Document:

Exhibit 10.3

 

SUBSCRIPTION AGREEMENT

AND

LETTER OF INVESTMENT INTENT

 

Granite

City Food & Brewery Ltd.

5831

Cedar Lake Road

St.

Louis Park,  MN 55416

 

Gentlemen:

 

THIS

AGREEMENT, made effective this 27th day of September, 2002, between

Granite City Food & Brewery Ltd. (formerly known as Founders Food &

Firkins Ltd.), a Minnesota corporation (the “Company”), and Andrew Redleaf, a

resident of the State of Minnesota.

 

1.                                       The Company agrees to sell to the

undersigned, and the undersigned agrees to purchase from the Company, 4,500

shares of Series A Convertible Preferred Stock (the “Preferred”) and warrants

to purchase common stock (collectively, the “Securities”) at a purchase price

equal to $100.00 per Preferred share (minimum investment $25,000).  The conversion price of the Preferred and

the exercise price of the Warrants will be the price established at the initial

closing of the sale of the Securities, which will be the lower of (a) 90% of

the average closing price of the common stock on Nasdaq for the ten trading

days preceding the initial closing date, or (b) $1.58.  The undersigned acknowledges that this

subscription is contingent upon acceptance in whole or in part by the

Company.  Once accepted by the Company,

this subscription is irrevocable.

 

2.                                       The undersigned will purchase the Securities

in three installments on October 1, 2002, December 20, 2002 and March 20, 2003

(each a “Purchase Date”).  On or before

October 1, 2002, the undersigned will deliver to Highland Bank, St. Paul,

Minnesota, as escrow agent for the Company, the sum of $150,000 in payment for

1,500 shares of Preferred and the related Warrants.  On or before December 20, 2002, the undersigned will deliver the

second installment payment to the escrow agent in the amount of $150,000 in

payment for 1,500 shares of the Preferred and the related Warrants.  On or before March 20, 2003, the undersigned

will deliver the third installment payment to the escrow agent in the amount of

$150,000 in payment for the remaining 1,500 shares of the Preferred and the

related Warrants.  Purchase and delivery

of the Securities will take place at a time and place specified by the Company

on each Purchase Date or such earlier date as the undersigned shall specify in

writing to the Company.  Payment for

each installment will be made by check or wire transfer payable to “Highland

Bank – Founders Food Escrow Account,” at least one business day prior to each

Purchase Date.

 

3.                                       The undersigned acknowledges and represents

as follows:

 

(a)                                  That he or she has received and carefully

reviewed the Confidential Private Placement Memorandum of the Company dated

February 25, 2002, as supplemented August 16, 2002 (the “Memorandum”), and all

documents delivered therewith;

 

(b)                                 That he or she believes he or she is able to

bear the economic risk of the investment in the Securities;

 

 

(c)                                  That he or she believes that he or she has

knowledge and experience in financial and business matters, that he or she is

capable of evaluating the merits and risks of the prospective investment in the

Securities and that he or she is able to bear such risks.

 

(d)                                 That he or she understands an investment in

the Securities is highly speculative but believes that the investment is

suitable for him or her based upon his or her investment objectives and financial

needs, and has adequate means for providing for his or her current financial

needs and personal contingencies and has no need for liquidity of investment

with respect to the Securities;

 

(e)                                  That he or she has been given access to full

and complete information regarding the Company (including the opportunity to

meet with Company officers and review such documents as he or she may have

requested in writing) and has utilized such access to his or her satisfaction

for the purpose of obtaining information in addition to, or verifying

information included in, the Memorandum;

 

(f)                                    That he or she recognizes that the

Securities, as an investment, involve a high degree of risk, including, but not

limited to, the risks described in the “Cautionary Statement” which is part of

“Management’s Discussion and Analysis or Plan of Operation” in the Company’s

Form 10-KSB included within the Memorandum; and

 

(g)                                 That he or she realizes that (i) the purchase

of the Securities is a long-term investment; (ii) the purchasers of the

Securities must bear the economic risk of investment for an indefinite period

of time because the Securities have not been registered under the Securities

Act of 1933, as amended (the “Act”) and, therefore, cannot be sold unless they

are subsequently registered under the Act or an exemption from such

registration is available; and (iii) the transferability of the Securities is

restricted, and (A) requires the written consent of the Company, (B) requires

conformity with the restrictions contained in paragraphs 4 and 5 below, and (C)

will be further restricted by a legend placed on the certificate(s)

representing the Securities stating that the Securities have not been

registered under the Act and referring to the restrictions on transferability

of the Securities, and by stop transfer orders or notations on the Company’s

records referring to the restrictions on transferability.

 

4.                                       The undersigned has been advised that the

Securities are not being registered under the Act or relevant state securities

laws pursuant to exemptions from the Act and such laws, and that the Company’s

reliance upon such exemptions is predicated in part on the undersigned’s

representations to the Company as contained herein.  The undersigned represents and warrants that the Securities are

being purchased for his or her own account and for investment and without the

intention of reselling or redistributing the same, that he or she has made no

agreement with others regarding any of such Securities and that his or her

financial condition is such that it is not likely that it will be necessary to

dispose of any of such Securities in the foreseeable future.  The undersigned is aware that, in the view

of the Securities and Exchange Commission and applicable state bodies that

administer state securities laws, a purchase of Securities with an intent to

resell by reason of any foreseeable specific contingency or anticipated change

in market value, or any change in the condition of the Company or its business,

or in connection with a contemplated liquidation or settlement of any loan

obtained for the acquisition of the Securities and for which the Securities

were pledged as security, would represent an intent inconsistent with the

representations set forth above.  The

undersigned further represents and agrees that if, contrary to his or her

foregoing intentions, he or she should later desire to dispose of or transfer

any of such Securities in any manner, he or she shall not do so without first

obtaining (a) the opinion of counsel designated by the

 

2

 

Company that such proposed disposition or transfer lawfully may be made

without the registration of such Securities for such purpose pursuant to the

Act, as then in effect, and applicable state securities laws, or (b) such

registrations (it being expressly understood that the Company shall not have

any obligation to register the shares for such purpose).  The undersigned agrees that the Company may

place a restrictive legend on the certificate(s) representing the Securities,

containing substantially the following language:

 

The

securities represented by this Certificate were issued without registration

under the Securities Act of 1933, as amended (the “Act”), and without

registration under state securities laws, in reliance upon exemptions contained

in the Act and such laws.  No transfer

of these securities or any interest therein may be made except pursuant to

effective registration statements under said laws unless this Corporation has

received an opinion of counsel satisfactory to it that such transfer or

disposition does not require registration under said laws and, for any sales

under Rule 144 of the Act, such evidence as it shall request for compliance

with that rule.

