Document:

EXHIBIT 10.2

MASTER

EQUIPMENT FINANCE LEASE

THIS MASTER EQUIPMENT
FINANCE LEASE made and entered into this 19th day of September,
2006, is by and between DHW Leasing, L.L.C, a South Dakota limited liability
company, 230 S. Phillips Avenue, Suite 202, Sioux Falls, SD 57104 (“Lessor”) and Granite City Food & Brewery, Ltd., a
Minnesota corporation, 5402 Parkdale, Suite 101, St. Louis Park, MN 55416 (“Lessee”).

In consideration of the
mutual promises set forth below, the parties agree as follows:

1.                MASTER
LEASE.  This Master Lease
sets forth the terms and conditions upon which the parties intend to govern
various lease transactions.  Each
separate lease shall be evidenced by a numbered Schedule A, executed by Lessor
and Lessee, incorporating the terms hereof, as well as the particular terms of
such lease (each, a “Lease”).  In the
event the terms of the Lease conflict with the terms of this Master Lease, the
Lease terms shall prevail.  Lessor hereby
leases to Lessee, and Lessee hereby leases from Lessor, all machinery,
equipment, and other personal property described in each Schedule A (hereafter
collectively called the “Equipment”).  The Equipment is, and shall at all times be,
the sole and exclusive property of Lessor, and Lessee shall have no right,
title, or interest in or to the Equipment except the right to quiet use of the
Equipment and the right to purchase the Equipment as provided in the
Lease.  Each Lease incorporating this
Master Lease or made a part hereof shall be characterized as a “finance lease” within the meaning of Article 2A of the
Uniform Commercial Code (“Article 2A”), whether or not each requirement of the
definition thereof has been technically or strictly met.  Lessee acknowledges and agrees that this
Master Lease and any Lease is intended as a “Finance Lease” as determined in
Minn. State. Section 336.2A-103(1)(G) and that Lessor is entitled to all
benefits, privileges and protections of a Lessor under a Finance Lease.

2.                TERM.  The term of each Lease shall commence upon
execution of the Lease and shall continue until Lessee has made all payments
required of it under the Lease.  For
purposes of the Lease, “Interim Period” shall mean the date as specified in an
applicable Schedule A, and generally meaning the time from which Lessor has
secured funds available to purchase the Equipment, through the time at which
the Equipment has been received and accepted by Lessee.

3.                RENT; FEES; INTERIM RENT.

(a)           As
rent for the Equipment, Lessee shall pay Lessor the rental set forth on the
applicable Schedule A, payable monthly beginning on the First Payment Date (as
set forth in the applicable Schedule A) and continuing on the same day of each successive month
until the number of payments required under such Schedule A are made.  In addition, Lessee shall pay the amount of
any personal property taxes, including sales and use taxes, all maintenance,
insurance, and other costs or expenses related to the Equipment or Lessee’s
obligations under the Lease.

 

(b)           In addition to the rent described in (a) above, Lessee
shall pay to Lessor upon execution of each Lease, an upfront fee equal to 0.25%
of the principal amount financed by each Lease, as well as any other filing and
recording fees related to the origination of each loan underlying the purchase
and lease of Equipment under the Lease.

(c)           For interest accruing on monies advanced during the
Interim Period, Lessee shall pay Lessor interim rent at the daily interest rate
set forth in the applicable Schedule A.

(d)           Lessee’s obligation to pay rent to Lessor shall be irrevocable
and independent, and is not subject to cancellation, termination, modification,
repudiation, excuse, or substitution without the express written consent of
Lessor, which consent may be withheld in its sole discretion.

(e)           All payments of rent shall be made at the address set
forth above, or at such other place as Lessor may designate in writing.  In the event Lessee fails to pay rent within
ten (10) days of its due date, it shall pay a late charge equal to five percent
(5%) of that payment, but not less than $5.00 (or if a lesser amount is
required by law, such lesser amount) and following Lessor’s delivery of written
notice of default to Lessee with ten (10) days opportunity to cure, Lessee
shall pay interest on the amount of each such delinquent payment at the rate of
18% per annum (or if a lesser amount is required by law, such lesser amount)
until paid.  Such interest calculations
shall be computed for the actual number of days elapsed between the date such
payment was due and the date such payment is actually received by Lessor.

