**Exhibit 10.1**

 

**BUSINESSLOAN AGREEMENT**

 
| **Principal**                                                                                                                                                                                                                                   |                                                                                                                                         | **Loan Date** |           | **Maturity**                                                                                |           | **Loan No** |      | **Call/Coll** |     | **Account** |   | **Officer** |   | **Initials** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------|---------------|----------------|---------------------------------------------------------------------------------------------|----------------|-------------|-----------|---------------|----------|-------------|--------|-------------|--------|--------------|
| **$**                                                                                                                                                                                                                                           | **750,000.00**                                                                                                                               |          | **04-14-2004** |                                                                                        | **09-01-2004** |        | **76601** |          | **0026** |        |   |        | **CD** |         |   |
|                                                                                                                                                                                                                                            |                                                                                                                                         |          |           |                                                                                        |           |        |      |          |     |        |   |        |   |         |
| References in the shaded area are for  Lender’s use only and do not limit the applicability of this document to any  particular loan or item.  Any item above containing “***” has been omitted due to text length  limitations. |
|                                                                                                                                                                                                                                            |
| **Borrower:**                                                                                                                                                                                                                                   | **Granite  City Food & Brewery Ltd.,  a Minnesota Corporation  (TIN: 41-1883639)  5831 CEDAR LAKE ROAD  ST. LOUIS PARK, MN  55416** |          | **Lender:**    | **First  National Bank  Pierre  125 W. Sioux Avenue  P.O. Box 730  Pierre, SD  57501** |
|                                                                                                                                                                                                                                                 |                                                                                                                                              |               |                |                                                                                             |                |             |           |               |          |             |        |             |        |              |  |  |  |  |  |

 

**THIS BUSINESS LOAN AGREEMENT datedApril 14, 2004, is made and executed between Granite City Food &Brewery Ltd., a Minnesota Corporation (“Borrower”) and First National Bank(“Lender”) on the following terms and conditions.  Borrower has received prior commercial loans from Lender or hasapplied to Lender for a commercial loan or loans or other financialaccommodations, including those which may be described on any exhibit orschedule attached to this Agreement (“Loan”).  Borrower understands and agrees that: (A) in granting, renewing,or extending any Loan, Lender is relying upon Borrower’s representations,warranties, and agreements as set forth in this Agreement; (B) thegranting, renewing, or extending of any Loan by Lender at all times shall besubject to Lender’s sole judgment and discretion; and (C) all such Loans shallbe and remain subject to the terms and conditions of this Agreement.**

 

**TERM.**  ThisAgreement shall be effective as of April 14, 2004, and shall continue infull force and effect until such time as all of Borrower’s Loans in favor ofLender have been paid in full, including principal, interest, costs, expenses,attorneys’ fees, and other fees and charges, or until September 1, 2004.

 

**CONDITIONS PRECEDENT TO EACH ADVANCE.** Lender’s obligation to make the initial Advance and each subsequentAdvance under this Agreement shall be subject to the fulfillment to Lender’ssatisfaction of all of the conditions set forth in this Agreement and in theRelated Documents.

 

**Loan Documents**. Borrower shall provide to Lender the following documents for the Loan:(1) the Note; (2) Security Agreements granting to Lender security interests inthe Collateral; (3) financing statements and all other documents perfectingLender’s Security Interests; (4) evidence of insurance as required below; (5)guaranties; (6) together with all such Related Documents as Lender may requirefor the Loan; all in form and substance satisfactory to Lender and Lender’scounsel.

 

**Borrower’s Authorization**. Borrower shall have provided in form and substance satisfactory toLender properly certified resolutions, duly authorizing the execution anddelivery of this Agreement, the Note and the Related Documents.  In addition, Borrower shall have providedsuch other resolutions, authorizations, documents and instruments as Lender orits counsel, may require.

 

**Payment of Fees and Expenses**. Borrower shall have paid to Lender all fees, charges, and other expenseswhich are then due and payable as specified in this Agreement or any RelatedDocument.

 

**Representations and Warranties**. The representations and warranties set forth in this Agreement, in theRelated Documents, and in any document or certificate delivered to Lender underthis Agreement are true and correct.

 

**No Event of Default**. There shall not exist at any time of any Advance a condition which wouldconstitute an Event of Default under this Agreement or under any RelatedDocument.

 

**REPRESENTATIONS AND WARRANTIES**. Borrower represents and warrants to Lender, as of the date of thisAgreement, as of the date of each disbursement of loan proceeds, as of the dateof any renewal, extension or modification of any Loan, and at all times anyIndebtedness exists:

 

**Organization**. Borrower is a corporation for profit which is, and at all times shallbe, duly organized, validly existing, and in good standing under and by virtueof the laws of the State of Minnesota. Borrower

 

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is duly authorizedto transact business in all other states in which Borrower is doing business,having obtained all necessary filings, governmental licenses and approvals foreach state in which Borrower is doing business.  Specifically, Borrower is, and at all times shall be, dulyqualified as a foreign corporation in all states in which the failure to soqualify would have a material adverse effect on its business or financialcondition.  Borrower has the full powerand authority to own its properties and to transact the business in which it ispresently engaged or presently proposes to engage.  Borrower maintains an office at 5831 CEDAR LAKE ROAD,ST. LOUIS PARK, MN  55416.  Unless Borrower has designated otherwise inwriting, the principal office is the office at which Borrower keeps its booksand records including its records concerning the Collateral.  Borrower will notify Lender prior to anychange in the location of Borrower’s state of organization or any change inBorrower’s name.  Borrower shall do allthings necessary to preserve and to keep in full force and effect itsexistence, rights and privileges, and shall comply with all regulations, rules,ordinances, statutes, orders and decrees of any governmental orquasi-governmental authority or court applicable to Borrower and Borrower’sbusiness activities.

