Granite City Food & Brewery (GCFB)

Amendment to Bridge Loan Agreement.

Effective December 16, 2009, Granite City Food & Brewery Ltd. (the “Company”) entered into an amendment to the bridge loan agreement dated March 30, 2009 with investors named therein.  The bridge loan agreement originally provided for $1,000,000 of partially convertible debt financing for the Company, and was described on the Company’s Current Report on Form 8-K filed April 3, 2009, which is incorporated herein by reference.  The Company closed on $800,000 of the debt.  The closing date on the remainder of the amount committed was extended by reason of successive amendments through December 16, 2009.  The December 16, 2009 amendment provides, among other things, that the amount loaned under the bridge loan agreement will be decreased to $800,000 from $1,000,000.  Under the existing agreement, indebtedness under the bridge loan agreement was to be repaid in six (6) monthly installments, commencing in April 2010.  Pursuant to the amendment, payment of principal and interest are restructured as follows:

(a)  The principal amount outstanding under the loans shall be payable as follows:  (i) six installments of Nine Thousand Dollars ($9,000.00) each shall be payable on January 1, 2010, and on the first day of each month thereafter including June 1, 2010; (ii) the remaining principal amount outstanding shall be payable in twelve (12) equal monthly installments commencing on January 1, 2011 and on the first day of each month thereafter, with the final installment of any unpaid principal due on December 1, 2011.

(b)  Interest accrued shall be treated as follows:  (i) accrued and unpaid interest shall be added to the principal amount outstanding under the loans on July 1, 2009, October 1, 2009 and January 1, 2010; (ii) accrued interest shall be payable quarterly in arrears on April 1, 2010, October 1, 2010 and January 1, 2011; and (iii) accrued interest shall be payable monthly in arrears commencing on February 1, 2011 and on the first day of each month thereafter; with a final payment of any accrued and unpaid interest due on December 1, 2011 with the final payment of principal.

Amendment No. 7 is attached to this Form 8-K as Exhibit 10.1 and is incorporated herein by reference.

ITEM 1.01             ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.

Second Closing on Bridge Loan Extended.

Effective October 31, 2009, Granite City Food & Brewery Ltd. (the “Company”) entered into an amendment to the bridge loan agreement dated March 30, 2009 with the investors therein (the “Amendment No. 6”) to extend the time period for the closing of the $200,000 balance on the loan to December 16, 2009.  The bridge loan provided for $1,000,000 of partially convertible debt financing to the Company, and was described in the Company’s Current Report on Form 8-K filed April 3, 2009, which is incorporated herein by reference.  The Company has closed on $800,000 of the debt.  The time period for the second closing was previously extended to October 31, as reported on the Company’s Current Report on Form 8-K filed October 6, 2009.  Amendment No. 6 is attached as Exhibit 10.1 hereto and incorporated herein by reference.

ITEM 1.01             ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.

Second Closing on Bridge Loan Extended.

Effective April 30, 2009, Granite City Food & Brewery Ltd. (the “Company”) entered into an amendment to the bridge loan agreement dated March 30, 2009 with the investors therein (the “Amendment No. 2”).  The bridge loan provided for $1,000,000 of partially convertible debt financing to the Company, and was described in the Company’s Current Report on Form 8-K filed April 3, 2009, which is incorporated herein by reference.  The Company has closed on $800,000 of the debt.  Amendment No. 2 extends the time period for the closing of the $200,000 balance on the loan from the end of April 2009 to the end of May 2009. Amendment No. 2 is attached as Exhibit 10.1 hereto and incorporated herein by reference.

ITEM 1.01             ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.

Company Enters into Agreement for $1,000,000 Bridge Loan.