(f)            PROVIDED THAT LESSOR PURCHASES THE EQUIPMENT, THE LEASE
IS A NET LEASE AND LESSEE ACKNOWLEDGES AND AGREES THAT LESSEE’S OBLIGATION TO
PAY ALL RENT AND ALL OTHER AMOUNTS REQUIRED HEREUNDER AND TO THE EXTENT SET
FORTH HEREIN AND IN THE SCHEDULE A AND THE RIGHTS OF LESSOR IN AND TO SUCH
RENTALS AND SUCH OTHER AMOUNTS SHALL BE ABSOLUTE AND UNCONDITIONAL, AND SHALL
NOT BE AFFECTED BY OR SUBJECT TO ANY CIRCUMSTANCE, INCLUDING, WITHOUT
LIMITATION, (A) ANY SETOFF, COUNTERCLAIM, ABATEMENT, RECOUPMENT, REDUCTION,
DEFENSE, OR OTHER RIGHTS OF LESSEE OR THE MANUFACTURER OR SUPPLIER OF THE
EQUIPMENT FOR ANY REASON WHATSOEVER, (B) ANY DEFECT IN DESIGN, CONDITION,
OPERATION, FITNESS FOR PURPOSE OR USE OF, OR ANY DAMAGE TO OR LOSS OR
DESTRUCTION OF, THE EQUIPMENT OR ANY INTERRUPTION OR CESSATION IN THE USE OR
THE POSSESSION THEREOF BY LESSEE FOR ANY REASON WHATSOEVER, (C) ANY INSOLVENCY,
BANKRUPTCY, REORGANIZATION OR SIMILAR PROCEEDING BY OR AGAINST LESSEE OR LESSOR,
OR (D) ANY OTHER CIRCUMSTANCE, HAPPENING OR EVENT WHATSOEVER, WHETHER OR NOT
SIMILAR TO THE FOREGOING INCLUDING WITHOUT LIMITATION, THE INVALIDITY, LACK OF
ENFORCEABILITY OR DUE AUTHORIZATION OF THE LEASE OR ANY PROVISION HEREOF, OR
THE EXISTENCE OF ANY MORTGAGES, LIENS (WHICH TERM THROUGHOUT THE LEASE SHALL
INCLUDE, WITHOUT LIMITATION, SECURITY INTERESTS), CHARGES, ENCUMBRANCES OR
CLAIMS OR RIGHTS OF OTHERS WHATSOEVER WITH RESPECT TO THE EQUIPMENT, WHETHER OR
NOT RESULTING FROM CLAIMS AGAINST LESSOR NOT RELATED TO THE OWNERSHIP OF THE
EQUIPMENT.  IT IS 

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THE INTENTION OF THE PARTIES THAT ALL RENT AND OTHER AMOUNTS PAYABLE BY
LESSEE HEREUNDER SHALL BE PAYABLE IN ALL EVENTS IN THE MANNER AND AT THE TIMES
HEREIN PROVIDED UNLESS LESSEE’S OBLIGATIONS IN RESPECT THEREOF HAVE BEEN
TERMINATED PURSUANT TO THE EXPRESS PROVISIONS OF THE LEASE.  NOTHING IN THIS SECTION 3(f) SHALL CONSTITUTE
A WAIVER OF LESSEE’S RIGHT TO MAKE A CLAIM FOR DAMAGES AGAINST LESSOR ARISING
OUT OF LESSOR’S BREACH OF THE TERMS AND CONDITIONS OF THIS MASTER LEASE OR ANY
LEASE OR ANY OTHER CONTRACTUAL COMMITMENT BY LESSOR TO LESSEE.

4.                USE.  Lessee shall use the Equipment in accordance
with all insurance policies, in a careful and proper manner and shall comply
with and conform to all national, state, municipal and other laws, ordinances
and regulations relating to the possession, use or maintenance of the
Equipment.  If at any time during the
term of the Lease Lessor supplies Lessee with labels, plates or other markings
stating that the Equipment is owned by Lessor, Lessee shall affix and keep the
same upon a prominent place on the Equipment. 
Lessee’s use of the Equipment shall be confined to the location
described in Schedule A or at such other location as Lessor shall approve in
advance in writing.  Lessee shall not
permit the Equipment to be used by anyone other than Lessee’s employees and
patrons.

5.                LESSEE’S SELECTION OF EQUIPMENT AND INSPECTION.  Lessee represents that it selects the
Equipment and the supplier of the Equipment. 
Lessor agrees to order the Equipment from the supplier in accordance
with Lessor’s customary practices, and Lessor shall not be obligated to lease
the Equipment to Lessee unless the supplier fills the order.  Lessor shall have no liability because of any
delay or default by the supplier in filling the order.  Lessee will accept the Equipment if delivered
in good repair and authorizes Lessor to add to the Schedules any serial numbers
or other identification of the Equipment when known.  Any delay in the delivery of the Equipment
will not affect the validity of this Master Lease or any Lease.  Lessee shall inspect and test, if appropriate,
the Equipment immediately upon delivery and if the Equipment is found to be in
good order and Lessee is satisfied with the Equipment, Lessee shall execute and
deliver to Lessor prior to the Commencement Date an acceptance certificate in
form satisfactory to Lessor (hereinafter termed “Acceptance”).  Lessee’s execution of the Acceptance shall
constitute Lessee’s acknowledgment as between Lessor and Lessee that the
Equipment is in good repair and condition, has been installed properly, has
been placed in service as of the date of the certificate, and is performing
satisfactorily, and is of the manufacture, design and capacity selected by
Lessee and that Lessee is satisfied that the same is suitable for its
purpose.  To the extent Lessee has a
right to revoke, reject or return the Equipment as nonconforming,
unsatisfactory, in breach of any warranty or otherwise, or to cancel or
repudiate this Master Lease or any Schedule A, upon execution and delivery of
said Acceptance Lessee waives all such rights (provided, that Lessor grants to
Lessee authority to pursue all rights for a breach of express or implied
warranties against the Equipment manufacturer or supplier).