 

**Assumed Business Names**. Borrower has filed or recorded all documents or filings required by lawrelating to all assumed business names used by Borrower.  Excluding the name of Borrower, thefollowing is a complete list of all assumed business names under which Borrowerdoes business:  **None**.

 

**Authorization**. Borrower’s execution, delivery, and performance of this Agreement andall the Related Documents have been duly authorized by all necessary action byBorrower and do not conflict with, result in a violation of, or constitute adefault under (1) any provision of (a) Borrower’s articles of incorporation ororganization, or bylaws, or (b) any agreement or other instrument binding uponBorrower or (2) any law, governmental regulation, court decree, or orderapplicable to Borrower or to Borrower’s properties.

 

**Financial Information**. Each of Borrower’s financial statements supplied to Lender truly andcompletely disclosed Borrower’s financial condition as of the date of thestatement, and there has been no material adverse change in Borrower’sfinancial condition subsequent to the date of the most recent financialstatement supplied to Lender.  Borrowerhas no material contingent obligations except as disclosed in such financialstatements.

 

**Legal Effect**. This Agreement constitutes, and any instrument or agreement Borrower isrequired to give under this Agreement when delivered will constitute legal,valid, and binding obligations of Borrower enforceable against Borrower inaccordance with their respective terms.

 

**Properties**. Except as contemplated by this Agreement or as previously disclosed inBorrower’s financial statements or in writing to Lender and as accepted byLender, and except for property tax liens for taxes not presently due andpayable, Borrower owns and has good title to all of Borrower’s properties freeand clear of all Security Interests, and has not executed any securitydocuments or financing statements relating to such properties.  All of Borrower’s properties are titled inBorrower’s legal name, and Borrower has not used or filed a financing statementunder any other name for at least the last five (5) years.

 

**Hazardous Substances**. Except as disclosed to and acknowledged by Lender in writing, Borrowerrepresents and warrants that: (1) During the period of Borrower’s ownership ofBorrower’s Collateral, there has been no use, generation, manufacture, storage,treatment, disposal, release or threatened release of any Hazardous Substanceby any person on, under, about or from any of the Collateral.  (2) Borrower has no knowledge of, or reasonto believe that there has been (a) any breach or violation of any EnvironmentalLaws; (b) any use, generation, manufacture, storage, treatment, disposal,release or threatened release of any Hazardous Substance on, under, about orfrom the Collateral by any prior owners or occupants of any of the Collateral;or (c) any actual or threatened litigation or claims of any kind by any personrelating to such matters.  (3) NeitherBorrower nor any tenant, contractor, agent or other authorized user of any ofthe Collateral shall use, generate, manufacture, store, treat, dispose of orrelease any Hazardous Substance on, under, about or from any of the Collateral;and any such activity shall be conducted in compliance with all applicablefederal, state, and local laws, regulations, and ordinances, including withoutlimitation of all Environmental Laws. Borrower authorizes Lender and its agents to enter upon the Collateralto make such inspections and tests as Lender may deem appropriate to determinecompliance of the Collateral with this section of the Agreement.  Any inspections or tests made by Lendershall be at Borrower’s expense and for Lender’s purposes only and shall not beconstrued to create any responsibility or liability on the part of Lender toBorrower or to any other person.  Therepresentations and warranties contained herein are based

 

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on Borrower’s duediligence in investigating the Collateral for hazardous waste and HazardousSubstances.  Borrower hereby(1) releases and waives any future claims against Lender for indemnity orcontribution in the event Borrower becomes liable for cleanup or other costsunder any such laws, and (2) agrees to indemnify and hold harmless Lenderagainst any and all claims, losses, liabilities, damages, penalties, andexpenses which Lender may directly or indirectly sustain or suffer resultingfrom a breach of this section of the Agreement or as a consequence of anyuse, generation, manufacture, storage, disposal, release or threatened releaseof a hazardous waste or substance on the Collateral.  The provisions of this section of the Agreement, includingthe obligation to indemnify, shall survive the payment of the Indebtedness andthe termination, expiration or satisfaction of this Agreement and shall not beaffected by Lender’s acquisition of any interest in any of the Collateral,whether by foreclosure or otherwise.

 

**Litigation and Claims**. No litigation, claim, investigation, administrative proceeding orsimilar action (including those for unpaid taxes) against Borrower is pendingor threatened, and no other event has occurred which may materially adverselyaffect Borrower’s financial condition or properties, other than litigation,claims, or other events, if any, that have been disclosed to and acknowledgedby Lender in writing.

 

**Taxes**.  To the bestof Borrower’s knowledge, all of Borrower’s tax returns and reports that are orwere required to be filed, have been filed, and all taxes, assessments andother governmental charges have been paid in full, except those presently beingor to be contested by Borrower in good faith in the ordinary course of businessand for which adequate reserves have been provided.

 

**Lien Priority**. Unless otherwise previously disclosed to Lender in writing, Borrower hasnot entered into or granted any Security Agreements, or permitted the filing orattachment of any Security Interests on or affecting any of the Collateraldirectly or indirectly securing repayment of Borrower’s Loan and Note, thatwould be prior or that may in any way be superior to Lender’s SecurityInterests and rights in and to such Collateral.

