Exhibit 10.3


 


SECURITY AGREEMENT


 


SECURITY AGREEMENT, dated as of August 28, 2003, between GRANITE CITY
FOOD & BREWERY LTD., a Minnesota corporation (the “Debtor”), and FIRST
NATIONAL BANK, a national banking association (hereinafter, the “Secured
Party”).


 


WHEREAS, the
Debtor has entered into a Loan Agreement dated as of August 28, 2003, (as
amended and in effect from time to time, the “Loan Agreement”), with the
Secured Party, pursuant to which the Secured Party, subject to the terms and
conditions contained therein, is to make a loan or otherwise to extend credit
to the Debtor; and


 


WHEREAS, it is a condition precedent to the Secured Party’s making the
loan or otherwise extending credit to the Debtor under the Loan Agreement that
the Debtor execute and deliver to the Secured Party a security agreement in
substantially the form hereof; and


 


WHEREAS, the Debtor wishes to grant security interests in favor of the
Secured Party as herein provided;


 


NOW, THEREFORE, in consideration of the promises contained herein and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:


 


1.             Definitions.  All capitalized terms which are not
defined herein shall have the respective meanings provided therefor in the Loan
Agreement.  The term “State,” as used
herein, means the State of Minnesota. 
All terms defined in Article 9 of the Uniform Commercial Code of the State
and used herein shall have the same definitions herein as specified therein.  The term “Obligations,” as used herein, means
all of the indebtedness, obligations and liabilities of the Debtor to the
Secured Party, individually or collectively, whether direct or indirect, joint
or several, absolute or contingent, due or to become due, now existing or
hereafter arising under or in respect of the Loan Agreement, and any notes or
other instruments or agreements executed and delivered pursuant thereto or in
connection therewith.  The term “Event
of Default” as used herein, means any Event of Default described in the Loan
Agreement, including the failure of the Debtor to pay or perform any of the
Obligations as and when due to be paid or performed under the terms of the Loan
Agreement.


 


2.             Grant of
Security Interest.  The Debtor hereby grants to the
Secured Party, to secure the payment and performance in full of all of the
Obligations, a security interest in, and pledges and assigns to the Secured
Party, the following properties, assets and rights of the Debtor, wherever
located, arising from, or used in connection with the business operations of
the Debtor, whether now owned or hereafter acquired or arising, and all
proceeds and products thereof (all of the same being hereinafter called the
“Collateral”):  all personal property
and fixture property of every kind and nature, including without limitation all
goods, including inventory, equipment, including but not limited to, all
present and future machinery, vehicles, furniture, fixtures, office and record
keeping equipment, and the goods described in any equipment schedule or list
herewith or hereafter furnished to Secured Party by Debtor (but no such
schedule or list need be furnished in order for the security interest to be
valid as to all of Debtor’s equipment); each and every right of Debtor to the
payment of money, whether such right to payment now exists or hereafter arises,
whether such right to payment arises out of a sale, lease, or other disposition
of goods or other property by Debtor, out of a rendering of services by Debtor,
out of a loan by Debtor, out of the overpayment of taxes or other liabilities
of Debtor, or otherwise arises under any contract or agreement, whether such
right to payment is or is not already earned by performance, and howsoever such
right to payment may be evidenced, together with all other rights and interests
(including all liens and security interests) which Debtor may at any time have
by law or agreement against any account debtor or other obligor obligated to
make any such payment or against any of the property of such account debtor or
other obligor; all including but not limited to all present and future debt
instruments, chattel paper, accounts, loans, and obligations receivable, and
tax refunds; all general intangibles of Debtor including but not limited to,
trademarks, trade secrets, goodwill, trade names, customer lists,


 

















 


permits and franchises, and the
right to use Debtor’s name; and all room rentals, licenses and agreements
including without limitation all receivables and other amounts arising in the
ordinary course of Debtor’s business.