 

The

undersigned agrees and consents that the Company may place a stop transfer

order on the Certificate(s) representing the Securities to assure the

undersigned’s compliance with this Agreement and the matters referenced above.

 

The

undersigned agrees to save and hold harmless, defend and indemnify the Company

and its directors, officers and agents from any claims, liabilities, damages,

losses, expenses or penalties arising out of any misrepresentation of

information furnished by the undersigned to the Company in this Subscription Agreement.

 

5.                                       The undersigned understands that the Company

at a future date may file a registration or offering statement with the

Securities and Exchange Commission to facilitate a public offering of its

securities.  The undersigned agrees, for

the benefit of the Company, that should such a public offering be made and

should the managing underwriter of such offering require, the undersigned will

not, without the prior written consent of the Company and such underwriter,

during the Lock Up Period as defined herein: (i) sell, transfer or otherwise

dispose of, or agree to sell, transfer or otherwise dispose of any of the

Securities beneficially held by the undersigned during the Lock Up Period; (ii)

sell, transfer or otherwise dispose of, or agree to sell, transfer or otherwise

dispose of any options, rights or warrants to purchase any of the shares

beneficially held by the undersigned during the Lock Up Period; or (iii) sell

or grant, or agree to sell or grant, options, rights or warrants with respect

to any of the Securities.  The foregoing

does not prohibit gifts to donees or transfers by will or the laws of descent

to heirs or beneficiaries provided that such donees, heirs and beneficiaries

shall be bound by the restrictions set forth herein.  The term “Lock Up Period” shall mean the lesser of (x) 180 days

or (y) the period during which Company officers and directors are restricted by

the managing underwriter from effecting any sales or transfers of the Company’s

common stock.  The Lock Up Period shall

commence on the effective date of the applicable registration statement.

 

6.                                       The undersigned represents and warrants that

the undersigned is a bona fide resident of, and is domiciled in, the state

listed in the Recital to this Agreement and that the Securities are being

purchased solely for the beneficial interest of the undersigned and not as

nominee, for, or on behalf of, or for the beneficial interest of, or with the

intention to transfer to, any other person, trust or organization, except as

specifically set forth in paragraph 11 of this Agreement.

 

PARAGRAPH

7 IS REQUIRED IN CONNECTION WITH THE EXEMPTIONS FROM THE ACT AND STATE LAWS

BEING RELIED ON BY THE COMPANY WITH

 

3

 

RESPECT

TO THE OFFER AND SALE OF THE SECURITIES. 

ALL OF SUCH INFORMATION WILL BE KEPT CONFIDENTIAL AND WILL BE REVIEWED

ONLY BY THE COMPANY AND ITS COUNSEL. 

The undersigned agrees to furnish any additional information which the

Company deems necessary in order to verify the responses set forth below.

 

7.                                       Accredited Status.  The

undersigned represents and warrants as follows (CHECK IF APPLICABLE):

 

	

  ý

  	

   

  	

  A.

  	

   

  	

  The

  undersigned is an individual with a net worth, or a joint net worth together

  with his or her spouse, in excess of $1,000,000.  (In calculating net worth, you may include equity in personal

  property and real estate, including your principal residence, cash,

  short-term investments, stock and securities.  Equity in personal property and real estate should be based on

  the fair market value of such property minus debt secured by such property.)

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

  ý

  	

   

  	

  B.

  	

   

  	

  The

  undersigned is an individual with income in excess of $200,000 in each of the

  prior two years and reasonably expects an income in excess of $200,000 in the

  current year.

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

  ý

  	

   

  	

  C.

  	

   

  	

  The

  undersigned is an individual who, with his or her spouse, had joint income in

  excess of $300,000 in each of the prior two years and reasonably expects

  joint income in excess of $300,000 in the current year.

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

  o

  	

   

  	

  D.

  	

   

  	

  The

  undersigned is a director or executive officer of Granite City Food &

  Brewery Ltd.

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

  o

  	

   

  	

  E.

  	

   

  	

  The

  undersigned, if other than an individual, is an entity all of whose equity

  owners meet one of the tests set forth in (A) through (D) above.

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

  o

  	

   

  	

  F.

  	

   

  	

  The

  undersigned is an entity, and is an “Accredited Investor” as defined in Rule

  501(a) of Regulation D under the Act. 

  This representation is based on the following (check one or more, as

  applicable):

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

  o

  	

  1.

  	

  The

  undersigned (or, in the case of a trust, the undersigned trustee) is a bank

  or savings and loan association as defined in Sections 3(a)(2) and

  3(a)(5)(A), respectively, of the Act acting either in its individual or

  fiduciary capacity.

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

  o

  	

  2.

  	

  The

  undersigned is an insurance company as defined in section 2(13) of the Act.

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

  o

  	

  3.

  	

  The

  undersigned is an investment company registered under the Investment Company

  Act of 1940 or a business development company as defined in Section 2(a)(48)

  of that act.

  
	

   

  	

   

  	

   

  	

   

  	

  o

  	

  4.

  	

  The

  undersigned is a Small Business Investment Company licensed by the United

  States Small Business Administration under Section 301(c) or (d) of the Small

  Business Investment Act of 1958.

  

 

4

 

	

   

  	

   

  	

   

  	

   

  	

  o

  	

  5.

  	

  The

  undersigned is an employee benefit plan within the meaning of Title I of the

  Employee Retirement Income Security Act of 1974 (“ERISA”) and either (check

  one or more, as applicable):

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

  o

  	

  a.

  	

  the

  investment decision is made by a plan fiduciary, as defined in Section 3(21)

  of ERISA, which is either a bank, savings and loan association, insurance

  company, or registered investment advisor; or

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

  o

  	

  b.

  	

  the

  employee benefit plan has total assets in excess of $5,000,000; or

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

  o

  	

  c.

  	

  the

  plan is a self-directed plan with investment decisions made solely by persons

  who are “Accredited Investors” as defined under the Act.

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

  o

  	

  6.

  	

  The

  undersigned is a private business development company as defined in Section

  202(a)(22) of the Investment Advisors Act of 1940.

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

  o

  	

  7.

  	

  The

  undersigned has total assets in excess of $5,000,000, was not formed for the

  specific purpose of acquiring securities of the Company and is one or

  more of the following (check one or more, as appropriate):

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

  o

  	

  a.

  	

  an

  organization described in Section 501(c)(3) of the Internal Revenue Code; or

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

  o

  	

  b.

  	

  a

  corporation; or

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

  o

  	

  c.

  	

  a

  Massachusetts or similar business trust; or

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

  o

  	

  d.

  	

  a

  partnership.

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

  o

  	

  8.