 

**Binding Effect**. This Agreement, the Note, all Security Agreements (if any), and allRelated Documents are binding upon the signers thereof, as well as upon theirsuccessors, representatives and assigns, and are legally enforceable inaccordance with their respective terms.

 

**AFFIRMATIVE COVENANTS**. Borrower covenants and agrees with Lender that, so long as thisAgreement remains in effect, Borrower will:

 

**Notices of Claims and Litigation**. Promptly inform Lender in writing of (1) all material adverse changes inBorrower’s financial condition, and (2) all existing and all threatenedlitigation, claims, investigations, administrative proceedings or similaractions affecting Borrower or any Guarantor which could materially affect thefinancial condition of Borrower or the financial condition of any Guarantor.

 

**Financial Records**. Maintain its books and records in accordance with GAAP, applied on aconsistent basis, and permit Lender to examine and audit Borrower’s books andrecords at all reasonable times.

 

**Financial Statements**. Furnish Lender with the following:

 

**Annual Statements**. As soon as available, but in no event later than ninety (90) days afterthe end of each fiscal year, Borrower’s balance sheet and income statement forthe year ended, reviewed by a certified public accountant satisfactory toLender.

 

**Tax Returns**. As soon as available, but in no event later than one-hundred-twenty(120) days after the applicable filing date for the tax reporting period ended,Federal and other governmental tax returns, prepared by a certified publicaccountant satisfactory to Lender.

 

All financialreports required to be provided under this Agreement shall be prepared inaccordance with GAAP, applied on a consistent basis, and certified by Borroweras being true and correct.

 

**Additional Information**. Furnish such additional information and statements, as Lender mayrequest from time to time.

 

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**Financial Covenants and Ratios**. Comply with the following covenants and ratios:

 

**Tangible Net Worth Requirements**. Borrower shall comply with the following net worth ratio requirements:

 

**Debt to Equity Ratio**. Maintain a ratio of Debt to Equity in excess of **8.000 to 1.000**.  This leverage ratio will be evaluated as ofyear-end.

 

Except as providedabove, all computations made to determine compliance with the requirementscontained in this paragraph shall be made in accordance with generally acceptedaccounting principles, applied on a consistent basis, and certified by Borroweras being true and correct.

 

**Insurance**. Maintain fire and other risk insurance, public liability insurance, andsuch other insurance as Lender may require with respect to Borrower’sproperties and operations, in form, amounts, coverages and with insurancecompanies acceptable to Lender. Borrower, upon request of Lender, will deliver to Lender from time totime the policies or certificates of insurance in form satisfactory to Lender,including stipulations that coverages will not be cancelled or diminishedwithout at least ten (10) days prior written notice to Lender.  Each insurance policy also shall include anendorsement providing that coverage in favor of Lender will not be impaired inany way by any act, omission or default of Borrower or any other person.  In connection with all policies coveringassets in which Lender holds or is offered a security interest for the Loans,Borrower will provide Lender with such lender’s loss payable or otherendorsements as Lender may require.

 

**Insurance Reports**. Furnish to Lender, upon request of Lender, reports on each existinginsurance policy showing such information as Lender may reasonably request,including without limitation the following: (1) the name of the insurer; (2)the risks insured; (3) the amount of the policy; (4) the properties insured;(5) the then current property values on the basis of which insurance has beenobtained, and the manner of determining those values; and (6) the expirationdate of the policy.  In addition, uponrequest of Lender (however not more often than annually), Borrower will have anindependent appraiser satisfactory to Lender determine, as applicable, theactual cash value or replacement cost of any Collateral.  The cost of such appraisal shall be paid byBorrower.

 

**Guaranties**. Prior to disbursement of any Loan proceeds, furnish executed guarantiesof the Loans in favor of Lender, executed by the guarantor named below, onLender’s forms, and in the amount and under the conditions set forth in thoseguaranties.

 

| **Name of Guarantor** |   | **Amount**    |   |
|-----------------------|--------|---------------|--------|
| Steven J. WAGENHEIM   |   | **$750,000.00 |   |

 

**Other Agreements**. Comply with all terms and conditions of all other agreements, whethernor or hereafter existing, between Borrower and any other party and notifyLender immediately in writing of any default in connection with any other suchagreements.

 

**Loan Proceeds**. Use all Loan proceeds solely for the following specific purposes:  **Proceeds to be advanced based upon bank approval only.**

 

**Taxes, Charges and Liens**. Pay and discharge when due all of its indebtedness and obligations,including without limitation all assessments, taxes, governmental charges,levies and liens, of every kind and nature, imposed upon Borrower or itsproperties, income, or profits, prior to the date on which penalties wouldattach, and all lawful claims that, if unpaid, might become a lien or chargeupon any of Borrower’s properties, income, or profits.

 

**Performance**. Perform and comply, in a timely manner, with all terms, conditions, andprovisions set forth in this Agreement, in the Related Documents, and in allother instruments and agreements between Borrower and Lender.  Borrower shall notify Lender immediately inwriting of any default in connection with any agreement.

 

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**Operations**. Maintain executive and management personnel with substantially the samequalifications and experience as the present executive and managementpersonnel; provide written notice to Lender of any change in executive andmanagement personnel; conduct its business affairs in a reasonable and prudentmanner.