On March 30, 2009, Granite City Food & Brewery Ltd. (the “Company”) entered into a bridge loan agreement with a group of accredited investors to provide $1,000,000 of partially convertible debt financing.  The bridge loan is evidenced by notes bearing interest at 9% per annum, payable in six equal monthly installments commencing on May 1, 2010 and due in full on October 1, 2010.  The net proceeds of the bridge loan will be used for working capital purposes.  The bridge loan was funded to the extent of $800,000 on March 30, 2009, with the balance of the bridge loan to be funded by the end of April 2009.

The lead investors in the transaction were Harmony Equity Income Fund, L.L.C. and Harmony Equity Income Fund II, L.L.C.  The Company’s Chairman, Eugene E. McGowan, is a member of, and has a beneficial interest in, both of the Harmony funds.  The transaction was approved by the Company’s Audit Committee as a transaction with a related person.

The notes are secured by a mortgage against the lease, and security agreements against personal property and intangibles relating to the Company’s Sioux Falls, South Dakota restaurant, including a grant of the rights to use patents, trademarks and other intangibles associated with that restaurant.  The Company’s Board of Directors has authorized it to borrow up to an aggregate of $3,000,000 under the terms of the bridge loan agreement, which provides that the investors may, but are not obligated to, make additional loans on substantially the same terms and conditions, including a similar pledge of collateral related to either its St. Cloud, Minnesota, or Fargo, North Dakota restaurants.

The notes may be prepaid upon 30 days prior notice without premium or penalty.  The notes must also be paid if the Company receives $4,000,000 or more of proceeds from the sale of equity securities or securities convertible into equity securities.  The notes must also be repaid in the event the Company defaults under the terms and conditions of the bridge loan, including the financial covenants set forth therein.  Such covenants include maintaining minimum operating income before interest, taxes, depreciation and amortization from the Sioux Falls, South Dakota restaurant operations, and minimum consolidated revenue of the Company, as provided in the bridge loan agreement.  These covenants were negotiated with the investor solely for purposes of the bridge loan and should not be considered statements of management’s expectations or estimates of results or other guidance.  The Company has also agreed to (1) limitations on its ability to create liens against its property, other than in the ordinary course of business, (2) limitations on liens against the Sioux Falls, South Dakota restaurant which serves as collateral for the loan and (3) limitations on certain investments and indebtedness.  The bridge loan provides for customary events of default which would give the investors the right to accelerate the Company’s indebtedness under the notes, including an adverse event affecting the Sioux Falls, South Dakota restaurant.

Up to 20% of each bridge note may be converted into common stock at a conversion price equal to $0.50 per share.  In addition, the Company will issue to the investors warrants for the purchase of an aggregate of 400,000 shares of common stock exercisable six months after date of issuance at a price of  $0.25267 per share, or 110% of the closing price of the Company’s stock on March 30, 2009.  The notes and the warrants provide customary anti-dilution rights to the holders, including weighted average anti-dilution provisions for sales at less than the exercise or conversion prices thereof.  The Company has also agreed that if it proposes to issue new securities in excess of 1% of its outstanding shares prior to May 1, 2010, subject to the exceptions noted below, it will give the investors the right to purchase up to that portion of the new securities which equals the proportion of the number of securities purchasable upon conversion of notes and exercise of the warrants relative to the Company’s outstanding stock as of March 30, 2009.  The participation right is not applicable to certain categories of issuances, such as shares issuable pursuant to public offerings, mergers and acquisitions and options, warrants and other rights to

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ITEM 1.01             ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.

On February 7, 2009, Granite City Food & Brewery Ltd. (the “Company”) entered into a master agreement with Dunham Capital Management, L.L.C. (“DCM”), the Company’s principal developer and landlord; DHW Leasing, L.L.C. (“DHW”) and Dunham Equity Management, L.L.C. (collectively, the “Dunham Entities”) to provide rent or other cash flow reductions to the Company in the amount of $2,500,000 for the calendar year 2009 and $1,500,000 for calendar year 2010 (the “Master Agreement”).