 


3.             Authorization
to File Financing Statements.  The Debtor hereby irrevocably
authorizes the Secured Party at any time and from time to time to file in any
Uniform Commercial Code jurisdiction any initial financing statements and
amendments thereto that (a) indicate the Collateral as all assets of the Debtor
as described in Section 2 of the Agreement; or words of similar effect,
regardless of whether any particular asset comprised in the Collateral falls
within the scope of Article 9 of the Uniform Commercial Code of the State or
such jurisdiction, and (b) contain any other information required by Article 9
of the Uniform Commercial Code of the State or any other state for the
sufficiency or filing office acceptance of any financing statement or
amendment, including (i) whether the Debtor is an organization, the type of
organization and any organization identification number issued to the Debtor
and, (ii) in the case of a financing statement filed as a fixture filing, a
sufficient description of real property to which the Collateral relates.  The Debtor agrees to furnish any such
information to the Secured Party promptly upon request. The Debtor also
ratifies its authorization for the Secured Party to have filed in any Uniform
Commercial Code jurisdiction any like initial financing statements or
amendments thereto if filed prior to the date hereof.


 


4.             Other Actions. 
Further to insure the attachment, perfection and first priority of, and
the ability of the Secured Party to enforce, the Secured Party’s security
interest in the Collateral, the Debtor agrees, in each case at the Debtor’s own
expense, to take the following actions with respect to the following
Collateral:


 


4.1.         Collateral in the
Possession of a Bailee.  If any
goods are at any time in the possession of a bailee, the Debtor shall promptly
notify the Secured Party thereof and, if requested by the Secured Party, shall
promptly obtain an acknowledgment from the bailee, in form and substance
satisfactory to the Secured Party, that the bailee holds such Collateral for
the benefit of the Secured Party and shall act upon the instructions of the
Secured Party, without the further consent of the Debtor.


 


4.2.         Other Actions as to
any and all Collateral.  Debtor
further agrees to take any other action reasonably requested by the Secured
Party to insure the attachment, perfection and first priority of, and the
ability of the Secured Party to enforce, the Secured Party’s security interest
in any and all of the Collateral including, without limitation, (a) executing,
delivering and, where appropriate, filing financing statements and amendments
relating thereto under the Uniform Commercial Code, (b) causing the Secured
Party’s name to be noted as secured party on any certificate of title for a
titled good if such notation is a condition to attachment, perfection or
priority of, or ability of the Secured Party to enforce, the Secured Party’s
security interest in such Collateral, (c) complying with any provision of any
statute, regulation or treaty of the United States as to any Collateral if
compliance with such provision is a condition to attachment, perfection or
priority of, or ability of the Secured Party to enforce, the Secured Party’s
security interest in such Collateral, (d) obtaining governmental and other
third party consents and approvals, including without limitation any consent of
any licensor, lessor or other person obligated on Collateral, (e) obtaining
waivers from mortgagees and landlords in form and substance satisfactory to the
Secured Party and (f) taking all actions required by any earlier versions of
the Uniform Commercial Code or by other law, as applicable in any relevant
Uniform Commercial Code jurisdiction, or by other law as applicable in any
foreign jurisdiction.


 


5.             Representations
and Warranties Concerning Debtor’s Legal  Status.  The Debtor represents and warrants to the
Secured Party as follows:  (a) the
Debtor’s exact legal name is that indicated on Schedule 5 and on the
signature page hereof, (b) the Debtor is an organization of the type and
organized in the jurisdiction set forth in Schedule 5, (c) Schedule 5
accurately sets forth the Debtor’s organizational identification number or
accurately states that the Debtor has none, (d) Schedule 5 accurately
sets forth the Debtor’s place of business or, if more than one, its chief
executive office as well as the Debtor’s mailing address if different, and (e)
all other information set forth in Schedule 5 pertaining to the Debtor
is accurate and complete.


 


6.             Covenants
Concerning Debtor’s Legal Status.  
The Debtor covenants with the Secured Party as follows:  (a) without providing at least 30 days prior
written notice to the Secured Party, the Debtor will not change


 


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its name, its place of business or, if more than one, chief executive
office, or its mailing address or organizational identification number if it
has one, (b) if the Debtor does not have an organizational identification
number and later obtains one, the Debtor shall forthwith notify the Secured
Party of such organizational identification number, and (c) the Debtor will not
change its type of organization, jurisdiction of organization or other legal
structure.