 

**Environmental Studies**. Promptly conduct and complete, at Borrower’s expense, all suchinvestigations, studies, samplings and testings as may be requested by Lenderor any governmental authority relative to any substance, or any waste orby-product of any substance defined as toxic or a hazardous substance underapplicable federal, state, or local law, rule, regulations, order or directive,at or affecting any property or any facility owned, leased or used by Borrower.

 

**Compliance with GovernmentalRequirements.**  Comply with all laws, ordinances, andregulations, now or hereafter in effect, of all governmental authoritiesapplicable to the conduct of Borrower’s properties, businesses and operations,and to the use or occupancy of the Collateral, including without limitation,the Americans With Disabilities Act. Borrower may contest in good faith any such law, ordinance, orregulation and withhold compliance during any proceeding, including appropriateappeals, so long as Borrower has notified Lender in writing prior to doing soand so long as, in Lender’s sole opinion, Lender’s interests in the Collateralare not jeopardized.  Lender may requireBorrower to post adequate security or a surety bond, reasonably satisfactory toLender, to protect Lender’s interest.

 

**Inspection.** Permit employees or agents of Lender at any reasonable time to inspectany and all Collateral for the Loan or Loans and Borrower’s other propertiesand to examine or audit Borrower’s books, accounts, and records and to makecopies and memoranda of Borrower’s books, accounts, and records.  If Borrower now or at any time hereaftermaintains any records (including without limitation computer generated recordsand computer software programs for the generation of such records) in thepossession of a third party, Borrower, upon request of Lender, shall notifysuch party to permit Lender free access to such records at all reasonable timesand to provide Lender with copies of any records it may request, all atBorrower’s expense.

 

**Compliance Certificates.** Unless waived in writing by Lender, provide Lender at least annually,with a certificate executed by Borrower’s chief financial officer, or otherofficer or person acceptable to Lender, certifying that the representations andwarranties set forth in this Agreement are true and correct as of the date ofthe certificate and further certifying that, as of the date of the certificate,no Event of Default exists under this Agreement.

 

**Environmental Compliance and Reports.** Borrower shall comply in all respects with any and all EnvironmentalLaws; not cause or permit to exist, as a result of an intentional or unintentionalaction or omission on Borrower’s part or on the part of any third party, onproperty owned and/or occupied by Borrower, any environmental activity wheredamage may result to the environment, unless such environmental activity ispursuant to and in compliance with the conditions of a permit issued by theappropriate federal, state or local governmental authorities; shall furnish toLender promptly and in any event within thirty (30) days after receipt thereofa copy of any notice, summons, lien, citation, directive, letter or othercommunication from any governmental agency or instrumentality concerning anyintentional or unintentional action or omission on Borrower’s part inconnection with any environmental activity whether or not there is damage tothe environment and/or other natural resources.

 

**Additional Assurances.** Make, execute and deliver to Lender such promissory notes, mortgages,deeds of trust, security agreements, assignments, financing statements,instruments, documents and other agreements as Lender or its attorneys mayreasonably request to evidence and secure the Loans and to perfect all SecurityInterests.

 

**LENDER’S EXPENDITURES.** If any action or proceeding is commenced that would materially affectLender’s interest in the Collateral or if Borrower fails to comply with anyprovision of this Agreement or any Related Documents, including but not limitedto Borrower’s failure to discharge or pay when due any amounts Borrower isrequired to discharge or pay under this Agreement or any Related Documents,Lender on Borrower’s behalf may (but shall not be obligated to) take any actionthat Lender deems appropriate, including but not limited to discharging orpaying all taxes, liens, security interests, encumbrances and other claims, atany time levied or placed on any Collateral and paying all costs for insuring,maintaining and preserving any Collateral. All such expenditures

 

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incurred or paidby Lender for such purposes will then bear interest at the rate charged underthe Note from the date incurred or paid by Lender to the date of repayment byBorrower.  All such expenses will becomea part of the Indebtedness and, at Lender’s option, will (A) be payable ondemand; (B) be added to the balance of the Note and be apportioned among and bepayable with any installment payments to become due during either (1) the termof any applicable insurance policy; or (2) the remaining term of the Note; or(C) be treated as a balloon payment which will be due and payable at the Note’smaturity.

 

**NEGATIVE COVENANTS.** Borrower covenants and agrees with Lender that while this Agreement isin effect, Borrower shall not, without the prior written consent of Lender:

 

**Capital Expenditures.** Make or contract to make capital expenditures, including leasehold improvements,in any fiscal year in excess of **$                    **or incur liability for rentals of property (including both real and personalproperty) in an amount which, together with capital expenditures, shall in anyfiscal year exceed such sum.

 

**Indebtedness and Liens.** (1) Except for trade debt incurred in the normal course of business andindebtedness to Lender contemplated by this Agreement, create, incur or assumeindebtedness for borrowed money, including capital leases, (2) sell, transfer,mortgage, assign, pledge, lease, grant a security interest in, or encumber anyof Borrower’s assets (except as allowed as Permitted Liens), or (3) sell withrecourse any of Borrower’s accounts, except to Lender.

 

**Additional Financial Restrictions.** This line of credit to be paid in full prior to stated maturity dateincluding all outstanding accrued interest.