DCM has an ownership interest in 16 of the Company’s 26 operating restaurant properties.  DHW is a financing entity that previously provided the Company with an Equipment Lease Commitment relating to the lease of furniture, fixtures and equipment for certain current and future restaurants of up to $16 million.  The Company obtained a final draw of $1.0 million under the DHW Equipment Lease Commitment concurrent with its entry into the Master Agreement.  DHW has agreed to amend and restate the Equipment Lease Commitment to reflect negotiated rent reductions on such financing leases.

DCM is controlled by Donald A. Dunham, Jr., who is a member of DHW and an affiliate of Granite Partners LLC, a beneficial owner of approximately one percent of the Company’s securities.  The other two members of DHW are Charles J. Hey and Steven J. Wagenheim.  Mr. Wagenheim is the Company’s President, Chief Executive Officer, one of its directors and the beneficial owner of approximately 9.5% of its common stock.  Mr. Wagenheim owns a 20% membership interest in DHW and has agreed to personally guarantee 20% of DHW’s indebtedness to its lenders.

The rent reductions are from the following areas:

·                                          reductions from leases where a Dunham Entity is either a landlord or sublandlord;

·                                          reductions from financing leases;

·                                          reductions in rent derived by Dunham Entities from ground lease landlords; and

·                                          reductions from landlords of non-Dunham controlled properties.

The Master Agreement also provides that the Dunham Entities will amend and restate applicable leases and subleases with the Company to reflect negotiated rent reductions.  The Company commenced paying reduced rent in January 2009 in anticipation of finalizing the Master Agreement, which amount will become a part of the negotiated rent reductions.

DCM has agreed to use reasonable efforts to secure rent reductions from all of its current ground lease landlords, which rent reductions will be considered a part of the overall rent reductions which the Dunham Entities have agreed to provide.

As a part of the Master Agreement, DCM has agreed to amend its leases with the Company that are currently treated as capital leases for accounting purposes by reducing their terms to periods which will thereafter qualify the leases to be treated as operating leases in accordance with generally accepted accounting principles.  Each lease will be modified for a term of not less than 10 years and will provide that the tenant will have three consecutive options to extend the leases for five years per extension.

In consideration of the agreements of DCM provided in the Master Agreement, the Company has issued to the Dunham Entities a warrant to purchase 1,000,000 shares of common stock of the Company at

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Item 1.01 Entry into a Material Definitive Agreement.

Amendment to Stock Purchase Agreement

As previously reported, on December 6, 2007, we entered into an Equipment Lease Commitment with DHW Leasing, L.L.C. ("DHW"), relating to the lease of furniture, fixtures and equipment for restaurants. In connection with the DHW financing, we also entered into an amendment to our Stock Purchase Agreement dated March 8, 2007 ("Amendment No. 1") with investors who purchased a majority of our securities sold pursuant thereto, including William Blair Small Cap Growth Fund; Booth & Co FFC Hartman Retirement Income Trust; Booth & Co FFC Rush University Medical Center Endowment Account; Booth & Co FFC Rush University Medical Center Pension & Retirement; Calhoun & Co FFC City of Dearborn General Employees Retirement System; Calhoun & Co FFC City of Dearborn Policemen & Firemen Revised Retirement Systems; and Mac & Co. Amendment No. 1 permits the Company to enter into a financing transaction with DHW, which was prohibited under the Stock Purchase Agreement.
Effective December 14, 2007, we amended Amendment No. 1 to conform to the terms of the leasing facility that was entered into between our company and DHW. The revised amendment, which supersedes Amendment No. 1, is attached hereto as Exhibit 10.1 and is incorporated by reference in response to this Item 1.01.

ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.

On March 8, 2007, we entered into a Stock Purchase Agreement with accredited investors for the sale of $14,002,737 of common stock.  Under this agreement, the investors will purchase 2,617,334 shares of common stock at a price of $5.35 per share.

In connection with the Stock Purchase Agreement, we granted the investors a 12-month right of participation in subsequent financings.