 


7.             Representations
and Warranties Concerning Collateral. 
The Debtor further represents and warrants to the Secured Party as
follows: (a) the Debtor is the owner of the Collateral, free from any adverse
lien, security interest or other encumbrance, except for the security interest
created by this Agreement and other liens permitted by the Loan Agreement
(b) none of the Collateral constitutes, or is the proceeds of, “farm
products” as defined in Section 9-102(a)(34) of the Uniform Commercial Code of
the State, (c) none of the account debtors or other persons obligated on any of
the Collateral is a governmental authority subject to the Federal Assignment of
Claims Act or like federal, state or local statute or rule in respect of such
Collateral, (d) the Debtor holds no commercial tort claim except as indicated
in Schedule 5, and (e) the Debtor has at all times operated its business
in material compliance with all applicable provisions of the federal Fair Labor
Standards Act, as amended, and with all applicable provisions of federal, state
and local statutes and ordinances dealing with the control, shipment, storage
or disposal of hazardous materials or substances and (f) all other information
set forth in Schedule 5 pertaining to the Collateral is accurate and
complete.


 


8.             Covenants
Concerning Collateral.  The
Debtor further covenants with the Secured Party as follows:  (a) the Collateral, to the extent not
delivered to the Secured Party pursuant to Section 4, will be kept at those
locations listed in Schedule 5 and the Debtor will not remove the
Collateral from such locations, without providing at least 30 days prior
written notice to the Secured Party, (b) except for the security interest
herein granted and liens permitted by the Loan Agreement, the Debtor shall be
the owner of the Collateral free from any lien, security interest or other
encumbrance, and the Debtor shall defend the same against all claims and
demands of all persons at any time claiming the same or any interests therein
adverse to the Secured Party, (c) the Debtor shall not pledge, mortgage or
create, or suffer to exist a security interest in the Collateral in favor of
any person other than the Secured Party except for liens permitted by the Loan
Agreement, (d) the Debtor will keep the Collateral in good order and repair,
reasonable wear and tear excepted, and will not use the same in material
violation of law or any policy of insurance thereon, (e) the Debtor will permit
the Secured Party, or its designee, to inspect the Collateral at any reasonable
time and upon reasonable prior notice, wherever located, (f) the Debtor will
pay promptly when due all taxes, assessments, governmental charges and levies
upon the Collateral or incurred in connection with the use or operation of such
Collateral or incurred in connection with this Agreement, (g) the Debtor will
continue to operate, its business in material compliance with all applicable
provisions of the federal Fair Labor Standards Act, as amended, and with all
applicable provisions of federal, state and local statutes and ordinances dealing
with the control, shipment, storage or disposal of hazardous materials or
substances, and (h) the Debtor will not sell or otherwise dispose, or offer to
sell or otherwise dispose, of the Collateral or any interest therein except for
(i) sales of inventory in the ordinary course of business and (ii) sales or
other dispositions of obsolescent items of equipment in the ordinary course of
business.


 


9.             Insurance.


 


9.1.         Maintenance of
Insurance.  The Debtor will
maintain with financially sound and reputable insurers insurance with respect
to its properties and business against such casualties and contingencies as
shall be in accordance with general practices of businesses engaged in similar
activities in similar geographic areas. 
Such insurance shall be in such minimum amounts that the Debtor will not
be deemed a co-insurer under applicable insurance laws, regulations and
policies and otherwise shall be in such amounts, contain such terms, be in such
forms and be for such periods as may be reasonably satisfactory to the Secured
Party.  In addition, all such insurance
shall be payable to the Secured Party as loss payee under a “standard” loss
payee clause.  Without limiting the foregoing,
the Debtor will (i) keep all of its physical property insured with casualty or
physical hazard insurance on an “all risks” basis, with broad form flood and
earthquake coverages and electronic data processing coverage, with a full
replacement cost endorsement in an amount equal to 100% of the full replacement
cost of such property, (ii) maintain all such workers’ compensation or similar
insurance as may be required by law and (iii) maintain, in amounts and with
deductibles equal to those generally maintained by businesses engaged in
similar activities in similar geographic areas, general public liability
insurance against claims of bodily


 


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injury, death or property damage occurring, on, in or about the
properties of the Debtor; business interruption insurance; and product liability
insurance.