6.                LESSOR’S INSPECTION.  Upon reasonable notice to Lessee, Lessor may
inspect any of the Equipment at any reasonable time.  Lessee shall, upon request by Lessor, advise
Lessor in writing of the exact location of the Equipment.

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7.                ALTERATIONS.  Lessee shall not make any alterations,
additions or improvements to the Equipment without the prior written consent of
Lessor provided, however, that nothing contained in this Paragraph 7 shall be
deemed to prohibit Lessee from performing ordinary maintenance and repairs to
the Equipment as required by Paragraph 9 of this Master Lease.  Title to all parts added to the Equipment
through alterations, additions or improvements shall immediately vest in
Lessor.

8.                TAXES.  Lessee shall be responsible for all federal,
state, county and municipal taxes, assessments or other governmental charges
including, without intending to limit the generality of the foregoing, any
personal property taxes incurred in connection with the shipment, use,
operation, ownership, leasing, sale or possession of the Equipment during the
term of the Lease, excepting only taxes on Lessor’s income.  Lessee shall comply with all state and local
laws requiring the filing of ad valorem tax returns on the Equipment.  Any statements for such taxes received by
Lessor shall be forwarded promptly to the Lessee by the Lessor for payment or,
if paid by Lessor, shall be reimbursable to Lessor upon presentment to Lessee
of Lessor’s invoice therefor.  Lessee
shall keep the Equipment free and clear of all levies, attachments, liens, and
encumbrances other than those being contested in good faith by appropriate
proceedings and which, as a result of such contest, do not adversely threaten
Lessor’s title to the Equipment.  Lessee
shall give Lessor immediate written notice of attempted levies, attachments,
liens, encumbrances, or other judicial process of every kind whatsoever and
shall cooperate with Lessor, and take whatever action may be necessary, to
enable Lessor to file, register, or record this Master Lease or such other
notice as Lessor may determine and wherever required or permitted by law for
the proper protection of Lessor’s title to the Equipment; and Lessee shall pay
all costs, charges and expenses incident thereto.  Any filing, registration or recording made by
Lessor shall not be deemed evidence of any intent to create a security interest
under the Uniform Commercial Code.

9.                REPAIRS; COSTS; RISK OF LOSS.  Lessee shall, at its own expense, keep the
Equipment in first class condition, repair, and working order, reasonable wear
and tear only excepted, and shall furnish all parts, mechanisms, and devices
required to keep the Equipment in good mechanical and working order.  Lessee shall pay all costs, fees, expenses
and charges incurred in connection with the shipment, use, operation, ownership,
leasing, sale or possession of the Equipment during the term of the Lease.

Lessee hereby assumes all
risk of loss, damage, theft or destruction of the Equipment from any cause
whatsoever from the date the Equipment is shipped by the vendor or
manufacturer.  No loss, damage, theft, or
destruction of or to the Equipment or any part thereof shall impair or abate
any obligation of Lessee under the Lease, which shall continue in full force
and effect, except as provided in the Lease.

(a)           In the event of loss or destruction of the Equipment from
any cause whatsoever from the date the Equipment is shipped by the vendor or
manufacturer to the date of Acceptance by the Lessee, which risk of loss or
destruction may be borne by the vendor or manufacturer pursuant to the terms of
any purchase order, contract of sale, or under applicable law, Lessor shall
promptly attempt to obtain recovery from the vendor or manufacturer with
respect to such loss or destruction of the Equipment.  Lessor shall not be required to commence
litigation against such vendor or 

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manufacturer, and if Lessor determines, in its sole discretion, that
such vendor or manufacturer will not pay Lessor in full on account for such
loss or destruction of the Equipment or will not otherwise satisfy Lessor with
respect to such loss or destruction, Lessor will assign or otherwise make
available to Lessee all of Lessor’s rights or causes of action against such
vendor or manufacturer with respect to such loss or destruction of the
Equipment upon payment by Lessee to Lessor of all sums theretofore paid by
Lessor to such vendor or manufacturer for the Equipment.

(b)           In the event of damage of any kind whatsoever to any item
of the Equipment on or after the date of Acceptance by Lessee, Lessee shall, at
Lessor’s option, either place the same in good repair, condition, and working
order or if, Lessee elects not to repair or replace the same, Lessee shall pay
Lessor the “Stipulated Loss Value” in cash as
set forth in Schedule A within thirty (30) days after the occurrence of any of
the foregoing events.  “Stipulated Loss
Value” shall not exceed 100% of the amount of the remaining principal balance
of the loan used to finance the Lease.. 
Upon such payment the Lease shall terminate with respect to such item of
Equipment and Lessee thereupon shall become entitled to such item of Equipment AS-IS-WHERE-IS
without warranty from Lessor, express or implied, with respect to any matter
whatsoever except as provided in Section 10(b) herein.