 

**Continuity of Operations.** (1) Engage in any business activities substantially different than thosein which Borrower is presently engaged, (2) cease operations, liquidate, merge,transfer, acquire or consolidate with any other entity, change its name,dissolve or transfer or sell Collateral out of the ordinary course of business,or (3) pay any dividends on Borrowers stock (other than dividends payable in itsstock), provided, however that notwithstanding the foregoing, but only so longas no Event of Default has occurred and is continuing or would result from thepayment of dividends, if Borrower is a “Subchapter S Corporation” (as definedin the Internal Revenue Code of 1986, as amended), Borrower may pay cashdividends on its stock to its shareholders from time to time in amountsnecessary to enable the shareholders to pay income taxes and make estimatedincome tax payments to satisfy their liabilities under federal and state lawwhich arise solely from their status as Shareholders of a Subchapter SCorporation because of their ownership of shares of Borrower’s stock, orpurchase or retire any of Borrower’s outstanding shares or alter or amendBorrower’s capital structure.

 

**Loans, Acquisitions and Guaranties.** (1) Loan, invest in or advance money or assets to any other person,enterprise or entity, (2) purchase, create or acquire any interest in any otherenterprise or entity, or (3) incur any obligation as surety or guarantor otherthan in the ordinary course of business.

 

**Agreements.** Borrower will not enter into any agreement containing any provisionswhich would be violated or breached by the performance of Borrower’sobligations under this Agreement or in connection herewith.

 

**CESSATION OF ADVANCES.** If Lender has made any commitment to make any Loan to Borrower, whetherunder this Agreement or under any other agreement, Lender shall have noobligation to make Loan Advances or to disburse Loan proceeds if: (A) Borroweror any Guarantor is in default under the terms of this Agreement or any of theRelated Documents or any other agreement that Borrower or any Guarantor haswith Lender; (B) Borrower or any Guarantor dies, becomes incompetent or becomesinsolvent, files a petition in bankruptcy or similar proceedings, or isadjudged a bankrupt; (C) there occurs a material adverse change in Borrower’sfinancial condition, in the financial condition of any Guarantor, or in thevalue of any Collateral securing any Loan; or (D) any Guarantor seeks, claimsor otherwise attempts to limit, modify or revoke such Guarantor’s guaranty ofthe Loan or any other loan with Lender; or (E) Lender in good faith deemsitself insecure, even though no Event of Default shall have occurred.

 

**RIGHT OF SETOFF.** To the extent permitted by applicable law, Lender reserves a right ofsetoff in all Borrower’s accounts with Lender (whether checking, savings, orsome other account).  This includes allaccounts Borrower holds jointly with someone else and all accounts Borrower mayopen in the future.  However, this doesnot include any IRA or Keogh accounts, or any trust accounts for which setoffwould be prohibited by law.  Borrowerauthorizes Lender, to the extent permitted by applicable law, to charge orsetoff all sums owing on the indebtedness against any

 

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and all suchaccounts, and, at Lender’s option, to administratively freeze all such accountsto allow Lender to protect Lender’s charge and setoff rights provided in thisparagraph.

 

**DEFAULT.** Each of the following shall constitute an Event of Default under thisAgreement:

 

**Payment Default.** Borrower fails to make any payment when due under the Loan.

 

**Other Defaults.** Borrower fails to comply with or to perform any other term, obligation,covenant or condition contained in this Agreement or in any of the RelatedDocuments or to comply with or to perform any term, obligation, covenant orcondition contained in any other agreement between Lender and Borrower.

 

**Default in Favor of Third Parties.** Borrower or any Grantor defaults under any loan, extension of credit,security agreement, purchase or sales agreement, or any other agreement, infavor of any other creditor or person that may materially affect any ofBorrower’s or any Grantor’s property or Borrower’s or any Grantor’s ability torepay the Loans or perform their respective obligations under this Agreement orany of the Related Documents.

 

**False Statements.** Any warranty, representation or statement made or furnished to Lender byBorrower or on Borrower’s behalf under this Agreement or the Related Documentsis false or misleading in any material respect, either now or at the time madeor furnished or becomes false or misleading at any time thereafter.

 

**Insolvency.** The dissolution or termination of Borrower’s existence as a goingbusiness, the insolvency of Borrower, the appointment of a receiver for anypart of Borrower’s property, any assignment for the benefit of creditors, anytype of creditor workout, or the commencement of any proceeding under anybankruptcy or insolvency laws by or against Borrower.

 

**Defective Collateralization.** This Agreement or any of the Related Documents ceases to be in fullforce and effect (including failure of any collateral document to create avalid and perfected security interest or lien) at any time and for any reason.

 

**Creditor or Forfeiture Proceedings.** Commencement of foreclosure or forfeiture proceedings, whether byjudicial proceeding, self-help, repossession or any other method, by anycreditor of Borrower or by any governmental agency against any collateralsecuring the Loan.  This includes agarnishment of any of Borrower’s accounts, including deposit accounts, withLender.  However, this Event of Defaultshall not apply if there is a good faith dispute by Borrower as to the validityor reasonableness of the claim which is the basis of the creditor or forfeitureproceeding and if Borrower gives Lender written notice of the creditor orforfeiture proceeding and deposits with Lender monies or a surety bond for thecreditor or forfeiture proceeding, in an amount determined by Lender, in itssole discretion, as being an adequate reserve or bond for the dispute.

 

**Events Affecting Guarantor.** Any of the preceding events occurs with respect to any Guarantor of anyof the Indebtedness or any Guarantor dies or becomes incompetent, or revokes ordisputes the validity of, or liability under, any Guaranty of theIndebtedness.  In the event of a death,Lender, at its option, may, but shall not be required to, permit theGuarantor’s estate to assume unconditionally the obligations arising under theguaranty in a manner satisfactory to Lender, and, in doing so, cure any Eventof Default.

