's board of directors granted options to certain of its employees, including its executive officers, on December 28, 2010, to purchase an aggregate of
174,000 shares of common stock. 

        2.     The
board of directors has authorized an option exchange plan, contingent on shareholder approval of the plan at the upcoming shareholder meeting, which would permit the
exchange of outstanding options held by employees for the purchase of 193,778 shares of common stock with exercise prices in excess of $6.00 per share for new options for the purchase of the same
number of shares of common stock at an exercise price of $2.00 per share. See the proxy statement, Proposal No. 3, for more detail. 

(The
following are set forth in the SEC Documents but are summarized here for convenience).  

	2.
	Participation Rights: Under the Debt Conversion Agreement
between DHW and the Company dated September 21, 2009, DHW received certain rights to participate in private placements to maintain its percentage ownership. This right is being terminated by
the signing of an Amendment No. 2 to the Debt Conversion Agreement in connection with the Transactions.

	3.
	Registration Rights:

        1.     DHW
has registration rights received in the Debt Conversion Agreement in September 2009, which generally entitled it to the filing of an initial resale registration
statement (which became effective Feb. 5, 2010) and demand rights to file an additional registration statement each six months, but only if all previously registered shares have been sold.
DHW's registration rights terminate when all its securities can be sold without volume limitations or three years from closing, whichever is earlier. These rights will be suspended by Amendment
No. 1 to the DHW Registration Rights Agreement in connection with the Transactions. 

        2.     The
warrants held by certain of the Company's landlords under rent reduction agreements signed January—September 2009, including those held by the Dunham
Landlords and their transferees, have piggy-back registration rights generally entitling them to notice of and inclusion in a registration statement being filed by the Company, including
the registration statement in connection with these Transactions. However, most of these parties have already exercised such piggyback registration rights in connection with the DHW registration
statement effective on February 5, 2010.  

	4.
	Anti-Dilution Rights: Anti-dilution rights are present and
outstanding in the warrants held by the Harmony Equity Income Funds and its assigns ("Harmony") pursuant to the March 30, 2009 bridge loan transaction, which provide for adjustments to the
number of the warrants and their exercise price if the Company issues securities below the current exercise price of the warrant. These warrants currently have an exercise price of $1.52. 

1

 

 SCHEDULE 4.4—NO CONFLICTS  

        1.     The
Company has certain agreements and negative covenants under the terms of the Bridge Loan Agreement with Harmony. The Company will seek a waiver of the applicable
negative covenants from Harmony. The Company intends to repay the Harmony bridge note with the proceeds concurrent with closing, which will terminate such negative covenants. 

        2.     The
Company will be required to obtain approvals and permits from agencies regulating the sale of alcoholic beverages and the brewing of beer in some of the jurisdictions
in which it operates.. No approvals or permits have been obtained. 

        3.     The
Company is required to obtain the consents of landlords for the following leased locations: (a) St. Louis Park, Minnesota; (b) Creve Coeur,
Missouri. No approvals or permits have been obtained. 

        4.     The
Company is required to obtain the consent of Carlton Financial Corporation, as Lessor ("Carlton"), under that certain Master Lease Agreement by and between Carlton
and the Company dated August 16, 2006, to any change in control. The Company intends to repay the Carlton agreement with the proceeds concurrent with closing, which will terminate such negative
covenants. 

        5.     DHW
is seeking the consent of Great Western Bank, CorTrust Bank and Dacotah Bank under the Release and Escrow Agreement attached hereto. 

2

 

 SCHEDULE 4.6—ABSENCE OF CERTAIN CHANGES  

        1.     The
Company sold an aggregate of approximately $930,000 (face value) of gift cards to Costco Wholesale Corporation at a discount of 31% from November 2010 to January
2011. Previously, sales of gift cards were made primarily through the Company's restaurants or in other direct transactions. 

        2.     On
December 30, 2010, DCM entered into agreements with General Growth Properties affiliates ("GGP") under which GGP agreed to restructure the rents for the Maumee,
Ohio and Ft. Wayne, Indiana locations and DCM issued a promissory note in the amount of $400,000 to GGP to discharge and terminate the lease on the closed Rogers, Arkansas restaurant location. 

3

 

 SCHEDULE 4.7—LITIGATION  

        Pursuant to an engagement letter dated September 16, 2009 (the "Engagement Agreement"), the Company engaged KeyBanc Capital
Markets ("KBCM") as an exclusive financial advisor to our board of directors and has utilized KBCM on an advisory basis. The Company proposes to pay an
advisory fee to KBCM in the amount of $350,000, contingent upon the closing of the transactions contemplated by the Agreement. Upon payment of such advisory fee, the Engagement Agreement and the
obligations of KBCM and the Company will terminate in all respects. If the transactions contemplated by the Agreement do not close, the Amendment will terminate and be void. 

4

 

 SCHEDULE 4.14—TITLE TO PROPERTY  

        1.     In
connection with the March 2009 Harmony bridge loan, Harmony has (i) a lien and mortgage on the Company's leasehold interest in its Sioux Falls location and the
buildings, improvements and fixtures at that location, and (ii) a lien and mortgage on the Company's trademarks, copyrights, works of authorship, patents, and certain know-how.
Harmony's security interests will terminate when the Company pays off the Harmony loan, which it intends to do with the proceeds of the credit facility concurrent with the Closing Date. 

        2.     First
National Bank has liens on personal property and fixtures of the Fargo, Clive, IA, and Davenport, IA locations, and on a checking account. (See UCC
filings). First National's security interests will terminate when the Company pays them off, which it intends to do with the proceeds of the credit facility concurrent with the Closing Date. 