10.              DISCLAIMER OF WARRANTIES; ASSIGNMENT OF
MANUFACTURER’S WARRANTIES. 
Lessee acknowledges and agrees that it has selected each item, type,
quality, quantity and supplier of Equipment based upon its own judgment and
disclaims any reliance upon any statements or representations made by Lessor,
and agrees that the Equipment is of a design, size, quality and capacity
required by Lessee and is suitable for its purpose.  Lessee covenants that it shall not assert any
claim or cause of action against Lessor based on or arising out of the
Equipment or any use thereof.

(a)           EXCEPT AS SET FORTH IN SECTION 10(b) BELOW, LESSOR MAKES
NO WARRANTIES OR REPRESENTATIONS, EXPRESS OR IMPLIED, AS TO VALUE, DESIGN,
CONDITION, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF THE EQUIPMENT
OR ANY OTHER REPRESENTATION OR WARRANTY WITH RESPECT TO THE EQUIPMENT, AND AS
TO LESSOR, LESSEE LEASES THE EQUIPMENT AS IS. 
LESSOR SHALL HAVE NO RESPONSIBILITY TO LESSEE OR ANY OTHER PERSON WITH
RESPECT TO ANY OF THE FOLLOWING: (i) ANY LIABILITY (INCLUDING, WITHOUT
LIMITATION, STRICT OR ABSOLUTE LIABILITY IN TORT OR BY STATUTE IMPOSED), LOSS
OR DAMAGE CAUSED OR ALLEGED TO BE CAUSED DIRECTLY OR INDIRECTLY BY THE
EQUIPMENT OR BY ANY OTHER CIRCUMSTANCES IN CONNECTION THEREWITH, (ii) THE USE,
OPERATION OR PERFORMANCE OF THE EQUIPMENT OR ANY RISKS RELATING THERETO, (iii)
ANY DELAY IN OBTAINING THE EQUIPMENT OR ANY INTERRUPTION OF SERVICE, LOSS OF
BUSINESS OR ANTICIPATED PROFITS OR CONSEQUENTIAL DAMAGES, (iv) DELIVERY,
INSTALLATION, OPERATION, SERVICING, MAINTENANCE, REPAIR, IMPROVEMENT OR
REPLACEMENT OF THE EQUIPMENT OR (v) ANY OTHER DAMAGES WHATSOEVER AND HOWSOEVER
CAUSED.  Upon Lessor’s delivery of
Equipment to Lessee, and in the absence of any default hereunder, any and all
rights and warranties extended by the Equipment manufacturer to Lessor in
connection with the purchase of the Equipment will be automatically transferred
and assigned to Lessee, to the extent permitted without necessity of further
action by either party.  Lessor further
agrees, but only if reasonably 

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required in order to satisfactorily prosecute the action, to join in
any action to enforce such rights or warranties, if any such action must be
brought in Lessor’s name; provided, however, that Lessee shall hold Lessor
harmless from any cost or expense incurred as a result of such action.  Notwithstanding any claim of breach of any
warranty against any person, Lessee’s obligations to pay the rental and all
other amounts payable under this Master Lease and the Schedules A are and shall
be absolute and unconditional.

(b)           Provided that Lessee performs its obligations under the
terms and conditions of the Lease. 
Lessor represents and warrants that Lessor has good and marketable title
to the Equipment and that the Equipment is not and shall not become subject to
any lien, claim or encumbrance of any third party claiming through Lessor,
except Lessor’s lender as provided in Section 19, and that Lessee shall enjoy
quiet possession of the Equipment.

11.              OPTION TO PURCHASE OR SURRENDER.  Lessee shall have an option to purchase the
Equipment for $1.00 upon the payment in full of all rent payments due
thereunder.  In the event of expiration
or earlier cancellation of this Master Lease or any Lease, unless Lessee
exercises its option to purchase, Lessee shall, at its own cost and expense,
surrender the Equipment to Lessor unencumbered and in good repair, condition,
and working order, ordinary wear and tear resulting from proper use thereof
alone excepted, in any reasonable manner as may be specified in writing by
Lessor.

12.              INSURANCE.  Lessee shall, at its own expense, maintain
insurance with respect to all of the Equipment covering all risks of loss or
damage by fire, and such other risks as covered by “extended
coverage” endorsements, in such amounts, in such form and substance
reasonably satisfactory to Lessor, and with such companies as Lessor shall
reasonably approve.  The underwriter of
such insurance shall at all times during the term of the Lease maintain a
rating of “B+” or better by A. M. best or
equivalent.  All policies shall name
Lessor and Lessor’s lender as insureds as their interest may appear (or as loss
payees).  Lessee shall pay the premiums
therefor and deliver to Lessor the policies of insurance or duplicates thereof,
or other evidence satisfactory to Lessor showing such coverages to be in
effect.  Each insurer shall agree, by
endorsement upon the policy or policies issued by it or by independent
instruments furnished to Lessor, that it will give Lessor thirty (30) days
written notice before the effective date of any alteration or cancellation of
such policy or policies.  The proceeds of
such insurance, at Lessee’s option, shall be applied toward the replacement,
restoration or repair of the Equipment or toward payment of the obligations of
Lessee under the Lease.  Lessor shall be
under no duty to ascertain the existence of such coverage or to advise Lessee
in the event such coverage does not comply with the requirements hereof.

