Liquidation Preference Agreement

Exhibit 10.18


LIQUIDATION PREFERENCE AGREEMENT


THIS LIQUIDATION PREFERENCE AGREEMENT (the " Agreement" ) is dated effective as of October 27, 2004 by and among RSTW PARTNERS III, L.P., a Delaware limited partnership (" RSTW" ), GORDON BIERSCH BREWERY RESTAURANT GROUP, INC., a Tennessee corporation (" Gordon Biersch" ) for the limited purposes set forth herein and each of the undersigned holders of Gordon Biersch' s common stock, no par value per share, (" Common Stock" ) outstanding as of the date hereof (the " Holders" ).

WHEREAS, RSTW and Gordon Biersch entered into that certain Note Purchase Agreement dated as of December 10, 1999 (as amended, supplemented or otherwise modified from time to time, the " Note Agreement" ), pursuant to which a senior subordinated promissory note in the original principal amount of $23,000,000 was issued by Gordon Biersch to RSTW (as amended, supplemented or otherwise modified from time to time, the " Senior Subordinated Note" ); and


WHEREAS, RSTW and Gordon Biersch entered into that certain Warrant Purchase Agreement dated as of December 10, 1999 (the " Warrant Agreement" ) under which Gordon Biersch issued RSTW a warrant to purchase capital stock; and

WHEREAS, pursuant to a Settlement Agreement between RSTW and Gordon Biersch dated as of the date hereof (the " Settlement Agreement" ). RSTW has agreed to terminate the Note Agreement and the Warrant Agreement and settle all obligations owing or incurred under such agreements, including cancellation of the Senior Subordinated Note (the " Obligations" ) and a warrant to purchase capital stock of Gordon Biersch;


WHEREAS , Gordon Biersch is willing to act as an administrator to the limited extent provided herein for certain payments that may be made under this Agreement;

WHEREAS, each of the Holders acknowledges and agrees that such Holder is the beneficiary of good and valuable consideration as a result of RSTW' s actions under the Settlement Agreement;

NOW, THEREFORE, in consideration of the mutual promises contained in this Agreement, the legal sufficiency of which is hereby acknowledged, RSTW, Gordon Biersch and each Holder hereby agree as follows:


1. Payment upon Liquidation Event.


(a) If the Holders shall be entitled to be paid or distributed proceeds in cash or in securities (including, without limitation, debt securities) or in other property pursuant to a Liquidity Event (as defined below) or payment of dividends or other distributions (collectively, " Distributions" ), each Holder hereby agrees that such Holder' s rights to receive such Distributions are hereby assigned to RSTW in an amount of up to $4,200,000 (the " Liquidation Amount" ).

(b) For purposes of this Agreement, a " Liquidity Event" shall mean:


(i) any liquidation, dissolution or winding up of Gordon Biersch, whether voluntary or involuntary;


(ii) any consolidation or merger of Gordon Biersch with or into any other corporation or other entity or person, or any other corporate reorganization or transaction or series of related transactions

by Gordon Biersch in which in excess of 50% of Gordon Biersch' s voting power is transferred, excluding any consolidation or merger effected exclusively to change the domicile of Gordon Biersch; or


(iii) a sale or other disposition of all or substantially all of the assets of Gordon Biersch.

(c) Each Holder hereby irrevocably authorizes and appoints Gordon Biersch to act as such Holder' s administrator and attorney-in-fact with respect to all such Distributions to which such Holder may become entitled. In the event that any such Distributions are payable to the Holders, the Holders shall cause such Distributions to first be deposited with Gordon Biersch which shall then, without any further action on the part of any party, deliver all such Distributions to RSTW until RSTW shall have been distributed the Liquidation Amount and shall thereafter distribute any such Distributions in excess of the Liquidation Amount ratably to each Holder based upon the allocations set forth on Exhibit A , as may be amended to reflect transfers of Common Stock by Holders.

(d) Any securities or other property to be delivered to RSTW or the Holders pursuant to this Agreement shall be valued as follows:

(i) Securities shall be valued as follows:

(A) If traded on a securities exchange or Nasdaq NMS, the value shall be deemed to be the average of the closing prices of the securities on such exchange over the 20 trading-day period ending three (3) trading-days prior to the closing;


(B) If actively traded over-the-counter (other than Nasdaq NMS), the value shall be deemed to be the average of the closing bid prices over the 20 trading-day period ending three (3) trading-days prior to the closing; and

(ii) If there is no active public market, the value shall be the fair market value thereof, as determined by the board of directors of Gordon Biersch.


(iii) All other property shall be valued at the fair market value thereof, as determined by the board of directors of Gordon Biersch.

(e) The amounts distributed under this Agreement to RSTW shall not exceed in the aggregate the Liquidation Amount. The Liquidation Amount is a maximum amount that may be payable to RSTW ...