We also agreed, within two business days of the closing date, to repay in full all of our outstanding obligations under our Master Equipment Finance Lease and Equipment Lease Commitment with DHW Leasing, L.L.C. (“DHW”), dated September 19, 2006 (the “DHW Agreement”).  We also agreed, following the repayment in full of our obligations thereunder, not to pay or enter into any agreement to pay or benefit any executive officer, director or 5% shareholder, or any entity affiliated with or controlled by such person (an “Interested Party”) in respect to any goods or services, financial service, loan, guaranty (other than guaranties of our debt), real estate or lease transaction, construction, construction financing or other transaction or service directly or indirectly provided by such Interested Party, or in which such Interested Party is financially interested (collectively, an “Interested Party Transaction”).  The foregoing covenant does not apply to payments or agreements which are compensatory in nature in respect to services provided to our company by our executive officers or directors.  The foregoing covenant does, however, apply to the DHW Agreement and the transactions contemplated thereby so long as any Interested Party, including Steven J. Wagenheim, holds a membership interest in DHW or guaranties any debt of DHW to its lenders.  Mr. Wagenheim presently holds a 20% membership interest in DHW.

We agreed to register for resale the shares of common stock to be issued in this transaction.  If a registration statement is not filed on or before May 7, 2007, or a registration statement is not declared effective on or prior to a required effectiveness date, we have agreed to pay each holder an amount as liquidated damages equal to 1/30 of 1% of the aggregate investment amount then held by the holder of the shares purchased pursuant to the Stock Purchase Agreement for each day of our failure to effect such registration.

In connection with this transaction, we will be required to pay our placement agents an aggregate commission equal to 7.5 percent of the gross proceeds raised and to reimburse our placement agents for expenses of up to a maximum $152,500.

The foregoing description is qualified in its entirety by reference to the Stock Purchase Agreement which appears as Exhibit 10 hereto.

ITEM 1.01             ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.

Compensation Arrangement with Steven J. Wagenheim

On February 22, 2006, the Compensation Committee of the Board of Directors authorized (1) a $25,000 merit bonus to Steven J. Wagenheim, our President, Chief Executive Officer and one of our directors, based on his performance during 2005, and (2) a 2006 CEO Compensation Plan under our Executive Employment Agreement with Mr. Wagenheim dated June 15, 2005.

The 2006 CEO Compensation Plan provides for a base salary of $275,000, commencing January 1, 2006.  Any salary increase for 2007 will be reviewed by the Committee, which will assess officer and company performance, in December 2006 with any future increase to be effective April 1, 2007.

The 2006 CEO Compensation Plan establishes performance metrics for incentive cash compensation based on our annual business plan, whereby the amount of achievement against each objective will determine the level of incentive cash compensation for 2006.  Such metrics are divided into four categories:  (1) sales/revenue, (2) income from restaurant operations, (3) general and administrative expense control, and (4) earnings per share.  Depending upon performance, Mr. Wagenheim’s cash incentive compensation for 2006 would range from $0 for performance that achieved substantially less than target performance on all measures, to $120,000 for performance that achieved 100% of target performance on all measures, to $167,400 for performance that achieved substantially more than target performance on all measures.  Mr. Wagenheim’s performance will be assessed pursuant to the foregoing measures on a quarterly basis.  Half of any incentive cash compensation earned will be paid quarterly and the remaining half of any incentive cash compensation will be paid at year end, following a performance versus plan reconciliation.  Incentive cash compensation for 2007 will be reviewed by the Committee at a later date as the annual business plan is approved by the Board of Directors.

The Committee also authorized the issuance of a non-qualified stock option for the purchase of 100,000 shares of common stock to Mr. Wagenheim pursuant to the terms of our 2002 Equity Incentive Plan.  The option vests in full on December 31, 2006.  The option is exercisable at $4.23 per share, which was the closing price of our common stock on Nasdaq on February 22, 2006.  The option expires on February 22, 2016.  The Committee will consider a stock option award for 2007 at a later date.  The form of option agreement has been previously filed with the SEC.