  	

  The

  undersigned is a trust with total assets exceeding $5,000,000 which was not

  formed for the specific purpose of acquiring securities of the Company and

  whose purchase is directed by a person who has such knowledge and experience

  in financial and business matters that he or she is capable of evaluating the

  merits and risks of the investment in the shares.  (IF ONLY THIS RESPONSE IS CHECKED, please contact the Company

  to receive and complete an information statement before this subscription can

  be considered).

  

 

 

8.             Registration Rights.

 

(a)                                  Definitions. 

As used in this paragraph 8, the following terms shall have the

following meanings:

 

“Advice”

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

 

5

 

“Affiliate”

means, with respect to any specified person, any other person who, directly or

indirectly, controls, is controlled by, or is under common control with such

specified person.

 

“Exchange

Act” means the Securities Exchange Act of 1934, as amended from time to

time, or any successor statute, and the rules and regulations of the Securities

and Exchange Commission promulgated thereunder.

 

“Holder”

means the undersigned.

 

“Prospectus”

means the prospectus included in any Registration Statement (including without

limitation, a prospectus that discloses information previously omitted from a

prospectus filed as part of an effective Registration Statement in reliance

upon Rule 430A promulgated under the Act), as amended or supplemented by any

prospectus supplement, and by all other amendments and supplements to the

prospectus, including post-effective amendments, and in each case including all

material incorporated by reference or deemed to be incorporated by reference in

such prospectus.

 

“Registrable

Securities” means the shares of common stock issuable upon exercise or

conversion of the Securities and any shares of common stock issued as payment

in lieu of cash dividends on the Series A Convertible Preferred Stock; provided,

however, that such securities shall cease to be Registrable Securities

when (i) a Registration Statement covering the Registrable Securities has been

declared effective and such Registrable Securities have been disposed of

pursuant to such effective Registration Statement, or (ii) the Registrable

Securities become eligible for sale pursuant to Rule 144 (or any similar rule

then in force) under the Act, or (iii) the Securities cease to be outstanding.

 

“Registration

Statement” means any registration statement of the Company that covers any

of the Registrable Securities pursuant to the provisions of this Agreement and

all amendments and supplements to any such registration statement, including

post-effective amendments, in each case including the Prospectus, all exhibits,

and all material incorporated by reference or deemed to be incorporated by

reference in such registration statement.

 

“Suspension

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

 

(b)                               Resale Registration.  The rights

described in this paragraph 8(b) will be available to holders of Registrable

Securities until the second anniversary of the expiration of the warrants to

purchase common stock issued with the Series A Convertible Preferred Stock.

 

(i)                                     Demand Registration.  If holders of at least one-third of the

Registrable Securities request that the Company file a registration statement

having an aggregate offering price to the public of not less than $1.0 million,

the Company will use its best efforts to cause such common stock to be

registered; provided, however, that the Company will not be obligated to effect

more than two such registrations, and will not be obligated to effect more than

one such registration during any 12-month period.  If registration is demanded under any subsection of paragraph

8(b), the Company may elect to register all of the Registrable Securities.  The number of demand registrations available

under this paragraph 8(b)(i) will be reduced by the number of Form S-3

registrations demanded under paragraph 8(b)(iii).

 

(ii)                                  Incidental Registration.  If the Company proposes to register under

the Act (except by a Form S-4 or Form S-8 Registration Statement or any

successor forms thereto) or qualify for a public distribution under

Section 3(b) of the Act, any of its equity securities or debt with equity

features, it will give written notice to all Holders of

 

6

 

Registrable Securities of its intention to do so and, on the written

request of any such Holder given within twenty (20) days after receipt of any

such notice (which written request shall specify the interest in the

Registrable Securities intended to be sold or disposed of by such Holder and

describe the nature of any proposed sale or other disposition thereof), the

Company will use its best efforts to cause all such Registrable Securities, the

Holders of which shall have requested the registration or qualification

thereof, to be included in such Registration Statement proposed to be filed by

the Company; provided, however, that if a greater number of Registrable

Securities is offered for participation in the proposed offering than in the

reasonable opinion of the managing underwriter of the proposed offering can be

accommodated without adversely affecting the proposed offering, then the amount

of Registrable Securities proposed to be offered by such Holders for

registration, as well as the number of securities of any other selling

shareholders participating in the registration, shall be proportionately

reduced to a number deemed satisfactory by the managing underwriter.

 

(iii)                               S-3 Registration.  Holders of

Registrable Securities are entitled to demand up to three registrations on Form

S-3 (if available to the Company) so long as each such offering is in an amount

of at least $500,000 (based upon the closing bid price of the common stock on

the trading day before the demand is made). 

The Company will not be obligated to file more than one Form S-3 in any

six-month period.

 

(c)                                  Registration Procedures.  In connection with the obligations of the

Company to effect or cause the registration of any Registrable Securities

pursuant to the terms and conditions of this Agreement, the Company shall use

reasonable efforts to effect the registration and sale of such Registrable

Securities in accordance with the intended method of distribution thereof, and

in connection therewith:

 

(i)                                     The Company shall prepare and file with the

Securities and Exchange Commission a Registration Statement on Form S-3 or

other similar form under the Act which permits secondary sales of securities in

a “shelf registration,” and use reasonable efforts to cause such Registration

Statement to become effective and remain effective in accordance with the

provisions of this Agreement;

 

(ii)                                  The Company shall promptly prepare and file

with the Securities and Exchange Commission such amendments and post-effective

amendments to each Registration Statement as may be necessary to keep such

Registration Statement effective and shall timely file with the Securities and

Exchange Commission all required filings under the Exchange Act as are

necessary to keep the Registration Statement effective for as long as such

registration is required to remain effective pursuant to the terms hereof;

shall cause the Prospectus to be supplemented by any required Prospectus

supplement, and, as so supplemented, to be filed pursuant to Rule 424 under the

Act; and shall comply with the provisions of the Act applicable to it with

respect to the disposition of all Registrable Securities covered by such

Registration Statement during the applicable period in accordance with the

intended methods of disposition by Holder set forth in such Registration

Statement or supplement to the Prospectus;

 

(iii)                               The Company shall promptly furnish to Holder such number of copies of

the Prospectus (including each preliminary Prospectus) and any amendments or

supplements thereto, as Holder may reasonably request in order to facilitate

the public sale or other disposition of the Registrable Securities being sold

by Holder;

 

7

 

(iv)                              The Company shall promptly notify Holder, (A) when a Prospectus or any

Prospectus supplement or post–effective amendment has been filed and,

with respect to a Registration Statement or any post–effective amendment,

when the same has become effective, (B) of any request by the Securities and

Exchange Commission or any state securities authority for amendments and

supplements to a Registration Statement and Prospectus or for additional

information after the Registration Statement has become effective, (C) of the

issuance by the Securities and Exchange Commission of any stop order suspending

the effectiveness of a Registration Statement, (D) of the issuance by any state

securities commission or other regulatory authority of any order suspending the

qualification or exemption from qualification of any of the Registrable

Securities under state securities or “blue sky” laws, and (E) of the happening

of any event which makes any statement made in a Registration Statement or

related Prospectus untrue or which requires the making of any changes in such

Registration Statement or Prospectus so that they will not 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.  As soon as practicable following expiration

of the Suspension Period (as defined below), the Company shall prepare and file

with the Securities and Exchange Commission and furnish a supplement or

amendment to such Prospectus so that, as thereafter deliverable to the

purchasers of such Registrable Securities, such Prospectus will not contain any

untrue statement of a material fact or omit to state a material fact necessary

to make the statements therein, in light of the circumstances under which they

were made, not misleading.