 


9.2.         Insurance Proceeds.  The proceeds of any casualty insurance
in respect of any casualty loss of any of the Collateral shall (i) so long as
no Default or Event of Default has occurred and is continuing and to the extent
that the amount of such proceeds is less than $25,000, be disbursed to the
Debtor for direct application by the Debtor solely to the repair or replacement
of the Debtor’s property so damaged or destroyed, and (ii) in all other
circumstances, be held by the Secured Party as cash collateral for the
Obligations.  The Secured Party may, at
its sole option, disburse from time to time all or any part of such proceeds so
held as cash collateral, upon such terms and conditions as the Secured Party
may reasonably prescribe, for direct application by the Debtor solely to the
repair or replacement of the Debtor’s property so damaged or destroyed, or the
Secured Party may apply all or any part of such proceeds to the Obligations.


 


9.3.         Notice of Cancellation.   All policies of insurance shall provide for at least 30 days prior
written cancellation notice to the Secured Party.  In the event of failure by the Debtor to provide and maintain
insurance as herein provided, the Secured Party may, at its option, provide
such insurance and charge the amount thereof to the Debtor.  The Debtor shall furnish the Secured Party
with certificates of insurance and policies evidencing compliance with the
foregoing insurance provision.


 


10.          Collateral Protection
Expenses; Preservation of Collateral.


 


10.1.       Expenses Incurred by
Secured Party.  In its
discretion, the Secured Party may discharge taxes and other encumbrances at any
time levied or placed on any of the Collateral, make repairs thereto and pay
any necessary filing fees or, if the debtor fails to do so, insurance
premiums.  The Debtor agrees to
reimburse the Secured Party on demand for any and all expenditures so
made.  The Secured Party shall have no
obligation to the Debtor to make any such expenditures, nor shall the making
thereof relieve the Debtor of any default.


 


10.2.       Secured Party’s
Obligations and Duties.  Anything
herein to the contrary notwithstanding, the Debtor shall remain liable under
each contract or agreement comprised in the Collateral to be observed or
performed by the Debtor thereunder.  The
Secured Party shall not have any obligation or liability under any such
contract or agreement by reason of or arising out of this Agreement or the
receipt by the Secured Party of any payment relating to any of the Collateral,
nor shall the Secured Party be obligated in any manner to perform any of the
obligations of the Debtor under or pursuant to any such contract or agreement,
to make inquiry as to the nature or sufficiency of any payment received by the
Secured Party in respect of the Collateral or as to the sufficiency of any
performance by any party under any such contract or agreement, to present or
file any claim, to take any action to enforce any performance or to collect the
payment of any amounts which may have been assigned to the Secured Party or to
which the Secured Party may be entitled at any time or times.  The Secured Party’s sole duty with respect
to the custody, safe keeping and physical preservation of the Collateral in its
possession, under Section 9-207 of the Uniform Commercial Code of the State or
otherwise, shall be to deal with such Collateral in the same manner as the
Secured Party deals with similar property for its own account.


 


11.          Power of Attorney.


 


11.1.       Appointment and Powers
of Secured Party.  The Debtor
hereby irrevocably constitutes and appoints the Secured Party and any officer
or agent thereof, with full power of substitution, as its true and lawful
attorneys-in-fact with full irrevocable power and authority in the place and
stead of the Debtor or in the Secured Party’s own name, for the purpose of
carrying out the terms of this Agreement, to take any and all appropriate
action and to execute any and all documents and instruments that may be
necessary or desirable to accomplish the purposes of this Agreement and,
without limiting the generality of the foregoing, hereby gives said attorneys
the power and right, on behalf of the Debtor, without notice to or assent by
the Debtor, to do the following:


 