13.              INDEMNITY.  Lessee shall indemnify Lessor against, and
hold Lessor, its officers, agents, employees, directors and shareholders
harmless from, any and all claims, actions, suits, proceedings, costs, demands,
damages and liabilities of whatever nature, and all costs and expenses,
including Lessor’s reasonable attorneys’ fees and expenses, on an after-tax
basis (collectively “Claims”), relating to or in any way arising out of (i)
injury to or death of any person, or damage to or loss of property, from the
ownership, management, control, use, possession, operation, violation of
environmental laws and regulations, storage, leasing, subleasing of,
relocations of, or any defect in, the Equipment (latent or otherwise,
discoverable or otherwise, or asserted under any “strict
liability” theory or otherwise) except to the extent that 

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such Claims arise out of the negligent act or omission of Lessor, (ii)
any breach of this Master Lease or Lease, and (iii) any damage to the premises
wherein the Equipment may be located caused by the installation, use or removal
thereof.  Lessee shall also indemnify
Lessor against, and hold Lessor harmless from, on an after tax basis, any and all federal,
state, county, municipal or other license fees or taxes whatsoever and
penalties and interest thereon (except for penalties and interest caused solely
by Lessor’s failure to timely file returns or make payments), whether assessed,
levied against, or payable by the Lessor or otherwise, with respect to the
Equipment or any portion thereof, this Master Lease, any Schedule A or the
purchase, sale, rental, use, operation, control, possession or ownership of the
Equipment or any portion thereof, this Master Lease, any Schedule A or measured
in any way by the value thereof, excepting only taxes on Lessor’s income.  Notwithstanding any provision in this Section
13, Lessee shall not be obligated to indemnify Lessor against consequential
damages.

14.              LESSOR’S PAYMENT.  In the event that Lessee fails to procure or
maintain insurance or to comply with any other provision of the Lease, Lessor
shall have the right, but shall not be obligated, to obtain such insurance or
compliance on behalf of Lessee.  In that
event, all monies spent and expenses incurred by Lessor in effecting such
insurance or compliance, including any reasonable legal fees incurred in
connection therewith, shall be paid by Lessee to Lessor with the next monthly
payment of rent.

15.              DEFAULT.  The occurrence of any of the following shall
constitute a Default by Lessee: (a) non-payment when due of any amount
due and payable under the Lease, which non-payment continues for more than ten
(10) days following the due date thereof; (b) failure to observe, keep, or
perform any other provision of this Master Lease or any Lease required to be
observed, kept, or performed by Lessee and failure of Lessee to remedy, cure,
or remove such failure in observing, keeping, or performing the provisions of
this Master Lease or Lease within ten (10) days after receipt of written notice
thereof from Lessor; (c) any statement, representation, or warranty of Lessee
in this Master Lease or Lease or in any other writing furnished by Lessee to
Lessor being, at any time, untrue in any material respect as of the date made;
(d) a petition under any chapter of Title 11 of the United States Code
(entitled “Bankruptcy”), as amended, being
brought by or against Lessee, which petition is not vacated or withdrawn within
ninety (90) days; (e) appointment of a receiver for any of the Equipment or for
any property in which Lessee has an interest; (f) seizure of any of the Equipment
for any reason other than a default of the Lease by Lessor; (g) default by
Lessee under any document, agreement or instrument evidencing obligations of
Lessee to Lessor, whether now existing or hereafter arising which default
continues for a period of more than ten (10) days following written notice
thereof to Lessee; (h) Lessee shall have liquidated or terminated its
corporate existence, consolidated with, merged (collectively a “Merger”) into
or conveyed or leased substantially all of its assets (collectively, a “Transfer”)
to any person; or (i) Lessee assigns the Master Lease or any Lease or subleases
the Equipment other than as specifically permitted in Paragraph 21.  For the purposes of this Agreement, a Merger
or Transfer transaction in which: (1) Shareholders of Lessee retain or succeed
to control of the transferee or entity surviving such transaction; (2)
individuals who are members of the incumbent board of directors of Lessee at
the time of the Transaction will constitute at least a majority of the members
of the board of directors of the entity resulting from the Merger or Transfer;
or (3) the Transfer is to a person or entity that is controlled by Lessee,
shall not constitute a Merger, Transfer or Default hereunder;