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On October 21, 2005, we entered into a Securities Purchase Agreement with certain accredited investors, including Solstice Investment Partners LP, for the sale of approximately $5.34 million of common stock and warrants.  Under this agreement, the investors will purchase 1,108,844 shares of common stock at a price of $4.8165 per share.  Each investor will also receive a five-year warrant to purchase one share of common stock at an exercise price of $6.50 per share, subject to certain anti-dilution adjustments, for every five shares of common stock purchased.  After the second anniversary of the closing, we may call for the mandatory exercise of such warrants if the average closing price of our common stock for any 30 consecutive trading days is greater than or equal to $10.00.  Investors in this placement have rights that provide them the opportunity to participate in future financings for a period of two years.

We agreed to register for resale all shares of common stock to be issued in this transaction and all shares of common stock issuable upon exercise of warrants to be issued in this transaction.  If a registration statement is not filed on or before its filing date, or a registration statement is not declared effective on or prior to a required effectiveness date, or after its effective date, a registration statement ceases to be effective for more than an aggregate of 20 trading days in any 12-month period, we have agreed to pay each holder an amount as liquidated damages equal to 1.0% of the aggregate investment amount then held by the holder of the shares purchased pursuant to the Securities Purchase Agreement and on each monthly anniversary of our failure to effect such registration.

In connection with this transaction, we will be required to pay our placement agent and any sub-agents a commission equal to 5 percent of the gross proceeds raised by such agent, and to issue such agents a warrant for the purchase of 5 percent of the shares sold by such agent in the transaction (excluding shares issuable upon exercise of warrants) on the same terms and conditions as the investor warrants.  We agreed to reimburse our placement agent for accountable expenses not to exceed $50,000 and to reimburse the lead investor for $25,000 in expenses.

The foregoing description is qualified in its entirety by reference to the Securities Purchase Agreement which appears as Exhibit 10 hereto.

ITEM 1.01             ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT

Employment Agreement with Daniel Bauer

On August 17, 2005, we entered into an at-will employment agreement with Daniel H. Bauer that provides for Mr. Bauer to serve as our Chief Financial Officer, commencing September 13, 2005.  The agreement provides for a minimum base salary of $215,000 per year.  Mr. Bauer will also be eligible to participate in any performance-based cash bonus or equity award plan for senior officers of our company based upon achievement of individual and/or company goals established with respect to each fiscal year by the board or compensation committee.  The extent of Mr. Bauer’s participation in bonus plans is within the discretion of the board or compensation committee provided, however, that for fiscal years 2005 and 2006, Mr. Bauer will be eligible to receive an annual cash bonus of up to $75,000 based upon performance targets that are established by the compensation committee.  Annual performance metrics that may be established by the committee may include, but not be limited to, objective performance criteria such as revenue, IROP, G&A, opening expenses, operating weeks and EBITDA, as well as achievement of individual performance goals.  The annual cash bonus will be pro-rated for 2005.  We have agreed to pay Mr. Bauer’s reasonable housing and commuting expenses for a period of the three months and Mr. Bauer’s moving expenses in the amount of $20,000.

The employment agreement provides that a severance payment equal to 12 months of base salary (and a pro-rata portion of any bonus earned as of the date of termination) will be made if Mr. Bauer’s employment is terminated in connection with a change of control, by our company without cause, or by the officer for good reason, including, but not limited to, a reduction of the officer’s compensation; a reduction of authority and responsibility; a relocation of place of employment; a breach of the employment arrangement by our company; or, following a change of control, Steven J. Wagenheim, our current chief executive officer, ceases to serve in such capacity.  In addition to the foregoing severance payments, we have agreed to pay or reimburse Mr. Bauer for medical (COBRA) benefits for the period covered by the severance payments.  In addition, Mr. Bauer has agreed to certain nondisclosure provisions during the term of his employment and any time thereafter, and certain noninterference and nonrecruitment provisions during the term of his employment and for a period of two years thereafter.