 

Upon

receipt of any notice (a “Suspension Notice”) by Holder from the Company of the

happening of any event of the kind described in paragraph 8(c)(iv), Holder

shall forthwith discontinue disposition of the Registrable Securities pursuant

to the Registration Statement covering such Registrable Securities until such

Holder’s receipt of the copies of the supplemented or amended Prospectus

contemplated by paragraph 8(c)(iv) or until Holder is advised in writing (the

“Advice”) by the Company that the use of the Prospectus may be resumed, and has

received copies of any additional or supplemental filings which are

incorporated by reference in the Prospectus, and, if so directed by the

Company, will, or will request any broker–dealer acting as Holder’s agent

to, deliver to the Company (at the Company’s expense) all copies, other than

permanent file copies then in Holder’s or broker–dealer’s possession, of

the Prospectus covering such Registrable Securities current at the time of

receipt of such notice; provided, however, that in no event shall

the period from the date on which Holder receives a Suspension Notice to the

date on which Holder receives either the Advice or copies of the supplemented

or amended Prospectus contemplated by paragraph 8(c)(iv) (the “Suspension

Period”) exceed 90 days.

 

(d)                                 Registration Expenses.  The Company shall bear all expenses incurred

in connection with the registration of Registrable Securities pursuant to

paragraph 8(b).  Such expenses shall

include, without limitation, all printing, legal and accounting expenses

incurred by the Company and all registration and filing fees imposed by the

Securities and Exchange Commission, any state securities commission or The

Nasdaq Stock Market.  Each Holder shall

be responsible for any underwriting discounts, brokerage fees or commissions

and taxes of any kind (including, without limitation, transfer taxes) with

respect to any disposition, sale or transfer of Registrable Securities and for

any legal, accounting and other expenses incurred by such Holder.

 

(e)                                  Indemnification and Contribution.

 

8

 

(i)                                     Indemnification by the Company.  The Company agrees to indemnity and hold

harmless, to the full extent permitted by law, each Holder from and against all

losses, claims, damages, liabilities and expenses (including without limitation

reasonable legal fees and expenses incurred by Holder (collectively, the

“Damages”) to which Holder may become subject under the Act or otherwise,

insofar as such Damages (or proceedings in respect thereat) arise out of or are

based upon any untrue statement of material fact contained in any Registration

Statement (or any amendment thereto) pursuant to which Registrable Securities

were registered under the Act, or caused by any omission to state therein a

material fact necessary to make the statements therein in light of the

circumstances under which they were made not misleading, or caused by any

untrue statement of a material fact contained in any Prospectus (as amended or

supplemented if the Company shall have furnished any amendments or supplements

thereto), or caused by any omission to state therein a material fact necessary

to make the statements therein in light of the circumstances under which they

were made not misleading, except insofar as such Damages arise out of or are

based upon any such untrue statement or omission based upon information

relating to Holder furnished in writing to the Company by Holder specifically

for use therein; provided, however, that the Company shall not be

liable to Holder under this paragraph 8(e)(i) to the extent that any such

Damages were caused by the fact that Holder sold securities to a person as to

whom it shall be established that there was not sent or given, at or prior to

the written confirmation of such sale, a copy of the Prospectus as then amended

or supplemented if, but only if, (A) the Company has previously furnished

copies of such amended or supplemented Prospectus to Holder and (B) such

Damages were caused by any untrue statement or omission contained in the

Prospectus so delivered which was corrected in such amended or supplemented

Prospectus.

 

(ii)                                  Indemnification by the Holder.  Holder agrees to indemnify and hold harmless

the Company, its stockholders, directors, officers and each person, if any, who

controls  the Company within the meaning

of either Section 15 of the Act or Section 20 of the Exchange Act to the same

extent as the foregoing indemnity from the Company to Holder, but only with

reference to information relating to Holder furnished in writing to the Company

by Holder specifically for use in any Registration Statement (or any amendment

thereto) or any Prospectus (or any amendment or supplement thereto); provided,

however, that Holder shall not be obligated to provide such indemnity to

the extent that such Damages result from the failure of the Company to promptly

amend or take action to correct or supplement any such Registration Statement

or Prospectus on the basis of corrected or supplemental information provided by

Holder to the Company expressly for such purpose.  In no event shall the liability of Holder hereunder be greater in

amount than the amount of the proceeds received by Holder upon the sale of the

Registrable Securities giving rise to such indemnification obligation.

 

(iii)                               Contribution.  To the extent

that the indemnification provided for in paragraph 8(e)(i) or paragraph

8(e)(ii) is unavailable to an indemnified party or insufficient in respect of

any Damages, then each indemnifying party under such paragraph, in lieu of

indemnifying such indemnified party thereunder, shall contribute to the amount

paid or payable by such indemnified party as a result of such Damages in such

proportion as is appropriate to reflect the relative fault of the Company on

the one hand and Holder on the other hand in connection with the statements or

omissions that resulted in such Damages, as well as any other relevant

equitable considerations.  The relative

fault of the Company on the one hand and of Holder on the other hand shall be

determined by reference to, among other things, whether the untrue statement of

a

 

9

 

material fact or the omission to state amaterial fact relates to

information supplied by the Company or by Holder and the parties’ relative

intent, knowledge, access to information and opportunity to correct or prevent

such statement or omission.

 

If

indemnification is available under subsection (i) or (ii) of this paragraph

8(e), the indemnifying parties shall indemnify each indemnified party to the

full extent provided in such paragraphs without regard to the relative fault of

said indemnifying party or indemnified party or any other equitable consideration

provided for in this paragraph 8(e)(iii). 

The Company and Holder agree that it would not be just or equitable if

contribution pursuant to this paragraph 8(e)(iii) were determined by pro rata

allocation or by any other method of allocation that does not take account of

the equitable considerations referred to herein.

 

9.                                       NASD Affiliation.  The

undersigned is affiliated or associated, directly or indirectly, with a

National Association of Securities Dealers, Inc. (“NASD”) member firm or

person.