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(a)           upon the occurrence and during the
continuance of an Event of Default, generally to sell, transfer, pledge, make
any agreement with respect to or otherwise deal with any of the Collateral in
such manner as is consistent with the Uniform Commercial Code of the State and
as fully and completely as though the Secured Party were the absolute owner
thereof for all purposes, and to do at the Debtor’s expense, at any time, or
from time to time, all acts and things which the Secured Party deems necessary
to protect, preserve or realize upon the Collateral and the Secured Party’s
security interest therein, in order to effect the intent of this Agreement, all
as fully and effectively as the Debtor might do, including, without limitation,
(i) the filing and prosecuting of registration and transfer applications with
the appropriate federal or local agencies or authorities with respect to
trademarks, copyrights and patentable inventions and processes, (ii) upon
written notice to the Debtor, the exercise of voting rights with respect to
voting securities, which rights may be exercised, if the Secured Party so
elects, with a view to causing the liquidation in a commercially reasonable
manner of assets of the issuer of any such securities and (iii) the execution,
delivery and recording, in connection with any sale or other disposition of any
Collateral, of the endorsements, assignments or other instruments of conveyance
or transfer with respect to such Collateral; and


 


(b)           to the extent that the Debtor’s
authorization given in Section 3 is not sufficient, to file such financing
statements with respect hereto, with or without the Debtor’s signature, or a
photocopy of this Agreement in substitution for a financing statement, as the
Secured Party may deem appropriate and to execute and/or file in the Debtor’s
name such financing statements and amendments thereto and continuation
statements which may require the Debtor’s signature.


 


11.2.       Ratification by Debtor.  To the extent permitted by law, the Debtor
hereby ratifies all that said attorneys shall lawfully do or cause to be done
by virtue hereof.  This power of
attorney is a power coupled with an interest and shall be irrevocable.


 


11.3.       No Duty on Secured Party.  The powers conferred on the Secured
Party hereunder are solely to protect its interests in the Collateral and shall
not impose any duty upon it to exercise any such powers.  The Secured Party shall be accountable only
for the amounts that it actually receives as a result of the exercise of such
powers and neither it nor any of its officers, directors, employees or agents
shall be responsible to the Debtor for any act or failure to act, except for
the Secured Party’s own gross negligence or willful misconduct.


 


12.          Remedies.  If an Event of Default (as defined in
the Loan Agreement) shall have occurred and be continuing, the Secured Party
may, without notice to or demand upon the Debtor, declare this Agreement to be
in default, and the Secured Party shall thereafter have in any jurisdiction in
which enforcement hereof is sought, in addition to all other rights and
remedies, the rights and remedies of a secured party under the Uniform
Commercial Code of the State or of any jurisdiction in which Collateral is
located, including, without limitation, the right to take possession of the
Collateral, and for that purpose the Secured Party may, so far as the Debtor
can give authority therefor, enter upon any premises on which the Collateral
may be situated and remove the same therefrom. 
The Secured Party may in its discretion require the Debtor to assemble
all or any part of the Collateral at such location or locations within the
jurisdictions of the Debtor’s principal office(s) or at such other locations as
the Secured Party may reasonably designate. 
Unless the Collateral is perishable or threatens to decline speedily in
value or is of a type customarily sold on a recognized market, the Secured
Party shall give to the Debtor at least ten Business Days prior written notice
of the time and place of any public sale of Collateral or of the time after
which any private sale or any other intended disposition is to be made.  The Debtor hereby acknowledges that ten
Business Days prior written notice of such sale or sales shall be reasonable
notice.  In addition, the Debtor waives
any and all rights that it may have to a judicial hearing in advance of the
enforcement of any of the Secured Party’s rights hereunder, including, without
limitation, its right following an Event of Default to take immediate
possession of the Collateral and to exercise its rights with respect thereto.


 


13.          Standards for
Exercising Remedies.  To the
extent that applicable law imposes duties on the Secured Party to exercise
remedies in a commercially reasonable manner, the Debtor acknowledges and
agrees that it is not commercially unreasonable for the Secured Party (a) to
fail to incur expenses reasonably deemed significant by the Secured Party to
prepare Collateral for disposition or otherwise to complete raw material or
work in process into finished goods or other finished products for disposition,
(b) to fail to obtain third party consents for access to


 