 

**Change in Ownership.** Any change in ownership of twenty-five percent (25%) or more of thecommon stock of Borrower.

 

**Adverse Change.** A material adverse change occurs in Borrower’s financial condition, orLender believes the prospect of payment or performance of the Loan is impaired.

 

**Insecurity.** Lender in good faith believes itself insecure.

 

**Right to Cure.** If any default, other than a default on Indebtedness, is curable and ifBorrower or Grantor, as the case may be, has not been given a notice of asimilar default within the preceding twelve (12) months, it may be cured if Borroweror Grantor, as the case may be, after receiving written notice from Lenderdemanding cure of such default:  (1)cure the default within ten (10) days, or (2) if the cure requires more thanten (10) days, immediately initiate steps which Lender deems in Lender’s solediscretion to be

 

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sufficient to curethe default and thereafter continue and complete all reasonable and necessarysteps sufficient to produce compliance as soon as reasonably practical.

 

**EFFECT OF AN EVENT OF DEFAULT.** If any Event of Default shall occur, except where otherwise provided inthis Agreement or the Related Documents, all commitments and obligations ofLender under this Agreement or the Related Documents or any other agreementimmediately will terminate (including any obligation to make further LoanAdvances or disbursements), and, at Lender’s option, all Indebtednessimmediately will become due and payable, all without notice of any kind toBorrower, except that in the case of an Event of Default of the type describedin the “Insolvency” subsection above, such acceleration shall be automaticand not optional.  In addition, Lendershall have all the rights and remedies provided in the Related Documents oravailable at law, in equity, or otherwise. Except as may be prohibited by applicable law, all of Lender’s rightsand remedies shall be cumulative and may be exercised singularly orconcurrently.  Election by Lender topursue any remedy shall not exclude pursuit of any other remedy, and anelection to make expenditures or to take action to perform an obligation ofBorrower or of any Grantor shall not affect Lender’s right to declare a defaultand to exercise its rights and remedies.

 

**MISCELLANEOUS PROVISIONS.** The following miscellaneous provisions are a part of this Agreement:

 

**Amendments.** This Agreement, together with any Related Documents, constitutes theentire understanding and agreement of the parties as to the matters set forthin this Agreement.  No alteration of oramendment to this Agreement shall be effective unless given in writing andsigned by the party or parties sought to be charged or bound by the alterationor amendment.

 

**Attorneys’ Fees; Expenses.** Borrower agrees to pay upon demand all of Lender’s costs and expenses,including Lender’s attorneys’ fees and Lender’s legal expenses, incurred inconnection with the enforcement of this Agreement.  Lender may hire or pay someone else to help enforce thisAgreement, and Borrower shall pay the costs and expenses of such enforcement.  Costs and expenses include Lender’sattorneys’ fees and legal expenses whether or not there is a lawsuit, includingattorneys’ fees and legal expenses for bankruptcy proceedings (includingefforts to modify or vacate any automatic stay or injunction), appeals, and anyanticipated post-judgment collection services. Borrower also shall pay all court costs and such additional fees as maybe directed by the court.

 

**Caption Headings.** Caption headings in this Agreement are for convenience purposes only andare not to be used to interpret or define the provisions of this Agreement.

 

**Consent to Loan Participation.** Borrower agrees and consents to Lender’s sale or transfer, whether nowor later, of one or more participation interests in the Loan to one or morepurchasers, whether related or unrelated to Lender.  Lender may provide, without any limitation whatsoever, to any oneor more purchasers, or potential purchasers, any information or knowledgeLender may have about Borrower or about any other matter relating to the Loan,and Borrower hereby waives any rights to privacy Borrower may have with respectto such matters.  Borrower additionallywaives any and all notices of sale of participation interests, as well as allnotices of any repurchase of such participation interests.  Borrower also agrees that the purchasers ofany such participation interests will be considered as the absolute owners ofsuch interests in the Loan and will have all the rights granted under theparticipation agreement or agreements governing the sale of such participation interests.  Borrower further waives all rights of offsetor counterclaim that it may have now or later against Lender or against anypurchaser of such a participation interest and unconditionally agrees thateither Lender or such purchaser may enforce Borrower’s obligation under theLoan irrespective of the failure or insolvency of any holder of any interest inthe Loan.  Borrower further agrees thatthe purchaser of any such participation interests may enforce its interestsirrespective of any personal claims or defenses that Borrower may have againstLender.

 

**Governing Law.  This Agreement will be governed by,construed and enforced in accordance with federal law and the laws of the Stateof South Dakota.  This Agreement hasbeen accepted by Lender in the State of South Dakota.**

 

**No Waiver by Lender.** Lender shall not be deemed to have waived any rights under thisAgreement unless such waiver is given in writing and signed by Lender.  No delay or omission on the part of Lenderin exercising any right shall operate as a waiver of such right or any otherright.  A waiver by Lender of aprovision of this Agreement shall not prejudice or constitute a waiver ofLender’s right otherwise to demand strict compliance with that provision or anyother provision of this Agreement.  Noprior waiver by Lender, nor any course of dealing between Lender and Borrower,or between Lender and any Grantor, shall

 

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constitute awaiver of any of Lender’s rights or of any of Borrower’s or any Grantor’sobligations as to any future transactions. Whenever the consent of Lender is required under this Agreement, thegranting of such consent by Lender in any instance shall not constitutecontinuing consent to subsequent instances where such consent is required andin all cases such consent may be granted or withheld in the sole discretion ofLender.