 

Yes o                                    No      ý     .

 

If yes, list the affiliated member firm or person:

 

Your relationship to such member firm or person:

 

 

10.                                 Entities.  If the undersigned is not an

individual but an entity, the individual signing on behalf of such entity and

the entity jointly and severally agree and certify that:

 

A.                                   The undersigned was not organized for the

specific purpose of acquiring securities of the Company; and

 

B.                                     This Agreement has been duly authorized by

all necessary action on the part of the undersigned, has been duly executed by

an authorized officer or representative of the undersigned, and is a legal,

valid and binding obligation of the undersigned enforceable in accordance with

its terms.

 

11.                                 Miscellaneous.

 

A.            Manner in which

title is to be held: (check one)

 

ý            Individual

Ownership

o            Joint

Tenants with Right of Survivorship*

o            Partnership*

o            Tenants

in Common*

o            Corporation

o            Trust

o            Other                                      (describe)

 

B.                                     The undersigned agrees that the undersigned

understands the meaning and legal consequences of the agreements,

representations and warranties contained herein, agrees that such agreements,

representations and warranties shall survive and remain in full force and

effect after the execution hereof and payment for the shares, and further

agrees to indemnify and hold harmless the Company, each current and future

officer, director, employee, agent and shareholder from and against any and all

loss, damage or liability due to, or arising out of, a breach of any agreement,

representation or warranty of the undersigned contained herein.

 

10

 

The undersigned acknowledges that the undersigned has retained his, her

or its own independent legal counsel to the extent that the undersigned determined

it to be necessary or helpful.  The

undersigned further acknowledges that the undersigned was not represented by

counsel for Aethlon Capital, LLC.

 

C.                                     This Agreement shall be construed and

interpreted in accordance with Minnesota law without regard to conflict of law

provisions.

 

D.                                    The agreements and covenants of the parties

hereto shall survive the delivery of the Securities and be binding upon the

parties and their respective successors, personal representatives and assigns.

 

E.                                      The undersigned agrees to furnish to the

Company or the Agent, if applicable, upon request, such additional information

as may be deemed necessary to determine the undersigned’s suitability as an

investor.

 

F.                                      This Agreement supersedes all previous

Subscription Agreements by the undersigned and all previous Subscription

Agreements are hereby withdrawn.

 

G.                                     In the event of a party’s default or breach

of this Agreement, the prevailing party in any action to enforce this Agreement

or to recover damages as a result of a breach or default, will be entitled to

recover its reasonable costs and expenses therein, including reasonable

attorneys fees.

 

[NOTE: SIGNATURE PAGES TO FOLLOW]

 

*Multiple

signatures required.

 

11

 

SIGNATURE PAGE

 

 

 

Dated: September     ,

2002.

 

 

	

  /s/

  Andrew J. Redleaf

  	

   

  	

   

  	

   

  
	

  Signature

  	

  Signature

  
	

   

  	

   

  
	

   

  	

   

  
	

  Andrew

  J. Redleaf

  	

   

  	

   

  	

   

  
	

  Name

  Typed or Printed

  	

  Name

  Typed or Printed

  
	

   

  	

   

  
	

   

  	

   

  
	

  1720

  Franklin Avenue West

  	

   

  	

   

  	

   

  
	

  Residence

  Address

  	

  Residence

  Address

  
	

   

  	

   

  
	

   

  	

   

  
	

  Minneapolis,

  MN 55405

  	

   

  	

   

  	

   

  
	

  City,

  State and Zip Code

  	

  City,

  State and Zip Code

  
	

   

  	

   

  
	

   

  	

   

  
	

  3033

  Excelsior Boulevard, Suite 300

  	

   

  	

   

  	

   

  
	

  Mailing

  Address

  	

  Mailing

  Address

  
	

   

  	

   

  
	

   

  	

   

  
	

  Minneapolis,

  MN 55416

  	

   

  	

   

  	

   

  
	

  City,

  State and Zip Code

  	

  City,

  State and Zip Code

  
	

   

  	

   

  
	

   

  	

   

  
	

  ###-##-####

  	

   

  	

   

  	

   

  
	

  Tax

  Identification or Social

  Security Number

  	

  Tax

  Identification or Social

  Security Number

  
					

 

12

 

Acceptance

by the Company

 

Granite City Food &

Brewery Ltd.  hereby accepts the

foregoing Subscription Agreement to the extent of 1,500 shares of Series A

Convertible Preferred Stock and warrants to purchase 47,468 shares of common

stock.

 

	

   

  	

  Granite City Food &

  Brewery Ltd.

  
	

   

  	

   

  
	

   

  	

  By 

  	

   /s/ Steven J. Wagenheim

  	

   

  
	

   

  	

  Steven J. Wagenheim

  
	

   

  	

  Chief Executive Officer

  

 

13Exhibit 10.4

 

THE

SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT

OF 1933, OR APPLICABLE STATE SECURITIES LAW. 

THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE

OFFERED FOR SALE, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ASSIGNED OR  OTHERWISE DISPOSED OF, AND NO TRANSFER OF

THE SECURITIES WILL BE MADE BY THE COMPANY OR ITS TRANSFER AGENT, IN THE

ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY

THAT SUCH REGISTRATION IS NOT REQUIRED.

 

 

GRANITE CITY FOOD

& BREWERY LTD.

 

COMMON STOCK

PURCHASE WARRANT

Warrant No.

2002-         

 

Granite

City Food & Brewery Ltd., a Minnesota corporation (the “Company”), hereby agrees that, for value

received,

                     ,

or his assigns, is entitled, subject to the terms set forth below, to purchase

from the Company at any time or from time to time after the date hereof and

before 5:00 P.M., Central Time, on

                 ,

2007,

                           

(           ) shares of

the common stock of the Company (the “Common

Stock”), at an exercise price of $1.58 per share, subject to

adjustment as provided herein (the “Warrant

Exercise Price”).

 

1.             Exercise

of Warrant.  The purchase

rights granted by this Warrant shall be exercised (in minimum quantities of 100

shares) by the holder surrendering this Warrant with the form of exercise

attached hereto duly executed by such holder, to the Company at its principal

office, accompanied by payment, in cash or by cashier’s check payable to the

order of the Company, of the purchase price payable in respect of the Common

Stock being purchased.  If less than all

of the Common Stock purchasable hereunder is purchased, the Company will, upon

such exercise, execute and deliver to the holder hereof a new Warrant (dated

the date hereof) evidencing the number of shares of Common Stock not so

purchased.  As soon as practicable after

the exercise of this Warrant and payment of the purchase price, the Company

will cause to be issued in the name of and delivered to the holder hereof, or

as such holder may direct, a certificate or certificates representing the

shares purchased upon such exercise. 