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Collateral to be disposed of, or to obtain or, if not required by other
law, to fail to obtain governmental or third party consents for the collection
or disposition of Collateral to be collected or disposed of, (c) to fail to
exercise collection remedies against account debtors or other persons obligated
on Collateral or to remove liens or encumbrances on or any adverse claims
against Collateral, (d) to exercise collection remedies against account debtors
and other persons obligated on Collateral directly or through the use of
collection agencies and other collection specialists, (e) to advertise
dispositions of Collateral through publications or media of general
circulation, whether or not the Collateral is of a specialized nature, (f) to
contact other persons, whether or not in the same business as the Debtor, for
expressions of interest in acquiring all or any portion of the Collateral, (g)
to hire one or more professional auctioneers to assist in the disposition of
Collateral, whether or not the collateral is of a specialized nature, (h) to
dispose of Collateral by utilizing Internet sites that provide for the auction
of assets of the types included in the Collateral or that have the reasonable
capability of doing so, or that match buyers and sellers of assets, (i) to
dispose of assets in wholesale rather than retail markets, (j) to disclaim
disposition warranties, (k) to purchase insurance or credit enhancements to
insure the Secured Party against risks of loss, collection or disposition of
Collateral or to provide to the Secured Party a guaranteed return from the
collection or disposition of Collateral, or (l) to the extent deemed
appropriate by the Secured Party, to obtain the services of other brokers,
consultants and other professionals to assist the Secured Party in the
collection or disposition of any of the Collateral.  The Debtor acknowledges that the purpose of this Section 13 is to
provide non-exhaustive indications of what actions or omissions by the Secured
Party would not be commercially unreasonable in the Secured Party’s exercise of
remedies against the Collateral and that other actions or omissions by the Secured
Party shall not be deemed commercially unreasonable solely on account of not
being indicated in this Section 13. 
Without limitation upon the foregoing, nothing contained in this Section
13 shall be construed to grant any rights to the Debtor or to impose any duties
on the Secured Party that would not have been granted or imposed by this
Agreement or by applicable law in the absence of this Section 13.


 


14.          No Waiver by Secured
Party, etc.  The Secured Party
shall not be deemed to have waived any of its rights upon or under the
Obligations or the Collateral unless such waiver shall be in writing and signed
by the Secured Party.  No delay or
omission on the part of the Secured Party in exercising any right shall operate
as a waiver of such right or any other right. 
A waiver on any one occasion shall not be construed as a bar to or
waiver of any right on any future occasion. 
All rights and remedies of the Secured Party with respect to the
Obligations or the Collateral, whether evidenced hereby or by any other
instrument or papers, shall be cumulative and may be exercised singularly,
alternatively, successively or concurrently at such time or at such times as
the Secured Party deems expedient.


 


15.          Suretyship Waivers by
Debtor.  The Debtor waives
demand, notice, protest, notice of acceptance of this Agreement, notice of
loans made, credit extended, Collateral received or delivered or other action
taken in reliance hereon and all other demands and notices of any description.  With respect to both the Obligations and the
Collateral, the Debtor assents to any extension or postponement of the time of
payment or any other indulgence, to any substitution, exchange or release of or
failure to perfect any security interest in any Collateral, to the addition or
release of any party or person primarily or secondarily liable, to the
acceptance of partial payment thereon and the settlement, compromising or
adjusting of any thereof, all in such manner and at such time or times as the
Secured Party may deem advisable.  The
Secured Party shall have no duty as to the collection or protection of the
Collateral or any income thereon, nor as to the preservation of rights against
prior parties, nor as to the preservation of any rights pertaining thereto
beyond the safe custody thereof as set forth in Section 10.2. The Debtor
further waives any and all other suretyship defenses.


 


16.          Marshaling.  The Secured Party shall not be required
to marshal any present or future collateral security (including but not limited
to this Agreement and the Collateral) for, or other assurances of payment of,
the Obligations or any of them or to resort to such collateral security or
other assurances of payment in any particular order, and all of its rights
hereunder and in respect of such collateral security and other assurances of
payment shall be cumulative and in addition to all other rights, however
existing or arising.  To the extent that
it lawfully may, the Debtor hereby agrees that it will not invoke any law
relating to the marshalling of collateral which might cause delay in or impede
the enforcement of the Secured Party’s rights under this Agreement or under any
other instrument creating or evidencing any of the Obligations or under which
any of the Obligations is outstanding or by which any of the Obligations is
secured or payment thereof is otherwise assured, and, to the extent that it
lawfully may, the Debtor hereby irrevocably waives the benefits of all such
laws.