 

**Notices.** Any notice required to be given under this Agreement shall be given inwriting, and shall be effective when actually delivered, when actually receivedby telefacsimile (unless otherwise required by law), when deposited with anationally recognized overnight courier, or, if mailed, when deposited in theUnited States mail, as first class, certified or registered mail postageprepaid, directed to the addresses shown near the beginning of thisAgreement.  Any party may change itsaddress for notices under this Agreement by giving formal written notice to theother parties, specifying that the purpose of the notice is to change theparty’s address.  For notice purposes,Borrower agrees to keep Lender informed at all times of Borrower’s currentaddress.  Unless otherwise provided orrequired by law, if there is more than one Borrower, any notice given by Lenderto any Borrower is deemed to be notice given to all Borrowers.

 

**Severability.**  Ifa court of competent jurisdiction finds any provision of this Agreement to beillegal, invalid, or unenforceable as to any circumstance, that finding shallnot make the offending provision illegal, invalid, or unenforceable as to anyother circumstance.  If feasible, theoffending provision shall be considered modified so that it becomes legal,valid and enforceable.  If the offendingprovision cannot be so modified, it shall be considered deleted from thisAgreement.  Unless otherwise required bylaw, the illegality, invalidity, or unenforceability of any provision of thisAgreement shall not affect the legality, validity or enforceability of anyother provision of this Agreement.

 

**Subsidiaries and Affiliates ofBorrower.**  To the extent the context of any provisionsof this Agreement makes it appropriate, including without limitation anyrepresentation, warranty or covenant, the word “Borrower” as used in thisAgreement shall include all of Borrower’s subsidiaries and affiliates.  Notwithstanding the foregoing however, underno circumstances shall this Agreement be construed to require Lender to makeany Loan or other financial accommodation to any of Borrower’s subsidiaries oraffiliates.

 

**Successors and Assigns.** All covenants and agreements by or on behalf of Borrower contained inthis Agreement or any Related Documents shall bind Borrower’s successors andassigns and shall inure to the benefit of Lender and its successors andassigns.  Borrower shall not, however,have the right to assign Borrower’s rights under this Agreement or any interesttherein, without the prior written consent of Lender.

 

**Survival of Representations andWarranties.**  Borrower understands and agrees that inextending Loan Advances, Lender is relying on all representations, warranties,and covenants made by Borrower in this Agreement or in any certificate or otherinstrument delivered by Borrower to Lender under this Agreement or the RelatedDocuments.  Borrower further agrees thatregardless of any investigation made by Lender, all such representations,warranties and covenants will survive the extension of Loan Advances anddelivery to Lender of the Related Documents, shall be continuing in nature,shall be deemed made and redated by Borrower at the time each Loan Advance ismade, and shall remain in full force and effect until such time as Borrower’sIndebtedness shall be paid in full, or until this Agreement shall be terminatedin the manner provided above, whichever is the last to occur.

 

**Time is of the Essence.** Time is of the essence in the performance of this Agreement.

 

**Waive Jury.**  **All partiesto this Agreement hereby waive the right to any jury trial in any action,proceeding, or counterclaim brought by any party against any other party.**

 

**DEFINITIONS.** The following capitalized words and terms shall have the followingmeanings when used in this Agreement. Unless specifically stated to the contrary, all references to dollaramounts shall mean amounts in lawful money of the United States ofAmerica.  Words and terms used in thesingular shall include the plural, and the plural shall include the singular,as the context may require.  Words andterms not otherwise defined in this Agreement shall have the meaningsattributed to such terms in the Uniform Commercial Code.  Accounting words and terms not otherwisedefined in this Agreement shall have the meanings assigned to them inaccordance with generally accepted accounting principles as in effect on thedate of this Agreement:

 

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**Advance.** The word “Advance” means a disbursement of Loan funds made, or to bemade, to Borrower or on Borrower’s behalf on a line of credit or multipleadvance basis under the terms and conditions of this Agreement.

 

**Agreement.** The word “Agreement” means this Business Loan Agreement, as thisBusiness Loan Agreement may be amended or modified from time to time, togetherwith all exhibits and schedules attached to this Business Loan Agreement fromtime to time.

 

**Borrower.** The word “Borrower” means Granite City Food & Brewery Ltd., aMinnesota Corporation and includes all co-signers and co-makers signing theNote.

 

**Collateral.** The word “Collateral” means all property and assets granted ascollateral security for a Loan, whether real or personal property, whethergranted directly or indirectly, whether granted now or in the future, andwhether granted in the form of a security interest, mortgage, collateralmortgage, deed of trust, assignment, pledge, crop pledge, chattel mortgage,collateral chattel mortgage, chattel trust, factor’s lien, equipment trust, conditionalsale, trust receipt, lien, charge, lien or title retention contract, lease orconsignment intended as a security device, or any other security or lieninterest whatsoever, whether created by law, contract, or otherwise.