The Company may require that such certificate or certificates contain on

the face thereof a legend substantially as follows:

 

“The

transfer of the shares represented by this certificate is restricted pursuant

to the terms of a Common Stock Purchase Warrant dated

                  ,

2002, issued by Granite City Food & Brewery Ltd., a copy of which is

available for inspection at the offices of Granite City Food & Brewery

Ltd.  Transfer may not be made except in

accordance with the terms of the Common Stock Purchase Warrant.  In addition, no sale, offer to sell or

transfer of the shares represented by this certificate shall be made unless a

registration statement under the Securities Act of 1933, as amended, with

respect to such shares is then in effect or an exemption from registration is

then in fact applicable to such shares.”

 

2.             Negotiability

and Transfer.  This Warrant is

issued upon the following terms, to which each holder hereof consents and

agrees:

 

(a)           Until

this Warrant is duly transferred on the books of the Company, the Company may

treat the registered holder of this Warrant as absolute owner hereof for all

purposes without being affected by any notice to the contrary.

 

 

(b)           Each

successive holder of this Warrant, or of any portion of the rights represented

thereby, shall be bound by the terms and conditions set forth herein.

 

3.             Antidilution

Adjustments.

 

(a)           The Warrant Exercise Price shall be

subject to adjustment from time to time as hereinafter provided.  Upon each adjustment of the Warrant Exercise

Price the holder of this Warrant shall thereafter be entitled to purchase the

number of shares of Common Stock of the Company obtained by multiplying the

Warrant Exercise Price in effect immediately prior to such adjustment by the

number of shares issuable pursuant to exercise immediately prior to such

adjustment and dividing the product thereof by the Warrant Exercise Price

resulting from such adjustment.

 

(b)           Except for (i) options, warrants or

other rights to purchase securities outstanding on the date of the issuance of

this Warrant (provided there is no adjustment to the terms of such options,

warrants or other securities on or after the date of issuance of this Warrant);

(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 Company 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 this Warrant) (appropriately adjusted to reflect stock splits,

combinations, stock dividends, reorganizations, consolidations and similar

changes); or (iii) Common Stock issued to holders of the Company’s Series A

Convertible Preferred Stock or upon conversion or in lieu of cash dividends on

the Company’s Series A Convertible Preferred Stock, if and whenever the Company

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 Warrant Exercise Price in effect

immediately prior to the time of such issue or sale, then, forthwith upon such

issue or sale, the Warrant Exercise Price shall be adjusted to a price

determined by multiplying such Warrant Exercise Price by a fraction, the

numerator of which shall be the number of shares of Common Stock outstanding

immediately prior to such issuance plus the number of shares of Common Stock

that the aggregate consideration received by the Company for such issuance

would purchase at such Warrant Exercise 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 this Warrant and any other

outstanding warrants, options or other rights for the purchase of shares of

stock or Convertible Securities had been fully exercised as of such date.  Except as provided in Section 3(e)

below, no further adjustments of the Warrant Exercise 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.

 

(c)           For purposes of this Section 3,

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 cash, the consideration received therefor shall be deemed to

be the amount received by the Company therefor, without deducting therefrom any

expenses incurred or any underwriting commissions, discounts or concessions

paid or allowed by the Company 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 Company shall be deemed to be the fair value of such consideration as

determined by the Board of Directors of the Company, without deducting

therefrom any expenses incurred or any underwriting commissions, discounts or

concessions paid or allowed by the Company in connection therewith.  In case any shares of Common Stock or

Convertible Securities or any rights or options to purchase such Common Stock

 

2

 

or Convertible Securities

shall be issued in connection with any merger or consolidation in which the

Company 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 Company 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 Company in which the Company is not the surviving corporation

or in the event of any sale of all or substantially all of the assets of the

Company for stock or other securities of any other corporation, the Company

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 Warrant Exercise Price, the determination of the number of

shares of Common Stock issuable upon exercise immediately prior to such merger,

conversion or sale, for purposes of Section 3(f) below, shall be made

after giving effect to such adjustment of the Warrant Exercise Price.

 

(d)           In case the Company shall at any time

subdivide its outstanding shares of Common Stock into a greater number of

shares, the Warrant Exercise Price in effect immediately prior to such

subdivision shall be proportionately reduced, and conversely, in case the

outstanding shares of Common Stock of the Company shall be combined into a

smaller number of shares, the Warrant Exercise Price in effect immediately

prior to such combination shall be proportionately increased.

 

(e)           If (i) the purchase price provided

for in any right or option referred to in Section 3(b), 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), or any Convertible Securities shall terminate, expire or cease to be

outstanding without exercise thereof, the Warrant Exercise Price then in effect

hereunder shall forthwith be increased or decreased to such Warrant Exercise

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

(a) 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 (b) 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 Company 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 Warrant Exercise Price then in effect

hereunder shall forthwith be increased to such Warrant Exercise 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 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 3(b), or the rate at which any

Convertible Securities referred to in Section 3(b) 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 Security, the

Warrant Exercise Price then in effect hereunder shall forthwith be decreased to

such Warrant Exercise Price as would have applied had the adjustments made upon

the issuance of such right, option or Convertible Security been made upon the

basis of the issuance of (and the total consideration received for) the shares

of Common Stock delivered as aforesaid.

 

3

 

(f)            If any capital reorganization or

reclassification of the capital stock of the Company, or consolidation or

merger of the Company 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 holder of this Warrant 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 Company immediately theretofore receivable upon the

exercise of this Warrant, 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 exercise of this Warrant had such

reorganization, reclassification, consolidation, merger or sale not taken

place, and in any such case appropriate provision shall be made with respect to

the rights and interests of the holder of this Warrant to the end that the

provisions hereof (including without limitation provisions for adjustments of

the Warrant Exercise Price and of the number of shares receivable upon the

exercise hereof) shall thereafter be applicable, as nearly as may be in

relation to any shares of stock, securities or assets thereafter receivable

upon the exercise of this Warrant.  The

Company shall not effect any such consolidation, merger or sale, unless prior

to the consummation thereof the successor corporation (if other than the

Company) resulting from such consolidation or merger or the corporation

purchasing such assets shall assume by written instrument executed and mailed

to the registered holder of this Warrant, at the last address of such holder

appearing on the books of the Company, the obligation to deliver to such holder

such shares of stock, securities or assets as, in accordance with the foregoing

provisions, such holder may be entitled to receive.

 

(g)           Upon any adjustment of the Warrant

Exercise Price, the Company shall give written notice thereof, by first-class

mail, postage prepaid, addressed to the registered holder of this Warrant, as

shown on the books of the Company, which notice shall state the Warrant Exercise

Price resulting from such adjustment and the increase or decrease, if any, in

the number of shares purchasable at such price upon the exercise of this

Warrant, setting forth in reasonable detail the method of calculation and the

facts upon which such calculation is based. 