 


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17.          Proceeds of Dispositions;
Expenses.  The Debtor shall pay
to the Secured Party on demand any and all expenses, including reasonable
attorneys’ fees and disbursements, incurred or paid by the Secured Party in
protecting, preserving or enforcing the Secured Party’s rights under or in
respect of any of the Obligations or any of the Collateral.  After deducting all of said expenses, the
residue of any proceeds of collection or sale of the Obligations or Collateral
shall, to the extent actually received in cash, be applied to the payment of
the Obligations in such order or preference as the Secured Party may determine,
proper allowance and provision being made for any Obligations not then
due.  Upon the final payment and
satisfaction in full of all of the Obligations and after making any payments
required by Sections 9-608(a)(1)(C) or 9-615(a)(3) of the Uniform Commercial
Code of the State, any excess shall be returned to the Debtor, and the Debtor
shall remain liable for any deficiency in the payment of the Obligations.


 


18.          Overdue Amounts.  Until paid, all amounts due and payable
by the Debtor hereunder shall be a debt secured by the Collateral and shall
bear, whether before or after judgment, interest at the rate of interest for
overdue principal set forth in the Loan Agreement.


 


19.          Governing Law;
Consent to Jurisdiction.  THIS
AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE.  The Debtor agrees that any
suit for the enforcement of this Agreement may be brought in the courts of the
State or any federal court sitting therein and consents to the non-exclusive
jurisdiction of such court.  The Debtor
hereby waives any objection that it may now or hereafter have to the venue of
any such suit or any such court or that such suit is brought in an inconvenient
court.


 


20.          Waiver of Jury Trial.  THE PARTIES WAIVE THEIR RIGHT TO A JURY
TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN
CONNECTION WITH THIS AGREEMENT, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THE
PERFORMANCE OF ANY SUCH RIGHTS OR OBLIGATIONS. 
Except as prohibited by law, the Debtor waives any right which it may
have to claim or recover in any litigation referred to in the preceding
sentence any special, exemplary, punitive or consequential damages or any
damages other than, or in addition to, actual damages.  The Debtor (i) certifies that neither the
Secured Party nor any representative, agent or attorney of the Secured Party
has represented, expressly or otherwise, that the Secured Party would not, in
the event of litigation, seek to enforce the foregoing waivers and (ii)
acknowledges that, in entering into the Loan Agreement the Secured Party is
relying upon, among other things, the waivers and certifications contained in
this Section 20.


 


21.          Miscellaneous.  The headings of each section of this
Agreement are for convenience only and shall not define or limit the provisions
thereof.  This Agreement and all rights
and obligations hereunder shall be binding upon the Debtor and its respective
successors and assigns, and shall inure to the benefit of the Secured Party and
its successors and assigns.  If any term
of this Agreement shall be held to be invalid, illegal or unenforceable, the
validity of all other terms hereof shall in no way be affected thereby, and
this Agreement shall be construed and be enforceable as if such invalid,
illegal or unenforceable term had not been included herein.  The Debtor acknowledges receipt of a copy of
this Agreement.


 


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


 


 


	
   

  	
  GRANITE CITY FOOD & BREWERY LTD.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Steven J. Wagenheim

  	
   

  
	
   

  	
   

  	
     Steven J. Wagenheim

  
	
   

  	
   

  	
     Its: 
  President

  



 


8

















 


Schedule 5


to


Security Agreement


 


	
  Debtor’s Exact Legal Name:

  	
   

  	
  Granite City Food & Brewery Ltd.

  
	
   

  	
   

  	
   

  
	
  Debtor’s type of organization:

  	
   

  	
  corporation

  
	
   

  	
   

  	
   

  
	
  Debtor’s place of organization:

  	
   

  	
  Minnesota

  
	
   

  	
   

  	
   

  
	
  Debtor’s organization identification number:

  	
   

  	
  9S-463

  
	
   

  	
   

  	
   

  
	
  Address of Debtor’s chief executive office:

  	
   

  	
  5831 Cedar Lake Road

  St. Louis Park, MN 55416

  
	
   

  	
   

  	
   

  
	
  Addresses of all of Debtor’s places of business:

  	
   

  	
  Fargo, North Dakota; and Clive, Iowa;

  Davenport, Iowa; and Cedar Rapids, Iowa.

  



 


9