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16.              REMEDIES.  Upon the occurrence of any Default or any
time thereafter, Lessor may without any further notice exercise one or more of
the following remedies, as Lessor shall in its sole discretion elect: (i)
cancel the Lease; (ii) recover from Lessee the sum of (a) any unpaid rent
accrued prior to such acceleration and (b) the present value of all future
rentals reserved in the Lease and contracted to be paid over the unexpired
initial Term of the Lease discounted at the rate of 5% per annum; (iii) take
possession of the Equipment wherever found, and for this purpose enter upon any
premises of Lessee and remove the Equipment without any liability to Lessee or,
rather than take possession of the Equipment, render any and all of the
Equipment unusable without removing it from the premises, again without
liability to Lessee; (iv) proceed by appropriate action either at law or equity
to enforce performance by Lessee of its obligations under this Master Lease or
any Lease and to recover damages for the breach thereof; (v) sell or lease the
Equipment or any part thereof at public auction or private sale or lease at
such time or times upon such terms as Lessor may determine, free and clear of
any rights of Lessee, and if notice thereof is required by law, any notice in
writing of any such sale or sales by Lessor to Lessee not less than ten (10)
days prior to the date thereof shall constitute reasonable notice thereof; and
(vi) exercise any and all rights accruing to a lessor under applicable law upon
default by Lessee including without limitation all remedies provided under
Article 2A-523(1).  None of the
remedies hereunder is deemed to be exclusive, but each shall be cumulative and
in addition to any other remedies referred to herein or otherwise available to
Lessor in law and equity.  The repossession
or subsequent sale or lease by Lessor of any item of Equipment shall not bar an
action for deficiency as herein provided and the bringing of an action or the
entry of judgment against the Lessee shall not bar the Lessor’s rights to
repossess any or all items of Equipment.

Lessor shall be entitled to
recover immediately, as liquidated damages for unpaid rent and not as a penalty,
a sum equal to the aggregate of the following:

(a)           Any reasonable and customary expenses and losses incurred
by Lessor in connection with the repossession, holding, repair, subsequent sale
or lease, or disposition of the Equipment, including reasonable attorneys’ fees
if collected by law or through an attorney at law or upon advice therefrom;

(b)           The Stipulated Loss Value for any item of Equipment which
Lessee fails to return to Lessor as provided above, or converts or destroys, or
which Lessor is unable to repossess;

(c)           The Stipulated Loss Value for any item of Equipment
returned to Lessor less, if the Equipment is sold, the net proceeds of such
sale.

17.              PERSONAL PROPERTY.  The Equipment is, and shall at all times be
and remain, personal property notwithstanding that the Equipment or any part
thereof may now be, or hereafter become, in any manner affixed or attached to,
embedded in, or permanently resting upon, any real property, or attached in any
manner to what is permanent as by means of cement, plaster, nails, bolts,
screws or otherwise.

18.              TAX QUALIFICATIONS.  It is the Intent of Lessor and Lessee that
this Master Lease and any Lease constitute a capital lease for Federal and
State income tax purposes.  Lessee
acknowledges that for income tax purposes only, Lessor is treating Lessee as
owner of 

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the Equipment and that Lessee has neither sought, nor received, tax
advice from Lessor as to the availability of any tax benefits with respect to
the Equipment.

19.              LENDER REQUIREMENTS.  To the extent required by Lessor’s lender,
Lessee agrees to allow Lessor’s lender to issue payment directly to the
suppliers of the Equipment.  In addition,
if Lessor grants a security interest in the Equipment to a lender to secure
amounts due under any loan, such lender may perfect a security interest,
evidencing such lendor’s security interest in the Equipment.  However, prior to perfecting such security
interest, the lender must provide a nondisturbance agreement to Lessee
reasonably acceptable to Lessee agreeing not to disturb Lessee’s use and
possession of the Equipment, provided Lessee is not in default of the Lease
beyond any applicable cure periods, affirming Lessee’s rights under the Master
Lease and any Lease and further agreeing to honor the terms therein in the
event the lender were to foreclose on any loan underlying any such the Lease.

20.              FINANCIAL STATEMENTS.  Lessee shall annually, within one hundred
twenty (120) days after the close of Lessee’s fiscal year, furnish to Lessor
financial statements of Lessee  prepared
in accordance with generally accepted accounting principles and certified by
Lessee’s public accountant, as well as a copy of Lessee’s tax return for such
year.  Lessee shall also provide any
other financial information Lessor may require from time to time to ensure the
financial condition of Lessee is fairly represented.  If requested by Lessor, Lessee shall also
provide quarterly financial statements of Lessee similarly prepared for each of
the first three (3) quarters of each fiscal year, which shall be certified
(subject to normal year end audit adjustments) by Lessee’s chief financial
officer and furnished to Lessor within sixty (60) days following the end of the
quarter.  The obligations of Lessee to
provide financial information pursuant to this Section 20 shall be suspended
for any period in which Lessee files when due with the Securities and Exchange
Commission, Lessee’s Forms 10-K or 10-KSB and 10-Q or 10-QSB, and such forms
are available through the Securities and Exchange Commission’s website as EDGAR
documents.