No adjustment to the Warrant Exercise Price shall be required unless

such adjustment would require an increase or decrease of at least five cents

($0.05); provided, however, that any adjustments which by reason of this

Section 3(g) 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 3 (other than this Section 3(g)) 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 3 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 3 to the

contrary notwithstanding, the Company shall be entitled to make such increases

in the conversion rate in addition to those required by this Section 3 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 Company to its stockholders shall not be taxable.

 

(h)           In case at any time: (i) there shall

be any capital reorganization, or reclassification of the capital stock of the

Company, or consolidation or merger of the Company 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

Company; then, in any one or more of said cases, the Company shall give written

notice, by first-class mail, postage prepaid, addressed to the registered

holder of this Warrant at the address of such holder as shown on the books of

the Company, of the date on which (a) the books of the Company shall close

or a record shall be taken for such dividend, distribution or subscription

rights, or (b) such reorganization, reclassification, consolidation, merger,

sale, dissolution, liquidation or winding up shall take place, as the case may

be.  Such notice shall also

 

4

 

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 Company’s transfer books are closed in

respect thereto.

 

(i)            If any event occurs as to which in

the opinion of the Board of Directors of the Company the other provisions of

this Section 3 are not strictly applicable or if strictly applicable would

not fairly protect the rights of the holder of this Warrant 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.

 

(j)            As used in this Section 3 the

term “Common Stock” shall mean and include the Company’s presently authorized

Common Stock and any additional Common Stock that may be authorized by due

action of the Company’s Board of Directors and shareholders entitled to vote

thereon.

 

(k)           No fractional shares of Common Stock

shall be issued upon exercise, but, instead of any fraction of a share which

would otherwise be issuable, the Company 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

exercise.  “Market price” shall mean 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.  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 “market price”

shall be deemed to be the higher of (i) the book value thereof as

determined by any firm of independent public accountants of recognized standing

selected by the Board of Directors of the Company 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 (ii) the fair value thereof determined in

good faith by the Board of Directors of the Company as of a date which is

within fifteen (15) days of the date as of which the determination is to be

made.

 

4.             Transferability;

Registration Rights.  Prior to

making any disposition of the Warrant or of any Common Stock purchased upon

exercise of the Warrant, the holder will give written notice to the Company

describing briefly the manner of any such proposed disposition.  The holder will not make any such

disposition until (i) the Company has notified the holder that, in the opinion

of its counsel, registration under the Act is not required with respect to such

disposition, or (ii) a registration statement covering the proposed

distribution has been filed by the Company and has become effective.  The holder then will make any disposition

only pursuant to the conditions of such opinion or registration.  The Company agrees that, upon receipt of written

notice from the holder hereof with respect to such proposed distribution, it

will use its best efforts, in consultation with the holder’s counsel, to

ascertain as promptly as possible whether or not registration is required, and

will advise the holder promptly with respect thereto, and the holder will

cooperate in providing the Company with information necessary to make such

determination.  If a state and federal

registration of the Common Stock purchased upon exercise of the Warrant is not

in effect such that the Common Stock purchased upon exercise of the Warrant is

not freely transferable by the holder of the Warrant or, in the absence of such

an effective state and federal registration, if an exemption from state and

federal registration of the exercising of the Warrant and sale of the Common

Stock is not available during the term of this Warrant when the holder of the

Warrant seeks to exercise the Warrant and sell the

 

5

 

Common

Stock so acquired, the exercise period of the Warrant will automatically be

extended until such time as either state and federal registration of the Common

Stock purchased upon exercise of the Warrant becomes effective and applicable

to the holder of the Warrant or an exemption for the exercise of the Warrant

and sale of the Common Stock by the holder, in the absence of such an effective

state and federal registration, is available to the holder of the Warrant, and,

if so extended, the Warrant shall then remain exercisable for a period of at

least thirty (30) calendar days from the date the Company delivers to the

holder of the Warrant written notice of the availability of such state and

federal registration or exemption from such registration.  In no event will the exercise period of the

Warrant expire before

                    ,

2007.

 

The

holder of this Warrant is entitled to the registration rights specified in the

Subscription Agreement for the Company’s Series A Convertible Preferred Stock.

 

5.             Cashless

Exercise Option.

 

(a)           The

holder of this Warrant shall have the right to require the Company to convert

this Warrant (the “Conversion Right”),

at any time after it is exercisable, but prior to its expiration, into shares

of Common Stock as provided for in this Section 5.  Upon exercise of the Conversion Right, the

Company shall deliver to the holder (without payment by the holder of any

exercise price) that number of shares of Common Stock equal to the quotient

obtained by dividing (x) the value of the Warrant at the time the Conversion

Right is exercised (determined by subtracting the aggregate exercise price for

the Warrant in effect immediately prior to the exercise of the Conversion Right

from the aggregate Fair Market Value (as determined below) for the Warrant

immediately prior to the exercise of the Conversion Right) by (y) the Fair

Market Value of one share of Common Stock immediately prior to the exercise of

the Conversion Right.  No fractional

shares shall be issuable upon exercise of the Conversion Right, and if the

number of shares to be issued in accordance with the foregoing formula is other

than a whole number, the Company shall pay to the holder of this Warrant an

amount in cash equal to the fair market value of the resulting fractional

share.

 

(b)           The

Conversion Right may be exercised by the holder, at any time or from time to

time after this Warrant is exercisable, prior to its expiration, on any

business day, by delivering a written notice in the form attached hereto (the “Conversion Notice”) to the Company at the

offices of the Company exercising the Conversion Right and specifying (i) the

total number of shares of Stock the holder of this Warrant will purchase

pursuant to such conversion, and (ii) a place, and a date not less than one (1)

nor more than twenty (20) business days from the date of the Conversion Notice

for the closing of such purchase.

 

(c)           At

any closing under Section 5(b) hereof, (i) the holder will surrender the

Warrant, (ii) the Company will deliver to the holder a certificate or

certificates for the number of shares of Common Stock issuable upon such

conversion, together with cash in lieu of any fraction of a share, and (iii)

the Company will deliver to the holder a new Warrant representing the number of

shares, if any, with respect to which the Warrant shall not have been

converted.

 

(d)           “Fair Market Value” of a share of Common Stock

as of a particular date (the “Determination

Date”) shall mean:

 

(i)            If

the Company’s Common Stock is traded on an exchange or is quoted on The

National Association of Securities Dealers, Inc. Automated Quotation (“Nasdaq”) National Market, or The Nasdaq

SmallCap Market, then the average closing or last sale prices, respectively,

reported for the ten (10) business days immediately preceding the Determination

Date.