 

**Environmental Laws.** The words “Environmental Laws” mean any and all state, federal and localstatutes, regulations and ordinances relating to the protection of human healthor the environment, including without limitation the ComprehensiveEnvironmental Response, Compensation, and Liability Act of 1980, as amended, 42U.S.C. Section 9601, et seq. (“CERCLA”), the Superfund Amendments andReauthorization Act of 1986, Pub. L. No. 99-499 (“SARA”), the HazardousMaterials Transportation Act, 49 U.S.C. Section 1801, et seq., the ResourceConservation and Recovery Act, 42 U.S.C. Section 6901, et seq., or otherapplicable state or federal laws, rules, or regulations adopted pursuantthereto.

 

**Event of Default.** The words “Event of Default” mean any of the events of default set forthin this Agreement in the default section of this Agreement.

 

**GAAP.**  The word“GAAP” means generally accepted accounting principles.

 

**Grantor.** The word “Grantor” means each and all of the persons or entitiesgranting a Security Interest in any Collateral for the Loan, including withoutlimitation all Borrowers granting such a Security Interest.

 

**Guarantor.** The word “Guarantor” means any guarantor, surety, or accommodation partyof any or all of the Loan.

 

**Guaranty.** The word “Guaranty” means the guaranty from Guarantor to Lender,including without limitation a guaranty of all or part of the Note.

 

**Hazardous Substances. **The words “Hazardous Substances” mean materials that,because of their quantity, concentration or physical, chemical or infectiouscharacteristics, may cause or pose a present or potential hazard to humanhealth or the environment when improperly used, treated, stored, disposed of,generated, manufactured, transported or otherwise handled.  The words “Hazardous Substances” are used intheir very broadest sense and include without limitation any and all hazardousor toxic substances, materials or waste as defined by or listed under theEnvironmental Laws.  The term “HazardousSubstances” also includes, without limitation, petroleum and petroleum by-productsor any fraction thereof and asbestos.

 

**Indebtedness.** The word “Indebtedness” means the indebtedness evidenced by the Note orRelated Documents, including all principal and interest together with all otherindebtedness and costs and expenses for which Borrower is responsible underthis Agreement or under any of the Related Documents.

 

**Lender.** The word “Lender” means First National Bank, its successors and assigns.

 

**Loan.**  The word“Loan” means any and all loans and financial accommodations from Lender toBorrower whether now or hereafter existing, and however evidenced, includingwithout limitation those loans and

 

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financialaccommodations described herein or described on any exhibit orschedule attached to this Agreement from time to time.

 

**Note.**  The word“Note” means the Note executed by Granite City Food & Brewery Ltd., aMinnesota Corporation in the principal amount of $750,000.00 datedApril 14, 2004, together with all renewals of, extensions of,modifications of, refinancings of, consolidations of, and substitutions for thenote or credit agreement.

 

**Permitted Liens.** The words “Permitted Liens” mean (1) liens and security interestssecuring indebtedness owed by Borrower to Lender; (2) liens for taxes,assessments, or similar charges either not yet due or being contested in goodfaith; (3) liens of materialmen, mechanics, warehousemen, or carriers, or otherlike liens arising in the ordinary course of business and securing obligationswhich are not yet delinquent; (4) purchase money liens or purchase moneysecurity interests upon or in any property acquired or held by Borrower in theordinary course of business to secure indebtedness outstanding on the date ofthis Agreement or permitted to be incurred under the paragraph of this Agreementtitled “Indebtedness and Liens”; (5) liens and security interests which, as ofthe date of this Agreement, have been disclosed to and approved by the Lenderin writing; and (6) those liens and security interests which in the aggregateconstitute an immaterial and insignificant monetary amount with respect to thenet value of Borrower’s assets.

 

**Related Documents.** The words “Related Documents” mean all promissory notes, creditagreements, loan agreements, environmental agreements, guaranties, securityagreements, mortgages, deeds of trust, security deeds, collateral mortgages,and all other instruments, agreements and documents, whether now or hereafterexisting, executed in connection with the Loan.

 

**Security Agreement.** The words “Security Agreement” mean and include without limitation anyagreements, promises, covenants, arrangements, understandings or otheragreements, whether created by law, contract, or otherwise, evidencing,governing, representing, or creating a Security Interest.

 

**Security Interest.**  The words “Security Interest” mean, without limitation, any andall types of collateral security, present and future, whether in the form of alien, charge, encumbrance, mortgage, deed of trust, security deed, assignment,pledge, crop pledge, chattel mortgage, collateral chattel mortgage, chatteltrust, factor’s lien, equipment trust, conditional sale, trust receipt, lien ortitle retention contract, lease or consignment intended as a security device,or any other security or lien interest whatsoever whether created by law,contract, or otherwise.

 

**BORROWER ACKNOWLEDGES HAVING READ ALLTHE PROVISIONS OF THIS BUSINESS LOAN AGREEMENT AND BORROWER AGREES TO ITSTERMS.  THIS BUSINESS LOAN AGREEMENT ISDATED APRIL 14, 2004.**

 

 
| **BORROWER:**                                         |   |
|-------------------------------------------------------|--------|
|                                                  |   |
| **GRANITE  CITY FOOD & BREWERY LTD.,**            |   |
| **A  MINNESOTA CORPORATION**                          |   |
| **By:**                                               |   |   |   |
|                                                  |   | **Steven  J. WAGENHEIM, President of Granite City** |
| **Food  & Brewery Ltd., a Minnesota Corporation** |   |
|                                                  |   |
| **LENDER:**                                           |   |
|                                                  |   |
| **FIRST  NATIONAL BANK**                              |   |
| **By:**                                               |   |   |   |
| **Authorized Signer**                                 |   |
|                                                       |        |  |  |  |

** **

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