21.              ASSIGNMENT.  (a) Lessee may assign or sublease any lease
to any Subsidiary.  The Assignment or Sublease
must be satisfactory in form and substance to Lessor, in Lessor’s reasonable
judgment, containing the subsidiary’s effective assumption and agreement to pay,
perform, comply with and otherwise be liable for all Lessee’s obligations under
such Lease.  No such Assignment or
Sublease shall relieve Lessee of liability under the Lease.  (b) Lessee acknowledges that the continuing
possessory interest of Lessee in the Equipment is material to the Lessor and
that any cessation of Lessee’s possession or a third party’s use of the
Equipment will substantially impair the value of the Master Lease or any Lease
to Lessor.  EXCEPT AS PERMITTED UNDER
SECTION 21(a) ABOVE, WITHOUT THE PRIOR WRITTEN CONSENT OF LESSOR, LESSEE
WILL NOT SUBLEASE OR ASSIGN THE EQUIPMENT TO A THIRD PARTY, including without
intending to limit the generality of the foregoing, any assignment or transfer
pursuant to or as part of a Merger or Transfer. 
LESSEE AGREES THAT THE LESSOR’S ASSIGNMENT OR GRANT OF A SECURITY
INTEREST DOES NOT CHANGE THE DUTY OF NOR MATERIALLY INCREASE THE BURDEN OR RISK
IMPOSED UPON LESSEE and does not constitute a delegation of material
performance unless and until Lessee’s quiet possession of the Equipment is
actually disturbed by a third party lawfully claiming by, through or under
Lessor.

 9
 

 

22.              PRE-PAYMENT, SALE OR REFINANCE.  Pursuant to Section 2 of the Equipment
Lease Financing Commitment between Lessor and Lessee of even date herewith,
Lessee may pre-pay any or all of the principal amount financed by Lessor as set
forth in applicable Schedule A.  After
such prepayment the Lease shall terminate except for Lessee’s right to purchase
the Equipment.  Lessee must pay off any
and all amounts due hereunder through the date of prepayment, as well as under
Schedule A in the event Lessee desires to sell the Equipment or if Lessee will
be liquidated.

23.              PARTIES.  “Lessor,” as
used in this Master Lease or any Lease, shall for all purposes include its
successors or assigns.  “Lessee” shall, as to its duties and obligations, include its
successors or assigns, but as to its rights shall include only those successors
or assigns substituted as permitted hereunder.

24.              WAIVER.  A waiver by Lessor of any Default or Defaults
by Lessee shall not be construed as a waiver as to any future occasions of
Default.

25.              SURVIVAL.  All covenants and agreements of Lessee made
herein or in any other document or certificate referred to herein or
contemplated hereby are material, shall be deemed to have been relied upon by
Lessor and shall survive the execution and delivery of this Master Lease or any
Lease and the expiration of the Master Lease or any Lease term.

26.              NOTICE.  Any notices permitted or required by this
Master Lease or any Lease shall be in writing and mailed by certified mail, by
receipted-for courier service, or by facsimile or telecopy if
concurrently sent by regular mail to the addresses in the introductory
paragraph above, or such other persons or address as Lessee may indicate
subsequently in writing to Lessor.

27.              TIME.  Time is of the essence to this Master Lease
and to each and all of the provisions of this Master Lease or any Lease.

28.              TITLES; CONSTRUCTION.  The title to the paragraphs of this Master
Lease or any Lease are solely for the convenience of the parties and are not intended
as an aid to the interpretation of this Master Lease or the Lease.  This Master Lease, any Lease and all rights
under this Master Lease or any Lease shall be governed by, construed, and
enforced in accordance with the internal laws of Minnesota without reference to
the principles of conflicts of laws.

29.              ENTIRE AGREEMENT.  THIS MASTER LEASE (INCLUDING SCHEDULE A’S)
CONSTITUTES THE ENTIRE AGREEMENT OF THE PARTIES.  NO AGREEMENT SHALL BE EFFECTIVE TO AMEND,
MODIFY, OR CHANGE THIS MASTER LEASE UNLESS SUCH AGREEMENT IS IN WRITING AND
SIGNED BY THE PARTY TO BE CHARGED THEREBY.

Wherever possible each
provision of this Master Lease or any Lease shall be interpreted in such manner
as to be effective and valid under applicable law, but if any provision of this
Master Lease or any Lease shall be prohibited by or invalid under applicable
law, such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Master Lease or any Lease.

 10
 

 

IN WITNESS WHEREOF, Lessee and
Lessor have duly executed this Master Lease in multiple counterparts as of the
date first above written, each of which shall constitute an original.

	
   

  	
  GRANITE CITY FOOD & BREWERY, LTD.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Peter P. Hausback

  	
   

  
	
   

  	
   

  	
  Peter P. Hausback

  
	
   

  	
  Title:

  	
  Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  DHW LEASING, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Donald A. Dunham, Jr.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Managing Partner

  	
   

  
								

 

 11

 

FORM OF

Schedule A – (Lease No.     )

To Equipment Finance Master Lease (“Master Lease”) executed by and between 

Granite City Food  & Brewery, Ltd.
and DHW Leasing, L.L.C.

Equipment:  See attached Exhibit A

Permanent Location of
Equipment:

Total Amount Financed:  $           
(including any applicable sales tax)

Interim Period:                ,
2006 through date of receipt of Equipment by Lessee [discuss; Lessee may want
to advance the cost and be reimbursed by Lessor]

Interim Rent Rate:  $                 
(based on interest-only payments) [discuss; see above]

First Payment Date:  1st day of Month following date of receipt of
Equipment by Lessee

Base Rent Rate (Total Amount
Financed amortized over 60 months at      %): $

Number of Payments:  sixty (60), monthly

Other Rent:  All taxes, licensing, origination fees and
maintenance as described in the Master Lease

Stipulated Loss Value:  unamortized principal of Total Amount
Financed

Purchase Option:  $1.00

Prepayment:   Lessee
may prepay the balance of the Total Amount Financed upon written notice to
Lessor

This
Schedule hereby incorporates all terms and conditions of the Master Lease not
expressly excluded or in conflict with the terms above.