 

6

 

(ii)           If the Company’s Common Stock is not traded on an exchange

or on The Nasdaq National Market, or The Nasdaq SmallCap Market, but is traded

in the over-the-counter market, then the average of the closing bid and asked

prices reported for the ten (10) business days immediately preceding the

Determination Date.

 

(iii)          If the Company’s Common Stock is not publicly traded and

there has been a bona fide sale for cash on an arm’s-length basis within 45

days prior to the Determination Date of such Common Stock by the Company

privately to one or more investors unaffiliated with the Company (a “Qualifying

Sale”), then the most recent such sales price.

 

(iv)          If the Company’s Common Stock is not publicly traded and

there has been no Qualifying Sale, then the appraised fair market value of such

stock, as determined by mutual agreement of the Company and the holder of the

Warrant; or if the parties cannot agree to such valuation, then the Board of

Directors, acting in good faith, shall determine the Fair Market Value.

 

6.             Redemption.  Upon the occurrence of an event that gives

rise to an Automatic Conversion of the Company’s Series A Convertible Preferred

Stock as provided in the Certificate of Designation for the Company’s Series A

Convertible Preferred Stock, the Company may redeem this Warrant, upon not less

than 20 days’ prior written notice, at the redemption price of $0.01 per

Warrant.

 

7.             Notices.  The Company shall mail to the registered

holder of the Warrant, at his last known post office address appearing on the

books of the Company, not less than fifteen (15) days prior to the date on

which (a) a record will be taken for the purpose of determining the holders of

Common Stock entitled to dividends (other than cash dividends) or subscription

rights, or (b) a record will be taken (or in lieu thereof, the transfer books

will be closed) for the purpose of determining the holders of Common Stock

entitled to notice of and to vote at a meeting of stockholders at which any

capital reorganization, reclassification of shares of Common Stock,

consolidation, merger, dissolution, liquidation, winding up or sale of

substantially all of the Company’s assets shall be considered and acted upon.

 

8.             Reservation

of Common Stock.  A number of

shares of Common Stock sufficient to provide for the exercise of the Warrant

upon the basis herein set forth shall at all times be reserved for the exercise

thereof.

 

9.             Miscellaneous.  Whenever reference is made herein to the

issue or sale of shares of Common Stock, the term “Common Stock” shall include any stock of any class of the

Company other than preferred stock with a fixed limit on dividends and a fixed

amount payable in the event of any voluntary or involuntary liquidation,

dissolution or winding up of the Company.

 

The

Company will not, by amendment of its Articles of Incorporation or through

reorganization, consolidation, merger, dissolution or sale of assets, or by any

other voluntary act or deed, avoid or seek to avoid the observance or

performance of any of the covenants, stipulations or conditions to be observed

or performed hereunder by the Company, but will, at all times in good faith,

assist, insofar as it is able, in the carrying out of all provisions hereof and

in the taking of all other action which may be necessary in order to protect

the rights of the holder hereof against dilution.

 

Upon

written request of the holder of this Warrant, the Company will promptly

provide such holder with a then current written list of the names and addresses

of all holders of warrants originally issued under the terms of, and concurrent

with, this Warrant.

 

7

 

The representations, warranties and

agreements herein contained shall survive the exercise of this Warrant.  References to the “holder of” include the

immediate holder of shares purchased on the exercise of this Warrant, and the

word “holder” shall include the plural thereof.  This Common Stock Purchase Warrant shall be interpreted under the

laws of the State of Minnesota.

 

All

shares of Common Stock or other securities issued upon the exercise of the

Warrant shall be validly issued, fully paid and non-assessable.

 

Notwithstanding

anything contained herein to the contrary, the holder of this Warrant shall not

be deemed a stockholder (including, no right to vote on any matters coming

before the shareholders) of the Company for any purpose whatsoever until and

unless this Warrant is duly exercised.

 

IN WITNESS

WHEREOF, this Warrant has been duly executed by Granite City Food

& Brewery Ltd., this          

day of

                  ,

2002.

 

	

   

  	

  GRANITE CITY FOOD & BREWERY LTD.

  
	

   

  	

   

  
	

   

  	

  By:

  	

   

  	

   

  
	

   

  	

  Name: Steven J. Wagenheim

  
	

   

  	

  Title: President and Chief Executive Officer

  

 

8

 

WARRANT EXERCISE

FORM

 

To be signed only upon

exercise of Warrant.

 

The undersigned, the holder

of the within Warrant, hereby irrevocably elects to exercise the purchase right

represented by such Warrant for, and to purchase thereunder,

                       

of the shares of Common Stock of Granite City Food & Brewery Ltd. to which

such Warrant relates and herewith makes payment of $                  

therefor in cash or by certified check, and requests that such shares be issued

and be delivered to

                                          ,

the address for which is set forth below the signature of the undersigned.

 

	

  Dated:

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

  (Taxpayer’s I.D. Number)

  	

   

  	

  (Signature)

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  (Address)

  
						

 

9

 

ASSIGNMENT

FORM

 

To be signed only upon

authorized transfer of Warrant.

 

FOR VALUE RECEIVED, the

undersigned hereby sells, assigns, and transfers unto

                                                       

the right to purchase shares of Common Stock of Granite City Food & Brewery

Ltd. to which the within Warrant relates and appoints

                                               ,

attorney, to transfer said right on the books of Granite City Food &

Brewery Ltd. with full power of substitution in the premises.

 

	

  Dated:

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

  (Signature)

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

  (Address)

  

 

10

 

CASHLESS

EXERCISE FORM

 

(To be executed upon

exercise of Warrant pursuant to Section 5)

 

To:   Granite City Food & Brewery Ltd.

 

The undersigned hereby

irrevocably elects a cashless exercise of the right of purchase represented by

the within Common Stock Purchase Warrant for, and to purchase thereunder,

                           

shares of Common Stock, as provided for in Section 5 therein.

 

If said number of shares

shall not be all the shares purchasable under the within Common Stock Purchase

Warrant, a new Warrant is to be issued in the name of said undersigned for the

balance remaining of the shares purchasable thereunder rounded up to the next

higher number of shares.

 

Please issue a certificate

or certificates for such Common Stock in the name of, and pay any cash for any

fractional shares to:

 

	

  NAME

  	

   

  
	

   

  	

  (Please Print

  Name)

  
	

   

  	

   

  
	

  ADDRESS

  	

   

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

   

  
	

  SOCIAL SECURITY NO.

  	

   

  
	

   

  	

   

  
	

  SIGNATURE

  	

   

  
			

 

 

	

   

  	

  NOTE:  The above signature should correspond

  exactly with the name on the first page of this Common Stock Purchase Warrant

  or with the name of the assignee appearing in the assignment form on the

  preceding page.

  

 

11

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