        3.     Home
Federal Savings Bank—lease filings as to specific equipment at Company headquarters and leased equipment (See UCC filings) (Carlton is assignor
for most). 

        4.     Premier
Restaurant Equipment—leased equipment at Rockford, IL location (See UCC filings) 

        5.     US
Express Leasing—leased personal property at Company headquarters (See UCC filings) 

        6.     Carlton—lease
filing with regard to Company headquarters and specified equipment at Olathe, KS location (See UCC filings) 

5

 

 SCHEDULE 4.16—NO BROKERS  

See
Schedule 4.7. 

6

 

 SCHEDULE 4.17—REGISTRATION RIGHTS  

See
Schedule 4.3. 

7

 

 SCHEDULE 4.21—ERISA  

Compensation
Plans and Arrangements: 

	1.
	Granite
City Food & Brewery 401(k) Plan

	2.
	The
Company offers its employees medical insurance, dental insurance, vision insurance, flexible spending accounts (under a Flexible Benefits Plan), life and
accidental death and dismemberment insurance, and short-term and long-term disability insurance, each pursuant to certain eligibility requirements.

	3.
	Amended
and Restated Equity Incentive Plan

	4.
	Amended
and Restated 1997 Director Stock Option Plan (expired; no further options may be granted thereunder)

	5.
	Non-equity
incentive plan (used for annual incentive compensation of executive officers, based on achievement of performance goals, paid in
cash); see proxy for historical description of process

	6.
	Employment
agreements with Steven J. Wagenheim, James G. Gilbertson, and Darius H. Gilanfar 

8

 

 SCHEDULE 5.1(b)—ISSUANCES OF STOCK—EXCEPTIONS  

See
Schedule 5.1(n) #4. 

9

 

 SCHEDULE 5.1(n)—BENEFITS/COMPENSATION ARRANGEMENTS : EXCEPTIONS  

        1.     The
Company proposes to enter into, on or before the date of this Agreement, an Amended and Restated Executive Employment Agreement with Steven J. Wagenheim, the terms of
which have been disclosed to Buyer. 

        2.     The
Company's Board of Directors made grants of options and authorized an option exchange program on December 28, 2010, as described in Schedule 4.3. 

        3.     The
Company's Board of Directors intends to pay fees to independent board members and the Chairman of the Board in connection with the consideration and negotiation of
the Transactions. 

        4.     The
Company's Board of Directors intends to (a) modify certain options to purchase 5,000 shares of the Company's common stock held by our non-employee
directors to provide for vesting after departure from the Board and (b) grant new options to purchase 5,000 shares of common stock to our resigning non-employee directors in place
of the non-employee director options that would have been awarded to them during 2011 in the normal course, and (c) provide that each of the forgoing options vests in full upon the
Closing Date, in each case to compensate these individuals for the forfeitures of stock options due to their planned resignations in connection with the Transaction. 

10

 

 SCHEDULE 5.1(p)—NEW CONTRACTS : EXCEPTIONS  

        1.     The
Company intends to enter into various agreements related to the procurement of food and alcoholic beverages, including the bottling and packaging of beer, any of
which could exceed the limits set forth in 5.1(p) and for which there may be no precedent business transactions. 

        2.     The
Company proposes to enter into an agreement with KeyBanc, as described on Schedule 4.7. 

        3.     Contracts
with service providers related to the Transactions shall be excepted from the limitations in 5.1(p), including, but not limited to, that the Company intends to
enter into an agreement with a proxy solicitor with respect to the Transactions, and all payments of transaction costs. 

        4.     See
Schedule 5.1(n), #3. 

11

 

 SCHEDULE 5.7—USE OF PROCEEDS  

In
addition to the other uses of proceeds set forth in Section 5.7 of the Stock Purchase Agreement, the Company plans to repay the following outstanding indebtedness: 

        1.     Repayment
of the Harmony Bridge Loan in the approximate amount of $686,106; 

        2.     Repayment
to First National Bank in the approximate amount of $1,125,021; and 

        3.     Repayment
of Carlton equipment leases in the approximate amount of: $708,008. 

12

QuickLinks

EXHIBIT 10.1

ARTICLE 1 DEFINITIONS

ARTICLE 2 PURCHASE AND SALE OF PREFERRED STOCK

ARTICLE 3 BUYER'S REPRESENTATIONS AND WARRANTIES

ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE COMPANY

ARTICLE 5 COVENANTS

ARTICLE 6 CONDITIONS TO EACH PARTY'S OBLIGATIONS

ARTICLE 7 CONDITIONS TO THE COMPANY'S OBLIGATION

ARTICLE 8 CONDITIONS TO BUYER'S OBLIGATION

ARTICLE 9 INDEMNIFICATION

ARTICLE 10 TERMINATION

ARTICLE 11 GOVERNING LAW; MISCELLANEOUS

EXHIBIT A

GRANITE CITY FOOD & BREWERY LTD. CERTIFICATE OF DESIGNATION OF RIGHTS AND PREFERENCES OF SERIES A CONVERTIBLE PREFERRED STOCK

AMENDMENT NO. 3 TO MASTER AGREEMENT

RECITALS

AGREEMENT

ARTICLE I DEFINITIONS

ARTICLE II REGISTRATION RIGHTS

ARTICLE III TRANSFERS OF CERTAIN RIGHTS

ARTICLE IV MISCELLANEOUS

RECITALS

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00184-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00184-of-00352.parquet"}]]