We also authorized the issuance of a non-qualified stock option for the purchase of 175,000 shares of common stock to Mr. Bauer pursuant to the terms of our 2002 Equity Incentive Plan.  The option vests to the extent of 75,000 shares on the date of commencement of employment, 50,000 shares upon the first anniversary of the date of employment, and 50,000 shares upon the second anniversary of employment.  The option is exercisable at $5.00 per share, which was the closing price of our common stock on Nasdaq on August 17, 2005.  The option expires on August 17, 2015.

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Employment Agreement with Steven J. Wagenheim

As previously disclosed, on March 15, 2005, the Compensation Committee of the Board of Directors authorized a three-year employment and compensation arrangement with Steven J. Wagenheim, our President and Chief Executive Officer.  This arrangement, the principal terms and conditions of which were previously disclosed, has been documented in the form of an executive employment agreement with Mr. Wagenheim, dated June 15, 2005.

This report is being amended to present such executive employment agreement as an exhibit.

ITEM 1.01             ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.

Compensation Arrangement with Steven J. Wagenheim

On March 15, 2005, the Compensation Committee of the Board of Directors authorized a three-year employment and compensation arrangement with Steven J. Wagenheim, our President and Chief Executive Officer.

The arrangement provides for a minimum base salary of $225,000, commencing January 1, 2005.  Base salary increases, if any, for 2006 and 2007 will be reviewed annually by the Committee, which will assess officer and company performance.

The arrangement establishes performance metrics for incentive cash compensation based on our annual business plan, whereby the amount of achievement against each objective will determine the level of incentive cash compensation for 2005.  Such metrics are divided into four categories:  (1) sales revenue, (2) income from restaurant operations, (3) income from restaurant operations less general and administrative expenses and opening expenses, and (4) earnings per share.  Depending upon performance, Mr. Wagenheim’s cash incentive compensation for 2005 would range from $0 for performance that achieved less than 95% of target performance on all measures, to $90,000 for performance that achieved 100% of target performance on all measures, to $125,550 for performance that achieved 105% or more of target performance on all measures.  Mr. Wagenheim’s performance will be assessed pursuant to the foregoing measures on a quarterly basis.  Half of any incentive cash compensation earned will be paid quarterly and the remaining half of any incentive cash compensation will be paid at year end, following a performance versus plan reconciliation.  Incentive cash compensation for 2006 and 2007 will be reviewed by the Committee at a later date as annual business plans are approved by the Board of Directors.

The Committee also authorized the issuance of a non-qualified stock option for the purchase of 150,000 shares of common stock to Mr. Wagenheim pursuant to the terms of our 2002 Equity Incentive Plan.  The options vests to the extent of 75,000 shares upon grant, 50,000 shares upon the second anniversary of the date of grant, and 25,000 shares upon the third anniversary of the date of grant.  The option is exercisable at $4.31 per share, which was the closing price of our common stock on Nasdaq on March 15, 2005.  The option expires on March 15, 2015.  The Committee will consider stock option awards for 2006 and 2007 at a later date.  The form of option agreement appears as Exhibit 10.4 to this report.

The foregoing compensation arrangement will be documented in the form of a new employment agreement with Mr. Wagenheim.  In addition to the terms set forth above, we expect such agreement to contain provisions regarding non-competition and severance substantially similar to those contained in his current employment agreement.  Upon preparation and execution of a written employment agreement formalizing the above-referenced arrangement, we will amend this report to file such agreement as an exhibit.

Non-Employee Director Compensation

On March 15, 2005, the Compensation Committee of the Board of Directors authorized a compensation arrangement with non-employee directors.  Such arrangement addresses (1) annual retainer, (2) board meeting fees, (3) committee meeting fees, and (4) stock option awards.  Pursuant to the arrangement, we estimate annual cash compensation for each non-employee director to be $9,250, based on attending four board meetings, one annual meeting of shareholders and three committee meetings.

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