	
  

  	
   

  	
  Lessor

  	
   

  	
  Lessee

  	
   

  
	
   

  	
  Initials

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Date:

  	
   

  	
   

  	
   

  	
   

  

 

ACKNOWLEDGEMENT AND
ACCEPTANCE

The undersigned Lessee
acknowledges that the Equipment described in Ex. A attached was received by
Lessee on         , 200   ,
in good order and condition acceptable to Lessee.  By the terms specified in the Master Equipment
Lease Agreement dated                     ,
2006, between Lessee and DHW Leasing, L.L.C., Lessor assigns to Lessee all
equipment warranties provided by any vendor or manufacturer including all right
to enforce in law or equity all remedies for breach thereof.  Lessee acknowledges that Lessor is not liable
for the performance of the Equipment and agrees that all rental payments will
be made regardless of Equipment operability. 
Any markings required of Lessor or its lenders shall be affixed to the
Equipment as directed by Lessor.

	
  Granite City Food & Brewery, Ltd.

  
	
   

  
	
  By

  	
   

  	
   

  
	
  ItsEXHIBIT 10.3

AMENDMENT
TO

DEVELOPMENT AGREEMENT

The terms and conditions of
this amendment (the “Amendment”) are hereby incorporated in and made a part of
the Development Agreement dated October 22nd, 2002 between Donald A. Dunham,
Jr., (“Developer”), Dunham Capital Management, L.L.C. (“Assignee”)and Granite
City Food & Brewery, Ltd. (“Granite City”).

For valuable consideration,
receipt of which is hereby acknowledged, it is agreed that the Development
Agreement shall be amended as follows:

1.                                       Addition of the following language to:

SECTION
VII.  LEASE AGREEMENT   A. 3. Lease Payments.

Effective
with leases entered into from and after September 1, 2006, the Lease Rate
(excluding the land lease portion of the rent) commencing on the fifth (5th) anniversary of each lease,
and on each five year anniversary of such date thereafter, shall increase by
ten percent (10%) (each a “Quintennial Increase”).  In addition, Granite City consents to an
amendment to its leases, in Omaha, Nebraska, Madison, Wisconsin and Roseville,
Minnesota, to provide for such Quintennial Increases in each of such
leases.  Each lease providing for an
option to extend the lease following its initial term shall provide that rent
during an option term shall be at such adjusted Lease Rate, and such rent
during an option period shall not be further increased during its term by the
Consumer Price Index or any other factor.

Developer and Assignee agree that Granite City may lease any site
through a wholly owned subsidiary of Granite City, provided that Granite City
guaranties performance of such subsidiary’s obligations under such lease.

2.                                       The provisions of paragraph 1 of this
Amendment are contingent upon DHW Leasing, LLC (“DHW”) providing Granite City
equipment lease financing, pursuant to the Equipment Lease Commitment of even
date, and in accordance with the terms of one or more lease agreements to be
entered into by such parties.  If DHW (i)
fails to provide such equipment lease financing or (ii) defaults under such
agreements, this Amendment shall terminate and each lease entered into after
such termination shall be at the previously agreed-upon Lease Rate of 10.5% of
all Approved Construction Costs as defined in each lease agreement.  Leases for sites entered into prior to
termination of this agreement shall not be affected by termination of this
Amendment.

 

3.                                       Addition of the following language to:

SECTION VIII.  NUMBER OF SITES  A.

After
Granite City has leased twenty two (22) sites from Developer, if Granite City
gives written notice to Developer directing Developer to develop a site and
Developer thereafter contributes services to the development of such a site
involving air travel or consultant or attorney costs (“ Services”), Granite
City may not contract for the development and/or lease of such site with a
third party (other than Developer or Assignee) unless it pays Developer’s
reasonable out-of-pocket expenses and a development fee of $10,000.

4.                                       The parties acknowledge and agree that DHW
Leasing, LLC shall have the right to reject a request for financing under the
Equipment Lease Commitment in the event Granite City is not using Developer to
develop and build the restaurant for which such leased equipment will be used.

5.                                       All other terms and conditions of the
Development Agreement shall remain in full force and effect.

Agreed
and acknowledged this 19th day of September, 2006.

 

	
  DUNHAM CAPITAL MANAGEMENT,
  L.L.C.

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Donald A. Dunham, Jr.

  	
   

  
	
  By:

  	
  Donald A. Dunham, Jr.

  
	
  Its:

  	
  Managing Member

  
	
   

  	
   

  
	
   

  	
   

  
	
  GRANITE CITY
  FOOD & BREWERY, LTD.

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Steven J. Wagenheim

  	
   

  
	
  By:

  	
  Steven J. Wagenheim

  
	
  Its:

  	
  President

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